Daily Népszabadság has an interesting if slightly incredible story today about how a Hungarian energy drink maker is currently negotiating with two Formula 1 teams over a potential sponsorship deal. The report says that Candy Globe Kft, the producer of the “Hell” energy drink, has been haggling with both the Williams and Brawn GP teams for “weeks,” and that the only remaining questions are which team the company will go with, and what kind of package a deal would involve. I, however, would say there is one other big question remaining.
According to the piece, the company, which was started back in 2004, had total revenues last year of Ft 15 billion, or slightly less than €50 million, from sales in Hungary and 16 other countries, but profits of just over Ft 100 million. So the question is, what kind of Formula 1 sponsorship package might a company of this size actually get?
One answer lies just an hour or so away by grand prix car, in Fuschl am See, Austria, where global leader of the energy drink market is based. Red Bull, as you may know, has not only one but two formula one teams, on which they lavish a combined $300 million, or less that 10% of Red Bull’s €3.3 billion in turnover. This is not counting all the other millions that they plow into the Red Bull air race series and other sundry marketing efforts that make up for the firm’s reluctance to spend on traditional advertising.
So let’s say that Candy Globe the same percentage of its turnover as Red Bull on F1, or roughly €5 million.
Now, according to this piece, Williams had a budget last year of $160.6 million and Honda, which morphed into Brawn last month, spent an eye-popping $398 million. Obviously, Brawn is going to spend a whole lot less than Honda did – this is why Honda got out – but will probably still need $150 million to get through 2009.
What all this means is that Candy Globe’s hypothetical €5 million F1 budget would represent around 3% of the budget of either of the teams it is said to be finalizing a sponsorship deal with. And this in turn means it seems highly unlikely that we are going to see “Hell” plastered across the side of a Williams or Brawn this year, or any obvious indication (at least on television) that a Hungarian company has actually broken into the big leagues of motorsports sponsorship.
On the other hand, they’ve already gotten some good press without spending as much as a can’s worth of profit on advertising and sponsorship, which seems like a pretty big marketing win.