24 April 2010
THE world of Formula One (F1) is more than just about fast cars and cutting-edge technology. With a viewership of 600 million people per race, it provides a fantastic platform for businesses to showcase their brands around the globe.
But in your typical business environment, businesses only want to be associated with the best and in the case of F1, its the big, established teams like Ferrari, McLaren or Mercedes that often get the upper hand in the war to secure sponsors.
But F1 is a tough business and even the elite have fallen on hard times. Last year’s global economic meltdown saw renowned teams – BMW, Honda and Toyota – pulling out as the financial strain proved too much to handle.
But the economy has picked up and this year’s F1 season saw the inclusion of three new names, namely Lotus Racing, Virgin Racing and Hispania Racing F1 Team (HRT) competing for the most coveted prize in motorsports.
Hoping for Lotus Racing to bloom
Taking a cue from other established F1 teams, Lotus Racing team principal Datuk Seri Tony Fernandes wants to monetise the Lotus brand by leveraging on the F1 brand. He believes Malaysia as a country can then bank on the success of its own F1 team.
“Just look at what Ferrari has done for Italy and Mercedes for Germany,” he tells StarBizWeek during the 2010 Petronas Malaysian Grand Prix (GP) earlier this month. Although he declines to disclose figures, he insists that running an F1 team is “not a waste of money”.
“I don’t think it’s a waste of money or else I won’t be doing it,” he counters.
According to Fernandes, who is also the group chief executive of low-cost carrier AirAsia Bhd, there are plans to leverage the popularity of Lotus Racing as an F1 brand to produce spin-off products. It recently launched its own energy drink, LR8.
“(There will be) more merchandise, joint ventures and business ideas in the pipeline,” he says. The team has also engaged in various cross-promotional efforts with AirAsia. “AirAsia made a lot of money selling Lotus T-shirts,” he adds.
Lotus Racing is operated by the 1Malaysia F1 Racing Team, a privately funded project, with Tune Group and Naza Group as co-owners.
Tune Group is jointly owned by Fernandes and Datuk Kamarudin Meranun, who is also a director of 1Malaysia F1 Racing Team. The other directors of 1Malaysia F1 Racing Team are Naza group executive chairman SM Nasarudin SM Nasimuddin and Zahri Ismail.
Its drivers are former Toyota F1 driver Jarno Trulli of Italy and Heikki Kovalainen of Finland, previously with McLaren.
Fernandes says the team’s long-term target, just like that of any other team in the circuit, is to eventually win the F1 crown.
“We want to become world champions one day. I didn’t start here to become last. It’s going to be hard but if I told you six months ago we were going to have an F1 team, you would have said it was impossible.”
He declines to comment about team sponsorship deals and if the team is in talks to secure more sponsors.
Recently, it was reported that the team expects four more major sponsors to come on board this season. Other unconfirmed reports also claim that Lotus Racing has inked a deal with Brazilian oil company Petrobras.
Different approaches needed
To HRT Team principal Colin Kolles, F1 is an “interesting business platform” and “the best way to present your business.”
Kolles realises the hardship of being a new team – an unknown brand in a league of established ones and the difficulty in attracting sponsors.
But he says that the task of securing sponsorships is never easy for any team, adding that both new and established teams need to approach the situation differently.
“You might attract small partners that see you as a young challenger. This might fit their marketing strategy, where it might be easier to get a sponsor than an established team,” he argues.
“Big companies would like to be associated with big brands and championship-winning teams like Ferrari and McLaren. Obviously this is a different strategy.”
However, Kolles concedes that surviving in the business is the biggest challenge for a new team. “It’s a tough business. I think a lot of people are not really aware how hard it is. For the new teams, what’s most important is to establish themselves.”
Kolles declines to disclose the team’s budget for the season but says it is less than those of the established outfits.
The Spain-based HRT team began as a collaboration between Adrian Campos of Campos Racing and Enrique Rodríguez of Meta Image, under the name of Campos Meta. In February, majority shareholder Jose Ramon Carabante took over full control of the team from Campos, and the team was renamed.
The team’s drivers are India’s Karun Chandhok and Brazil’s Bruno Senna, the nephew of former world champion, the late Ayrton Senna.
Virgin Racing initially started out as Manor Grand Prix, a tie-up between Manor Motorsport and Wirth Research, and were initially granted entry in F1 as Manor GP.
However, as part of sponsorship arrangement that saw tycoon Richard Branson’s Virgin Group acquiring 80% of the team, the racing outfit became known as Virgin Racing.
Team principal John Booth says being associated with a brand like the Virgin Group was a big advantage. “Our partnership with Virgin helps tremendously. They’re one of the world’s most well-known brands,” he says.
The Virgin Group is a British-branded venture capital conglomerate organisation, with its core business areas being travel, entertainment and lifestyle.
Booth calls F1 “the biggest show in the world” and feels privileged to be part of “13 of the world’s best” to be competing this season.
Booth has been involved in the motorsport arena for over 30 years, but when he made the transition to F1, he knew it was an all-new ball game. “When I was in F3 (Formula 3), we used carried about three tonnes of equipment with us to each race. In F1, we transport about 26 tonnes of equipment. You can certainly imagine how much Ferrari and McLaren carry!”
Based in Britain, the team has over 150 employees. Its drivers are Lucas di Grassi of Brazil and former Toyota F1 driver, Timo Glock of Germany.
Keeping the wheels turning
So far, after four races this season, all of the new teams have yet to score points. The13th place finish by Lotus Racing’s Kovalainen at the Australian GP last month is the highest placing among the newcomers.
Interestingly, when the three new teams were asked whether they benchmark against each other or against the established outfits, all have different targets.
Kolles says because HRT is a new team, its target is to compete against “the new guys”.
Booth, however, says Virgin Racing benchmarks itself against both the new and established teams. “It’s both,” he adds. “Our short-term target is to benchmark against the new teams, but we also have a long-term goal where we want to compete against the best.”
Fernandes says Lotus Racing aims to compete against the big teams right from the beginning. “We set our standards high, just like we did with AirAsia. We didn’t benchmark ourselves against the small guys. We set out to compete against the best in the world.
“You’ve got to benchmark yourself against the best, otherwise don’t bother being in it.”
by Eugene Mahalingam