Depending on the category, offering on-site sales rights to sponsors can be a relatively straightforward arrangement–offering event or venue real estate from which a sponsor can sell directly–or a complicated transaction involving third-party concessionaires, royalties and commissions.

Regardless of whether properties have deals of either type–or both–there are constantly new twists to on-site sales that sponsorship marketers should stay on top of in order to maximize their ability to offer such rights.

Below, IEG SR examines some new wrinkles effecting a sponsorship mainstay–beverage pouring rights–and also looks at some of the latest ways that sponsors in other categories are integrating on-site sales into their partnerships.

Better Balancing Act Between Sponsors And Concessionaires
Historically, there has been tension between sponsors with sales rights and the third-party concessionaires that they had to sell through at many properties.

As recently as five years ago, food, soft drink and beer sponsors routinely marked up the products they sold to concessionaires, a practice they justified by pointing to the higher than average retail prices the concessionaires charged fans.

“Like a lot of people, sponsors and properties both assumed that the concessions were making a fortune,” said Chris Bigelow, president of The Bigelow Cos., a foodservice management consultancy. “They didn’t realize the prices are the way they are because there are a lot of hidden costs.”

The result was disgruntled concession operators, who often would complain to the property only to be told to grin and bear the mark-ups, Bigelow said.

Over the past few years, properties–particularly pro sports teams–have gained a better understanding of the concessionaires’ business and cost-structure, in many cases because they have moved from being tenants to owners of their host venues. In turn, they have done a better job of working with food and beverage sponsors to structure agreements that are fair to everyone, Bigelow said.

Properties now are taking care to insert language that requires street pricing–i.e., no mark-ups–into the food sales and pouring rights clauses of their sponsorship contracts.

“You need to make sure a sponsor is not inflating the wholesale price to you in an effort to try to make money from the sponsorship,” said Howard Freeman, president of Promo 1, which produces festivals and music events including the Quick Chek New Jersey Festival of Ballooning. “Events have to pass on that additional fee, which will hurt consumers, and subsequently the event, over the long run.”

Freeman ensures that his concessionaries are paying no more for sponsor products than the prices paid by Quick Chek and other c-stores that sponsor his events.

Beverage Sponsors Offer Premium For Switch To Bottles
Another vending related issue is having a direct effect on the fees beverage companies are willing to pay for pouring rights. Some companies are dangling additional rights fee dollars if properties eliminate fountain service and convert their concessions exclusively to bottled offerings.

Beverage companies want to make the switch because they earn higher profit margins on bottles and because pre-packaged products offer more points-of-sale because there is no need for the heavy equipment associated with running a fountain stand.

“I have heard of cases where companies are offering as much as 50 percent over and above the proposed rights fee,” Bigelow said. “There is no other incentive for the property to do it except for extra sponsorship dollars.”

Concessionaires are resistant to the change because they have to pay more for bottles. In addition, moving to all-bottle service can be a logistical nightmare for venues that do not have the space required to store large numbers of containers.

Such drawbacks have been enough to keep some venue operators from taking the beverage companies’ bait. Two years ago, Rose Bowl Stadium turned down a “significant” cash incentive from sponsor Coca-Cola Bottling of Los Angeles to convert to all-bottles because of a lack of storage room, said Darryl Dunn, the facility’s general manager.

A deal including fountain drinks was consummated, but not before an aggressive sales effort that left Dunn understanding the clear message: “It’s bottles or bust.”

Sellers Get Creative To Increase Value Of On-site Rights
Sellers who have closed on-site sales sponsorships recently say that pitching such deals today is about providing the sponsor with an increased number of distribution points, making those vending locations as inviting and unique as possible, and providing turnkey promotional activities to drive on-site sales.

The more point-of-sale opportunities generated, the more the likelihood of making a sale increases, said Chris Pepe, vice president for sponsorship sales agency Premier Partnerships, Inc.

“This is an area where sellers have to get creative about who they can attract and how they can integrate the prospect into the venue,” Pepe said. “We find that generating ideas for on-site integration gets prospective sponsors enthusiastic.”

Premier credits its development of a Snack Shacks concept with attracting Dr Pepper/Seven Up, Inc., PepsiCo Beverages North America’s Gatorade and Masterfoods USA’s Snickers as partners for soccer parks in the Dallas and Denver areas. Six Snack Shacks will be located throughout each park. Each Shack will have up to eight vending machines containing sponsors’ products exclusively.

“Without developing wide ranging sales distribution channels such as the Snack Shacks, our chances of landing those brands would have been greatly reduced,” said Randy Bernstein, Premier’s president. “That we can guarantee them greater distribution is a key part of our pitch.”

Sponsors also are seeking promotions that can energize on-site sales. For example, Naperville (Ill.) Park District conducted a Drink Up and Win promotion on behalf of sponsor PepsiAmericas, Inc. that was touted on vending machines at two golf courses, an aquatic center and other facilities this summer.

On-site sales received a 95 percent boost in July as park district patrons attempted to find bottles tagged with free passes to park district facilities and nearby Brookfield Zoo, said Erin McNulty, the district’s corporate relations manager.

Shipping Category An Example Of Non-traditional On-site Sales
While it is a given that food and beverage sponsors generally will insist on on-site sales rights as part of any sponsorship package, a growing number of other categories are seeking to hawk their wares directly to audiences at events and venues.

Whether it is BellSouth Corp. selling phone services, ING Group N.V. installing an ATM at Amsterdam’s Rijksmuseum or Virgin Entertainment Group, Inc.’s Virgin Megastores selling CDs at Coachella Valley Music and Arts Festival—where they posted a 15 percent year-over-year sales increase—categories that were once content with sampling and demonstrations now want to complete transactions on the spot.

This trend is a reflection of both sponsors’ desire for measurable return on investment, as well as the increased sophistication of properties who are making such opportunities more available than ever before as a way to add value for their corporate partners.

The types of companies that don’t automatically spring to mind when one thinks of on-site sales are exactly the ones that can benefit the most from tying in sales. Take shipping, for example, a category where sampling is impossible.

“When you have a service, it’s difficult to have a physical manifestation of the product,” said Nancy Altenburg, manager of sponsorship marketing for FedEx Corp. “We found that the best way to overcome that was to get ourselves at events to demonstrate what we do by actually doing it.”

Around its league sponsorships, FedEx does a booming business at the NFL Experience during Super Bowl week and at the NBA Jam Session during the all-star game weekend. At both events, the package carrier sets up staffed FedEx ShipSites near or in the media centers, as well as at official hotels where fans use them to ship merchandise.

FedEx limits the use of the ShipSites to events that draw people to a location for multiple days. “We don’t do single-day events because there is no market for us. People who attend an event for a day don’t bring anything to ship and can wait until they leave to ship something they buy,” Altenburg said. “We only become a necessity when people are attending for a few days.”

United Parcel Service of America, Inc. has followed its competitor’s lead by developing a on-site shipping service around its NASCAR partnership and sponsorships of individual tracks.

Developed as a test program in ’02, UPS Trackside Services overcame initial skepticism on the part of NASCAR officials regarding the need and desirability of having the company set up shop within the secured garage area. “They didn’t remain doubtful,” said Susan Rosenberg, UPS PR manager. “It was within a few races that NASCAR officials themselves started using our services.”

UPS has seen Trackside Services take off–it experienced a 34 percent sales increase from ’03 to ’04. It has attracted business through several channels: the sanctioning body, the race teams 35 of which currently use UPS and direct their suppliers to do the same–and from other NASCAR sponsors, who have become familiar with UPS through its at-track presence.

“Without the on-site presence, we wouldn’t have been able to integrate ourselves into the NASCAR family the way we have been able to,” Rosenberg said.

Taking It To The Max: Sponsor Facilities Incorporated Into Venues
For properties that own their venues, the latest iteration of on-site sales rights consists of offering space for sponsors to open up permanent outposts for selling products or providing services.

Case in point: Baylor Health Care System’s new 13-year, mid-six-figure-per-year partnership with MLS team FC Dallas includes the right to operate a 6,500-square-foot physical therapy clinic within the team’s new soccer complex, Pizza Hut Park.

The clinic, ensconced in the northwest corner of the park’s stadium, will benefit from year-round usage and the team’s affiliation with the grassroots North Texas State Soccer Assn. Baylor is contributing a column to the association’s eight-times a-year newsletter that has a circulation of more than 100,000. Furthermore, it will conduct conditioning clinics with youth soccer coaches and health fairs at NTSSA events.

“We’ll be open daily all year round and this gives them a premier location that will be well-known to everyone in the area,” said John Alper, senior vice president of business development for Hunt Sports Group, which operates the team and the park.