There were cheers across France when Les Bleus bested Belgium to progress to the World Cup Final. But for the team’s Chinese sponsor, le triomphe might be more cause for concern than for celebration.
This year’s tournament has been something of a coup for Chinese companies. With a number of mainstay sponsors ditching FIFA following the governing body’s corruption scandals, Chinese firms gladly filled the void. Consumer brands have been scrambling to launch their World Cup campaigns at home as well, leading to some odd pairings of football icons and Chinese brands (see WiC414).
Vatti Corp, a kitchen appliance maker, has thrown its support behind France, making the team its “official World Cup partner”.
As part of the deal, some seven million fans tuned in last month to a livestreaming session to watch former World Cup winner Thierry Henry cook food using Vatti appliances and talk about his culinary tastes.
Vatti’s most audacious promotional offer, however, is a promise to fully refund Vatti products bought during June if France wins the World Cup.
Now that France is in the final this weekend – with only Croatia standing in its way – Vatti’s shareholders have been privately sweating on the potential payout.
Yet a company spokesperson told China Securities Journal last month that Vatti wasn’t really worried. “If France wins, the cost of the payment will be really big, but it is still within our annual marketing budget and won’t have a major impact on the company’s performance.”
Vatti even upped the ante after France defeated Argentina 4-3 at the round of 16, and extended the deadline for its refund offer by another three days.
However, after France’s strong showing in knocking out Argentina, jitters began to spread that Vatti might have scored a costly own goal with its World Cup marketing effort. Its Shenzhen-listed shares fell nearly 10% the following day (hitting the daily limit). Last week, the company had to put up a regulatory disclosure explaining the refund package would be capped at Rmb79 million ($12 million).
Investor Journal noted that Vatti’s stock price has fallen more than 40% since the World Cup started, although the dive might not be entirely down to football.
In a sign that Vatti has other problems a court in Guangdong ordered the seizure of Vatti’s distributor in Beijing and Tianjin last week, revealing that the dealer was overdue Rmb100 million in debt. More concerning still, the Beijing Morning Post reported that the dealership’s general manager, had been ‘missing’ for 10 days.
The distributor is Vatti’s second largest in the country, though the company stressed that it is just one of its 133 dealerships nationwide.
According to 36Kr, Vatti and its distributors had agreed to split the cost of the refunds, with the company footing the bill for online sales.
However, chances are Vatti will now have to cover in full the costs for the troubled Beijing-Tianjin dealership. The company might have Rmb79 million reasons to cheer for Croatia on Sunday.
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