McDonald's in talks to sponsor NASCAR

It would replace E.J. Reynolds and Winston Cup tradition

April 26, 2003|By BLOOMBERG NEWS

DAYTONA BEACH, Fla. - McDonald's Corp., the world's biggest restaurant chain, is negotiating for one of the biggest prizes in U.S. sports sponsorships: naming rights for NASCAR's elite Winston Cup stock-car racing series.

The Winston sponsorship, worth between $40 million and $60 million a year, is one of the most expensive in sports because it covers 36 races that draw crowds of more than 100,000 and better television ratings than any U.S. sport except football in the National Football League.

"If one of my clients asked me whether NASCAR was worth pursuing, I would unquestionably encourage them to go after it," said Dean Bonham, a Denver-based sports franchise consultant.

R.J. Reynolds Tobacco Holdings Inc., which has sponsored the racing series since 1971 through its Winston cigarette brand, told NASCAR in February that it wanted to get out of the five-year extension it signed last year for about $200 million.

The No. 2 U.S. cigarette maker can't afford to continue its sponsorship, said Ned Leary, president of R.J. Reynolds Sports Marketing Enterprises. The company yesterday cut its earnings forecast for the year to $250 million from $465 million because lower-priced competitors are taking sales. It also expects to pay about $2.2 billion in tobacco lawsuit settlements this year.

"It's put pressure on our business," Leary said.

"As effective as it has been and continues to be, we had to let them know that if someone came along, we'd be willing to step aside."

Winston's association with Daytona Beach, Fla.-based NASCAR was effective. According to Leary, NASCAR fans are five times more likely to buy Winston cigarettes than non-racing fans.

George Pyne, NASCAR's chief operating officer, wouldn't discuss specifics of the negotiations and didn't give a timetable for a decision on a new sponsor.

McDonald's is already NASCAR's official drive-through restaurant.

The maker of the Big Mac sandwich has been involved with NASCAR since 1990, and might put its name on its top-level series, said John Lewicki, the company's head of sports marketing.

"Are we interested? Sure," Lewicki said.

NASCAR's predominantly young fans may be attractive to McDonald's after 13 straight months of declining sales, said fund manager Lawrence Creatura of Clover Capital Management Inc., which manages about $1.6 billion and owns McDonald's shares.

"It all depends on the terms of the deal, but the NASCAR demographic is a good one," Creatura said.

McDonald's President Charles Bell told investors in New York this month that one of the company's strategies is to focus on 18-to 29-year-olds, rather than trying to be "all things to all people." That plan would seem to fit with NASCAR, which says 32 percent of its fans are between the ages of 18 and 34.

The company is scheduled to report first-quarter earnings on Monday.

R.J. Reynolds's Winston brand got $160 million worth of free advertising on NASCAR telecasts last year, according to Joyce Julius & Associates, a firm that gauges the value of sports sponsorships. The figure is based on the number of times broadcasters and drivers mentioned Winston on the air, along with track-side advertising shown during the telecasts.

By comparison, the dozen top Olympic sponsors each pay $55 million to $60 million over a four-year period, and Lincoln National Corp. is paying an average of $7 million a year to have its name on the Philadelphia Eagles' new football stadium.

It costs about $15 million a year to sponsor a NASCAR team.

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