Financial Times Europe - 19.10.2019 - 20.10.2019

14 ★ FTWeekend 19 October/20 October 2019

COMPANIES

A L I C E H A N C O C K A N D M U R A D A H M E D
LONDON

Tobacco groups rea conductingspon-
sorship deals withracing teams in an
effort to promotevaping roducts afterp
losing their place among the largest
backersofFormulaOne.
But a growingregulatory backlash
against e-cigarettes threatens to block
marketing efforts targeted at millions of
motorsportsfans.
For decades, tobacco companies were
the biggest sponsors of F1 and by the
mid-1990salmosteveryteamfeatureda
cigarette brand on their cars. F1 drivers
— from James Hunt to Michael Schu-
macher — have worn the logo of Marl-
boro cigarettes across their racing over-
alls. Brands such as Rothmans and Ben-
son & Hedges also regularly featured on
cars.
That ended when the FIA, the world
governing body for motor racing, voted
to ban sponsorship from cigarette mak-
ersin2006.
However a pivot by Big Tobacco
towards developing alternatives to their
traditional products has created fresh
opportunities. British American
Tobacco signed a sponsorship deal
with UK-based F1 team McLaren to pro-
mote what it calls its “reduced risk”
smoking products earlier this year, fol-
lowing a similar partnership between
Italy’s Ferrari racing team and New
York-basedPMI.
But during races in seven countries
includingAustralia,CanadaandFrance,
the F1 teams were forced to remove
marketing logos related to their vaping
sponsorships in order to comply with
localtobaccoadvertisinglaws.
A threatened crackdown gainst vap-a
ing in the United States undermines one
of the key reasons why BAT is sponsor-
ing McLaren. As well as promoting its
products on theMcLaren F1 car uringd
the US Grand Prix in Texas next month,
BAT is using the logo of its “Vuse” e-
cigarettes on the livery of McLaren’s
cars in the Indycar racing series, one of
themost-watchedsportingeventsinthe
country.
“You’ll find the overlap between the
F1 calendar and our business is pretty
profound,” said Kingsley Wheaton,
chief marketing officer at BAT, when
explaining the purpose of the com-
pany’sreasonstosponsorMcLaren.

He added that the “US foothold” was

anotherkeymotivation.

The regulatory crackdown on vaping

around the world threatens a potential

revenue stream for F1 teams that have

struggled o gaint sponsorship deals in

recenttimes.

BAT is paying around £20m a year for

its deal with McLaren, according to a

personfamiliarwiththedealterms.

PMI has not revealed the value of its

agreement with Ferrari, but it is merely

the latest commercial link between two

groups that have been closely tied in the

past. Indeed, PMI’s former chairman,

Louis Camilleri, was appointed chief

executive of Ferrari following the death

of predecessor Sergio Marchionne in

July2018.

As cigarette volumes have declined in

the west, tobacco companies have bol-

stered their efforts to develop new ways

to deliver nicotine. David O’Reilly,

director of scientific research at BAT,

said that 90 per cent of the company’s

research budget was now spent on ciga-

rette alternatives, which amounts to

more than £3bn. PMI has said that it has

invested $6bn into developing new

products.

However, the discovery of at least 450

cases of lung disease associated with

e-cigarettes across 33 US states

prompted the Centers for Disease

Control and Prevention to recommend

avoiding e-cigarettes altogether. In Sep-

tember, President Donald Trump

announced that he would consider ban-

ningflavouredvapingproducts.

“You can use F1 as a barometer for

effective tobacco control,” said Phil

Chamberlain, a partner at the Bloomb-

erg-funded initiative Stopping Tobacco

OrganizationsandProducts.

“It will be interesting to see how the

[US] crackdown has an effect

... Money talks in sports. It will be
about how much [the sports teams] are
able to resist the offer from tobacco
companies,”headded.
Different advertising regulations for

e-cigarettes across the globe mean that

Big Tobacco cannot obviously advertise

specific products on the cars in many

countries. PMI’s “Mission Winnow”

logo, the branding the company uses for

its relationship with Ferrari, was

removed from the team’s cars in Aus-

tralia after it was deemed too close to

thelogoforMarlborocigarettes.

PMI said that “regrettably, we know

that some may have preconceived ideas

about us and have expressed reserva-

tions about what they feel are our true

intentions”.

However, Formula One also provides

a venue at which the companies can

entertain policymakers and corporate

guests as well as invite social media

influencers to be seen with e-cigarette

products. “Sports events work quite

well for them,” said Mr Chamberlain.

“[Formula One] is fast, it’s sexy, it’s all

about winning and those are messages

withwhichtheyaretryingtoassociate.”

Mr Wheaton said BAT’s sponsorship

deal with McLaren was aimed solely at

promoting vaping products, rather than

being a backdoor to promote traditional

cigarettes.

“[It was] only for the marketing and

communication of our next-generation

products,” he said. “They are nothing to

do with our combustible portfolio, and

neverthetwainshallmeet.”

Rules backlash threatens red flag for vaping

Tobacco groups’ marketing deals with F1 teams may come to nothing if alternative products fall foul of legislation

M I L E S J O H N S O N— ROME
J O S E P H C OT T E R I L L— GABORONE

The Vatican’s powerful central admin-
istration office spent more than a year
researching a $200m investment into
an Angolan oil company in a deal pro-
posed by a personal contact of a senior
Cardinal, raising fresh questions about
the oversight of funds administered by
the Catholic Church.

The Vatican Secretariat of State, custo-
dianofcharitabledonationsmadetothe
Church by Catholics around the world,
used external consultants in 2012 to
conduct due diligence into lending
funds it held in Swiss bank accounts to
Falcon Oil, an Angolan oil company
owned by the businessman Antonio
Mosquito,peoplewithdirectknowledge
oftheproposalsaid.

After deciding against the loan to Fal-

con Oil, the Secretariat instead decided

to invest the $200m with aLondon-

basedItalianfinanciertobuyaminority

stake in a building he already owned in

London’s exclusive Chelsea. That Lon-

donpropertydealhasbecomesubjectof

a Vatican investigation in which Vatican

policeseizeddocumentsandcomputers

fromtheofficesoftheSecretariat.

The Vatican hasdeclined to comment

on the focus of its investigation and the

suspensionoffiveofficials,sayingonlyit

was examining past financial transac-

tionsconductedbytheSecretariat.

Mr Mosquito directly approached the

Vatican about the $200m investment, a

senior Holy See official said. The Ango-

lan businessman had an existing rela-

tionship with Cardinal Giovanni Angelo

Becciu dating back to when he served as

the Vatican’s ambassador to Angola

from2001-09.

Falcon Oil and Mr Mosquito did not

respondtoarequestforcomment.

Until 2018 Cardinal Becciu was the

second-highest ranking official in the

Secretariat of State reporting directly to

bothPopeBenedictandlaterPopeFran-

cis. He personally authorised the Lon-

don real estate investment, people

directlyinvolvedsaid.

At the time he Secretariat was con-t

sidering the investment, Angola was led

by President José Eduardo dos Santos.

Until he stepped down in 2017, Africa’s

second-largest crude producerwas

known asone of the most corrupt coun-

tries in the world. The country sits near

the bottom of Transparency Interna-

tional’sindexofcorruptionperceptions,

ranking165outof180countries.

Alberto Perlasca, a former senior offi-

cial in the Secretariat’s Office of Admin-

istrationatthetimeoftheproposal,who

this year was moved by Pope Francis to

serve on the Church’s highest court, told

the Financial Times the Secretariat was

approached directly by Mr Mosquito.

abouttheAngolanoilopportunity.

“Mr Mosquito contacted the Secretar-

iat of State as anyone else could have

easily done,” Mr Perlasca said in

response to questions from theFT. “The

fact that nothing was done about it

shows that the Secretariat of State has

been scrupulous in the examination of

the investment beyond every consider-

ationofpersonoroffriendship.”

Mr Perlasca did not directly respond

to questions about why a $200m loan to

an Angolan oil platform was considered

a suitable possible investment for the

Secretariat, which is the custodian of

hundreds of millions of dollars of char-

ity money donated to the Catholic

Churchbythefaithful.

In 2012 Falcon Oil held a 5 per cent

stake in the Angolan offshore explora-

tion block 15/06, whose largest share-

holders were and still are Italy’s Eni and

the Angolan state company Sonangol.

Falcon was seeking the $200m loan to

finance its contribution to the construc-

tionofanoffshoreplatform.

Cardinal Becciu declined to respond

directlytotheFT’squestions.

CreditSuissedeclinedtocomment.

Credit Suisse was acting as rivatep

banker for the Secretariat, and its

adviser for its investments. WRMsaid it

has no direct knowledge of the Vatican

investigation into the Secretariat’s

investmentintoitsLondonproperty.

Oil & gas

Vatican spent more than a year examining $200m Angolan oil investment

Cardinal Giovanni Angelo Becciu

authorised a London real estate deal

Driving

ambition: the

distinctive

Marlboro logo

and cigarette

packet colours

were a familiar

sight in 1970s

F1, such as on

James Hunt’s

McLaren of 1978

Hulton Archive/Getty

F1 ‘is fast,

it’s sexy, it’s

all about

winning

and those

are

messages

with which

they are

trying to

associate’

Contracts & Tenders Business Opportunities

Readers are strongly recommended to take appropriate professional advice before entering into obligations.

OCTOBER 19 2019 Section:Companies Time: 18/10/2019- 16:44 User:alistair.fraser Page Name:CONEWS5, Part,Page,Edition:USA, 14, 1