The 2014 Sochi Winter Olympics: A slippery slope for brands?

Beleaguered by anti-gay discrimination, the threat of terrorism and rising financial costs, the Winter Olympics in Sochi promises to be scandalous, not least for the brands putting their names to it, argues Katie McQuater.

The 2014 Winter Olympics is just around the corner, and all eyes are on the Black Sea city of Sochi as Russia prepares to host its first ever Winter Games under a cloud of major controversy.The country’s tough stance on civil freedoms, particularly LGBT rights, has come under fire from campaigners around the world, with its anti-gay discrimination summed-up by Vladimir Putin’s warning to gay people to “leave children alone please”.The cost of the event has also been deeply scrutinised, with widespread allegations of corruption as costs look set to hit $50bn, making it the most expensive Winter Olympics ever. Security tensions, meanwhile, have increased over the heightened terror risk following recent attacks on Volgograd, casting an inauspicious gloom over the city that has become known as ‘fortress Sochi’.All of these negative headlines raise important questions for worldwide Olympics partner brands including Coca-Cola, Samsung, McDonald’s and Visa. By associating with the Games, are these sponsors on a path to reputational risk? Although the complex relationship between sports, politics and sponsorship has never been particularly easy, today’s sporting events are under more scrutiny than ever, and brands should be fully aware of this when undertaking sponsorship contracts, according to Christian Schroeder of branding agency Lambie-Nairn.“Ever since the tragic terrorist events of the Munich Olympics over 40 years ago, global sporting events like the Olympics or the World Cup have iced under the shadow of political agendas. Sporting events go to great lengths to distance themselves from political situations and more often than not succeed. Their argument has always been that sport transcends political struggle.“With the increase in global media coverage and the explosion of social media, it has become increasingly difficult for sporting events to exist in a bubble. The Winter Olympics in Sochi are a prime example of this. Issues around homophobia, terrorism and human rights have the potential to overshadow what should be a great sporting spectacle.”The question of whether or not politics and sport can ever be fully separated, and the role brands play within that complicated relationship, was highlighted recently when Zoopla announced it wouldn’t be renewing its sponsorship of West Bromwich Albion following Nicholas Anelka’s alleged use of the ‘quenelle’, a controversial gesture known as an inverted Nazi salute. Brands entering sponsorships are preparing to fail if they don’t prepare for the worst, according to Andy Sutherden, head of sports and global practice director at PR company Hill+Knowlton, who describes negative coverage as a reality of modern-day sponsorship. “Modern-day sponsorship brings risk and reward in equal measure. Historically, sponsorship brands have invested most of their time, energy and budget in planning for the best, but now they are having to prepare for the worst. The brands that don’t prepare for the worst are taking huge reputational risk into any of the events that they are involved in, and Sochi is an acute example of that.”Sutherden, who has worked on London 2012 campaigns with P&G and Visa, says responsible sponsors will be those with a robust crisis management plan and an ability to move the agenda on to what they want to be associated with, detaching themselves from political commentary around Sochi and focusing on the sport itself. This is not an easy task, he acknowledges, but “a good sponsor will not be detracted from the primary job they have of ensuring that the Olympics values they have bought into provide a halo effect on their business, rather than a dark cloud.”Schroeder echoes this view, arguing: “Sport is a great leveller and, in my view, should be able to transcend political agenda and should be able to operate in isolation.”Even if it seems unlikely that any of the Olympics advertisers will pull their sponsorships this close to the Games, some suggest that the branding implications of involvement could be far-reaching. Is sponsorship of the Games a calculated risk of commercial value winning out over brand value, and could companies find themselves tarnished by their involvement?Coca-Cola has faced the brunt of the ongoing criticism emerging from the Winter Olympics so far, garnering negative publicity over its sponsorship deal, particularly from LGBT rights campaigners, after it became implicated in the detention of a gay rights protester by a member of Olympics security personnel who was sporting the Olympics sponsor’s logo. The company’s statement to The Drum confirms its stance on discrimination: “We have long been a strong supporter of the LGBT community and have advocated for inclusion, equality and diversity through both our policies and practices. We do not condone intolerance or discrimination of any kind anywhere in the world.” However, with a global campaign based on equal happiness, association with these pejorative headlines puts Coke in a difficult position.There are two central considerations for brands prior to inking an Olympics sponsorship agreement, according to Mark Lowe, founding partner of public relations firm Third City – the potential commercial value and the trickier moral aspect.“Firstly, is it worth the investment, will you reach the people you need to in the right way and is there any risk attached? Secondly, should brands be seen to give succour to a regime that looks increasingly undemocratic and authoritarian?“From a commercial perspective, there is some evidence that Olympics events are so heavily sponsored that there is a danger of being lost in the noise,” says Lowe, adding that for brands looking to think outside the constrictions of sponsorship, imaginative ambush activity, while arguably more memorable, will be harder to pull off in Russia. He argues that affiliation or involvement with such a politically volatile event could be damaging for brands.“The moral question is trickier. Many will hide behind the ‘sport and politics shouldn’t mix’ argument but for me it’s been undermined on too many occasions. If I managed a youth brand, in particular, I would be extremely wary of endorsing an Olympics where an anti-government political stunt seems a strong possibility. You don’t have to look back that far to see how effective and memorable political statements at the Olympics can be.”The 2008 Olympics in Beijing attracted its fair share of negative publicity prior to the event, with large numbers of activists protesting the Games, causing a headache for sponsors. Yet in the eyes of audiences around the world, Beijing was a success – even if its legacy for the people of China was somewhat more mixed. Meanwhile, even London 2012 was not without inevitable criticism and doubt over the weather, cost and morale. However, it is the sporting achievements themselves that endure in the minds of consumers, and negativity towards Olympics host countries shouldn’t necessarily deter brands, according to Lambie-Nairn’s Schroeder, who argues that brands, while having a tough decision to make, are ultimately associating themselves with an event rather than a country.“They are looking to achieve awareness, recognition and association with elite athletes from around the world and neither they nor those athletes have a say in the choice of venue,” he says. The event itself is a great sporting spectacle, so more concerning for sponsors than the continued doubt over Russia’s suitability as an Olympic host country will be whether it can deliver in terms of ROI, according to Felix Hall, managing director of communications company 23red, who describes sponsorship of the Olympics as a media buy rather than a branding exercise.“Is there a sense of disquiet amongst sponsors around a Winter Olympics hosted by a macho Putin, with ongoing question marks over infrastructure let alone the weather? Probably not. The Winter Olympics is one of the great sporting festivals, whatever the side show around it. Who doesn’t love the bobsleigh, the downhill and the hockey? “The real question is around ROI. Will it be a vintage year or just so-so? And if it’s just so-so, do the corporate hospitality and bragging rights swing the balance? After all, it’s hardly a grass roots association that builds a brand’s credibility through shared values. It’s a media buy.”Contractual rigour is also important for brands in ensuring they can protect their corporate reputation. Sutherden believes the sponsorship industry has, for too long, survived on ambiguous contracts that are not as robust as they should be in order to protect brand reputation, and suggests work needs to be done to ensure brands and rights-holders have absolute clarity over what constitutes reputational damage.Similarly, individual ambassador athletes looking to express personal feelings about the political situation around the Winter Olympics could find themselves at odds with their sponsor’s corporate position. The risks around individual sponsorship were exemplified in 2010 when Australian swimmer Stephanie Rice was dropped by sponsor Jaguar, following a homophobic comment on Twitter. “Athletes wanting to express a personal point of view about any one of the social or political issues confronting the Sochi Games could unwittingly bring their own sponsors into disrepute,” says Sutherden.Sponsors of sporting events of any kind, from the World Cup to the Tour de France, run a calculated risk in undertaking investment in sports individuals and events, with the associated possibility of damage to their reputation arising from political and social bones of contention, not to mention social media errors of judgement, drug abuse or personal scandal on the part of ambassadors. On the eve of the Olympics, associated sponsors face increased possibility of reputational risk as political debate looks set to increase around a city and a Games mired in controversy. Brands looking to learn sponsorship lessons from the issues surrounding Sochi would do well to consider the risks carefully, plan for a crisis and get the paperwork right – otherwise their journey into the Olympics arena may leave them sitting a little uncomfortably.This feature is published in The Drum's 5 February issue, available from The Drum store.