Posted on May 14, 2015.
The following article is from the Bloomberg Business website:
Philip Morris International Inc. is continuing one of the quietest sponsorships in sports.
The largest publicly traded tobacco company has renewed its backing of the Ferrari Formula One team for three more years even though advertising laws means it hasn’t displayed the Marlboro cigarette brand at a race since 2007, team manager Maurizio Arrivabene said.
Cigarette makers were once major sponsors in the sport, with three companies spending more than $750 million on the world’s most popular auto competition in 2001, before rules banned advertising on cars. While tobacco brands can’t feature on race cars, Ferrari’s vehicles feature a red-and-white square that resembles a Marlboro cigarette pack.
“The synergies are unspoken and un-promoted but they are there,” Mark Jenkins, a professor of business strategy at the U.K.’s Cranfield University who wrote a 2010 case study about the team.
The relationship between the team and sponsor is so close that in 1996 Ferrari changed the color of its racing cars to orange-red from blood-red to suit Marlboro, Jenkins said.
Philip Morris, the only cigarette maker retaining a link with Formula One, extended the sponsorship through 2018 at a board meeting more than a year ago without making a public announcement, Arrivabene said in an interview.
No Fanfare
The New York-based company, which promotes the link at some airport duty free shops and the streets of Monaco, doesn’t make a fanfare about the sponsorship to avoid rousing anti-tobacco lobbyists, according to Jenkins. The next race — the Monaco Grand Prix — is May 24.
In an e-mail, Philip Morris confirmed it extended the relationship beyond 2015 without giving financial details. It’s paying $160 million annually under the current deal, Sports Pro magazine reported in 2011.
A Philip Morris spokeswoman in Switzerland said Ferrari designs the paint scheme. The agreement allows consumers and business partners to visit Ferrari factories and attend races, she said.
The links go deeper than color. Sergio Marchionne, chief executive officer of Ferrari’s parent company Fiat Chrysler Automobiles NV, gets $320,000 a year as a non-executive director of Philip Morris and holds $5.2 million of the company’s shares, according to Bloomberg data. He smokes Muratti cigarettes, another of Philip Morris’ brands.
In September, Philip Morris held a board meeting at the Ferrari team’s headquarters in Maranello, Italy, according to La Repubblica newspaper. Arrivabene was hired from Philip Morris, where he was a marketing executive, to lead the Ferrari team in November.
Advertising Ban
The European Union ban on tobacco advertising in the sport started in 2005. Territories including China and Monaco allowed Ferrari to carry Marlboro branding until 2007.
Even before the ban, it wasn’t Philip Morris’s style to broadcast the arrangement, Arrivabene said. A previous contract extension with Ferrari was made public with a one-line press release, he added.
Philip Morris switched from backing McLaren, whose drivers included Ayrton Senna, to supporting Michael Schumacher’s Ferrari in 1996. Archive footage of those drivers and auto racing movies such as “Senna” in 2010 and “Rush” in 2013 also give racing fans a reminder of the Marlboro association with Formula One, according to Jenkins.
“Just because you remove the brand it doesn’t mean people don’t see the link,” Jenkins said.
