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Friday 30 September 2016

Philip Morris still quietly goes about its business with Formula One sponsorship

Alex Duff

Published 18/05/2015 | 02:30

Tobacco advertising was more high-profile before crackdown
Tobacco advertising was more high-profile before crackdown

Philip Morris International is continuing one of the quietest sponsorships in sports.

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The largest publicly traded tobacco company has renewed its backing of the Ferrari Formula One team for three more years even though advertising laws mean 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 over $750m on the world's most popular car competition in 2001, before rules banned ads 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 unpromoted but they are there," said Mark Jenkins, a professor of business strategy at the UK's Cranfield University, who wrote a study about the team.

The relationship between the team and sponsor is so close that in 1996 Ferrari changed the colour of its racing cars to orange-red from blood-red to suit Marlboro, Mr Jenkins said.

New York-based Philip Morris, the only cigarette maker retaining a link with Formula One, extended the sponsorship through 2018 at a board meeting over a year ago without making a public announcement, Mr Arrivabene said in an interview.

The 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 Mr Jenkins. The next race - the Monaco Grand Prix - is next Sunday.

Philip Morris confirmed it extended the relationship beyond 2015 without giving financial details. It's paying $160m annually under the current deal, 'Sports Pro' magazine reported in 2011. A Philip Morris spokeswoman 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 colour. Sergio Marchionne, CEO of Ferrari's parent company Fiat Chrysler Automobiles, gets $320,000 a year as a non-executive director of Philip Morris and holds $5.2m of the company's shares, according to Bloomberg data. He smokes Muratti cigarettes, another of Philip Morris's brands.

In September, Philip Morris held a board meeting at the Ferrari team's HQ in Italy, according to 'La Repubblica' newspaper. Maurizio Arrivabene was hired from Philip Morris, where he was a marketing executive, to lead the Ferrari team in November. The EU 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 racing movies such as 'Senna' in 2010 and 'Rush' in 2013 also give racing fans a reminder of the Marlboro association with Formula One.

"Just because you remove the brand, it doesn't mean people don't see the link," Jenkins said. (Bloomberg)

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