Take one minute to watch some of the Formula 1 Singapore Grand Prix this weekend and you’ll struggle not to lock eyes with a luxury brand being splashed on an advertising hoarding or chassis panel.
One year ago this month LVMH – parent company of the likes of Louis Vuitton, Dior, Moet & Chandon, Tiffany & Co., Bulgari and TAG Heuer – signed a decade-long deal with Formula 1, reportedly worth $1bn, which sees their brands plastered across the sport.
But this is part of a trend of luxury in sport, demonstrated by LVMH owners the Arnault family partnering with Red Bull to invest in Ligue 1 club Paris FC, and Chanel partnering with the Oxford versus Cambridge Boat Race along the Thames.
Throw in the likes of Carl Friedrik with Williams Racing and Gucci with Jannik Sinner and the world of luxury in sport is fascinating. But Neil Hopkins says it is not “necessarily new”, especially in Formula 1.
F1 prominent
“Champagne and high-end time pieces have been involved in the sport for decades,” M&C Saatchi Sport & Entertainment’s chief strategy officer tells City AM. “The grid itself features Ferrari, McLaren and Aston Martin, each synonymous with automotive luxury.
“F1 isn’t alone in this. Sailing and golf in particular have always been magnets for premium brands but the audiences for both are a fraction of those for F1.”
Often the entire point of sponsorship is bemoaned by onlookers; does seeing the latest £750 hoover on television make you want to buy a new powerful suction device? Does seeing a Rolex urge you to go out and part ways with thousands for a new time piece?
No, Sponsor editor Sean Connell says, but it creates an aura of wanting what you cannot have.
“Sponsorship provides a powerful platform for luxury brands,” he adds. “It reaches younger audiences on a global scale in contexts that make them culturally relevant while reinforcing exclusivity, prestige and aspiration.
“The paradox is that exclusivity only works if the masses want in. Luxury relies on most people desiring the product even if only a few can afford it. Sponsorship lets these brands showcase themselves in a premium environment. If people do not see it, they do not want it, and then it stops being exclusive.”
The key question
Hopkins concurs, adding that “the recent explosion in interest is down to F1’s unique and expanding capacity to appeal to the super-rich while also reaching a vast global audience.
“It can offer the very best in hospitality in Monaco and cram 160,000 into Silverstone on race day.
“That enables such brands to do two things: engage directly with their most affluent customers and maintain high visibility amongst those who simply aspire to become their customers.”
But the world of luxury in sport is not all sunshine and rainbows. Hopkins says that “F1 is accelerating away from other sports when it comes to high-end sponsors”. This is evident from the cash being dished out to teams from vastly hiked sponsorship revenues.
Connell raises, however, the question of how long luxury brands will continue to pay for these high-cost platforms.
“Unlike gambling or consumer goods companies,” he concludes, “they do not need constant awareness.
“We may see cycles of luxury investment, with three to five years of high-visibility sponsorship in elite sports enough to fuel decades of aspiration. Giants like LVMH have the budgets to stay the course, but for many others, short bursts of premium exposure may be enough to generate long term demand.”
Luxury in sport appears to be the latest chronicle in an anthology of examples demonstrating how Formula 1 is leaving rival sports behind. But it is because of its uniqueness that its operations can be over-egged.
Whether Chanel remains with the Boat Race and Moet sticks with Brentford are the case studies which will provide much more insight.
