[Intl-tobacco] Formula One Teams Waiting for Smoke to Clear After Tobacco Ban

[Robert Weissman]

July 21, 2005


  Formula One Teams Waiting for Smoke to Clear After Tobacco Ban

By BRAD SPURGEON
International Herald Tribune <http://www.iht.com>

With all the talk about the fiasco at the U.S. Grand Prix last month,
the threat of a breakaway series and the debate over new rules, a
critical epoch-changing story has gone largely unnoticed in Formula One:
Over the next few races the sport is entering into the last gasps of a
nearly 40-year long nicotine habit.

The foundation upon which the multibillion-dollar sport was built -
after the Gold Leaf cigarette brand became its first tobacco sponsor,
with the Lotus team in 1968 - will start to crumble after July 31, when
a European Union ban on tobacco sponsorship comes into effect.

Half of the 10 teams, including the top three, still have tobacco
sponsors. But that number will shrink when the West tobacco brand, which
sponsors the McLaren-Mercedes team, leaves the sport after the German
Grand Prix at Hockenheim on Sunday, although its logo will be on the
cars during practice in Hungary the following before the last European
race of the season.

Not yet ready to face the withdrawal symptoms, the remaining minority of
tobacco teams nevertheless hope to keep on smoking outside Europe after
the ban goes into effect the day after the Hungarian Grand Prix. But
even that depends on an interpretation of a British anti-tobacco law
that also goes into effect on July 31, making things even more difficult
for the three British-based teams.

"We are all really waiting to see, everyone's watching everybody else,"
said Neil England, commercial director for Gallaher Group, which
sponsors the Jordan team with both its Benson & Hedges and Sobranie
cigarette brands.

When the EU announced in 2002 that tobacco sponsorship would be outlawed
from July 31, 2005, nearly a year and a half earlier than Formula One
had expected, the International Automobile Federation, the sport's
governing body, threatened that teams and races would leave Europe for
Asia for at least half the 2005 season, and possibly all of 2006.

That has not happened, and Asian countries have signed the World Health
Organization's anti-tobacco framework. But teams and tobacco companies
are working behind the scenes to clarify the situation with the
authorities, said England, who is also a member of the Formula One
Commission, which works with the FIA on running the sport.

Of the five tobacco teams, only Jordan and BAR were willing to speak at
length on the subject. Renault and McLaren refused to comment. Although
Ferrari has said that it will continue to be sponsored by Marlboro even
beyond 2006, Luca Colajanni, the Ferrari spokesman, remained evasive.

"Our position is very simple, as usual we will respect the laws each
country foresees regarding tobacco advertising," Colajanni said. "To
know what will happen, the best thing you can do is to check the laws in
each country and understand when the EU directive will be transformed
into law."

On the other hand, as an Italian team Ferrari is not concerned with what
is vexing the three British-based teams. In Britain, the Tobacco
Advertising and Promotion Act also sets July 31, 2005 as the deadline
for the end to tobacco sponsorship in "global events" such as Formula
One and World Snooker. But the way the law is written suggests that even
if an event takes place in another country, if the logos are seen on
television in Britain, the teams and sponsors may be prosecuted.

Although a response to a question in parliament recently indicated that
the law did not intend for Britain to dictate sponsorship for races in
other countries, England said their lawyers were unsure of the value of
that response.

"As a UK based tobacco company, together with British American Tobacco
and Imperial Tobacco, we are seeking clarity of the UK regulations in
order to determine whether we are able to brand and thus able to
continue in the sport," England said.

Tobacco companies inject around $300 million into the sport each season,
but the cash is more important for some teams than others.

The Renault car manufacturer, for instance, requires the chassis side of
its team, which is based in England, to be self-supporting, and Mild
Seven tobacco is its title sponsor.

For the BAR team, on the other hand, because it is not just sponsored
by, but partly owned by the British American Tobacco company, the team
is in a more stable situation in the short term, according to Nick Fry,
the team's chief executive.

"They'd keep the team afloat because they are 55 percent equity
partners," Fry said, adding, however, that, "British American Tobacco
have made absolutely clear for some time now that they would look in the
long run to divest themselves of a Formula One team that they couldn't
sponsor.

"They would say to me as chief executive you'd better get your skates on
to find an alternative."

In preparation for that, Honda bought 45 percent of the team last
winter, and could buy the rest, depending on what happens.

England said much will depend on each tobacco company's marketing needs.
As a mostly Europe-based company, Gallaher would probably suffer more
through the loss of Europe than Philip Morris, for example, which as a
worldwide brand, can profit by the sport's races in Asia.

At races where tobacco is banned, cars would run without branding as
they have for years at some races such as the British Grand Prix, the
French Grand Prix and at the Canadian Grand Prix this year. There teams
replace the tobacco names and logos with other words, puns or images
resembling the name or logo.

Benson & Hedges, for instance, puts the words "Be On Edge" on the cars.
Ferrari removes the name Marlboro but keeps the red and white color
scheme. BAR has an elaborate graphic resembling the Lucky Strike roundel.

England said such methods may look like ruses, but no proof exists that
they attract smokers.

"We've no evidence that an unbranded car has any advertising value at
all," he said. "Our only interest is in the branded races."

Even so, a non-tobacco future is not necessarily all tarry black: Fry
said that already at the non-tobacco races the BAR team picks up other
sponsors that do not want to be associated with tobacco, and more could
be on their way.