Coca-Cola is pulling out of being the title sponsor of the National Hot Rod Association Drag Racing Series, according to a lawsuit filed by the association Sept. 21 that says the company is failing to meet contractual obligations.
Per the suit, “Coca-Cola has seized on global tragedy, the COVID-19 pandemic, as a pretext to claim a ‘breach’ and ‘terminate’ the sponsorship agreement early to save money.”
Coca-Cola has been the series’ title sponsor since 2002, using it to promote multiple brands. From 2002-08, Powerade had the title spot, then Full Throttle took over in 2009. Mello Yello had been the sponsor since 2013.
In 2017, Coca-Cola and NHRA announced a six-year extension to the sponsorship deal worth $34.32 million according to the suit.
But in September 2019, the company allegedly said it “wanted to get out of the deal” because of a “change in business strategy,” but acknowledged there were four years left.
“Recently, Coca-Cola had a change of heart, and told us they would walk away from their agreement to sponsor our professional series — not at the end of 2023, as promised in their agreement, but now, after being with us since 2002,” NHRA President Glen Cromwell said in a statement to Front Office Sports. “We’re deeply disappointed that they’ve taken this position. … Although we attempted to negotiate a different outcome with Coca-Cola, the NHRA had no choice but to file a breach of contract lawsuit against the company.”
Coca-Cola allegedly withheld a $2.86 million payment that was due May 15.
According to the allegations, earlier in September, Coca-Cola “unilaterally declared the agreement to be ‘terminated.’” At that point, Coca-Cola also told the NHRA that it could enter discussions with other potential sponsors and that it would be “amenable to an early termination of our agreement in the event that your new sponsor desires to begin its sponsorship prior to December 31, 2023.”
Coca-Cola allegedly tried to invoke the agreement’s “force majeure” clause, saying that NHRA’s efforts to restart its series following a shutdown due to the pandemic — which included limiting fan attendance — constituted an inability to meet performance obligations. The company allegedly also sought a fees reduction of $520,000 as a result of the cancellation and postponement of multiple events, and an additional reduction of $293,000.
“The NHRA’s allegations against The Coca-Cola Company are unfounded and we will defend the lawsuit accordingly,” Coca-Cola said in a statement to Front Office Sports.
The series shut down in late February, which resulted in the cancellation of nine events nationwide and the changing of nine additional events from three days to two.
When it returned to action in July, the NHRA slashed its purse for series events. Under the new regulations, winners received $35,000, down from $50,000, and the series is making further cuts that lower winners’ earnings to $15,000 for the remainder of 2020.
“Like many organizations, the pandemic impacted our finances. For example, without fans in the stands, we were forced to reduce purses,” Cromwell wrote in a message on NHRAracer.com.
“The good news is that our overall financial health remains strong and we are excited to gear up for our 70th anniversary in 2021. We are taking a bit more time to announce the 2021 national event schedule so we can have fuller information and more certainty. The schedule might look different than before — it might start later and it might start on the east coast — but it will be packed with what everyone expects from NHRA racing.”
FOS senior reporter A.J. Perez contributed to this story.