Top Japanese CEO says economic losses from no-fan Tokyo Olympics will be ‘enormous’

By Michelle Toh and Selina Wang, CNN Business

One of Japan’s most prominent business leaders says the Olympics are losing their commercial value.

Suntory CEO Takeshi Niinami told CNN Business in an exclusive interview on Monday that his company decided against being a sponsor of the upcoming Tokyo Games, saying it was “too expensive.”

“We thought of being an Olympic partner … but the economics didn’t match up,” said the chief of the Japanese beverage giant, which is home to brands such as Orangina and Jim Beam bourbon.

Instead of signing on as an official sponsor, Suntory chalked out another route to increase its visibility during the Games, which start this Friday: the Tokyo-based company planned to tie up with restaurants and bars around the sporting venues to promote its drinks, and open several establishments to serve its products exclusively.

“I thought that this occasion would be very much a showcase for us,” Niinami said in Tokyo. “I expected a lot of spectators from abroad to visit.”

The recent decision by organizers to bar spectators from the Games’ Tokyo venues over public health concerns scrapped those plans.

“The economic losses will be enormous,” said Niinami, estimating that Japanese businesses could have enjoyed a roughly 10% hike in sales had fans been allowed.

Having no domestic spectators could cost Japan’s economy 146.8 billion yen ($1.3 billion), according to an estimate by Takahide Kiuchi, an economist at the Nomura Research Institute.

He noted in a June report that “much of the expected economic benefit from the Tokyo Games vanished in March, when it was decided to ban foreign spectators from traveling to Japan” — a move Kiuchi projected had already caused economic losses of $1.4 billion.

“This is the time [when] we have to think about: what is the value of the Olympics?” said Niinami. “I think the Olympics have been losing [their] value.”

The Tokyo Games have been hugely controversial, with countless protests to cancel the event and thousands of volunteers pulling out.

Despite Niinami’s close ties to the Japanese government — he is an economic adviser to Prime Minister Yoshihide Suga — the executive doesn’t shy away from criticizing it. “I don’t know why the Games were not delayed,” he said, noting Japan’s lagging vaccine rollout and Tokyo’s ongoing heat wave. “[They] should be postponed … at least two months.”

A big bet

This month, Japan confirmed the Olympics would be held under a state of emergency due to the coronavirus pandemic.

That news was a blow to those, like Suntory, who’d been banking on an uptick in consumer spending. So far, more than 60 Japanese businesses have spent a record high of $3 billion on this year’s Olympics — and now many of them are concerned about the return on investment.

Asked whether he thought the Olympics could still provide a boost for Japanese companies this summer, Niinami said: “More and more, I don’t think so.”

Some businesses have had to significantly reconsider their involvement.

Akio Shinya, managing director of Tokyo Skytree, the world’s tallest broadcasting tower, told CNN Business that his company had deliberated last year “whether we should become a sponsor under this circumstance.”

Though it later decided to commit, it has since been forced to call off various events, including a torch relay on the skyscraper’s viewing platform intended to “boost the mood for the Olympics.”

“Because of Covid, it’s not the right time,” said Shinya. “There wasn’t a mood to hold such a fancy festival.”

Nearly 80% of people in Japan say the Olympics should not go ahead, according to an Ipsos Mori survey released last week.

Companies have been mindful of these sensitivities. This week, Toyota, one of the Games’ biggest sponsors, said it would not release ads related to the event in Japan, choosing instead to run “regular” commercials.

According to the automaker’s North American division, the decision was made out of consideration of “the Covid-19 situation” in the country.

Michael Payne, former head of marketing at the International Olympic Committee, acknowledged the uphill battle for businesses. “There’s no point in sugarcoating. You know, this is not an ideal situation,” he said.

But Payne, who created the Olympics’ global sponsorship program some four decades ago, predicts that companies could “still be pleasantly surprised at the potential legacy benefit that will come from these very difficult Games.”

“There’s still an important opportunity,” he said. “I wouldn’t count it all out yet.”

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