November 4, 2011 / 10:22 AM / 8 years ago

Volvo Ocean Race riding out economic storm

ALICANTE, Spain (Reuters) - Bruised and battered policymakers trying to steer the global economy through the current economic storm might empathise with the sailors exposed to the giant waves, hurricane-force winds and extreme temperatures of the Volvo Ocean Race.

Volvo Ocean Race team Puma sails past the Castle of Santa Barbara before the start of the first the first in-port race in Alicante October 29, 2011, a week before the official start of leg one between Alicante and Cape Town. REUTERS/Heino Kalis

The eight-month, 39,000-nautical mile slog across some of the world’s stormiest seas is considered one of the toughest events in sport, as well as one of the most prestigious.

Despite the obvious attraction for companies keen to exploit its glamorous reputation and global reach, including stopovers in such fast-growing markets as China, Brazil and Abu Dhabi, it has not been immune to the financial crisis.

To stay in business, organisers have been forced, partly at the urging of sponsors, to introduce around 100 changes to the rules that race chief executive officer Knut Frostad says have cut the cost of winning by half.

Exact figures are hard to pin down but the six teams competing in the latest edition — down from eight in 2008-09 — are probably spending around 50 million euros on their campaigns, compared with anything up to around 100 million previously, according to an industry source who asked not to be identified by name.

Joint owners Volvo Car Corporation and Volvo Group each put in around 11 million euros, the source said.

In an interview with Reuters at race headquarters in Alicante, Spain, Frostad, a Norwegian who has competed in four editions of the event, said the cost-cutting measures would be expanded for the next race starting in Alicante in 2014.

“We have to adapt to anything that happens so if there is a difficult economic environment we adapt to that too,” Frostad said, adding that some companies who were planning to fund entries this time around had pulled out.

“The crisis started showing itself in 2008 already and when I began this cost-reduction programme for the teams the sponsors said great. This is exactly what we are doing in our companies. Continue and we need to see it happening.

“Making the race sustainable is also about making sure it’s long-term and it works for the sponsors.”

HIGHEST EARNERS

The six teams, backed by companies including sports apparel firm Puma, shoe and clothing maker Camper and telecommunications provider Telefonica, depart Alicante in their elegant 70-foot yachts on Saturday bound for Cape Town, the opening ocean leg of the race which ends in Galway, Ireland in July.

They will leave behind a purpose-built race village designed to lure thousands of sailing enthusiasts and other consumers.

Sailing has a relatively small yet affluent target group, with a higher-than-average proportion of new car buyers, according to Marcel Cordes, an executive director at Cologne-based consulting firm Sport+Markt.

That may help explain why the Volvo Ocean Race stays afloat and continues to attract sponsors even as many sporting events are losing support and struggling to make ends meet.

The villages also provide a glitzy venue for companies to woo customers.

Volvo Group and Volvo Car Corporation announced on Saturday they would continue their commitment to the race beyond the current edition, suggesting the right choice of sporting event can still be a valuable marketing tool even in tough times.

“We see this as a long-term investment and it’s very important that we keep on doing it,” Volvo Group chief executive Olaf Persson, a keen sailor in his youth, told Reuters.

“It’s something that distinguishes us from the competition and when things are slowing down and the competition gets even harder then it’s very good to have this kind of vehicle.”

KEY WEAPON

Perched on a giant red cushion on top of the “Puma Quad”, a box-like structure showcasing the Germany-based firm, chief executive Franz Koch explains that the Volvo Ocean Race is a key weapon in their push into sailing apparel.

The sporting goods industry was “fairly well prepared” to cope with the economic slowdown, the 32-year-old Koch, a former professional field hockey player, told Reuters, adding that the high-value sailing sector seemed particularly buoyant.

“We are in the sailing space for the long haul,” Koch said.

“We want to build a proper commercial business around it and sailing is the technical research and development centre for our functional products.

“The Volvo Ocean Race is the perfect vehicle for us given that it’s one of the most prestigious races in the world.”

Puma, like several of the sponsors, is hoping to use the stopover in the port of Sanya, China to help promote its business. China is also an important market for Volvo Group, which makes construction equipment and commercial vehicles.

“When you look at their current size and growth potential the top two markets are probably the U.S. and China,” Puma’s Koch said.

“It’s very important for us to be successful in China in the long term and the stopover in Sanya will of course help to raise more brand awareness.”

Volvo’s Persson added: “Definitely the Sanya stopover is important and if you look at the construction equipment market we are now number one in China.

“This gives us an opportunity in Sanya to invite customers to get a better coverage of the brand in China which is also very important.”

INCREASED SCRUTINY

Race partner Inmarsat, which provides the satellite communications used to track teams and transmit the live video footage provided to the world’s media, is convinced of the value of its involvement in the race despite the severe downturn in the maritime sector.

“It is true that this is a very difficult time for companies and it is true that investment decisions such as sponsorship are under increased scrutiny,” Chris McLaughlin, vice president for external affairs, told Reuters.

“The various stops around the world are also very helpful to us,” he added.

“They mean we can reach people we otherwise might not visit other than at trade shows and exhibitions.

“We like to think that the event demonstrates to our customers that even at extremes Inmarsat works and that makes the race work for us.”

Editing by Ed Osmond

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