Sport MarHeting Quarterly, 2006, 15, 114-123, © 2006 West Virginia University

Coca-Cola vs.PepsiCo —A "Super''Battleground forthe Cola Wars?

Steve M. McKelvey

IntroductionIt was March 31, 2003, and the Coca-Cola Classic

brand management team was excited about enjoyinganother Major League Baseball opening day at TurnerField against the visiting Montreal Expos. As the teamdrove out to Turner Field, most of the talk centered onthe Atlanta Braves' prospects for the upcoming season.Jill Smith, however, had her mind on football—specifi-cally, the 2004 Super Bowl in Houston—only 10months away. Although Coca-Cola was no longer theofficial soft drink sponsor of the National FootballLeague—rival Pepsi-Cola had outbid Coca-Cola forthose rights in 2002—Coca-Cola was an official teamsponsor of the Houston Texans, the hosts of theupcoming Super Bowl.

Jill, the senior marketing executive on the Coca-ColaClassic brand, had recently received a memo from herboss, the Vice President of Brand Management for theClassic brand, requesting that, within two weeks, shepresent her recommendations for what, if any, promo-tional activity the company should conduct in con-junction with the 2004 Super Bowl in Houston. Jillknew that if Coca-Cola planned to conduct any suchpromotional activity, it would be viewed by some,including the NFL and Pepsi, as "ambush marketing."Her recommendations might not only have ethicalimplications for Coca-Cola, but also legal implicationsas well. As a local Atlanta youth choir sang the nationalanthem to commence the Braves' 2003 season, Jill'smind was elsewhere, mulling over a wide range of con-cerns and possible recommendations.

Steve McKelvey, JD, is an assistant professor in theDepartment of Sport Management at the University ofMassachusetts Amherst. His research interests includesport sponsorship and legal issues in sport marketing.

Overview of the Soft Drink Industry

Coca-Cola: The Defending ChampionSince its inception in the late 1800s, Coca-Cola has

experienced meteoric growth, progressing from nineglasses per day to nearly 4.5 billion cases on an annualbasis ("Top 10," 2004). Today, Coca-Cola offers nearly400 brands in over 200 countries and controls thehighest market share (44%) in the soft drink market("Top 10," 2004). In addition to its leading global mar-ket-share, Coca-Cola also retains the title of having themost popular individual beverage in the world inCoca-Cola Classic, with an 18.6% market share ("Top10," 2004). Additionally, in 2003 it placed four bever-ages in the top 10 for individual product sales: CokeClassic (#1), Diet Coke (3), Sprite (5), and CaffeineFree Diet Coke (8) ("Top 10," 2004). ThroughResearch & Development (R&D) and acquisitions,Coca-Cola has also expanded its product line toinclude non-carbonated beverage products, including:Dasani, Fanta, Fruitopia, Hi-C, Minute Maid, and Mr.Pibb. In 2003, Coca-Cola spent approximately $1.9 bil-lion on marketing and advertising. In November 2004,Coca-Cola CEO Neville Isdell stated that "[Marketingexpenditures] would rise by $350-$400 million a year... forever" (Marketplace Roundup, 2004).

Pepsi-Cola: The ChallengerWith the exception of brief bankruptcy stints in 1923

and 1932, Pepsi-Cola assumed its place at the heels ofCoca-Cola through its creation of an extensive fran-chise bottling network and distribution outlets (Yoffie,2004). Over the years, the Pepsi-Cola company hasexpanded its product offerings, through R&D andacquisitions, to include: Diet Pepsi, Mountain Dew,Mug Root Beer, Slice, Sierra Mist, Lipton, Aquafina,and Starbucks Frappachino, among others. Pepsi-Cola's acquisition of Gatorade from the Ouaker Oatscompany in December 2000 further proved its com-mitment to broadening its product base as well asexpanding its sponsorship connection to the sportindustry, in which Gatorade was already a major play-er. As of 2003, Pepsi controlled 31.8% of the market inthe soft drink industry with annual sales of 3.2 billioncases ("Top 10," 2004). Today, the company's flagshipbrand, Pepsi-Cola, ranks second only to Coca-ColaClassic, with a U.S. market share of 11.9% ("Top 10,"2004). Similar to the Coca-Cola company, it also hasfour products in the top 10 on an individual productsales basis: Pepsi (#2), Mountain Dew (4), Diet Pepsi(6), and Sierra Mist (9) ("Top 10," 2004). In 2003,Pepsi spent $1.6 billion dollars on marketing andadvertising (www.pepsico.com).

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The "Cola Wars"The "cola wars," which describes the on-going battle

between Coca-Cola and Pepsi for supremacy in thesoft drink industry, date back to the 1950s whenPepsi's corporate focus became "Beat Coke" (Yoffie,2004). Since then, they have battled domestically andglobally for market share and sales, with a tremendousamount at stake: the soft drink industry annually pro-duces approximately 10.1 billion cases of soft drinksdomestically, with a total U.S. retail value of $65 bil-lion. Of that annual dollar total, the "cola" flavors rep-resent close to a 70% market share, followed distantlyby the lemon/lime, citrus, pepper, root beer, andorange flavored soft drinks (Yoffie, 2004). Civen theamount at stake, the "cola wars" are fought dailybetween Coca-Cola and Pepsi-Cola on a variety offronts, as illustrated below:

New Products: There seem to be no secrets in the bev-erage category, with Coca-Cola and Pepsi typicallyreleasing new products in unison. For example, in 2003when Coca-Cola introduced Vanilla Coke and SpriteRe-Mix, Pepsi simultaneously countered by introducingMountain Dew Live Wire, Pepsi Blue, and Sierra Mist(Chura, 2003). Within the last tive years, both Coca-Cola and Pepsi also introduced their own brands ofbottled waters (Aquafma and Dasani, respectively).More recently, responding to the low-carb craze, withinweeks of Coca-Cola's launch of C2, Pepsi respondedwith Pepsi Edge (Moses, 2004). The "cola wars" evenextends to product packaging: recently, both corpora-tions have tried to reduce costs and increase profit mar-gins with the release of the streamlined L5-liter bottlein attempt to phase out the 2-liter bottles.

Global Expansion:The "cola wars" have also heated up on the interna-

tional front. For example, India, a nation with over onebillion potential customers, has become one of the lat-est battlegrounds. Over the past five years, both corpo-rations have battled for the rights to use cricket stars assponsors, to fund "Bollywood" movies, and to secureonline relationships (Yahoo! India with Pepsi;Hungama with Coca-Cola). Both companies have airedcommercials with high profile Indian personalities inan effort to capture this burgeoning market (Datta,2001). Likewise, as China has opened its borders tointernational trade, Coca-Cola and Pepsi have aggres-sively moved to establish themselves. Both companieshave moved aggressively to establish distribution, man-ufacturing, and bottling networks in China, enablingboth to offset stagnant soft drink sales in the UnitedStates (Terhune, 2004). In 2003, Houston Rockets bas-ketball sensation Yao Ming, a native of China, was atthe center of ambush marketing allegations and a sub-

sequent lawsuit when Coca-Cola utilized his image onpackaging without his permission (Anthony, 2004).Coca-Cola alleged that it had properly secured therights to feature Ming through its official sponsorshipof the Chinese national basketball team (Anthony,2003). The lawsuit, though settled, illustrate just howmuch is a stake in global expansion for companies likeCoca-Cola and Pepsi, as the profile of major U.S. sportleagues and its stars expand to countries like China.

U.S.-based Marketing Initiatives:The summer months always serve as a key battle-

ground for high-profile promotional sweepstakes cam-paigns. For instance, in the summer of 2004, Coca-Colalaunched its "Unexpected Summer" promotion cen-tered on its tradition and in-store merchandising,wbich Pepsi countered with its "Play for a Billion" pro-motion (MacArthur, 2004). Over the past decade, the"cola wars" bave expanded into new venues, includingsponsorship deals with public schools and municipali-ties (Benson, 1999). The "cola wars" have also recentlyentered the digital music world. For instance, in 2004,when Coca-Cola launched www.mycokemusic in aneffort to tap into tbe growing on-line, tech-sawy, digi-tal media market, Pepsi immediately countered with aconsumer offer of 100 million songs in a co-brandedpromotion witb Apple's iTunes (Briggs, 2004).

Sport Sponsorships:Sport sponsorship has become an increasingly inte-

gral part of marketing strategy for botb Coke andPepsi. Over tbe past few decades, concurrent with tbeoverall rise in sport sponsorship spending, botb corpo-rations bave aligned tbeir core brands witb sport prop-erties tbat tbey feel effectively deliver particular marketsegments. Botb corporations annually rank among tbetop 50 in sports advertising spending. In 2003, tbePepsi-Cola beverage division spent an estimated $77million (ranking 10) and Coca-Cola spent an estimated$64 million (ranking 17) (Top 50, 2004). Appendix Alists tbe major involvements of botb corporationswitbin tbe area of sport sponsorsbips. As sball be seenin greater detail, arguably no U.S. sport property pro-vides more fertile ground for tbe "cola wars" tban tbeNational Football League.

Overview of NFL sponsorship programTwo events cbanged tbe course of professional sports

in tbe 1950s. Tbe first event was CBS signing on in1956 to televise NFL games. Tbe second occurred atYankee Stadium on December 28, 1958, wben, intbrilling fashion, tbe underdog Baltimore Colts beattbe New York Ciants, 23-17, for tbe NFLCbampionsbip before an estimated television audience

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of 45 million people. Based upon the growing popular-ity of the NFL as a television property, in 1962 the NFLrenewed its broadcast arrangement with CBS, for athen-exorbitant $4.65 million annually (Mihoces,1998). With each subsequent television negotiation,the NFL achieved monumental increases in televisionrights fees, reflecting the fact that the Super Bowl is thetop rated sports telecast every year. In 1998, the NFLentered into eight-year television rights deals withABC, Fox, CBS, and ESPN totaling $17.6 billion, repre-senting an average annual value of $2.2 billion {By theNumbers, 2004). In addition, in 2004 DirecTV extend-ed its Sunday Ticket package contract through 2010 ata total five-year cost of $3.5 billion (Bernstein, 2004).

In 1963, to further capitalize on its growing popular-ity, the NFL, through a representation agreement withits member franchises known as the NFL TrustAgreement, created a division whose main purpose wasto generate income as a method of underwriting theleague's charitable programs (this division within NFLwas officially named NFL Properties, or "NFLP," in1982). The premise of the NFL Trust Agreement wasthat all revenues generated through broadcasting,hcensing, and sponsorship would be shared equallyamong all the NFL teams.

Table /2003 NFL Sponsors

It was not until the 1980s that the NFL began to fullyrealize the potential for additional revenues throughlicensing and corporate sponsorship. Corporationstoday are willing to invest tens of millions of dollars ona multi-year basis to gain an association with the NFLand access to its fan base, and the escalating cost ofthese sponsorship deals suggests that an NFL sponsor-ship creates numerous benefits for the corporations.Table 1 identifies the NFL's 2003 official sponsors.

Historically, an official sponsorship deal with the NFLgranted the sponsor the rights to utilize not only league-wide NFL trademarks, but also the individual trade-marks of all of the NFL teams in their advertising andpromotional campaigns. However, in the mid 1990s, asmall coalition of owners led by Jerry Jones of the DallasCowboys began to challenge the NFL to release the localmarketing rights back to the individual teams. In anattempt to force this issue on the NFLP, Jones embarkedon a series of highly-publicized sponsorship signingsthat made companies like Pepsi, Nike, AmericanExpress, AT&T, and Dr. Pepper official sponsors of theDallas Cowboys stadium (a clever maneuver designed toassociate these companies with the Dallas Cowboyswhile not violating the legal provisions of the team'sagreement with NFLP) ("NFL, Cowboys owner," 1996).

Company (brand)

Bayer Pharmaceuticals Corp.Campbell Soup Co.Canon USA, Inc.Castrol North America, Inc.Coors Brewing Co.DirecTV, Inc.FedEx Corp.Frito-Lay North AmericaCatorade/ Tropicana (Catorade)Catorade/Tropicana (Tropicana)Ceneral Motors Corp. (Cadillac)IBMKraft Foods, Inc. (Oscar Mayer)MasterfoodsMBNA America BankMotorola Inc.News AmericaPepsi-Cola North America (Pepsi)Southwest Airlines Co.StaplesVisa USA

Source: By the Numbers 2004 (2004).

Category

PharmaceuticalSoupCameras and EquipmentMotor OilBeerSatellite TelevisionWorldwide Delivery ServiceSalty SnackSports Beverage (Isotonic)JuiceCar and Passenger TruckComputer HardwareProcessed Meats/PicklesChocolate and Non-chocolate ConfectioneryTeam-Identified Credit CardsWireless Telecommunications EquipmentSuper Bowl Free Standing InsertsSoft DrinksAirlineOffice Supply RetailerPayment Systems Services

SportsBusiness Journal, 6(36), 22.

Partner Since

200319981984199120021994200020001983200220012003198320021995199919792002199719961995

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In response to Jones' renegade efforts, in 1995 theNFL sued Jones and the Dallas Cowboys for violatingthe Trust Agreement the club signed in 1982 authoriz-ing the NFL to negotiate commercial uses of the team'sname, helmet, uniform, and slogans ("NFL, Cowboysowner," 1996). The NFL also voiced concern thatJones' actions in signing sponsorship deals with com-petitors of NFL official sponsors, including Coca-Cola,constituted ambush marketing ("NFL, Cowboysowner," 1996). The case was eventually settled out ofcourt, with the NFL recognizing Jones' right to sellsponsorships to the Dallas Cowboys stadium.However, in 2002, spurred by the continued lobbyingof Jones and newer owners such as Washington'sDaniel Snyder, the NFL agreed to cede local marketingrights back to the individual teams, creating the oppor-tunity for individual teams to sell its trademark rightsto whomever they choose, including competitors ofNFL official league-wide sponsors (Lefton, 2002).Capitalizing on this policy change, competitors of offi-cial NFL sponsors began to aggressively pursue indi-vidual team sponsorship rights. One of thosecompanies was MasterCard, which went from no NFLteam deals in 2002 to 25 NFL team deals by 2004, leav-ing Visa with the seven remaining NFL teams despiteits position as the NFL's "official credit card."

What is Ambush Marketmg?As the popularity of the NFL has increased, so too has

the number of companies seeking to align themselveswith the league without actually securing the officialsponsorship rights. This tactic, known as ambush mar-keting, has been defined as "a company's intentionalefforts to weaken—or ambush—its competitor's 'officialsponsorship.' It does this by engaging in promotionsand advertising that trade off the event or property'sgoodwill and reputation, and that seek to confuse thebuying public as to which companies reaJly hold officialsponsorship rights" (McKelvey, 1994a, p. 20). Furtherliterature on ambush marketing has suggested that,beyond this narrow and more pejorative definition,ambush marketing can be more broadly defined todescribe "a whole variety of wholly legitimate andmorally correct methods of intruding upon public con-sciousness surrounding an event" (Meenaghan, 1994, p.79). Thus, for instance, even a company that purchasesgeneric (non-football themed) advertising within aSuper Bowl telecast could, as a competitor of an NFLofficial sponsor, be construed as an "ambush marketer"regardless of the company's motives or intentions.

The country's premier sporting event, the SuperBowl, has long been one of the key battlefields inambush marketing. Over the years, a broad range oftactics have been utilized, including: 1) the purchase of

advertising in and around the Super Bowl telecast, 2)presence in and around the venue of the Super Bowl,3) consumer promotions tying into the event, whichtypically offer football-themed merchandise in proof-of purchase offers or trips and tickets as sweepstakesprizes, and 4) congratulatory messages.

Purchase of Advertising Time in and Around the Event:The purchase of advertising in and around a sporting

event telecast is one of the most common and populartactics of ambush marketing (McKelvey, 1992;Meenaghan, 1996; McAuley & Sutton, 1999). This tac-tic was also deemed to be the most effective form ofambush marketing in a survey designed to assess theattitudes and opinions of senior marketing executivesof corporations actively engaged in sport sponsorship(McKelvey & Gladden, 2003).

Given its unparalleled worldwide audience, telecastsof the Super Bowl have historically provided fertileground for ambush marketers. Throughout the 1990s,for example, Anheuser-Busch conducted a series ofhighly-publicized "Bud Bowl" commercials that airedduring Super Bowl telecasts, serving to ambush MillerBrewing's position as the NFL's official beer sponsor ofthe Super Bowl. The "Bud Bowl" campaign featured itsmain beers, Budweiser and Bud Light (the bottles per-sonified as football players), competing in a fantasyfootball game for the mythic "Bud BowlChampionship." Throughout the Super Bowl telecaststhe commercials provided highlights of the "game."Corporations seeking to gain an association with theSuper Bowl have also resorted to purchasing advertis-ing on local affiliate stations, thus ambushing competi-tors who have secured exclusive category advertisingrights within the national telecast of the Super Bowl.

Presence in and Around the Event VenueAnother popular form of ambush marketing is for

non-sponsors to secure a presence in and around thesporting event venue. In the early days of ambush mar-keting, companies would employ blimps and airplaneswith trailing banners to ambush a major sportingevent, but event owners have successfully closed thisambush avenue by working closely with the FederalAviation Administration and with host cities to enactair traffic restrictions during such events. Other popu-lar ambush marketing avenues have included: securingstrategically placed billboards; erecting tents and inflat-ables in high-traffic locations; and distributing litera-ture and samples to consumers attending the event.These types of activities are all designed to gain animplied association with the event. However, as foundin the survey by McKelvey and Gladden (2003), secur-ing signage near or around the event venue, as well as

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sampling and promotional literature distribution, weredeemed by corporate sport marketers to be among theleast effective ambush marketing tactics.

In-venue ambushing can also involve a direct con-flict between an official league sponsor and a non-sponsor. In 1995, tbe New England Patriots becamethe first team to crack Coca-Cola's monopoly on localNFL team agreements, signing Pepsi to an officialsponsorship that included in-stadium pouring rights.This deal was soon followed by Jerry Jones' high-pro-file signing of Pepsi to be the official sponsor oftheDallas Cowboys' stadium, as discussed above(Vaillancourt, 2001).

Conducting Consumer PromotionsAnother popular avenue of ambush marketing is to

conduct consumer promotions that associate theambush marketer with popular sporting events. Suchpromotions typically are offered at retail locations andare supported by point-of-sale displays that featurevisuals "themed" to the particular sporting event andthat utilize words that generically refer to the sportingevent. For instance, a company intent on associatingitself with the Super Bowl may run an in-store promo-tion offering consumers a free football in exchange forproofs-of-purchase and/or inviting consumers to enterto win "a trip for 2 for the Big Game." W hile purposelyavoiding the use of any registered trademarks, the dis-plays are intended to lure consumers through animplied association with the Super Bowl. Companiesare also finding increasingly creative ways to associatethemselves with events like the Super Bowl, withoutspecifically offering Super Bowl trips. For instance,companies have provided consumers the opportunityto win trips to "Big Game"-themed parties in attractivelocations such as Las Vegas or the Playboy mansion.Increasingly, these types of promotions are also beingoffered on-line, providing further challenges to sportorganizations in identifying and addressing such con-sumer promotions.

Congratulatory MessagesIn an attempt to create an association with a particu-

lar event, companies will often create advertisementsoffering "congratulations" to the winning team or cer-tain players. For instance, only days after the 2003Super Bowl, The Milk Counsel, although not an officialsponsor ofthe NFL, ran a full-page advertisement inUSA TODAY featuring the game's two MVPs in their"Got Milk?" moustache campaign. This tactic is one ofthe most indirect forms of ambush marketing, andbecause of the one-time nature of the advertisementand First Amendment concerns, it is one of the mostlegally protected methods of associating with a sporting

event, especially if the "congratulations" message is nottied directly to the sale of a product or service.

The Effectiveness of Ambush MarketingThe effectiveness of ambush marketing has been the

subject of numerous research studies which, withsometimes conflicting results, have focused on con-sumer perceptions. The majority of research hasfocused on the success or failure of ambush marketingin terms of levels of recall and recognition of ambushmarketers versus "official sponsors" (McDaniel &Kinney, 1998; McDaniel & Kinney, 1996; PerformanceResearch Inc., 1992; Shani & Sandier, 1998). Researchstudies have also found consumer confusion regardingthe classification of sponsors (McDaniel & Kinney,1998; Sandier & Shani, 1993, 1989; Stotlar, 1993).Shani and Sandier (1998) found that consumers' atti-tudes toward ambush marketing were largely indiffer-ent and linked to their levels of knowledge of an event.

More recently, Lyberger and McCarthy (2001) con-cluded that there existed confusion and a lack ofknowledge regarding sponsorship of the Super Bowlthat was unaffected by levels of interest in sport, in theNFL, or in the event itself Their study further foundthat consumers are less aware of ambush tactics beingemployed at the Super Bowl than those beingemployed at the Olympic Games, and that there is "abroad lack of awareness of levels of sponsorship and ofthe entitlements associated with those levels" (p. 136).Finally, results of their study demonstrated that a sig-nificant number of respondents did not opposeambush marketing practices and that consumers werenot "disgruntled" by companies that engage in ambushmarketing and that there seems to be "a generalacceptance ofthe practice" (p. 137).

The effectiveness of ambush marketing has also beenassessed through a survey of corporate decision makers(McKelvey & Gladden, 2003). Their study found thatalmost 90% of the respondents agreed that effectiveambush marketing can confuse consumers into think-ing a non-sponsor is actually a sponsor, and that nearlythree-quarters ofthe respondents agreed that the aver-age consumer does not differentiate between officialsponsors and ambushers. The survey also found that,on the whole, executives felt that sport properties wereineffective in dealing with ambush marketing threats.For instance, almost 70% of the respondents agreedthat while properties often imply they will combatambush marketing at the time of contracting, theyseem powerless to do so when it occurs. Furthermore,a majority of executives agreed with the notion thatproperties are either too lazy or ambivalent to addressthe ambush marketing concerns of its corporate spon-sors (McKelvey & Gladden, 2003).

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This research study, coupled with research studiesinvolving consumer attitudes toward ambush market-ing, suggests significant hurdles for sport organizationsregarding the prospects of educating the general publicwith respect to the official sponsors ofthe event andthe potential negative impact of ambush marketingupon the value of official sponsorship programs.

Legal Landscape of Ambush MarketingThe debate over ambush marketing is further cloud-

ed by questions regarding its legality, particularly giventhe intangible nature of ambush marketing typicallymanifested through promotion and advertising(McKelvey, 1994b). According to U.S. law, there areseveral legal recourses that a sport organization cantake to prevent ambush marketing. First, if an ambush-ing company uses a trademarked name, symbol, orlogo ofthe event, the organization can sue for trade-mark infringement. Under the Lanham Act, anambushing company using a mark that is Jikely tocause consumer confusion with respect to the corpo-rate affiliation can be held liable for damages. Absentblatant trademark infringement, however, the LanhamAct requires that the organization demonstrate, mostoften through the use of consumer surveys, that thereis not only a likelihood of confusion, but that con-sumers have actually been confused as to which com-pany is the official sponsor.

A second legal remedy is to sue ambushers for falseendorsement. This legal claim, which can be broughtunder the Lanham Act or under state unfair competi-tion statutes, enables the sport organization to arguethat the ambusher is trading off of the goodwill associ-ated with an event—goodwill that has been built up bythe organization, over time, through a tremendousinvestment of resources.

Ambush marketing campaigns, however, are mostoften conducted by marketers who are savvy enough toavoid blatant trademark infringement, instead prefer-ring to more subtly imply or evoke a false relationshipwith the sport property in the minds of consumers.

V^hen sport organizations are confronted byambush marketing campaigns, especially those thatspecifically threaten their official sponsors, they mayreact by publicly denouncing the actions oftheambusbing company. As NFL spokesman BrianMcCarthy publicly stated prior to the 2004 SuperBowl, in addressing ambush marketing activities byseveral beer companies, "Ambush marketing is a trans-parent attempt to cash in on the passions of our fans"(Murphy, 2003, p. DI). When sport organizationsbelieve that they have valid legal grounds, they issuecease-and-desist letters to potential infringers, threat-ening potential legal action if the company refuses to

cease its promotional activity. For instance, the NFL isreported to send out "dozens of cease-and-desist lettersannually to companies that engage in trademarkinfringement" (p. DI).

However, given the gray areas that surround thelegalities of ambush marketing, U.S. professionalsports leagues have historically been reluctant to bringlawsuits, primarily because ambush marketers aresavvy and knowledgeable enough to avoid blatantlyinfringing on registered trademarks. As a result, thereexists no decided U.S. case law based directly upon anambush marketing scenario, absent an outright case oftrademark infringement {Host Communications v.Kellogg Company, 1994) or a contractual dispute thatinvolved the licensing of official sponsor rights in con-flicting categories {MasterCard v. Sprint, 1994).

One of the reasons that professional sport leagueshave been reluctant to bring suit against ambush mar-keters is the fear of an adverse court ruling. Such wasthe case in 1992, when a Canadian court upheld thelegality of ambush marketing NHL v. Pepsi ColaCanada (McKelvey, 1992). In 1990, the NationalHockey League ("NHL") sued Pepsi-Cola Canada("Pepsi") in a Canadian court in the first-ever litiga-tion specifically addressing ambush marketing. Thecase provided a textbook illustration of ambush mar-keting in action. Pepsi did not utilize any NHL regis-tered trademarks in its promotional and advertisingmaterials. Instead, the company utilized city namesrepresenting NHL playoff participants and game num-bers printed under bottle caps and on scratch-off gamecards as part of its "Pro Hockey Playoff Pool" promo-tion offering consumers various hockey-related prizes.Pepsi also sponsored the league's telecasts of theStanley Cup playoffs throughout Canada and featuredhockey imagery as well as hockey legend Don Cherryto advertise the promotion. To allay potential con-sumer confusion as to its association with the NHL,Pepsi utilized disclaimer language, stating in advertis-ing and promotional materials that its promotion was"neither associated with nor sponsored by the NationalHockey League or any of its member team or otheraffiliates" (p. 7). Despite the NHL's claims that Pepsihad engaged in misappropriation and unfair competi-tion (referred to under Canadian laws as the tort of"passing of) , or alternatively, that Pepsi had unlawful-ly interfered with the NHL's business associations, thecourt found in favor of Pepsi, holding that, inter alia, ithad used disclaimers sufficient to alleviate any con-sumer confusion.

As stated earlier, one of the most popular forms ofambush marketing is the offering of tickets for specialevents in consumer sweepstakes. This tactic was chal-lenged in by the National Collegiate Athletic

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Association (NCAA), which, in 2002, sued CoorsBrewing Company for ttie unauthorized use of NCAAFinal Four tickets in a consumer promotion. TheNCAA argued ttiat Coors' use of Final Four ticketsconstituted a breach of contract based on the ticketback language that resembles that on the back of atlspecial event tickets inctuding Super Bowt tickets:"[U]ntess specificalty authorized in advance by theNCAA, this ticket may not be offered in a commercialpromotion or as a prize in a sweepstakes or contest"(McKetvey, 2003). Although this case had the potentialto become a seminat U.S. case on the tegatities ofambush marketing, it was settled out of court in Aprit2003 (McKetvey, 2003).

Ethical Considerations of Ambush MarketingWtiite the practice of ambush marketing has been

widety debated, particutarty around premier sportingevents sucti as the Otympics, World Cup and SuperBowt, the answer to whether it is an "immorat or imag-inative practice ... may wett tie in the eye of the behotd-er" (Meenaghan, t994, p. 85). For instance, sportproperty owners and their officiat sponsors typicattyregard as immorat or unethicat any activity by a non-sponsor that wittingty or unwittingty intrudes upon theproperty's and/or sponsors' rigtits, thus potentiattydetracting from the officiat sponsor's "exctusive" associ-ation with the sport property. On ttie other hand, suchactivity engaged in by non-sponsors is typicatty per-ceived and defended as nothing more than a part of the"normat 'cut and thrust' of business activity based on astrong economic justification" (p. 85).

Ttie diverse positions taken by two teading sportmarketing executives further serve to ittustrate the etti-icat issues surrounding ambush marketing. FormerAmerican Express marketing executive lerry Wetsh, thearctiitect betiind his company's tiighty pubticizedassautt on Visa's Otympic sponsorship, has been anoted defender of ambush marketing:

In explaining the practice of ambush marketing... tbere is no need to discuss etbics or moratity.Companies routinety compete - mostty, we bopeand expect, bonestty and bard - and ambusb mar-keting, correctty understood and rigbtty practiced,is an important, etbicatty correct, competitive tootin a non-sponsoring company's arsenat of businessand image-buitding weapons. To tbink otberwise iseitber not to understand - or wittfutty to misrepre-sent - tbe meaning of ambusb marketing and itssignificance for good - and winning - marketingpractice. (Wetsb, 2002, p. 4)On tbe otber end of tbe spectrum, former

Internationat Otympic Committee (IOC) bead of mar-keting Micbaet Payne, wbo coined tbe term "parasitic

marketing" to refer to ambusbers of tbe OtympicMovement, bas stated:

Ambusb marketing is an attempt by corporationsto mistead tbe pubtic into betieving tbat tbey aresupporting a sports event. Tbis deception contra-venes a basic premise of etbicat business practice:tbat of trutb in advertising and business communi-cations. ... It is in tbe interests of sport tbat ambusbmarketing activity be positioned in tbe pubtic mindas unetbicat and deceptive and tbat offenders besubject to pubtic exposure and embarrassment. It isonly by matcing ambusb marketing unattractive topotentiat offenders tbat sport can continue to pro-tect its revenue base. (Payne, 1998, p. 330-331)Regardtess of one's perspective, it is important to

consider ambusb marketing witbin an etbicat frame-work. Ambusb marketing, attbougb usuatty tegat, basoften been criticized as deceptive and unetbicat (Doust,1998; O'Suttivan & Murpby, 1998). Doust (1998) sug-gests tbat ambusb marketing can be viewed witbin tbeetbics paradigm of marketing in generat. Betcb andBetcb (1995) define etbics as "... morat principtes andvatues tbat govern tbe actions and decisions of an indi-viduat or group. A particutar action may be witbin tbetaw and stitt not be etbicat" (p. 680). Doust (1998) basfurtber suggested tbat "tbe degree to wbicb a companyagrees to 'back off a bit' witt to a targe extent be deter-mined by its own code of etbics, and by wbetber tbatcompany views ambusb marketing practices as unetbi-cat or simpty good business sense" (p. 25).

Dickson (1994) furtber argues tbat companies needetbicat guidetines because tbe tetter of tbe taw is gener-atty considered to be onty a minimum etbicat standard:"tbe taw is a ftoor, and must not serve as tbe onty basisfor individuat and corporate etbics" (p. 203). Wbitemost corporations bave a generat code of marketingetbics (some written, otbers not), tbe need to meet per-formance goats resutts in etbicat stresses being ptacedon marketers' personat codes of etbics (p. 203-206).

Tbe etbics of ambusb marketing can be viewed fromtwo tbeoreticat frameworks. Tbe first emptoys utititari-an tbeory; essentiatty, tbe rigbt action is tbat wbicbproduces tbe most good for tbe most peopte in a spe-cific situation. Laczniak and Murpby (1993) state:

In an organizational context, utititarianism basi-catty states tbat a decision concerning corporateconduct is proper if and onty if tbat decision pro-duces tbe greatest good for tbe greatest number ofindividuats. Good is usuatty defined as net benefitstbat accrue to tbe parties affected by cboice. (p. 30)Tbus, from an etbicat perspective, as suggested by

Meenagban (1996), an ambusb marketer tbat "givestbe impression of invotvement witb payment is meretyserving its own narrow setf-interest and, in doing so.

120 Votume 15 • Number 2 • 2006 • Sport MarHeting Quarterly

engages in bebavior tbat is barmfut to tbe greater goodof sport" (p. 109). As Dickson (1994) furtber pointsout, tbere are several problems inberent in apptyingutititarian tbeory, often atso referred to as situationatetbics: 1) it is difficutt to catcutate wbat constitutes tbemost good for tbe most peopte in a specific situation,as tbe principte of utitity does not betp in measuringgood or bad; 2) it does not explain wbetber totat goodcan be measured by adding up att tbe positive out-comes and tben subtracting att tbe negative outcomes;3) it can resutt in companies sinking to tbe towest etbi-cat standards among a group of competitors, wbeneacb rationatizes tbat it is at teast as etbicat as tbe com-petition; and 4) marketers can become fixated witbbow bis or ber company witt benefit, resutting in toweretbicat standards being apptied.

Wbite utititarian tbeory focuses on tbe consequencesof ones actions, tbe second tbeory focuses on tbeintentions of tbe decision maker. Tbis second tbeorycan be traced back to Kantian morat tbeory, wbicb"reties on universat standards of goodness and tbemotivation to futfitt one's duties and obtigations"(Meenagban, 1996, p. 109). Tbis tbeory bas atso beenreferred to as "duty-based etbics" (O'Suttivan &Murpby, 1998). Dickson (1994) argues tbat wbite tbisapproacb takes most of tbe situation or context out oftbe etbicat evatuation, it stitt requires tbe decisionmaker to see tbe universat wrong or evit in tbe act ifeveryone did it. In otber words, immorat or moratindividuats may answer tbat, yes it woutd be fine forsociety and for otbers to act in tbe same way towardtbem. If, for instance, an ambusb marketer's mainobjective is to confuse tbe consumers about wbo tbesponsor is and tberefore gain tbe associated benefitswitbout payment of a rigbts fee, tbe intention is cteartyone of deceit and tbus woutd be an etbicatty question-abte practice. On tbe otber band, an ambusb marketermay betieve be or sbe bas a morat dut^ and obtigationto stoctcbotders to maximize revenues. Tbus, in creat-ing a promotionat campaign tbemed to a major sport-ing event, an ambusb marketer may ctaim tbat,witbout ambusbing, it is otberwise denied tbe rigbt toparticipate in an important sporting event due meretyto tbe fact tbat a competitor bas atready secured "offi-ciat" rigbts to tbe event, tbat it can not afford to paytbe sponsorsbip fee, or tbat it does not believe tbe"officiat" association is commensurate witb tbe prop-erty's sponsorsbip fee. As pointed out by O'Suttivanand Murpby (1998), tbe financiat success of Nit<;e,wbicb built its empire as a notorious ambusb mar-keter, provides a good ittustration of tbis approacb totbe etbicat issue.

As Meenagban (1996) bas rigbtty conctuded, ambusbmart<eting raises "comptex issues in an area witb dia-

metricatty contrasting perspectives and varying rigbtsctaimed by sbarebotders and stakebotders. Sucb con-siderations are vatuabte for judging issues on a case-by-case basis" (p. 109).

Coca-Cola, Football and NFL: The CurrentLandscape

Coca-Cota was tbe officiat soft-drink sponsor of tbeNFL for 19 years. However, in 2002, wben Coca-Cota'sdeat expired, tbe NFL signed Pepsi as its exctusive soft-drink sponsor at a reported cost of $160 miUion over fiveyears (Leitb, 2002). tn response to tosing tbe NFL officiatsponsorsbip, a spokesman for Coca-Cota, stated: "Webave become increasingty concerned about tbe trend ofescatating costs for nationat sponsorsbips. Our researcbsbows tbat most peopte reatty don't see a distinctionbetween being a nationat sponsor or a major advertiser,particutarty at tbe tocat tevet" (Leitb, 2002, p. 1).

Some industry experts criticized Pepsi as bavingover-paid for tbe NFL sponsorsbip, but Pepsi defendedtbe deat as necessary in order to strengtben its nationatmarketing presence. Stated one industry expert, "Cokeprobabty got tbe better deat bere. For tbe most part,consumers don't bave any affitiation witb tbe NFL, perse. You're a fan of your tocat team" (Leitb, 2002, p. 1).

Despite ceding its status as tbe NFL's officiat softdrink, Coca-Cota did not abandon its marketingaround tbe sport of footbatt. Entering tbe 2004 season,Coca-Cota bad tocat sponsorsbip agreements witb 20NFL teams for tbe rigbts to conduct tocat advertisingand promotion. Inctuded among tbese teams were tbeHouston Texans. Attbougb tbe Texans served as tbeSuper Bowt bost team, att commerciat activities aroundtbe Super Bowt were controtted by tbe NFL, in cottabo-ration witb a tocat bost organizing committee cbargedwitb setting tocat sponsorsbips, subject to tbe approvatof tbe NFL. Obviously, despite its regutar season spon-sorsbip of tbe Texans, Coca-Cota knew tbat neitber tbeTexans, tbe NFL, nor tbe bost committee woutd grantany officiat promotional rigbts, in order to best protectPepsi's investment as tbe NFL's officiat soft-drinksponsor.

In addition to maintaining its tocat NFL team spon-sorsbips, Coca-Cota strengtbened its association witbtbe sport of footbatt at tbe cottege, bigb scboot, andyoutb footbatt tevets. Sbortty after tosing tbe NFLsponsorsbip, Coca-Cota trademarked a togo featuringtbe pbrase "Footbatt Town USA," wbicb, according tolitl, woutd "attow us to capitalize on tbe poputarity andgoodwitt of footbatt at att tevets of ptay, from youtband bigb scboot, to cottege and professionat."

Coca-Cota's extensive invotvements witb many NFLteams, as wett its investment in its "Footbatt TownUSA" campaign, offered any number of promotionat

Volume 15 • Number 2 • 2006 • Sport MarHeting Quarterly 121

ptatforms upon wbicb to possibly associate tbe Coca-Cota Ctassic brand witb tbe 2004 Super Bowt. It left littwitb many important decisions to make in crafting berrecommendation; decisions tbat sbe knew woutd atsoinvotve tegat and etbicat issues.

lill's decision making process was furtber compticat-ed wben sbe was informed by ber in-bouse counset tbattbe city of Houston bad just passed an ordinance tbatcreated a "safety zone" for tbe period of January 23,2004, tbrougb February 2, 2004, probibiting tbe unau-tborized erection of tents and inftatabtes in tbe vicinityof Retiant Park, site of tbe 2004 Super Bowt. Tbe areasencompassing tbe "safety zone" were specificatty spettedout in tbe ordinance. Attbougb tbe ordinance's purposewas coucbed as a means of ensuring pubtic safety, a pri-mary goat was to prevent competitors of officiat NFLsponsors from engaging in ambusb marketing activityin and around tbe Super Bowt venue.

Witb tbis furtber information in mind, sbe gatberedber staff to begin devetoping ber recommendations fortbe 2004 Super Bowt.

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Note: Tbe autbor wisbes to recognize tbe researcbassistance of Tbomas Cerasoti. Tbis case study wasdevetoped sotety as tbe basis for ctass discussion and isnot autborized or approved by Tbe Coca-CotaCompany.

Appendix A

Sport Sponsorship Involvements (2004)

Coca-Cola CompanyCoca-Cota: NHL, NASCAR, NASCAR WCS Coca-

Cota 600 and 12 NASCAR WCS drivers (associatesponsorsbips), WUSA, PGA Tour/Cbampions Tour,NCAA

Dasani: NASCAR, WUSA, NCAAMinute Maid: NASCAR, WUSA, NCAA, Minute

Maid Fietd (in Houston)Powerade: NHL, NASCAR, NHRA, WUSA, USA Alt

American Higb Scboot Soccer Game (co-titte sponsor)Sprite: NBAVarious brands: 20 NFL teams, 17 NHL teams, 16

MLB teams, 16 NBA teams

PepsiCoPepsi: MLB and 14 teams, 13 NBA teams, 10 NFL

teams, 12 NHL teams, NASCAR WCS Pepsi 400, MLSand seven teams, 42 NCAA member atbtetic depart-ments, Pepsi Center (in Denver), Pepsi Arena (inAlbany, N.Y.), Pepsi Cotiseum (in Indianapotis) andColisee Pepsi (in Quebec City, Quebec)

Gatorade: MLB, NFL and CFL, NBA and WNBA,NASCAR Gatorade 125s

Tropicana: MLB, NFL, Tropicana Fietd (in St.Petersburg, FL.)

Frito-Lay: NFL, CFLLipton Tea: PGA Tour/Cbampions TourMountain Dew: NASCAR WCS Mountain Dew

Soutbern 500, Mountain Dew Nationat Cbampionsbipof BMX, X Games and Winter X Games

Various brands: U.S. Youtb Soccer Association, fiveNASCAR WCS drivers (associate sponsorsbips)

Source: Soda Sponsorsbips. (2003, Marcb 24).SportsBusiness Journal, 5(48), 21.

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