Heineken stung over NZ's dumping as Cup subhost

By Nick Smith

Friday 12th September 2003

Heineken's brand-building plans were shot down when New Zealand lost its Rugby World Cup subhosting rights causing the brewer to seek a refund on its $7 million sponsorship.

Heineken, brewed in New Zealand under licence by DB Breweries, was not the only major sponsor aggrieved by the decision last year to strip the union of World Cup games.

But the beer brand giant was one of the few whose plans to commercially leverage its sponsorship were directly affected by New Zealand's loss.

It had hoped to use the tournament as a platform to build its brand in New Zealand, it was revealed in a report into the commercial operation of rugby union's showpiece event and published by Sportcal Global Communications.

But Heineken had to revise its World Cup marketing strategy when the International Rugby Board (IRB) stripped New Zealand of its subhosting rights last year.

Heineken at one stage threatened to demand a rebate on its multimillion-dollar agreement, as did TVNZ, which spent about $20 million for the 1999 and 2003 tournaments.

TVNZ, under chief executive Ian Fraser, sought a $5.2 million rebate but in the end wrote off that amount in its accounts last year.

"Although TVNZ's contract with Rugby World Cup contained no specification regarding where the tournaments took place, [Mr] Fraser claimed the broadcaster had a moral claim for a rebate," the report says.

In the end, Rugby World Cup declined to renegotiate the contract, while Heineken also abandoned its efforts for a rebate.

The Rugby World Cup report also reveals that Adidas pays the New Zealand Rugby Union about $30 million a year for sponsorship rights, an agreement extended late last year for seven years to 2011.

Combined with the Newscorp deal, worth about $US550 million for 10 years when signed in 1995, the union gets about $130 million a year from its principal sponsorships alone.

Broadcasting rights and sponsorship will also be a bonanza for the IRB during the World Cup. The 1999 tournament resulted in revenue of $US100 million, while profit increased 168%, to $US75.7 million, compared with the 1995 event hosted in South Africa.

Sponsorship revenue is expected to rise 60% to nearly $US60 million, while income from hospitality will rise to $US58.5 million nearly double the 1999 amount.

All of which starkly illustrates the economic cost of losing subhosting rights to the world's third-biggest sporting event, in terms of global television audience and match attendance.

An independent review conducted by former chief justice Sir Thomas Eichelbaum into New Zealand's handling of its World Cup duties found board and executive level mismanagement and incompetence, costing the country an expected $100 million windfall.

In contrast, Australia Rugby Union chief executive John O'Neill managed to renegotiate the $A45 million cap on profit after strong ticket sales, its main source of income.

The Australian union estimates ticket revenue will be $A192 million and under the new deal will be able to pocket the first $US31 million in profit, with revenue about this level split 70:30 in the IRB's favour.

The report publisher, Sportcal Global Communications, operates the leading business-to-business website for sport, Sportcal.com.

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