The ongoing dispute between the National Hockey League and its players has claimed a major marketing casualty.
Kraft Canada, a national sponsor of the NHL, is cancelling its Kraft Hockeyville program for 2013.
Early Tuesday morning, the company will announce a new promotional program, and will be giving $1-million to Hockey Canada-affiliated minor hockey associations across the country.
"We're re-investing our sponsorship dollars to recognize the game is going on – from Victoria to St. John's," Kraft spokesperson Kathy Murphy said in an e-mail.
The program, which runs each year in partnership with the CBC, encourages Canadians to compete to win prize money for their communities. That money is used to upgrade a local hockey arena.
Kraft has been working with agencies for weeks to develop an alternative community-based program it could run if the lockout went on too long. The lockout also meant that the Hockeyville 2012 celebrations in Stirling-Rawdon Ont., north of Belleville, in September did not include the planned pre-season NHL game. (The NHLPA held its own event with Stirling's Minor Hockey Association in October to keep up part of the commitment.)
"We review all of our advertising. We will shift our funds – that's just the reality of the situation. Our brands have to continue to speak to consumers," Jack Hewitt, vice-president of marketing services for Kraft Canada, told The Globe and Mail last month.
The shift to another community program is now in motion – an attempt by Kraft to maintain its connection to the moms who are its key target customers. Its contributions to local hockey through Hockeyville have made a real impact: Kraft Canada's baseline sales have been up 5 to 6 per cent each year for the six years Hockeyville has run. That's a faster rate of growth than in its pre-Hockeyville days.
"The frustration levels among sponsors are nearing the tipping point," said Brian Cooper, chief executive officer of S&E Sponsorship Group, which counsels companies on sports sponsorships and counts NHL sponsors such as Canadian Tire Corp. Ltd., Bank of Nova Scotia, and SiriusXM Canada among its clients.
"The league's been very good about keeping them informed. That works really well in the first six weeks," he said. But more than two months since the lockout began, sponsors are tired of hearing the same message that nothing's changed, Mr. Cooper added.
Earlier this month, Molson Coors Brewing Co. blamed declining sales in Canada partly on the lockout. In the first four weeks of October, sales to retail customers were down "at a high single-digit rate" compared with the same period last year, spurred by larger industry trends but also by the lack of hockey here, which is responsible for creating more occasions for people to drink beer together – both at home and in bars and at the arenas.
"We are looking for and are working behind substitute programming to ensure that we remain competitive in the quarter. But … there is no doubt that this property is quite unique in its impact, both on industry volume and on our share," chief executive officer Peter Swinburn said on a Nov. 8 conference call. "And so to think that we can actually replace it in the short term, I think is unrealistic."
Mr. Swinburn has said the company will ask the league for financial compensation when the lockout is over, to make up for the damage that a delayed or cancelled hockey season has done to its brand and sales.
In the event of a labour disruption, sponsors have clauses in their contracts allowing them to recoup the funds they would have spent on sponsorship. However, the long lead time of marketing plans means they still must struggle with how to reallocate those dollars in an effective way. And with the holiday period being so crucial for some companies, any lack of certainty in marketing plans can be a real hindrance, even if the dollars are technically returned.
The dispute has now dragged on long enough that marketers are forced to consider, even if the season resumes tomorrow, whether the NHL will be as valuable a brand to tie themselves to, Mr. Cooper said. Hockey is too dominant a sport in Canada for most sponsors to consider dropping their affiliation, of course. But at this point, even when league play resumes, sponsors may have to wait some time before the NHL has regained enough of its goodwill to be a useful selling tool.
"How do you use a tainted brand?" Mr. Cooper said. "...Everyone's losing here."