NEW YORK (Reuters) - Four days before the Olympic Opening Ceremony, in London’s historic Horse Guards Parade courtyard where throngs will have just celebrated Queen Elizabeth’s Diamond Jubilee, United Parcel Service will ship in to set up scoreboards, umpire chairs, sand rakes, nets and other fixtures for beach volleyball.
The world’s largest parcel delivery company, known to build brand awareness with relief services after disasters in Japan and Haiti and by flying an orphaned polar bear from Alaska to a Kentucky zoo, is sole logistics provider for the 2012 Games.
UPS expects to handle 30 million items — everything from boxing gloves to beds for the athletes’ village, relay torches and drug-testing samples to broadcast equipment.
That is nearly 60 percent more items than four years ago in Beijing, where the Chinese government took a more hands-on role.
Bloopers before billions of people would threaten a public relations blow that could hit profit, marketing experts say. But gains from networking, and showing competence at pulling off such a complex event, could pay dividends long after the Games.
UPS’s business is a logical fit for the event, making its sponsorship more valuable, said Ronald Goodstein, professor of marketing at Georgetown University’s McDonough School of Business in Washington, D.C.
“It’s a huge PR nightmare if it doesn’t work,” he said, “but they will cover their butts” with trial runs and back-up systems to avert any very public crises.
“The logistics of an Olympics is a nightmare, and we make it easy,” is the message UPS will impart widely with a smooth run.
Beach volleyball begins a day after the July 27 Opening Ceremony, and is just one example of UPS’s task to make sure all equipment is where it needs to be at the right time.
The company likes to say that if you turned all of the venues upside down, it is responsible for everything that falls out except humans and horses.
Atlanta-based UPS is in the midst of moving and assembling all furnishings for the village that will house 10,500 athletes, having shipped the goods in from Asia.
It will handle 250,000 pieces of luggage, move 400 tons of TV broadcast equipment into the International Broadcast Center for 21,000 media representatives and manage customs clearance.
It will be responsible for the timely placement of 1 million pieces of equipment for 26 sports in 34 Olympic venues across the U.K. for an estimated 800,000 ticketed spectators.
Drug-testing samples gone missing? UPS is transporting all 5,000 from athletes and horses to the test laboratory.
“Calculating the exact return on investment is challenging,” UPS Chief Financial Officer Kurt Kuehn said in an interview. “We feel very confident it’s a good investment,” he said, “but it’s primarily a brand and customer event that showcases UPS well.”
For competitive reasons UPS never discloses its investments in Olympic partnerships or other sponsorships including NASCAR and the PGA European tour, spokesman Mark Dickens said.
UPS soon learned that the Beijing Olympic could not serve as a cut-and-paste blueprint for London, said Alan Williams, UPS Director, London 2012 Sponsorship and Operations.
“These games are very different, not least being that Beijing was about China coming out to the world and huge, huge budgets while London is being run in the midst of one of the worst recessions in our lifetime so financially it’s a totally different environment.”
To stay within budget, UPS opted to be a domestic sponsor of this event, as it was in Beijing. This is below the IOC global sponsor level that it chose in Atlanta, Nagano and Sydney.
Top tier sponsors in London will pay $100 million to $125 million for a four-year worldwide partnership, estimated Rob Prazmark, founder of 21 Sports and an Olympic marketing rights expert based in Greenwich, Connecticut.
UPS’s tier 2 agreement is estimated to cost between $30 and $35 million in cash and value-in-kind services, he said.
UPS can twin its logo with the Olympic rings in ads, on trucks and driver uniforms only in the UK with this level of sponsorship. It is using those images widely, however, via its Facebook page, Youtube channel and the London 2012 web site.
The company reported $53 billion in 2011 revenue and record adjusted earnings per share. [ID:nL2E8CUBP9]. It is viewed as an economic bellwether, with the value of packages it handles is equivalent to 6 percent of U.S. gross domestic product and 2 percent of global GDP.
While not defining its cost, UPS plays up a 33 percent brand awareness jump in China, a key emerging market, after its sponsorship of the 2008 Beijing games.
And since 1996, when UPS first got involved with the Olympics in its home base in Atlanta, it says export volume from Europe has grown more than 10 percent each year on average.
“It’s a very powerful statement for us to make to any customer anywhere in the world that if we do this for the Olympics just imagine what we can do for you,” said Williams.
Timely deliveries are UPS’s bread and butter. But with LOCOG, the London Organizing Committee of the Olympic and Paralympic Games, estimating a 4 billion worldwide audience, UPS said it is doing numerous dry runs now to work out the kinks.
“It certainly isn’t for the faint of heart, some of these things that we’ve had to pull off to within a couple of minutes here or there,” said Cindy Miller, director of UPS’s UK, Ireland and Nordics operations.
UPS is testing every venue by the end of May in live sporting events at newly created arenas as well as iconic stadiums including Wembley and Wimbledon.
In one fast turnaround of a major venue, UPS has 17 hours to dismantle and remove the entire gymnastics set-up in the North Greenwich Arena, then move in and place all of the equipment needed to transform the space for basketball quarter finals.
Instead of what UPS refers to as “bumping in and bumping out” equipment, delivering to an event and then pulling the inventory back to one of its two warehouses, UPS will now keep supplies at the venues whenever it can.
It also prepared for at least one uncharted Olympic event.
“A year and half ago we had the ash cloud over Europe, and that’s something that never appeared in anyone’s contingency plan,” Williams said. “We now have an ash cloud contingency plan.”
UPS has greater market penetration in Europe than it did in China during the last summer Olympics, so the percentage gain in brand awareness won’t be as great.
“UPS was not only creating acceptance by the Chinese business community but it was also in a very big way gaining acceptance by the Communist party, which really was BOCOG, the Beijing Olympic organizing committee, and they control a lot of business in government,” Prazmark said.
“They gained acceptance as a mainstream provider. DHL dominated that market for many, many years.”
But the benefits of showcasing UPS’s expertise in London could pay dividends long after the Games are over, analysts say, while networking with other corporate sponsors and sports organizations is also a crucial opportunity.
Coca-Cola, General Electric, McDonald’s, Dow Chemical, Atos Origin, Samsung, Omega, Panasonic, Procter & Gamble and Visa are top-tier worldwide Olympic partners in London.
Georgetown’s Goodstein said the idea is for the company to become synonymous with package delivery and logistics.
“If I say petroleum jelly, you immediately think Vaseline. If I say facial tissue, you think Kleenex,” he notes. “You want to be the generic default for the category. That’s what’s really important about this sponsorship.”