Author|Liu Zhiheng
This season's NBA has come to an end, when we see more and more alcohol sponsorship on and off the court, or LeBron James and Damien Lillard holding wine glasses video link, promoting each other's investment in wine brands, we can find that the "spirits" business in the NBA world is getting bigger and bigger.
According to the latest report from sports sponsorship platform SponsorUnited, the NBA's 2022-23 team sponsorship revenue reached $1.4 billion, an increase of $100 million or 10.5% over last season, accumulating more than 2,700 brands in the league, with an average of 76 sponsorship revenues per team.
According to SponsorUnited, the top five most active categories for NBA regular-season sponsorship are: alcohol, finance, technology, automobiles and non-alcoholic beverages, with alcohol sponsorship growing to $79 million, up 3 percent from the same period last year. Michelob Ultra, Budweiser and Hennessy are among the top three in alcohol sponsorships, with sponsorship deals with the league and several teams; Meanwhile, emerging brands such as Bud Light Seltzer, Sire Spirits and Cutwater Spirits are also ramping up their sponsorship of the NBA. Currently, 66 percent of NBA teams have Tequila sponsorship, including Astral, Casa Noble and Herradura, who have signed NBA teams this season.
Why wine?
Data analytics firm GlobalData believes that since alcohol is an important part of sports consumption, sponsoring sports events provides a way for alcohol brands to directly reach consumers and ultimately drive sales growth. Beer and sportsmanship have a natural fit and association, and major beer brands are also keen to lock in sports for a long time, such as Budweiser's sponsorship of the FIFA World Cup, Super Bowl, Heineken's sponsorship of the Champions League, etc.
Spirits and sports seem to lack this natural connection compared to beer, so why are spirits increasing their sponsorship of the NBA? On the one hand, spirits need to find ways to embrace young people and attract a new generation of consumers, so sports has become an important area for the spirits industry to expand its marketing links in recent years. With the help of the NBA, spirits have achieved brand value recognition and consumer mental occupation, taking a solid step to open up sales channels for them.
Why do brands such as Budweiser, Heineken, and Hennessy already have high recognition and increase their sponsorship of sports? Statistically, the preference for alcohol among young people who follow sports is actually declining. Sponsored United made statistics on the sponsor searches of the five major North American professional sports leagues in 2021, and there is only one alcoholic beverage brand in the top 50 brands, and the top brands can see brands closely related to health, such as Hyperice, Therabody, and Whoop, so alcohol brands must continue to fight for the right to speak in the sports market in order to stabilize the new generation of consumers.
On the other hand, despite the weak macroeconomic outlook, it has not affected the overall sales volume of the spirits market, and the epidemic has promoted the development of spirits in the e-commerce channel. According to the latest IWSR survey, e-commerce sales are expected to contribute more than $10 billion in additional revenue in 16 major alcohol consumption markets from 2021 to 2026, reaching nearly $40 billion by 2026. This gives spirits brands more confidence to come up with more money for marketing and promotion.
The outlook for the spirits market is positive
According to data from Statista, the total revenue of the global spirits market is expected to reach $525.3 billion in 2023, and from this year to 2027, the revenue of the spirits market is expected to maintain an average annual compound growth rate of 4.56%. In addition to Chinese liquor, spirits include brandy, whiskey, vodka, gin, rum and tequila, which are commonly referred to as the world's top seven spirits categories.
Each spirits segment is also expected to grow in 2023, and Statista's data also shows that the total global sales of brandy, whiskey, vodka and rum are expected to reach $62.44 billion, $88.07 billion, $46.61 billion and $15.87 billion, respectively, and their market size is expected to grow at a compound annual growth rate of about 5% until 2027, and the largest market for the above four spirits is in the United States.
Although the pandemic has restricted the movement of consumers, it has not closed the spirits market. The pandemic has affected entire business management systems, from supply chains to e-commerce, and alcohol brands have begun to use social media platforms to broaden their sales channels. The pandemic has led to a large influx of active offline buyers, and online sales of liquor stores and spirits have surged despite a significant drop in sales in bars and restaurants due to the convenience offered by online channels. According to Modor Intelligence, Barret Liquors (liquor stores) in Kentucky, USA, saw sales soar by 30-40% in 2020 as the pandemic spread. In 2020, e-commerce sales in 16 key alcohol markets increased by more than 40%, compared to 12% in 2019 and 16% in 2021. In the coming years, as the market enters a normal post-pandemic period, the growth rate of alcohol e-commerce channels will slow down, but the overall trend is still rising.
Owner star and entry
In recent years, the rise of alcohol brands in the NBA sponsorship category has also attracted the investment interest of many industry celebrities, and many team owners and players have begun to invest in alcohol brands, such as Michael Jordan's Cincoro, LeBron James' Lobos 1707 and Stephen Curry's recently launched Gentleman's Cut Bourbon, etc., Yao Ming even released his own Yao Family Wines many years ago. It is worth noting that these NBA owners and stars basically create high-end wine brands. Tequila, for example, is priced at more than $45 per bottle, and the brands James and Jordan invested in are priced above that.
Today's consumers' palates are more complex than those of older generations, who are constantly seeking to explore unique, high-quality alcoholic beverages. The addition of natural ingredients to alcoholic beverages can improve their functionality, and such products are widely concerned by consumers. Increasing health awareness and the promotion of natural ingredients provide greater opportunities for the premium wine market.
Back in 2016, inside a pizzeria in Manhattan, Hornets owner Michael Jordan was preparing to have dinner with four NBA team owners: Emilia Fazarari and Vic Grossbeck of the Celtics, Jenny Buss of the Lakers and Wes Edens of the Bucks. At the dinner table, the five people suddenly began to enthusiastically discuss the tequila on the table, which led to the idea of creating a tequila brand. In 2019, five NBA owners founded the agave brand Cincoro, which later became the official sponsor of the Los Angeles Lakers.
Cincoro's idea came at a time, as the U.S., the world's largest market for tequila, sold about 18.3 million cases in 2018 (the year before its creation), accounting for 56% of global consumption. In addition, whiskey and agave in the United States have the strongest growth momentum, with CAGRs expected to grow at 16% and 30%, respectively, from 2021 to 2026, according to consulting firm IWSR. Demand for the premium tequila market in the U.S. is also growing rapidly — up 19 percent annually since 2013 — so Cincoro's prospects are bright.
Cincoro, one of the world's most expensive tequila brands, retails for $130 for its añejo and Jordan's favorite new line, Extra Añejo, for up to $1,600 a bottle. Five NBA owners won't say whether they plan to build their own distillery, but they have invested millions of dollars in the company. The largest region in the spirits market in 2022 will continue to be Asia-Pacific, with North America being the second largest market. If they want to expand into Asia, they need to invest at least another $10 million. Fazarari said this is within their plans and they can choose to invest themselves or bring in other partners.
At the 2022 San Francisco Tequila Contest, a wine that beat five NBA owners Tincoro and a number of brands to win the championship was Lobos 1707, a tequila brand invested by LeBron James in conjunction with Anthony Davis and Drummond Green. Compared to the Cincoro, the Lobos 1707 is less expensive, ranging from $49 to $159. Recently, the Lobos 1707 launched a limited edition Añejo, which sold only 9,000 bottles for $99. James also made a special promise that if the investment was successful, he would give each partner $1 million.
Unlike Jordan and James, Curry sees a good time to enter the whiskey game. In May, Curry announced the launch of Gentleman's Cut Kentucky Straight Bourbon, a premium aged bourbon that will soon be available globally for $79.99 per bottle. With the rapid growth of the cocktail market, the increasing demand for premium whiskey is a key factor driving the growth of the US whiskey market. U.S. demand for whiskey such as bourbon, Tennessee and rye is growing significantly.
When more and more alcohol brands enter the sports marketing market, even if alcohol sports marketing faces certain restrictions, the market space still exists, and the key lies in the judgment of alcohol brands on new market trends. With the NBA's Collective Bargaining Agreement easing restrictions on player endorsement of alcohol brands, and recent news that NFL Seahawks wide receiver Taylor Lockett sponsors his team, more NBA players are expected to get involved in the alcohol business if that can be realized in the NBA in the future.