World Cups present possible financial ruin for companies seeking to make a quick buck

The FIFA 2010 Soccer World Cup has presented unprecedented opportunities to increase revenue for businesses and bolster the economy. However, there are some crucial issues which businesses need to take into account before investing capital into sporting World Cup based ventures, explains Andy Bryant, Director of Chester Finance, providers of trade finance. 

South Africa is only one of a handful of countries, and the only country in Africa, that will have hosted the Soccer, Rugby and Cricket World Cups within the past 15 years, which have each brought growth opportunities and financial injections onto the economy. Trade Finance has played a key role in assisting companies in securing stock in order to capitalise from increased trade, yet pitfalls exist that companies should be wary of.  

“One of the burning questions for many people would be what the hot products are to promote during sporting and other large ad-hoc events,” says Bryant, who goes on to explain that though no clear cut trends have identified themselves as of yet, there are a few items that are gaining popularity. “Cell and smart phones seem to be gaining in popularity. Clothing is always extremely popular for sporting events, especially for World Cups and ceramic goods and printing related products are also attracting interest.”

“However, the main winners may not be products but services in the form of tourism, accommodation, logistics, security, HR in the form of people and insurance. This, and of course the infrastructure and facility upgrades. The FIFA 2010 World Cup for example will build an awareness of South Africa in the business environment, which may lead to second stage trade in the form of people visiting South Africa, meeting our business people and seeing opportunities perhaps for new products and brands to be introduced to South Africa,” says Bryant.  The world-class facilities that have been built and the infrastructure that has been developed will also lend itself to future large scale sporting and other trade and related events.

“Companies need to be careful however not to end up with stock that won’t move,” warns Bryant. “Businesses need to be aware of the licensing, branding, display or distribution requirements of products such as those imposed by FIFA.” Some South African companies, both large and small have fallen foul of FIFA regulations already. Issues like stadium zones, such as the 1 mile around the stadiums, and ambush marketing regulations, all come into play.

“It’s important to consider whether a product has a life expectancy beyond once-off events such as the upcoming World Cup and not to saddle a business with goods that are not movable after the event.” A prime example of this is when the Proteas failed to make it to the Super 6 stages of the 2003 Cricket World Cup in South Africa and demand for South African World Cup goods declined sharply.

"Further, companies that produce unofficial World Cup branded stock run the risk of having their stock being confiscated, as with the recent incident where over ZAR46-million worth of allegedly fake World Cup merchandise was seized by customs authorities.”

“Smaller businesses should look towards obtaining confirmed orders for a large portion of the product they are considering procuring and to be realistic with sales expectations on products linked to specific events.  The larger retail giants are much better off, as they have access to funding and the muscle to negotiate prices with suppliers. Furthermore they have the extensive distribution channels to move their product during the World Cup as well as the means to rid themselves of event specific product after the party has ended, they do this through bundling products, running promotions or using them as giveaways and so forth,”  says Bryant.

Bryant feels that events such as the World Cup present definite opportunities for entrepreneurs.  “By applying local knowledge with trade expertise, companies can use access to trade finance, together with the once in a lifetime opportunity of the World Cup, to grow and stretch their business, allowing them to earn extraordinary profit which could then be reinvested into longer term business growth objectives.”

“It is important though to keep in mind not to go for an ‘all or nothing approach’, but to find products that can still move after a specific event is over.” By staying with the products that they’re familiar with, businesses stand a greater chance of success, instead of a hit and miss approach with a new gimmick.  “It’s also necessary to think out of the box, and not only see a once-off event as a money generating venture, but also a learning, meeting, networking and developing opportunity through the interactions far beyond the event itself,” concludes Bryant.