IEG SPONSORSHIP REPORT June 7, 2010 800/834-4850 | www.IEGSR.com WHO DOES WHAT Direct Sellers Sign Wide Variety Of New Deals Multilevel marketers promote both corporate and brand names; nutritional and beauty products are primarily involved. Sponsorship activity on behalf of companies in the direct selling category shows no signs of slowing down, as evidenced by a batch of new partnerships both in the U.S. and internationally on behalf of either corporate brands or specific products. On the international front, Herbalife Ltd. last week announced a three-year, multimillion-dollar partnership with FC Barcelona and an endorsement deal with soccer star Lionel Messi. Those deals follow recent club sponsorships with Brazil’s Santos FC and Mexico’s Club Universidad Nacional A.C. (Pumas de la UNAM). In addition, Stockholm-based multilevel marketer Oriflame Cosmetics AB recently came on board as the official cosmetics partner of the Sony Ericsson WTA Tour in a deal starting in ’11. The two-year partnership affords a presence at 26 WTA Tour events in Africa, Europe and elsewhere, but does not include the U.S. Domestically, Amway Int’l, Inc. earlier this year signed a two-year deal with the Miss America Organization on behalf of its Artistry skin care and cosmetics line, while New York City-based Avon Products, Inc. recently came on board as the exclusive fragrance and cosmetics sponsor of the Black Eyed Peas’ The E.N.D. World Tour presented by Blackberry. Avon is using the tour sponsorship to support a new endorsement deal with Black Eyed Peas frontwoman Fergie and collaboration with her on a new fragrance. Those companies and other direct sellers are increasingly using sponsorship to build their brands and gain credibility with current and prospective individual distributors and their customers. Those efforts are driven in part by the growing popularity of direct sales among job seekers looking for new employment opportunities. The number of individuals representing direct sales companies in the U.S. totaled 15.1 million in ’08, up from 13.6 million in ’04, according to the Direct Selling Assn. Internationally, the DSA says 66 million people are involved in direct sales. Below, IEG SR breaks down the sponsorship strategies and activation tactics at three of the industry’s most active sponsors. © 2010 IEG, LLC. All rights reserved. 1 IEG SPONSORSHIP REPORT Amway Int’l, Inc. 7575 Fulton St. East Ada, MI 49355 Gary Mougalian, marketing director, Amway Global 616/787-6000 Strategy: World’s second-largest* direct seller launched a new U.S. sponsorship strategy in ’08 to reintroduce the Amway Global (“Amway Calls On Properties To Help Re-establish Brand, Update Image,” 7/28/08) brand after phasing out the Quixtar name it had used in North America for nearly a decade. “We didn’t use the Amway brand for nine years, and it was important to reintroduce the brand to the public,” Mougalian said. “We’ve been using sponsorship more prominently ever since.” In addition, the company uses sponsorship to tout two core product brands: Nutrilite health supplements and Artistry beauty products. Typically looks for prominent exposure—such as branding on San Jose Earthquakes jerseys—and the opportunity to support philanthropic outreach efforts, such as the Earthquakes’ Kicks for Kids program at schools in underprivileged communities. Partnered with Women’s Professional Soccer’s FC Gold Pride this year after the WPS Los Angeles Sol folded; Amway followed former four-time reigning FIFA World Player and former Sol star Marta to the Bay Area team. Current Deals: Amway: Title: Amway Arena/Amway Center, Orlando, Fla. Presenting: MLS San Jose Earthquakes; WPS FC Gold Pride. Cosponsor: NBA Orlando Magic. Artistry: Miss American Organization. Nutrilite: Rock ‘n’ Roll Marathon Series. Additional Comments: Amway Arena, home of the NBA Magic, will be replaced with new Amway Center, opening in October. Company struck a multiyear deal in late ’09 to sponsor practice jerseys for the Magic; Amway co-founder Richard DeVos and family own the team. Determines success by measuring event attendance, sponsorship awareness and changes in brand perception. “We can’t tie sponsorship directly to sales, which makes it difficult to measure. As long as we are consistent with our values and vision, we know we have a positive impact on our business,” Mougalian said. Activates Miss America and Rock ‘n’ Roll Marathon Series with on-site experiential marketing programs. Herbalife Ltd. 800 West Olympic Blvd. Suite 406 Los Angeles CA 90015. Rob Levy, senior vice president, worldwide sales and marketing 310/410-9600 Strategy: World’s sixth-largest seller uses sponsorship to accomplish four primary goals: Promote product purchase; gain sampling and other business-building opportunities for distributors; build exposure for the Herbalife brand and support the company’s community outreach efforts. Focuses on soccer and other international properties to build its presence outside the U.S., where it conducts 80 percent of its business. “We’re associated with the top one or two soccer teams in the world, and one of the top players in the world. That gets our distributors excited and gives them an opportunity to talk about the company,” said Levy, referring to the new FC Barcelona tie. Distributors manage on-site sampling programs. Looks for prominent branding such as exposure on player jerseys, as well as product use by sponsored organizations. Current Deals: Title/Primary: MLS Los Angeles Galaxy; Sam Schmidt Motorsports/Chip Ganassi Racing Izod IndyCar Series team, Indianapolis 500. Presenting: Kaiser Permanente Los Angeles Triathlon. Cosponsor: Amgen Tour of California; AYSO; Chinese Cycling Assn.; Club Deportivo Universidad San Martín de Porres, soccer team, Peru; FC Barcelona; FIVB World Grand Prix volleyball; HC Plzen, hockey team, Czech Republic; Holmenkol Staffeten and Knarvikmila running events, Norway; Inter Milan FC, soccer team, Italy; K.R. Basket Reykjavik, basketball team, Iceland; KV Mechelen, soccer club, Belgium; Lyngby Boldklub, soccer team, Denmark; Montepaschi Siena, basketball team, Italy; Moscow Marathon; Nautica Malibu Triathlon presented by Toyota; RC Strasbourg, soccer team, France; Santos FC; SBV Excelsior, soccer team, Netherlands; Universidad © 2010 IEG, LLC. All rights reserved. 2 IEG SPONSORSHIP REPORT Nacional A.C. (Pumas de la UNAM); Valencia CF, soccer team, Spain; XL Triathlon, Gerardmer, France. Additional Comments: Herbalife was drawn to FC Barcelona and Messi in part because of the team’s and player’s chartable outreach efforts; the company will support those efforts through the Herbalife Family Foundation, Levy said. Activated AYSO by developing a video in which doctors discuss the importance of healthy active lifestyles; the video is not branded under the Herbalife moniker, Levy added. Roughly 300 employees, distributors and suppliers participate in the Kaiser Permanente Los Angeles Triathlon. Usana Health Sciences, Inc. 3828 W. Parkway Blvd. Salt Lake City, UT 84120 Dan Macuga, vice president of marketing & public relations 801/954-7100 Strategy: Usana, the world’s 31st largest direct seller, uses sponsorship to build credibility and generate excitement among distributors and customers. The company recently expanded its portfolio with a tie to the ECHL Utah Grizzlies and is negotiating additional deals with other teams and athletes, Macuga said. Looks to provide vitamins and nutritional supplements to athletes on sponsored teams to demonstrate the effectiveness of its products. For example, Usana- sponsored athletes won 22 gold medals at the Vancouver Olympic Games, he said. “People want to know what they are doing to obtain that success,” added Macuga, who says has since fielded numerous calls from athletes and teams looking for similar partnerships. Current Deals: Title: Usana Amphitheatre, Salt Lake City. Cosponsor: Biathlon Canada; C.F. Pachuca, soccer team, Mexico; Cross Country Canada; ECHL Utah Grizzles; National Ice Skating Assn. of Great Britain short track speed skating team; Sony Ericsson WTA Tour; Speed Skating Canada; U.S. Luge Assn.; U.S. Speedskating. Additional Comments: Usana launched its sponsorship initiative in ’02 with a tie to the U.S. Speedskating team at the Salt Lake City Olympic Games; the company was later approached by other national governing bodies based on the team’s gold medal performances, Macuga said. Usana touts its sponsorships through a bimonthly magazine, as well as through social media outlets. For example, the company used Twitter to update distributors on the performance of its athletes in Vancouver. “We found social media to be extremely effective,” he said. *2010 ranking by Direct Selling News © 2010 IEG, LLC. All rights reserved. 3 IEG SPONSORSHIP REPORT June 7, 2010 800/834-4850 | www.IEGSR.com Cause MARKETING Signs Point To Higher Scrutiny of Nonprofit Sponsorships By IRS Nonprofits should pay attention to IRS developments and continue best practices related to managing and reporting sponsorship income The Internal Revenue Service may be preparing to revisit whether certain types of nonprofit sponsorship revenue should be considered taxable unrelated business income. While the IRS has taken no definitive steps in that direction, experts say nonprofit organizations and their corporate partners should be alert to the possibility of a review of the safe harbor for some sponsorship benefits and, more immediately, be aware of the government’s recent heightened scrutiny of sponsorship activity. Marcus Owens, an attorney