Four years after making waves in NASCAR by signing on as the primary sponsor of Dale Earnhardt Jr., Amp Energy is phasing its brand off the car of the sport's most popular driver.
PepsiCo is expected to announce this week that Diet Mountain Dew will replace its Amp Energy brand as Earnhardt's primary sponsor for 16 races in 2012. The company has the primary sponsorship rights for 20 total races on the No. 88 car, and Amp will serve as an associate sponsor while also appearing on the hood for the other four races. The National Guard will continue to be the primary sponsor for the other 18 races Earnhardt drives.
The shift is a major downsizing in the sponsorship between Amp, an upstart energy drink, and Earnhardt, the sport's biggest driver. Pepsi, which owns Amp and Mountain Dew, has one year left on its contract with Earnhardt and Hendrick Motorsports, and the company's executives believe Diet Mountain Dew, which is one of the fastest-growing soft drinks, stands to benefit more from Earnhardt than Amp.
"The story is really about opportunity," said George Cox, Mountain Dew brand manager. "With Dew, Dale and NASCAR there's this awesome marriage. Dale is the embodiment of the person we're trying to target with Diet Dew. We wanted to tap into that equity Dew has in NASCAR and put it into overdrive with Dale."
Pepsi and Hendrick Motorsports are expected this week to unveil a new paint scheme for the No. 88 car for next year's Daytona 500. The unveiling comes just weeks after Earnhardt signed a five-year extension with Hendrick Motorsports that will keep him with the team until 2017.
Cox said Pepsi plans to focus on developing its marketing and activation plans for Diet Mountain Dew and won't begin discussing a possible renewal with Hendrick until next year. Its current agreement with Hendrick and Earnhardt runs through 2012, but the company has had a long-standing relationship with Hendrick that dates to 1996.
Amp Energy signed a deal with Hendrick Motorsports and Earnhardt in 2007, shortly after the team added Earnhardt to its stable in one of the sport's most anticipated free-agent signings. The sponsorship was valued at $25 million to $30 million and made the brand the primary sponsor for 20 races on the No. 88 Chevrolet.
At the time, Amp was the fifth-largest player in a fast-growing category, which then had more than $6 billion in annual sales. But the category's growth has stalled recently. The category added only 1 million new energy drink consumers between 2007 and 2009, compared with 9.3 million new consumers from 2005 to 2007, according to Mintel, a global market research company. Amp Energy has remained a small player in the category, generating an estimated $234 million for the past year across key retail channels for energy drinks except Wal-Mart, according to SymphonyIRI Group, a company that tracks retail sales across consumer packaged goods.
The shrinking number of new consumers made it difficult for Amp to justify the cost of the sponsorship. The brand also is planning to relaunch its product later this year and reposition it as an energy drink for older users, sources said.
By shifting the bulk of its marketing support of the driver from Amp to Diet Mountain Dew, Pepsi can save the Amp brand money and align Earnhardt with a brand he's already passionate about. Earnhardt is a fan of Mountain Dew and grew up drinking the soft drink in North Carolina. When Brian Vickers drove a retro Mountain Dew car in a 2006 Nationwide Series race, Earnhardt famously asked for some of the retro hats that the brand rolled out for the occasion.
Though not as prevalent, Amp Energy will continue to have an association with Earnhardt, which PepsiCo hopes can preserve the connection Amp made with NASCAR fans during the past four years.
"They're going to continue to speak to the NASCAR Amp drinker we've developed, but Amp is going through an evolution," Cox said. "We're not to a point of where we can talk about where we're going with that, but once it's public it will make sense how we're using the NASCAR platform going forward."