IPL sells title rights to PepsiCo for $71m

Global beverage giant PepsiCo has bagged the IPL title sponsorship rights for the next five years (2013-17) for Rs 396.8 crore ($71.77 million approx), almost double the original title sponsorship deal done in 2008. Along with PepsiCo, the only other contender for the title sponsorships rights was Airtel, an Indian telecommunications company, who bid Rs 316 crore ($57.27 million approx). For the next five years the tournament is to be called Pepsi-IPL.

In 2008, DLF, Indian's biggest real estate company, had paid a sum of Rs 200 crore ($36.25 million approx), to own title rights for the first five years (2008-12) of the tournament. But in August DLF decided not to renew its contract, forcing the BCCI to issue a new tender. The BCCI had set Rs 300 crore as the base price for the title sponsorship.

"So far our record of selling various properties of IPL has been very good," IPL governing council chairman Rajiv Shukla said after a meeting of BCCI's marketing committee in Mumbai. "We have doubled, tripled or quadrupled the amount while selling some of the properties," Shukla said. Gautham Mukkavilli, CEO, Beverages, PepsiCo India region, said that in a country where "cricket was a religion," the IPL had become the "most revered temple where the faithful flock to."

The news of the new title sponsorship was approved of by the IPL franchises, who believe the Pepsi deal will have a positive effect on their own businesses. Raghu Iyer, the chief financial officer at Rajasthan Royals, said the new title sponsorship will, "ignite the market" for the franchises. "It is absolutely double the value. What was expected was one-half-times what DLF paid, but these guys have paid something like 80-crore mark (per year)… IPL needed this kind of positive reinstatement from a global brand like Pepsi."

Venky Mysore, the CEO of Kolkata Knight Riders, said the title sponsorship would add "tremendous value" to both the league as well as the global beverage brand. "It is terrific news that they have come on board. Pepsi would have done their homework. They know their numbers and they would have clearly seen some value," Mysore said.

According to Mysore the value addition and the returns on Pepsi's investment would be manifold. "There are analytical models that we also use to show our brands who are associated with our franchise in terms on what their return on investment is. Leave aside the fact that it is an association with a marquee product (IPL) and the synergies that brings, if you look at just pure advertisement value and the kind of the exposure that happens leading upto the IPL, during the IPL and then the rub-off effect of it continuing on, there is a very clear way of calculating what the value of that exposure is. That is how you calculate the return on investment. Pepsi would get at least five times the exposure it would normally get," Mysore said.

After DLF let the deadline of July 28 (meant for the renewal of the title sponsorship contract) pass, speculation grew about whether the value of the IPL as a brand was shrinking. The timing of that news coincided with the controversy surrounding the Deccan Chargers franchise. According to TAM Sports, a division of TAM Research, one of the leading television ratings agencies, the overall tournament rating for the fifth IPL was 3.45, compared to 3.51 the previous year - far from the TVR of 5.51 reached in 2010. The telecommunications pair of Airtel and Nokia had decided to not renew their annual title sponsorship of the Champions League Twenty20, adding weight to the growing perception that the IPL was no longer a valuable property.

The new title sponsorship with Pepsi silenced those doubts. According to a senior official from a different franchise, who did not want to be identified, despite all the negative colours IPL had been painted in, the league has always achieved what it wanted. "People have spoken negative about IPL but in the end everybody has paid the money which we have always asked for. We have never had problems at getting sponsors at our price. I will get it even in future. People will still talk so it is best we keep quiet," the official said. "Pepsi will not put in money unless they are sure about their numbers, isn't it? They are putting hardcore cash. Pepsi operates not only in India. It is a global giant and they would have done their studies," the official pointed out.