On November 18, days before the FIFA World Cup Qatar 2022 was due to start, Anheuser-Busch InBev (the owner of Budweiser, a World Cup sponsor since 1985) was dealt an unexpected yellow card: FIFA issued a statement that appeared to renege on certain terms of their $75 million (£63 million) commercial sponsorship agreement.
Budweiser and FIFA had agreed to a commercial sponsorship deal that, in addition to the ubiquitous logos and banner advertisements we expect to see in sports tournaments, included an exclusivity arrangement for Budweiser to sell alcoholic beer in the eight stadiums participating in the World Cup in Qatar this year. However, just two days before the global tournament began, following discussions with the Qatari government, FIFA announced that no alcohol would be available at any of the stadiums, other than in corporate suites.
There will be unavoidable financial consequences for Budweiser, the severity of which will depend on a number of commercial, logistical, and contractual factors, including whether the contract anticipated a change in policy of this nature. Some of the considerations include
- how revenue was structured under the commercial agreement;
- what, if anything, Budweiser can do with the surplus stock already in Qatar (is the announcement that Budweiser will gift the beer to the winning team to be believed?);
- how quickly Budweiser can increase the locally held stock of nonalcoholic beer;
- whether Budweiser will raise a dispute for breach of contract; and
- what compensation might be negotiated with FIFA.
While not a completely dry country, Qatar’s alcohol sales and consumption were already strictly regulated. For many observers, both local and from nearby Gulf and Asian countries, the consumption of alcohol at this year’s World Cup at levels seen at previous World Cups may have proved a shock.
As global sporting events, including the World Cup and Formula One races, become increasingly geo-diversified, cultural and geopolitical issues of this nature may become more prevalent. Potential sponsors will need to mitigate the risk of last-minute changes in local policy by setting out clear contractual remedies in their sponsorship agreements. It is unlikely that most boilerplate force majeure or change-in-law provisions will be drafted to explicitly anticipate sudden and dramatic changes of this nature.
Global sporting events bring a matrix of new and existing sponsors, sporting governing bodies, and local and national governments that potential sponsors will need to navigate. This is something that sponsors of the World Cup US-Canada-Mexico 2026 and the LA Olympics 2028 will need to be ready for.
Legal commenters will be watching this space closely to see if Budweiser takes any legal action against FIFA. However, in the short term, it is clear there is still value in the sponsorship agreement for Budweiser. In addition to its branding being displayed throughout the tournament, which helps drive sales in other countries, Budweiser will continue to sell both alcoholic and nonalcoholic beers at FIFA Fan Festival areas and other licensed venues.
Moreover, Budweiser’s response on social media has garnered extraordinary publicity outside of the tournament. The brand’s continued quick wit on social media has generated a legion of fans, showing that you truly can make the best out of a (potentially) bad deal.