In Depth

Grocery Retailers Stock Shelves With New Sponsorships

Retail deal structures vary; vendor participation often critical for both sponsor and property. 9/20/10: While traditional grocery retailers, primarily supermarkets, have historically represented one of the most active sponsorship categories, increased competition from mass merchandisers, warehouse stores and other less traditional food purveyors is driving sponsorship activity to record levels.

Retail consultancy Willard Bishop expects dollar share of food and consumables sold by traditional grocery retailers to decline from 47.5 percent in 2009 to 44.1 percent in 2014. Over the same period, it projects market share for non-traditional grocery retailers will rise from 37 percent to 40.2 percent.

Although the forecast rate of market share erosion is not quite as rapid as the firm predicted two years ago, when it said non-traditional retailers would account for the majority of food sales by 2013, Willard Bishop still expects those retailers to overtake traditional stores by 2017.

In the face of that change, supermarket chains have stepped up sponsorship activity with a variety of property types.

Recent deals have come from Publix Super Markets, Inc., which this summer came on board as the presenting sponsor of the November 21 Women’s Running Magazine Women’s Half Marathon in St. Petersburg, Fla.; Giant Food, LLC, which signed as a cosponsor of the NFL Baltimore Ravens; and The Kroger Co., which inked a partnership with the NBA Indiana Pacers and sibling WNBA Indiana Fever.

In addition, Weis Markets, Inc. has grown its five-year-old partnership with Pennsylvania’s Pocono Raceway by taking title to the track’s ARCA Racing Series presented by Re/Max and Menards race, while Save Mart Supermarkets expanded its partnership with October’s Big Fresno Fair in Fresno, Calif.

Save Mart sponsors the fair on behalf of its flagship supermarkets as well as its FoodMaxx discount chain, which serves as a reminder to properties to explore partnerships with multiple retail brands under the same ownership, possibly tapping additional marketing budgets for expanded deals.

Structuring Deals With Retail Partners
Retail sponsors can provide properties with two key benefits that make them unique from any other category: promotional support to tout a sponsorship, as well as access to consumer packaged companies and other vendors that sell through their stores.

“Supermarkets are super powerful,” said Lynn Berling-Manuel, CMO of American Youth Soccer Organization, which works with The Kroger Co.’s Ralphs chain.

On the vendor front, properties can leverage supermarket sponsors to gain the interest of potential partners in packaged goods and other categories that want to build a relationship with the retailer, as well as provide additional benefits to existing sponsors that already sell through the trade partner.

Deals with supermarkets are typically structured in one of two ways: Cash deals that give the retail sponsor the right to sell cosponsorship to vendors, or promotional commitments in lieu of cash.

With cash deals, supermarkets purchase sponsorship rights and then recruit vendors as cosponsors. The retailers typically ask vendors to pay cash for the deals, thus offsetting or partially offsetting their rights fees.

In some cases, a portion of the cosponsors’ fees is shared with the property. In others, the retailer retains all of the vendors’ dollars. Often, it is the property’s responsibility to negotiate the cosponsorship deals.

Typically, if a retailer is retaining all of the partner fees and/or the property is selling on the retailer’s behalf, the retail partner will pay a premium price for its sponsorship package, which often is the property’s highest sponsorship level.

In the second scenario, in exchange for a package of sponsorship assets, the retailer agrees to promote the property and its sponsors in its circulars, on bags or through in-store displays and other promotions.

Most major retail chains are partial to cash deals when working with pro sports teams and other larger properties. On the flip side, deals done by smaller retailers, and those with fairs, festivals and other smaller properties, are often promotional commitments.

Breaking It Down: Stater Bros. Vendor-funded Program
Supermarket chain Stater Bros. Holdings, Inc. liquidates its low-seven-figure title of a February NASCAR Nationwide Series race at Fontana, Calif.’s Auto Club Speedway by offering packaged goods companies the opportunity to participate in its Race to Savings promotion.

The retailer rolled out the program five years ago to drive incremental traffic and sales volume.

“Stater Bros. came to us and said, ‘we need to justify our relationship with the track and sport, and we need to see increased cash register ring counts at the store level,’” said Fritz Maskrey, Auto Club Speedway’s senior director of corporate sales and marketing.

The track responded with the idea for a two-week in-store promotion that includes a “Race to 75” offer for a free ticket to the NASCAR Sprint Cup event held the same weekend as the Stater Bros. 300 to consumers who purchase more than $75 worth of groceries in a single transaction.

The program has paid off, driving incremental traffic and sales over each of the past five years, Maskrey said.

Ten Stater Bros. vendors pay $125,000 to $130,000 each for their brands to participate in the promotion.

As summarized in the Race to Savings Recap provided by Auto Club Speedway (see Sidebar), each vendor receives a number of benefits, including signage, sampling rights and hospitality at the track, as well as inclusion in end-aisle displays, point-of-sale collateral and other in-store promotional assets.

Vendors also receive a presence at the Stater Bros. Racefest presented by Pepsi, an event that occurs prior to October’s Camping World 300 Nationwide Series race and Pepsi Max 400 Sprint Cup race at Auto Club Speedway.

The retailer and venue both play a role in securing vendor partners, said Maskrey, who has brought The Clorox Co. and other existing track sponsors into the promotion. The Race to Savings platform gives each sponsor the opportunity to participate in a unified program that carries more muscle than if they activated on their own, he said.

“We said, let’s put this under one umbrella and work together.”

Auto Club Speedway owner Int’l Speedway Corp. has conducted similar programs at other tracks, Maskrey said. Sources
American Youth Soccer Organization, Tel: 800/872-2976
Auto Club Speedway, Tel: 909/429-5000

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