Lowe’s leaving NASCAR came as a big surprise to many NASCAR fans. The brand has been associated with one of the greatest drivers of all-time, seven-time Monster Energy NASCAR Cup Series Champion Jimmie Johnson.
The brand association was a synonymous as Richard Petty with STP and Dale Earnhardt with GM Goodwrench. But it seems to be a growing trend in NASCAR that the big-time sponsors are pulling out of the sport. Why would that be? Are the companies struggling?
Not entirely. Lowe’s has been a consistent top-60 company on the Fortune 500 list since 2004, with an increase to 40th in 2017. Lowe’s has also seen the benefits of acquiring Canadian retailer Return of Net Associates (RONA) in the past year. This move has helped Lowe’s make great strides in Canada. And with the rapid change in retail experience of the past few years, Lowe’s is no exception.
It appears that Lowe’s, as well as many other past sponsors who have moved on from NASCAR, are looking to adjust to the times, leaving NASCAR in the rear-view mirror.
Lowe’s’ main competitor, The Home Depot, left NASCAR after the 2014 season. Since the home improvement company joined NASCAR in the late 1990s, sponsoring two-time MENCS champion Tony Stewart, it rose from 50th to as high as 13th from 2003-2005 on the Fortune 500 list.
In the years since, The Home Depot dropped to 35th, and the high price of upwards of $20 million to sponsor a top-tier NASCAR team like Joe Gibbs Racing.
NASCAR may have fallen down the list of priorities for its advertising dollars, leading to The Home Depot pulling out of the sport. The extra money saved from sponsoring NASCAR allowed them to purchase Interline Brands in 2015, according to Fortune.
The transition allowed them to create more commercial exposure in hospitality and healthcare, a market that has a higher spending size than that of the average NASCAR fan. As a result, The Home Depot saw a boost in sales growth by 5.6 percent in same store sales, and a year record of sales and net earnings in 2017. The home-improvement chain has risen back up to 23rd on the Fortune 500 list.
Then, we have Target, another company that saw a decline on the Fortune 500 list during its points of sponsorship with NASCAR. The store brand pulled out of NASCAR following the 2017 season, after sponsoring Chip Ganassi Racing since the 2002 season. Target deals with the highly competitive market of consumer faced companies that deals with high employment necessities. But that doesn’t mean they are less willing to spend the money for sport-sponsorship.
According to USA today, a big reason why Target left NASCAR and IndyCar was to pursue a major sponsorship with Minnesota United, a Major League Soccer team, while becoming a corporate sponsor for the league. With soccer being the biggest sport in the world, and U.S. interest increasing, it seems as if Target saw more value in soccer.
Reasons could include the brand exposure to younger fans, who are quicker to pick up a copy of FIFA and are less interested in cars. NASCAR believes that promoting young hot-shot drivers will help raise younger, new fan interest in the sport.
With that being said, Target, which sponsored Kyle Larson, a driver with extremely high potential and media coverage and had one of the highest valued sponsorship deals in NASCAR, totaling about $111 million. The company did not see that price being worth the increased promotion and brand exposure from Larson’s media coverage, and pulled out of the sport.
Dollar General decided to leave NASCAR despite being attached to Matt Kenseth, who at the time of the announcement, was a championship contender in 2016. Similar to Target, the reason the company left could be due in part to the large price of sponsorship in NASCAR, according to Sporting News.
National Guard spent $32 million to sponsor Dale Earnhardt Jr. It’s hard to believe that Dollar General was paying a signifigantly less number to sponsor one of the sport’s top teams. Dollar General is not at all struggling either, they have seen a solid rise up the Fortune 500 list since 2008, increasing from 274th all the way up to 128th on the list in 2017.
It seems that this “largest small box retail” chain could have seen NASCAR’s high viewership through the mid 2000s as a great way to promote their brand. However, with the 2010s seeing a steady decrease in ratings, Dollar General may have seen it as a sign to use their growing revenue elsewhere. “Our strategy to reallocate our future marketing assets into new programs is strictly a business decision to align our priorities to better serve our customer in this rapidly changing retail environment,” the company said in a statement given to ESPN.
Current primary sponsor of the Cup Series, Monster Energy, seems to be treading lightly with the extension decision deadline approaching (a deadline that has been extended twice already) to keep the naming rights to the Cup Series in 2019 and 2020, according to Sports Business Daily.
The beverage company has its hands in a couple of auto racing baskets. The Monster Energy Supercross series has seen a 50 percent increase in the 18-34 demographic as of April 2017, according to Power Sports Business. With a combination of a simpler sponsorship activation negotiation with Supercross, as well as the complicated nature of activation negotiation in NASCAR between the tracks, teams, and media partners, Monster seems to be taking extra care in making the right decision as to how to spend their advertisement dollars.
While the negotiation extensions seem ominous, there does appear to still be interest from Monster to stay with NASCAR. If there were little interest, then both sides would have left the negotiation table by this point.
Former primary sponsor of the Cup Series, Sprint, has seen a decrease in stock price recently, according to Fortune. The wireless phone company ended its NASCAR relationship following the 2016 season. A publicized interest in merging with T-Mobile could have played a role in the business decision to leave NASCAR. After that transaction failed in November 2017, a change in CFO has caused the stock price to drop. This current situation for Sprint, as well as the current landscape of NASCAR sponsorship, does seem to make a revitalized association with NASCAR out of the question.
Another problem that NASCAR is facing with sponsorship is the associations of competing companies. It was highly publicized that Subway left Daniel Suarez and NASCAR as a whole in 2017, because of a NASCAR on NBC broadcast where the Joe Gibbs Racing driver helped promote Dunkin Donuts, a company that was a deemed as a Subway competitor.
With the landscape of sponsorship in NASCAR, teams will work with as many big name sponsors as they can for the ad revenue. Subway did not want to move forward knowing that they would have to associate with competitors.
Farmers Insurance is another small example. The Insurance company increased sponsorship throughout the 2010s with former Hendrick Motorsports driver Kasey Kahne. The deal with Rick Hendrick’s MENCS team was the sponsors only deal within NASCAR. Farmers Insurance, while not the biggest name in homeowners insurance, did briefly appear on the Fortune 500 list in 2015, ranking 264th.
Speculation by Sport Business Daily indicates Farmers left NASCAR because of discomfort with sponsoring a team that also sponsors its competitor Nationwide. This factor could have lead their interest in pursuing other avenues of brand exposure. A company that still has some ground to make up behind the Nationwide’s of the world, look to pursue avenues where they are the sole insurance sponsor.
With NASCAR sponsorship becoming more of a problem for the sport it is safe to assume that the issue does not fall on the sponsors themselves, but with the sport of NASCAR as a whole. The economy seems to be performing well, and these sponsors are doing well enough in the eyes of Fortune. Thus leads the question why has sponsorship in NASCAR become a problem?
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