Despite the controversy around Qatar hosting the World Cup, FIFA has reported earning a record breaking $7.5 billion through commercial arrangements tied to the current competition.
One such sponsor is Budweiser, who have reportedly paid $75 million to be the exclusive beer brand of the tournament. Whilst Qatar’s alcohol consumption is very heavily regulated, it was previously agreed that alcohol could be sold and consumed within the fan zones and in the stadia.
Well, that was the plan, until last Friday when they announced that no alcohol would be allowed in the stadia – except for corporate ticket holders.
So where does this leave Budweiser and their exclusive rights to sell beer during matches? We asked Nick Paszek, Senior Associate in our dispute resolution team for his thoughts on the matter.
“Alcohol is controlled in Qatar and so to sell beer at stalls within the stadia would have been an exception to the existing laws”, explains Nick.
“Now it appears that the exception has been withdrawn. The 11th hour nature of this change suggests a default by Qatar on likely contractual assurances given by Qatar to FIFA, which if this is the case, would have a knock on effect on the contracts between FIFA and Budweiser.
It may mean that FIFA will have breached their contract with Budweiser but it’s difficult to tell which party is more affected by this decision.”
Nick continues, “There is a reputational risk here for FIFA as they’ve potentially sold rights for something they’ve not delivered. Qatar who have been on the receiving end of a deluge of bad publicity come off even worse, as their position appears to have flip-flopped. Parties in a commercial relationship need certainty and credibility.”
Will there be any financial penalties for Qatar? It seems crazy to think that this is a new issue given that Qatar were awarded the competition 12 years ago.
“There will have been a lot of communication between Qatar, FIFA and the various sponsors prior to the final contracts being signed. It may be that alcohol sales in the Stadia was always at risk, in which case the parties may have agreed what the consequence of this last minute change would be,” says Nick.
“However if this was entirely unforeseen, Qatar will likely have to compensate FIFA for any losses FIFA suffers as a result. FIFA’s losses are likely to be any compensation it has to pay to Budweiser.”
Those loses, it could be argued, are huge. Not only does Budweiser miss out on beer sales at the stadia but the beer brand was ordered to move its beer stalls inside stadiums to more discreet locations. Budweiser have commented that their plans “cannot move forward due to circumstances beyond our control.”
Nick Continues, “Revenue from beer sales in the stadia will be a relatively small aspect of the contract that permits Budweiser to include World Cup trademarks on its packaging and in its advertising.”
“Global sponsorship of the World Cup generally results in increased beer consumption. For example during the last World Cup in Russia, Budweiser’s revenues grew by 4.1% globally and by 10.1% outside of the US. Given Qatar’s heavily regulated alcohol sales I doubt this market is a key one for Budweiser. Therefore, it’s the football fan watching around the world where Budweiser can be accessed easily that’s appealing to the beer brand.”
Budweiser, owned by AB Inbev, has a long-running partnership with FIFA that started with the 1986 World Cup in Mexico. Budweiser clearly consider this longstanding relationship to be valuable. Yes Budweiser have lost out to beer sales in the Stadia which perhaps aren’t that significant when set against the objective of brand awareness. In fact, the decision to not allow beer sales in the stadia has been reported globally and has resulted in news coverage that would not have happened otherwise. Some may say it’s actually done them a favour.
Nick concludes, “Budweiser appear to be the winners here. They are the aggrieved party and a financial settlement will probably be agreed. Budweiser are likely to have contractual remedies which could be enforced in whichever jurisdiction the parties chose but its more likely a commercial resolution will be reached between FIFA and Budweiser, maybe over a beer since Budweiser will have a few laying about now.”
Budweiser have already turned the situation from a PR nightmare into a marketers dream by tweeting a photo of all the surplus beer and promising that the winning country will get all of the beer. Now how ironic would that be if Qatar won?