economics

April 15, 2010

World Cup Crimps Merchants

Filed under: Uncategorized — ktetaichinh @ 8:47 pm
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CAPE TOWN—With the World Cup’s arrival this June in South Africa, the world soccer organization’s marketing machine and its strict rules on using trademarks are colliding with businesses both large and small.

When the budget airline Kulula.com wanted to sell flights to cities hosting World Cup games, the carrier ran an ad calling itself the “Unofficial National Carrier of the ‘You-Know-What.'” The ad displayed a soccer player, soccer balls and the South African flag.

Samantha Reinders for The Wall Street JournalStreet vendor Armstrong Masuku, 24, sells soccer shirts at a traffic light in Cape Town, South Africa.

CUP

CUP

No dice, said FIFA, the Fédération Internationale de Football Association. Lawyers for soccer’s governing body accused Kulula of “ambush marketing,” saying the ad illegally associated the airline with the trademarked 2010 FIFA World Cup South Africa.

The legal warning prompted Kulula to revise its ad. Among changes, it replaced the soccer balls with a disco ball, dropped the flag for a whistle and removed the shoes and socks from the player.

FIFA says it is investigating more than 400 cases related to trademark infringement in South Africa. Meantime, the soccer organization’s rules about which businesses can sell goods near the match venues are colliding with South Africa’s small businesses and street hawkers.

The matter is of particular concern in South Africa, a country with some of the sharpest income disparities in the world and a jobless rate of nearly 25%. Many of the poor eke out a living on the streets, selling everything from feather dusters to fake soccer jerseys on sidewalks and outside car windows.

June will mark the first time the World Cup is played on African soil, a development that seeks not only to highlight the global nature of the sport but also to nod to the emerging economies of the continent. The South African government embarked on a massive road, rail and stadium building boom to prepare for an influx of visitors, stirring hopes of new jobs and an uptick in economic growth.

Samantha Reinders for The Wall Street JournalA street vendor in Cape Town, South Africa, says his knock-off soccer shirts are his biggest sellers.

CUPjump

CUPjump

FIFA Secretary General Jérôme Valcke said it cost $1 billion to stage the World Cup in South Africa, and exclusive sponsorship deals were needed to fund the event. That is why FIFA was working with police and authorities to fend off ambush marketers, he said.

Sponsors such as Adidas AG, Coca-Cola Co. and Emirates airline are permitted to link their brands to the soccer tournament and its widely recognized official symbols. While FIFA declined to disclose sponsorship amounts, an industry veteran with knowledge of current pricing says some companies are paying $250 million to $300 million for an eight-year deal, or $30 million to $40 million a year.

FIFA says World Cup business will trickle down well beyond big sponsor companies. It cites research from management consultant Grant Thornton LLP estimating that nearly a half million visitors will come to South Africa for the games, generating about $2.6 billion in tax revenue and creating about 415,000 jobs.

But in some cities, South African officials are facing anger from small businesses feeling disenfranchised by the event. The soccer authority is working with police to ward off unauthorized sales and advertising around stadiums in so-called Exclusion Zones, which range from half a kilometer to three kilometers (about one-third of a mile to 1.9 miles), depending on the venue.

FIFA says it is seeking to integrate local makers of handicrafts and some shop owners into these spectator-dense zones.

South Africa Prepares for World Cup

1:45After three years of work South Africa enters its final phases of preparations for the World Cup, boosting wildlife inspired stadiums. Video courtesy of AFP.

In Johannesburg and South Africa’s capital, Pretoria, hawkers have complained they won’t be allowed near stadiums to set up in areas with the heaviest foot traffic, according to David Cote, a Pretoria-based member of the Lawyers for Human Rights.

In Cape Town, scores of fruit and vegetable sellers are upset about being evicted from street stalls as part of a citywide cleanup ahead of the World Cup. They have warned of launching protests and sales boycotts during the South African showcase.

“We aren’t going to reap the benefits of all the people coming,” declared Uthmaan Rhoda, who was speaking to several dozen fellow Cape Town produce traders at a recent “crisis” meeting. But he added: “As traders, we can make the World Cup impossible for them.”

South African officials involved in the World Cup say hawkers need to adjust to the rules, as merchants do elsewhere. “The way they sell their products normally is not the same way as when it’s the World Cup,” said Rich Mkhondo, spokesman for South Africa’s World Cup Organizing Committee.

But such an adjustment isn’t going to be easy, especially for those who belong to this nation’s huge underclass. Ester Nongauza, who operates a snack and cigarette stand with her son at the Cape Town railway station, suspects she won’t be able to sell there during the World Cup, since it is near a designated fan park. “If we stay at home we have nothing,” she says.

—Matthew Futterman in New York contributed to this article.

Write to Peter Wonacott at peter.wonacott@wsj.com

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