PepsiCo Suits Up for Landmark NFL Contact Renewal

President Obama's decision to work his jobs speech on Thursday around the schedule of the National Football League's opening day shows that he's still got some keen political instincts. Because this week, in this economy, the NFL seems to be the one thing you don't want to mess with.

Brand marketers seem to have forgiven the uncetainties sown by the league's four-month labor stoppage and are ready to jump back on an advertising bandwagon that has outrun every other marketing vehicle over the last three years.

Certainly PepsiCo is the prime example: Today, the beverage giant and the NFL announced a 10-year extension of their current agreement to go into effect next year. According to the Wall Street Journal, the extension could be valued as a $2.3-billion investment in the continued marketing appeal of America's real pastime.

It's one of the largest sponsorship deals ever in sports and ensures that PepsiCo brands Pepsi, Gatorade, Frito-Lay, and others will be official marketing partners of the league at a cost of nearly $100 million a year.

That's got to be a good thing for the Pepsi brand, which infamously has been lagging the performance of Coca-Cola for a few years now — and which PepsiCo CEO Indra Nooyi has been trying to jumpstart this year with bigger advertising investments and other sponsorship deals, such as for FOX's The X Factor, the Simon Cowell-produced show that debuts later this month. PepsiCo has already announced that the winner of season one of Cowell's American X Factor will be featured in a Pepsi Super Bowl spot.

Nooyi told CNBC today:

Football and the NFL is perhaps the best sports franchise in the world, not just the United States — the entire world. The game evokes a passion. I think the NFL is a superbly run franchise. I think PepsiCo strongly believed we needed to be in partnership because both entities are extremely synergistic in the way they approach the business, the passion they have for the respect of businesses, and it was a marriage made in heaven. We were going to be partners with NFL, come what may. I think this partnership seals the next few years, an example of the best of the United States coming together, through 2022.

NFL commissioner Roger Goodell commented in the same interview:

We're fortunate. Our sponsorship business is up, particularly coming off of a difficult lockout, and obviously we're still going through a very difficult economy, but Ithink it shows a strength of the NFL and our relationships. We're proud to be here with Pepsi because Indra and I spent a lot of time talking about our brands, how we strengthen our brands. This is more than just a sponsorship arrangement. This is really a partnership to promote each other's brands and make them stronger and do that on a global basis. We're proud of that relationship.

Among the interesting details in the extension with the NFL is that PepsiCo for the first time will be including Tropicana and Quaker Oats in the mix, which makes sense given that they are better-for-you brands that now will associate with the most popular sport in America, as Nooyi commented to CNBC:

The great thing about the partnership is Gatorade is going to be on the sidelines which is great for the players. We'll have all kinds of engagement with the fans in-stadium and fans at home because we have an incredible lineup of products, not just Gatorade but beverages and snacks which all go together to make partying and watching football a lot of fun. We feel wonderful about the partnership. Let me speak now to the investments and the consumer. I think we're going through a difficult time in terms of consumer sentiment, especially in the developed markets. The amazing thing is watching a ball game and buying the few pleasures in life to watch a ball game is really what's surviving through the downturn. So clearly as the consumer is distracted, no question about it, and the consumer is shifting their buying habits from spending on big-ticket entertainment to the simple pleasures of life. When the NFL and pepsico come together and say, hey, let's give you this moment of great pleasure, watch a a great game, have your Doritos and Tostitos and dip, life's good.

With the NFL, there are plenty of other brands — from auto makers to brewers to athletic-shoe makers — that keep benefiting from attaching themselves to the juggernaut. Through the Great Recession and into whatever you call this new malaise, rising viewership for NFL games has been about the only thing that many marketers believed they could count on. With the Super Bowl on top, of course, many NFL games were among the most-watched TV shows of any kind during the 2020-2011 season.

Sure, the lockout over the spring and summer slowed down the NFL revenue machine, and marketers' worries about a double-dip recession (will American consumers who faithfully watch pro-football games for free also go out and spend their money so reliably?) could stunt growth as the season goes on. But this week, the NFL as an advertising bet is as sound as a 20-yard field-goal try.

Meanwhile, Nooyi is looking beyond the 20-yard line to shore up PepsiCo's business globally — another theme she brought up in her CNBC interview as she summarized the company's fortunes regionally:

East of the Middle East, especially in all of the emerging markets, I think the economic growth is still robust. Even though inflation is rampant around the world, east of the Middle East everything seems to be okay. Growth rates of all of those economies are somewhere between 5% and 8%, sometimes as high as 10%. In all of those markets business seems to be okay, top line growth is good and bottom line is following because you can price through the ins nation. Parts of Latin America I think are beginning to slow down now, although i'd say Latin America is performing and faring better than the developed economies of North America and Western Europe, so I'd say Latin America can power through.

Let me talk about North America and Western Europe. We're going through some of the difficult time, I don't mean PepsiCo, the industry as a whole, because you have GDP growth that's anemic, unemployment rates that are very high and inflation that's extremely high. The three together make it very hard for companies to figure out how to thread the needle and how to perform. In these environments, what's critically important is that you have powerhouse brands that can pull the product through to the consumer. You've got scale so that you can go toe to toe with the large retailers who are trying to capture efficiencies of scale. And most importantly you've got to run the company for the long term. Because when you have slowdowns in economies and runaway inflation, the natural tendency is to do the wrong thing to maximize the short term and forgetting corporations exist for the long term. One thing to take away, companies need to have the eye to the long term and manage the company for the long term, especially in these times.