New Delhi: Hero MotoCorp Ltd (HMCL) is breaking away from cricket, having been a high-profile sponsor of events and teams associated with the game for more than two decades, and will form similar ties instead with other disciplines such as hockey, shooting and athletics, according to five people aware of the development.
India’s largest two-wheeler company and one of the country’s biggest advertisers has ended its ties with the Indian Premier League (IPL), the Mumbai Indians team that it’s a part of and all International Cricket Council events. Hero was the title sponsor of the Mumbai Indians IPL team. Some ties have been retained—Virender Sehwag is still a brand ambassador, down from eight cricketer ambassadors earlier.
As part of the shift, Hero has signed a four-year contract with the International Hockey Federation to sponsor all its events in the country. Hero is also the main sponsor for the Hockey India League, which concluded last week.
The move to cut ties with cricket is strategic, said one of the people cited above.
Hero is trying to stay ahead of changing tastes as viewers switch from cricket, which is the dominant television sport in India, to other games that are slowly gaining favour. This will allow it to stand out from the clutter and improve its appeal to rural buyers, it expects.
A large proportion of Hero’s sales has traditionally come from rural areas (46% in the last fiscal year), a segment it needs to hold on to amid competition from rivals—No. 2 and former joint venture partner Honda Motorcycles and Scooters India and No.3 Bajaj Auto Ltd.
Sponsoring cricket is also vastly more expensive, so breaking with the sport will allow companies to deploy their money elsewhere.
Branding experts are divided about the merits of Hero’s move.
Santosh Desai, chief executive of Futurebrands and former president of McCann-Erickson, describes the development as “an admirable move, perhaps not very wise”.
“It’s uncommon for companies to do this. You’d test waters before taking such a step,” said Desai. “You can have efficiency arguments related to advertising with cricket, but the size and reach of the game cannot be substituted.”
Hero will be able to sustain itself without cricket, said Anuja Chauhan, brand expert and author.
“Hero is a mammoth brand, and if there is a brand which can snap ties with cricket and still survive, it’ll have to be at the scale of Hero,” she said. “The cricket advertising space is definitely getting cluttered, so either you’re present there in a huge way or not present at all. At the same time, I feel this is a bigger loss for cricket than for Hero.”
The move, which will direct money to hitherto neglected disciplines, also reflects a change in what Indians are interested in, she said.
“Even if you look at movies, we’re moving away from the cliched cricket towards biopics on Milkha Singh, like Bhaag Milkha Bhaag,” Chauhan said. “I think Hero’s step is also in that direction.”
Cricket has been a mainstay for the company, with events ranging from the Hero Cup in 1993 to the India-England Test series of 2011, which was used as a launch pad for an advertising and brand-building exercise. That followed the end of a 27-year-long partnership with Honda Motor Co. and the demise of Hero Honda India Ltd, since renamed Hero MotoCorp.
A Mumbai Indians spokesperson said talks with sponsors are currently on and declined to comment further.
“Our decision not to renew our central contract with IPL and with IPL team Mumbai Indians does not in any way dilute our commitment to cricket as a sport,” a Hero spokesman said by email. “It is the most popular game in the country, and we will continue to remain associated with the game in various forms.”
IPL commissioner Rajeev Shukla didn’t respond to messages and phone calls. An email sent to a Hero spokesperson on Monday did not elicit any response.
Another senior IPL official said on condition of anonymity that Hero has broken its sponsorship ties with the tournament.
The move is part of a two-pronged strategy that involves tapping rural demand and brand differentiation, said a person familiar with the development.
Typically, a brand would spend Rs.60-70crore for an IPL sponsorship across various media, including Rs.35 crore spent on television alone. It would be about one-tenth of that for the Hockey India League.
In hockey, advertisement spending is Rs.5-6 crore with about Rs.1 crore allocated to television, according to Mona Jain, chief executive, Vivaki Exchange, a media buying firm.
Others said the move will help lower costs.
“To me, it appears to be a cost-cutting initiative,” said Mahantesh Sabarad, senior vice president, equity and research, Fortune Equity Brokers Pvt. Ltd, a Mumbai-based brokerage firm.
The company spends a high 3% of net sales on advertising, which includes promotion, marketing and branding, he said. This has risen from 2% of sales until the last fiscal due to new brand launches and changes in the product mix, Anil Dua, Hero’s senior vice president, marketing and sales, said on an analyst call last month.
Other expenses rose 28% to Rs.3,975 per vehicle in the December quarter from a year ago, said a 24 January Crisil research report.
“It is an essential item that they want to bring down or an attempt to reallocate funds in research and development activities,” Sabarad said.
Rural sales is projected to continue expanding, said Bhaumik Bhatia, analyst at Mumbai-based IDBI Capital Market Services Ltd. But since cricket is popular in rural areas as well as towns and cities, it will have to be seen how the move affects sales there, he said.
“Rising other expenses has been a worry, given that HMCL will need to incur these to sustain or build on volumes or prevent significant dip in volumes,” Bhatia said.
As for Hero’s plans to invest more aggressively in less popular sports, Desai of Futurebrands said companies don’t always put their money where their mouth is.
“It could be foolhardy. These sports are not ripe enough to be exploited for passive sponsorship,” he said. “It’s not developed enough to be profitable. Hero will have to go beyond investing in these sports to actually have an impact on consumers.”