It has been barely a year since the group decided to focus its branding efforts on sports and sports related events. Its first acquisition was a minority stake in Atletico De Kolkata and as part of its branding exercise, the group brought football legend Pele to Kolkata early this year. It plans to go pan India with branded merchandise in 2016 and engage more deeply with fans via digital media, the company has said on numerous occasions.
Acquiring the Pune franchise of the Indian Premier League through its 51 per cent step down subsidiary, New Rising, is a step in the same direction. Goenka is expected to pay Rs 10 crore a year to the BCCI for the franchise. Another company to acquire a team this year was Intex, owned by Keshav Bansal; he is expected to pay Rs 16 crore a year to the BCCI.
Sports has been used a branding tool by many companies. It helps companies cut through regional and national identities and it is usually undertaken with a view to establish a global character. Different companies do it differently; some buy a team, some sponsor tournaments and some acquire a sporting icon as a brand endorser as the Tata group has recently done with Lionel Messi. The aim is to reach out to a wider circle of customers and build an association that goes beyond the transactional relationship that exists between a buyer and a product.
However, there are challenges to such an approach. As Goenka discovered, owning a listed company can be tricky. The organisation comes under greater scrutiny and stock starts reacting to the perceptions of the market.
As the news of him entering the IPL bandwagon spread, the CESC's scrip took a beating.
Investors had reason to worry. It was clear that the franchisee will not make any profit in a two year window and would instead burn cash. "It's pertinent to note that high costs have been the undoing of few IPL franchisees, there could be an impact of Rs 1.2 billion over the company's cash flows in two years," said an analyst with the market research firm Motilal Oswal.
Sanjiv Goenka on his part has done his calculations thoroughly. The businessman, in an interaction with this newspaper, explained, "As a group we always have a marketing
budget ready for media blitz, there can be no bigger platform than the IPL to show our brand identity on a national scale, it was a simple, conscious decision which was taken on commercial merit." An executive with a large consumer durables major, who was also eyeing the Pune franchisee, but lost out in the bidding process, agrees with his sentiment. "It definitely helps in grabbing eyeballs towards the parent company, consumers start associating with the brand," he said
Grabbing eyeballs is important for Goenka as the group is undergoing a massive transformation process. Spencers Retail, the group's retail arm has recently forayed into e-commerce and aims to turn the business profitable and go public. Goenka is also close to acquiring a media business by the end of January. And Saregama, the group's entertainment content arm is trying to reinvent itself in the new world of digital music. Clearly there is a need to establish the brand on a national scale and go beyond the confines of the product and geographical boundaries of the business.
"It could be a pre-IPO branding exercise for Spencer's," Goenka said. The intent was clear in the way the group bid aggressively in the player's draft process. The franchise spent Rs 39 crore to pick up MS Dhoni, the highest valued player along with Ravichandran Ashwin, a marquee player of the national team. The hope is that the brand, through the players will find an easy recall among their fans.
"Nothing can be compared in terms of visibility with the IPL, it will be immensely beneficial to the group's consumer oriented brand like Spencers and they now have some high profile players in their squad who will also endorse their brand," said Varun Gupta, MD, American Appraisal.
With cricket and football in its branding kit, the next step for the group could be expanding into other sports or deepening the association with the two. Goenka said that he on his part is aiming for a bigger pie of the sporting business. "With opportunities in other sports, we will definitely look for more such properties," he said.