Functional CPG Brands Shouldn’t Overlook NIL Opportunities
“Given the popularity I had and my team had, whatever I decided to do would have sold like hotcakes…”
As a member of the University of Wisconsin–Madison men’s basketball team that went to back-to-back Final Four appearances in 2014 and 2015, Nigel Hayes wanted to start a clothing brand at the peak of his fame. He figured it would help him apply business school learnings and possibly provide long-term earnings beyond the hardwood. However, conversations with an academic advisor made it clear his plan would not be permitted under NCAA rules that barred players from profiting off their name, image and likeness (known as NIL). What would be allowed for non-athletes at Wisconsin was off limits to him…
Those stories of missed commercial opportunities are by the thousands from former student athletes, but recently (July 2021) the NCAA changed their stance on compensation for NIL. Leading up to the landmark change, I felt NIL could offer fertile ground for functional CPG brands. It provided access to influential members of a consumer cohort that tend to be one of the most valuable to functional CPG brands (especially if we are talking sports nutrition).
Notable Early Functional CPG NIL Deals
Since I worked with several functional CPG brands that were aggressively seeking NIL deals, I (wrongly) assumed that the broader industry would be prepared to participate from the start. That being said, there was an initial summertime burst of attention-grabbing student-athlete NIL headlines in the functional CPG industry…
- My old boss at Musclepharm Brad Pyatt’s new company Plantfuel invested mid-six figures in its entire student athlete program. They initially signed gymnast Olivia Dunne, quarterback Spencer Rattler, and about a dozen other high-profile college athletes.
- Iovate Health Sciences owned Six Star Pro Nutrition signed six athletes and used the athletes themselves, in an integrated, dynamic advertising campaign called “Student Athlete Stories.”
Throughout the inaugural fall season, there were some wins, some telling trends in terms of distribution of deals, and a lot of groundwork laid by these first companies. During the spring season, we started to see functional beverage brands jump into the mix…
- Optimum Nutrition leveraged the University of Texas to launch its new Orange Blast flavor of AMIN.O. ENERGY Plus Electrolytes Sparkling Hydration Drink.
- Gatorade signed women’s basketball standout Paige Bueckers and HBCU football player Shedeur Sanders.
- Biosteel snagged the nation’s top freshman female basketball player Azzi Fudd
Confusion Around NIL
So, why didn’t we see more NIL deals from functional CPG brands? One word…confusion!
While the new NCAA policy removed the restriction on student athletes receiving compensation for NIL, it did not enact uniform policies or rules. This landmark shift in NCAA amateurism rules opened the door to NIL opportunities that were catalyzed by new state laws. Roughly half of the states in the U.S. created some form of legislation in the lead-up to the July 2021 decision that guaranteed a college athlete’s right to make endorsement money. To address concerns about a pay-for-play system evolving in the NCAA, many of those laws included regulations prohibiting a school from being directly involved in facilitating deals for students.
NCAA initially planned to create similar restrictions when changing its rule to align with the wave of state laws that started going into effect last summer. It ended up backing away from any specific nationwide regulations out of a fear that those limits could be seen as thwarting competition in violation of federal antitrust law. The lack of a detailed NCAA policy means that states that didn’t push for NIL laws — such as Utah — now actually have fewer restrictions than states that were proactively pressuring the association to change.
I mentioned Utah because it’s where maybe one of the best-known functional CPG NIL deals happened at BYU. Built Bar Company paid the tuition of all 36 BYU football walk-ons. This was a brokered deal facilitated by BYU, and also the kind of deal that would be illegal in some states. The patchwork of slightly varying state laws will likely produce scenarios in which certain types of businesses can contract with student-athletes in some states but not in others. It also remains possible that the federal government could enact legislation that once again changes how companies navigate NIL rules. Functional CPG brands interested in inking their first NIL deals with student-athletes should keep in mind that current rules allow for a wide variety of agreements.
NIL deals have so far proven to range from six-figure deals to contracts in which a student athlete might merely receive a few hundred dollars or even non-cash compensation (e.g. free product). Despite those headline grabbing deals that I shared above; the current data shows that most student-athletes are making much less. Opendorse, an athlete marketing and NIL platform, reported that deals earned an average (not median) of just over one-thousand dollars since July 1, 2021.
NIL = Billion-Dollar Industry
Despite the slow start, I still think predictions that NIL endorsements would create a multibillion-dollar market is still a reality.
- I expect functional CPG brands that weren’t prepared to participate in the first two college sports seasons to allocate more marketing budget for student-athlete NIL endorsements.
- There’s a lack of turnkey solutions making this niche of influencer marketing messy. Maturation of the entire NIL ecosystem will start to happen. While pro athletes have agents, players associations, and a lot of resources to help them find opportunities and support them in the activation and fulfillment of those…student-athletes are still figuring out how to balance everything without much support.
NIL Best Practices
NCAA athletes want to do deals ASAP, but not every athlete is a marketing major. To be highly successful in this niche of influencer marketing, functional CPG brands should:
- Provide guidance and teach these student athletes what good content is by giving them great examples.
- Explain the difference between features and benefits when it comes to pitching your CPG products. Make it easy for them to succeed.
- While larger brands might look to college athletes with national name recognition and/or large social media followings, regional companies should consider partnering with student-athletes who are popular within their local markets.
- Remember it’s important to find those athletes who truly love your brand. These student-athletes will create the best content.
- Look for ways to build deeper relationships and see how they can help you expand your ambassador program beyond the locker room and to their peers, friends, and family.
- Go beyond the normal large conference football and men’s basketball player deals that accounted for most of the NIL compensation. I see women athletics as a huge opportunity. The same can be said around HBCU athletes. Now is a great time to show that your functional CPG brand is forward thinking and wants to help these athletes get the attention they deserve.
- Don’t just use game performance as the most important determinant of marketing power. While it might take a bit of extra research, functional CPG brands should put a significant focus on the relevance and overall storytelling fit of the athlete when determining some of their investment decisions. Gen Z athletes have become savvy at presenting themselves, their brands and their values via social media…so make sure to leverage that.
Final Thoughts
These new NCAA NIL rule changes provide a lot of opportunities for functional CPG brands to create more awareness and increase sales volume. The key to success is knowing the rules, acting fast, finding new opportunities, educating your ambassadors, and building meaningful relationships. While this may seem simple, the work that needs to be done to properly build an athlete ambassador program is quite cumbersome so make sure you build in flexibility and creativity to deal with unforeseen risks.
