Kotoko have agreed a two-year deal with global nutrition company, Herbalife worth over €30,000. Joy Sports Gary Al-Smith analyses how the international company may be using the Ghanaian club to market a potentially dodgy franchise.

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The partnership has been announced with pomp, as usual. 

Herbalife will support Kotoko players and technical team with their nutritional needs while the company gets mileage through the club's branding channels.

As part of the agreement, Kotoko gets supplies of Herbalife-branded training kits. A ceremony in Kumasi on Friday evening will officialise the launch.

General Manager, Opoku Nti and the Director of Herbalife Ghana, Frederick Amissah signed the partnership agreement on Thursday at the club secretariat.

This deal was signed by the Ghana franchise holder of the global company, which also has operations in 90 other countries

But did the Kumasi-based club look at the fine print? Or is any money acceptable in a country where entities badly need sustenance?

Should Kotoko be worried?

It is not yet clear if the management of Kotoko will be worried by Herbalife's problems in the past two years.

The Cayman Islands-based company has been under investigation in the USA after last March, the country's Federal Trade Commission started looking into whether it was a pyramid scheme.

The investigation was triggered byan activist investor, Bill Ackman, who accuses the company of a $1 billion 'short' or pyramid scheme. 

The main characteristic of a pyramid scheme is that participants only make money by recruiting more members in an unsustainable way that is illegal by law in many countries.

In a pyramid scheme, an organization cajoles individuals to make a payment and join. And then in exchange, the organization promises its new members a share of the money taken from every additional member that they recruit. 

Major League Soccer giants LA Galaxy, which has the brand as its nutrition sponsor as well, has been trying hard to deflect the negative press this has brought them since.

The nutrition company has been a long-time shirt sponsor of the four-time champions, with the partners’ latest 10-year, $44 million sponsorship deal only in its third year now.

"We understand that this investigation makes people doubt us, but so far as you know we have not been indicted of any wrongdoing. And Herbalife Ghana is a very different operation from Herbalife USA, so the Porcupine Warriors should not be worried," Richard Avenorgbor, a sports lawyer, tells Joy Sports.

But he cautions that should Herbalife ever be punished for being a pyramid scheme, Kotoko should disengage itself immediately.

"Brand names are powerful things and Kotoko's name must be protected at all cost," Avenorgbor says. 

The lawyer goes on: "For now, it is a good deal. It isn't much, but it's good. But the team must have clauses in there that will let them get adequate compensation if Herbalife's name causes Kotoko's name to come into disrepute in any way through its parent company."

Herbalife worldwide states its revenue for the year-ending 2014 as over $3.8 billion, with assests totalling over $1.7 billion.

"It will be in Kotoko's interest to have strict clauses to protect its name because the company will have money to compensate the club for soiling its image."

Cash and sponsors

Indeed, this deal will not have come at a better time for the reigning Ghanaian champions, whose financial situation has taken a big hit because of the general ailing economy as well as its fans unwillingness to attend games.

"We hope that this new deal will make us even more attractive for sponsors to associate with us. More importantly, we want fans to come for games so we can get the mileage for our sponsors," Opoku Nti said in an interview in Kumasi on Thursday. 

Kotoko, under the previous adminsitration led by Dr Kofi Kodua Sarpong, boasted up to 11 sponsors by the time he left. Most of those deals have been unable to be sustained.

The club's fans will hope this Herbalife partnership will be a corner turned.

UPDATE (1315pm, March 27)

A company official from Herbalife Ghana got in touch with the Joy Sports team with the following assurance:

"We want to assure fans of Kotoko that although our parent company was in the news for those reasons, it has got nothing to do with us here," the official, speaking on condition of anonymity said on Friday.

"Herbalife Ghana is a very legitimate enterprise that is dedicated to improving the lives of its consumers and we see Kotoko as a great way to extend our reach in the country"

The official, empasizing that the Ghana operation is not a franchise, but actually a direct subsidiary, also promised to ensure that the image of the partnership will be upheld at all times.

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