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Vaping backlash threatens to slam brakes on F1 sponsorship

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Via Financial Times

The world’s biggest tobacco companies, once among the largest backers of Formula One, are conducting multi-dollar sponsorship deals with leading racing teams in an effort to promote new “vaping” products around the world.

But a growing regulatory backlash in key markets against e-cigarettes threatens to block marketing efforts targeted at millions of motorsports fans. 

For decades, tobacco companies were the biggest sponsors of F1 and by the mid-nineties almost every team featured a cigarette brand on their cars. Ferrari’s long term links with Philip Morris International included its drivers — from James Hunt to Michael Schumacher — wearing the logo of Marlboro cigarettes across their overalls. Brands such as Rothmans, Benson & Hedges and Silk Cut regularly featured on rival cars.

That ended when the FIA, the world governing body for motor racing, voted to ban sponsorship from cigarette makers in 2006.

However a pivot by Big Tobacco towards developing alternatives to their traditional products has created fresh opportunities. British American Tobacco signed a sponsorship deal with UK-based F1 team McLaren to promote its so-called “reduced risk” smoking products earlier this year, following a similar partnership between Italy’s Ferrari team and New York-headquartered PMI. 

But during races in seven countries including Australia, Canada and France, the F1 teams were forced to remove marketing logos related to their vaping sponsorships in order to comply with local tobacco advertising laws. 

A threatened crackdown against vaping in the United States undermines one of the key reasons why BAT is sponsoring McLaren. As well as promoting its products on the McLaren F1 car during the US Grand Prix in Texas next month, BAT is using the logo of its “Vuse” e-cigarettes on the livery of McLaren’s cars in the Indycar racing series, one of the most watched sporting events in the country.

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“You’ll find the overlap between the F1 calendar and our business is pretty profound,” said Kingsley Wheaton, chief marketing officer at BAT, when explaining the purpose of the company’s reasons to sponsor McLaren. He added that the “US foothold” was another key motivation. 

The regulatory crackdown on vaping around the world threatens a potential revenue stream for F1 teams that have struggled to gain new sponsorship deals in recent times.

BAT is paying around £20m a year for its deal with McLaren, according to a person familiar with its terms. PMI has not revealed the value of its deal with Ferrari, but it is merely the latest commercial link between two groups that have been closely tied in the past. PMI’s former chairman, Louis Camillieri, was appointed chief executive of Ferrari following the death of Sergio Marchionne in July 2018. 

As cigarette volumes have declined in the west, tobacco companies have bolstered their efforts to develop new ways to deliver nicotine. David O’Reilly, director of scientific research at BAT, said that 90 per cent of the company’s research budget now went on cigarette alternatives, which amounts to more than £3bn. PMI has said that it has put $6bn into developing new products. 

However, the discovery of at least 450 cases of lung disease across 33 US states prompted the Centers for Disease Control and Prevention to recommend avoiding e-cigarettes altogether. In September, President Trump announced that he would consider banning flavoured vaping products. 

“You can use F1 as a barometer for effective tobacco control,” said Phil Chamberlain, a partner at the Bloomberg-funded initiative Stopping Tobacco Organizations and Products. “It will be interesting to see how the [US] crackdown has an effect . . . Money talks in sports. It will be about how much [the sports teams] are able to resist the offer from tobacco companies,” he added. 

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Different advertising regulations for e-cigarettes across the globe mean that Big Tobacco cannot obviously advertise specific products on the cars in many countries. PMI’s “Mission Winnow” logo, the branding they use for their relationship with Ferrari, was removed from the team’s cars in Australia after it was deemed too close to the logo for Marlboro cigarettes. 

PMI said that “regrettably, we know that some may have preconceived ideas about us and have expressed reservations about what they feel are our true intentions”. 

However, Formula One also provides a venue at which the companies can entertain policymakers and corporate guests as well as invite social media influencers to be seen with e-cigarette products. 

“Sports events work quite well for them,” said Mr Chamberlain. “[Formula One] is fast, it’s sexy, it’s all about winning and those are messages with which they are trying to associate.” 

Mr Kingsley said BAT’s sponsorship deal with McLaren was aimed solely at promoting vaping products, rather than being a backdoor to promote traditional cigarettes. 

“[It was] only for the marketing and communication of our next-generation products,” he said. “They are nothing to do with our combustible portfolio, and never the twain shall meet.”

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