America's Cup Diary - August 2006

Few people can have witnessed the massive changes to the America's Cup over the past quarter century quite like Grant Simmer. As a 26-year-old, the young Australian was thrust into the limelight as the navigator of Australia II when Alan Bond wrenched the Auld Mug out of the New York Yacht Club's 132-year grasp. These days Simmer is a backroom boy, but no less important. He is the managing director and design coordinator of Alinghi, and is seen as one of the lynchpins of the Swiss team's success.
 
In the 23 years since Australia II's momentous victory, the Cup has evolved from the idle whim of a few wealthy individuals into big business, attracting sponsorship dollars from large multinational corporates such as UBS, BMW and Allianz. "We're a business as much as we're a sports team these days," says Simmer. "Balancing the business and the sports side is something you see Formula One motor racing teams doing quite a lot, and you've seen it more and more since 1995 in the Cup.

"Australia II was a Corinthian team. We still had sponsors, but we never saw them. We didn't have a relationship with them. We weren't allowed branding on the boat or on the sails, so we couldn't offer the sort of returns that we can offer now. Now the branding on the boat is very powerful and the images are really important and that's a major asset that the sponsors are buying. We have a very sophisticated hospitality programme for entertaining clients."

With an overview of the entire budget for Alinghi, it is Simmer's responsibility to balance those sporting and business interests. Gone are the days when sailors and sponsors are kept at arm's length. Members of the sailing team are expected to meet and greet sponsors and corporate guests as part of their regular day job. "There's always a balance between having the guys properly prepared to go racing and providing some level of access to the sponsors. We think we have that balance at a level where the sponsors enjoy good access without hurting the team's competitiveness."

Alinghi has three main tiers of commercial support, each with different levels of visibility on the boat and the sails. The two most prominent names on the boat are UBS, the Swiss investment bank, and BT Infonet, the information technology provider and consultant. Alinghi counts these companies as ‘Main Partners', the team's biggest financial backers.

Below the Partner tier are a group of ‘Co-Sponsors', with less prominent branding on the boat. The five companies in this medium category are luxury watch manufacturers Audemars Piguet, certification and inspection company SGS, coffee company Nespresso and MSC Cruises. Below the Co-Sponsor tier are the Suppliers, a long list of companies that have earned the right to call themselves ‘Official Suppliers to Alinghi' but which do not have branding rights on the boat.

Like the vast majority of Cup teams, Alinghi is very guarded about financial details, except to say that the overall budget for this four-year Cup cycle is 100 million Euros. How much of that is funded by team head Ernesto Bertarelli and how much by the family of partners, sponsors and suppliers is not clear, but it is highly likely that Bertarelli is not having to delve as deep into personal coffers as he did for his Challenger campaign in 2003. Alinghi has become a brand that more and more companies want to associate with, and so the asking price for getting involved is bound to have increased as the team has grown in stature.

A number of commercial backers such as UBS have been with Alinghi since the very start, and so they must be doing something right. But what exactly does the brand Alinghi stand for? The team's director of marketing and business, Margrethe van der Stroom, explains: "First and foremost it's a sports team. It is positioned as a multicultural team that represents Switzerland. It is about combining human abilities and technology in a professional and team-oriented way. And the team's goal is quite simple: to win the Cup again.

"The team started as a dream and a vision of Bertarelli. Like any strong brand or story, there is business potential. That is our job, forming a strategy to make the most of that business potential. Alinghi is a strong brand, it's a successful sports team supported by companies that want to associate themselves with that success. Our aim is to provide value back to whoever invests in this team."

In terms of offering value, brand exposure through mass media such as TV is part of the equation. But van der Stroom is realistic about the limitations of sailing in this respect. She came to the Cup scene from a strong background in football marketing. "Remember that a total audience of 32 billion people watched the recent Football World Cup, and no sailing event can offer the same commercial potential. However, the Cup is so much more special. It has so many unique qualities, so do you really want to position yourself against the mainstream sports? You might want to make it more accessible to the public, which is part of our strategy at Alinghi and with America's Cup Management (ACM), but you wouldn't want to go all the way to the point of dumbing down the event."

The other, more obvious sporting comparison is with Formula One, both in terms of the large numbers of people involved and the application of cutting-edge technology. Again, the America's Cup pales in terms of global reach or TV audience, and yet companies such as Allianz and Red Bull are involved both in F1 and the Cup. Teams like Alinghi can't compete directly with Formula One, except in a few key areas such as corporate hospitality. After all, there are only two drivers on a Formula One team, but there are more than 30 sailors on even the smallest Cup teams.

There are other advantages to the Cup. You can't stand on the pitch as a 12th man in football, just as you can't expect to ride as a passenger in a Formula One racing car. You can, however, sail aboard a Cup boat as 18th man during racing, there in the thick of the action in a way that few other sports can offer. While most teams make great use of the 18th man - King Juan Carlos of Spain for example has been a regular guest aboard Desafio Espanol 2007 - Alinghi has tended to shy away from this. Picking up on Simmer's earlier theme of striking a balance between the team's sporting and business demands, van der Stroom comments: "Why have the distraction of entertaining a guest or a sponsor when you are trying to focus on the racing? I'm not criticising it, I can see why other teams do it, but it is something that our team prefers not to do too much."

Alinghi offers sponsors value in a number of other ways, however, and one of the most innovative is the development of the Alinghi Academy. "This is a programme we have developed for our sponsors so that they can come and use the base outside regatta periods," explains van der Stroom. "It enables them to come and learn about the culture of Alinghi, and gives them insights that they can take away and apply to their own in-house training programmes." Sponsors can use the base for their own conventions and seminars, and they can take out a fleet of seven Beneteau 7.5s for on-the-water teambuilding exercises.

Van der Stroom stresses that these opportunities are open only to partners and sponsors, and yet the Alinghi Academy has been extremely busy. Already in 2006 there have been 80 different programmes totalling 120 days of activity and involving more than 5,000 people. Activities have ranged from a North Sails fashion show, through to a UBS annual marketing convention, a teambuilding exercise for BT Infonet and the launch of Mercedes-Benz's new R Class car.

Another strong marketing initiative is Alinghi's in-house TV resources. With a full-time TV producer and editors, Alinghi produces its own weekly TV programme which airs every Wednesday on Eurosport. Just four or five minutes long, "Inside Alinghi" has proved phenomenally successful. By the end of May a total of 49.2 million people across Europe had watched the programme. Partners and suppliers such as UBS, Nespresso and Phonak have committed to spending money around the show, and van der Stroom is now keen to move into other TV markets. For example, Alinghi features in a programme put together by German TV station ARD, which draws parallels between the home team United Internet Team Germany with the Swiss Defender. It's only 90 seconds long, but van der Stroom says the show has already reached a total audience of 70 million viewers.

In addition to providing more exposure for corporate backers, the TV programmes are part of Alinghi's vision of bringing the Cup closer to normal everyday people. The team had an ‘open base' policy in Auckland and it is one of the more open-access teams in Valencia too. Members of the public can try their hand at the full-size sailing simulator at the team base, for example. And Alinghi has not forgotten its Swiss roots, with the team engaged in a tour of Switzerland during late August and September, when the sailors and other team members will visit Lausanne, Bern, Zurich and Geneva.

This is one of the last times that the team will go travelling before the final phase of the America's Cup next year. The travelling element of the Louis Vuitton Acts in 2004-05, when regattas took place in Marseille, Malmo and Sicily, opened the door to the way the America's Cup might operate in future. Rather than being so firmly rooted in one venue, as has been the long tradition of the Cup, there is a widely-held hope that whoever wins the 2007 edition will take the good lessons learned by ACM this time and expand upon them in the future.

Van der Stroom says the Acts have made the marketing job much easier than it might have been in previous Cup cycles, when teams operated behind closed doors for three years. "The Acts have been a good decision, not just for the sailors but from the business perspective. You can leverage your investment over three years as opposed to one short period. Now it's possible to get different markets interested because you're travelling to different countries."

While Grant Simmer has every expectation of successfully defending the Cup and helping set the agenda beyond 2007, he remains concerned about the fluid and uncertain nature of the event. "Providing continuity to your sponsors tends to be a problem. It's hard for us to guarantee what it's going to be like beyond the next Cup," he says, although he believes that everyone has bought into the concept of the Acts and the notion of travelling to different venues. "I think it [the travelling roadshow concept] will always be there. Somehow we need to get some continuity from one Cup to the next, so teams can take the same sponsor families from event to event."

Of course the best way to guarantee holding on to your sponsors is to win the Cup, but Simmer hopes that Alinghi's corporate friends are enjoying good value whatever next year's outcome. "Winning is very important but not fatal. If we are a strong team but for some reason not successful at defending the Cup I think our sponsor family would stay with us. Obviously we're not expecting to lose the America's Cup but if that should happen for some reason and we put up a good show then they will stay with us. If we put up a lousy show, which doesn't look like will be the case, then we deserve to lose them."

It's clear that the teams in the Cup have become more reliant on corporate backing than at any time in the event's 150-plus years. That said, most of the biggest teams still have a wealthy individual behind them, what with the likes of Bertarelli, Larry Ellison and Patrizio Bertelli. Will the America's Cup ever reach the point where teams are fully funded by corporate sponsors? Simmer comments: "Several teams are already solely funded by sponsorship, but it definitely helps to have a wealthy individual such as an Ellison or a Bertarelli while you're building up your sponsor family."

For van der Stroom, she hopes that the event will never become solely dependent on business money. "I don't think you want that for the Cup," she argues. "One of the mythical elements of the Cup is the involvement of these business tycoons. This makes the event very special. Even if you want to increase the involvement of corporate sponsors, some of the appeal of the Cup is that these people are involved and remain involved."







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