IPL's sheen wears off

In November 2012, an overjoyed senior management at PepsiCo India found it hard to control its glee after bagging the title sponsorship of the Indian Premier League (IPL) for a jaw dropping ₹396.8 crore for a five-year period. In a statement to the media, the company’s CEO, beverages, Gautham Mukkavilli went as far as saying that cricket was a religion in India and IPL was its most revered temple where the faithful flock to. “Given its historic association with the game, brand Pepsi will add new lustre to the tournament,” he went on to add.

Last week, the company said it was considering exiting this sponsorship deal after being a part of it for three years. The story is that Pepsi is miffed following the negative publicity around the IPL, which started with the spot-fixing controversy and eventually led to the suspension of two teams – Chennai Super Kings and Rajasthan Royals – for two years. While the scandal around this much hyped tournament is hard to miss, Pepsi too has been looking for an honourable exit. Much of this starts from having hugely overpaid for the sponsorship deal. Real estate major, DLF was the title sponsor for five years starting 2008 after having paid ₹200 crore. Pepsi’s intent to double that when the other interested party, BhartiAirtel’s bid was ₹315 crore, was inexplicable at that point.

At an annual marketing and advertising budget of around ₹300 crore, Pepsi was setting aside a handy ₹80 crore each year for the cricket tournament, which ran for barely two months. Without a doubt, cricket was a big draw, though the question really was about how far could a sponsor go? This was no more evident than in 2013, the first year of the now Pepsi IPL, when television ratings (TVR) for the tournament dropped to just 3 from 4.7 in the first edition in 2008 and dipped further to 3.6 in 2012. Clearly, fragmented viewership and a general perception of an overdose of cricket were hitting the IPL hard. Nothing seemed to have changed over 2014 and even this year with TVRs still below 4.

For Pepsi, which had evidently overpaid, the relentless bad publicity around the IPL provided it the perfect exit option.This is at a time when other large advertisers are slowly moving their monies outside cricket. Havells India, with an estimated advertising spend of ₹250 crore during the 2015 fiscal, had a 90% exposure to cricket till 2012. Today, that number is down to just 30%, with less than half of that going to the IPL. The company’s vice-president, marketing, Vijay Narayanan points to the IPL facing a peculiar situation where TVRs have dropped, though advertising on it remains expensive. For the recent edition this year, the broadcaster was charging at least ₹5.2 lakh for a 10-second spot, which was substantially higher than the ₹4.5 lakh it charged in 2014. “In that scenario, it is not efficient for an advertiser. Besides, we do not want to talk to the same audience all the time,” he reasons.

With two more years of IPL sponsorship up for grabs, who will pick it up and at what price is anybody’s guess. Irrespective of how it plays out, it will be interesting to see if the winner pays anything close to what Pepsi spent. By the looks of it, that seems a little difficult.