HomeSponsorship & Marketing

Sponsorship Sector Profile: Energy Utilities

Has the energy sector’s love affair with sport peaked in the United Kingdom?

Five years ago, sport’s value as a communications tool for brands in the newly-deregulated energy sector was undisputed. In a period of intense competition between energy suppliers, sport sponsorship played an important role in terms of brand positioning and market share.

German energy company E.ON launched in the UK by partnering the FA Cup at £8m per year between 2006 and 2011, while the French provider EDF signed as the official partner and official electricity supplier of the London 2012 Olympic and Paralympic Games for £40m in 2007.

Of the deals that remain, British Gas’ commitment as principal partner to British Swimming lasts until 2015 at a reported £3m per year. Meanwhile, Swalec, owned by SSE (Scottish and Southern), and with one million customers in Wales, is title sponsor of Welsh rugby union’s league and cup competitions though 2015. Swalec is also in the fifth year of a 10-year partnership with Glamorgan Cricket, which includes naming rights to Swalec Stadium, while parent company SSE signed up as the Official Energy Supplier to Glasgow 2014 this summer.

These latter deals are not in the same league as those that have elapsed, so why the flight from big-time sports properties? According to Kevin Peake, who implemented npower’s sports strategy for 11 years before setting up the consultancy Asset Optimisation this year, the slowdown is to do with macro issues in the energy sector rather than a strategic shift.

“There is a lack of marketing activity across the whole industry,” says Peake. “Part of the reason is that profitability and margins are very low. Far from profiteering, the industry is in a period of consolidation and there is less difference between suppliers.

“Everything from advertising and marketing is affected by volatility in the power market. Sponsorship demands long-term commitment, but you can’t do that when you don’t know clearly what’s happening tomorrow. “

Intriguingly, his replacement at npower, director of customer marketing, Debbie Britton, has been mandated to “rebuild trust” in the npower brand following a series of above-inflation price hikes common to all energy brands over the last 18 months.

“In all the metrics, trust is one thing that sports sponsorship delivers. My view is that the problem is more at the reputational media level than consumer [trust] level,” says Peake.
But could there be more activity around the corner?

Peake says that the energy sector is readying for its next growth phase. “Smart metering will start en masse in 2014. It is the biggest infrastructure change in the UK with 28 million meters to be installed in people’s houses. Smart meters give you real time electricity useage and accurate billing. Sponsorship is a strong property in this sector – when we’re in the next phase, you’ll see that.”

The United Kingdom is far from alone in facing energy sector problems. In Germany, where four big utilities – RWE, E.ON, EnBW and Vattenfall Europe – share around 80 per cent of the market, there are similar media accusations of profiteering, but far less switching of providers among consumers.

This is partly because energy companies in the German market retain strong regional municipal stakeholdings, which encourage brand loyalty, reinforced by local football club and CSR projects.

“There was a period four or five years ago when brands were looking to build on a European, even global basis,“ says Peake. ”RWE was looking at sponsoring Williams F1, but there’s not that desire anymore. Recent legislation against German nuclear power hasn’t helped.”

Where foreign brands have entered the German market, however, sport has raised awareness. Berlin-based Gazprom Germania, for example, currently serves a modest 65,000 residential customers, but Germany is the largest foreign consumer of Russian gas and a premium market for Gazprom where the company pays great attention to its image. Gazprom’s shirt sponsorship of FC Shalke 04, “a club boasting deep-rooted football traditions” is part of that story. As a result, “Gazprom`s brand has become much more recognisable in Germany and the image of our company has much improved,” the company told Frontiers.

But Gazprom’s international CSR programme “Gazprom for Children” should not be underestimated. From 2007 to 2012 Gazprom allocated almost RUB 17.8bn ($570m) to the company’s largest social project.
 

Most recent

SportBusiness gathered a panel of experts at the All That Matters Online 2020 conference to discuss the challenges being faced in the sports media rights sector.

An upstart daily fantasy company with an unusual name and unconventional approach has quickly risen to prominence by challenging established market leaders DraftKings and FanDuel and striking a large series of team sponsorships.

ESPN is putting on major marketing effort to promote its new media-rights deal with German top flight league while also focusing on wider long-term content initiatives. Bob Williams reports

Liu Jiadi, partner, and Jeffrey Wilson, counsel, at Chinese law firm JunHe, explain the significance of new player image rights rules in the Chinese Basketball Association League.