Business of Sport: Venturing into New territory to compete with elite

Jay Asser 23/11/2015
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Brand power: New Balance.

The world of sports branding is a hypercompetitive place, but New Balance is carving out its space among the elites to truly become an international name.

Everyone is aware of the wellknown brands that dominate the industry: Nike, adidas, Under Armour, etc. While those brands have had more relatively immediate success in becoming the cream of the crop, New Balance has just recently ascended to similar heights despite having the longest history of the four.

New Balance was founded in Boston, Massachusetts in 1906, well before adidas in 1949, Nike in 1964 and Under Armour in 1996. From humble beginnings selling arch supports, New Balance is now embedded in a number of sports and continues to widen its grip across the world.

The Middle East and South Asia are the next markets New Balance has set its sights on to expand in. That’s why the company has committed to an exclusive distribution agreement with The Apparel Group, a brand conglomerate based in Dubai, to be in 25 of the franchisee’s stores today. Next year, the brand is aiming for five New Balance stores in the Middle East, with three in the UAE and two in Saudi Arabia, according to Darren Tucker, vice president of New Balance Asia Pacific, Middle East & India.

“We as a company, over the last 10 years, have made some strategic choices on investment. I won’t say we neglected this part of the world, but I only had so much money given to go around and we chose to put it into China at the time. We’re now at that stage where the next part of our investment strategy starts,” Tucker told Sport360.

“We’re underdeveloped in this market. Although there may be some short-term challenges with the economy, we believe the Middle East and India are markets that we need to be established in and need to grow. Right now, with The Apparel Group as our partner, it’s a great time to get in and start to build a brand in this part of the world. It’s not a rapid expansion, it’s about being strategic.”

While its presence in the these regions is fairly new, New Balance isn’t planning on presenting itself as anything other than an elite brand.

“The strategy for us remains consistent around the world. We don’t have a view of coming in to be a local brand,” Tucker said. “The consumers in this market travel, so they want to buy the luxury brands overseas. As this market grows and becomes a great consumers market, those luxury brands are consistent globally and we have a goal to be that way.

“While we’re deep in running as our core and that’s who we are, this metropolitan consumer who wants to wear nice, athletic footwear, maybe thinks they’re an athletic, fit person but goes to the gym once or twice a week and uses the footwear for multiple things, is an important consumer in these emerging markets.”

Two of New Balance’s most recent ventures into sport will be key to unlocking the market in this part of the world.

The company reached an agreement with Cricket South Africa earlier this year on a five-year deal to be their official apparel and footperwear supplier until 2020, as well as individual sponsorship with Dale Steyn and David Miller. The two joined the roster of New Balance cricketers, which recently added England star Joe Root to unite with team-mates Mark Wood, Gary Ballance and Ben Stokes, in addition to Australia’s Steve Smith.

“It’s been very successful for us,” Tucker said of New Balance’s presence in cricket. “It was one that started out as a footwearonly project and then we looked at it as a bit of a test. We thought the hardware would take 10 years because it’s a traditional game and you don’t convert people overnight.

“In the UK and Australia, the next season pre-orders look like we’ll be the number three brand on shelf. It’s no doubt, if you have right players who fit in with your brand, it makes a difference. We see it as a good launch platform for India, because it definitely resonates with the consumer. Cricket has probably delivered beyond its investment.”

Establishing more than just a foothold in cricket is undoubtedly valuable for the brand, but the return on making a name in football is a different animal.

New Balance announced it was entering the global football market in February this year by inking a multi-year deal to become Liverpool’s kit suppliers until 2017. The club, which initially signed a six-year deal with Warrior in 2012 worth a guaranteed £25m (Dh140m) per year, switched to the parent company beginning of this season. Liverpool products are sold in more than 500 New Balance retail stores around the globe, while clubs FC Porto, Sevilla and Stoke City are also part of the brand’s football venture, along with high-profile players Vincent Kompany, Marouane Fellaini, Samir Nasri, Aaron Ramsey, Tim Cahill and more.

“Our football business is in its infancy and we’re seeing positive signs,” Tucker said. “The affect on our European business has been significant and that’s grown over double-digits in the last five years and Liverpool you wouldn’t say have been enormously successful over that time. So the fact that we’re on TV all the time, the fact we’re in the media all the time, the younger consumers are receiving our brand in a more relevant way. It’s not just being identified as running and also not being identified by age bracket. It’s made the brand younger.”

Aside from the impressive group of sponsored cricketers and footballers, New Balance also have noteworthy faces in tennis with Milos Raonic and Heather Watson, baseball with Miguel Cabrera and Dustin Pedroia, and athletics with Jenny Simpson and newcomer Trayvon Bromell.

The one sport of significance which the brand is currently absent in is basketball after previously working with the San Antonio Spurs’ Matt Bonner. Though New Balance have manufactured basketball shoes, their lack of athletes in the sport means their presence in basketball won’t be an emphasis anytime soon, according to Tucker.

Nevertheless, New Balance’s growth continues as the company reached $3.3bn in sales in 2014. That figure trumps Under Armour’s revenue of $3.08bn, but still pales in comparison to Nike’s sales of $27.8bn. New Balance, however, is growing at a faster rate than the powerhouse, averaging a 15 per cent increase in revenue over the last five years, compared to 10 per cent for Nike, according to Bloomberg.

New Balance are doing this while still making or assembling more than four million pairs of athletic footwear per year in the USA. Where the domestic value is 70 footper cent, the company label their shoes ‘Made in the USA’. They have five factories in New England and another in Flimby, UK.

“We think our ‘Made in USA’, ‘Made in UK’ product offers a value in premium materials and premium manufacturing capabilities,” Tucker said. “So when someone spends $200 on a pair of ‘Made in USA’ shoes, they get something that’s special. Also, the volume of the product is not as high so it adds a prestige feel to it. You’re not going to be walking down the street and everyone has a pair.”

The company’s trajectory hasn’t aligned with the other leading sports brands and though its heritage runs deep, New Balance is making a name for itself all over again and climbing to the top of the landscape where it looks to stay.

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Cost of sport in Dubai exceeds $1.7bn a year

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Deloitte make a presentation at the Host Cities conference in Dubai.

The economic footprint of sport in Dubai now exceeds $1.7 billion a year according to Deloitte, who presented their study on the subject on day one of the Host Cities conference at the Fairmont on Palm Jumeirah.

The report, published during Host Cities 2015 by Deloitte’s Sports Business Group, quantifies for the first time the economic impact of sport in Dubai.

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Of the $1.763bn generated by sport in Dubai each year (gross expenditure), $670m originates from overseas – an indication of the emirate’s growing standing on the world’s sporting stage.

“In Dubai we have long recognised that sport plays an important role in the growth and appeal of any global city and have worked strategically to invest in resources and capabilities across the sector,” said Saeed Hareb, the secretary general of Dubai Sports Council.

“We have been building our sports industry for more than 40 years, with a continued focus on the future. The Deloitte report highlights what has been achieved and demonstrates the strength of Dubai’s existing offering in world-class events and facilities.

“Dubai remains committed to sport and the report points to future opportunities which will be used to inform our ongoing strategic thinking as we continue on our journey to become one of the world’s international sporting destinations.”

The largest economic contribution comes from Dubai’s annual calendar of more than 300 events, which attract more than one million spectators each year.

Seven major annual showpieces account for more than 90 per cent of the events sector’s direct impact on Dubai’s economy.

These events, which span horseracing, golf, marathon running, tennis, rugby and cycling have helped establish Dubai as the region’s preeminent sports hub.

Significantly, ahead of the DP World Tour Championship this weekend, the report revealed that Dubai is already one of the leading golf tourism destinations in the world, with 16,000 international golf visitors enjoying its 11 courses every year.

Today the sport contributes $270m of gross expenditure to Dubai’s sports economy, with $131m of that originating from abroad.

In addition to events, sports facilities and local participation play an important role in the sports industry, which now employs more than 14,500 people in the northern emirate.

The report estimates that mass participation events attract over 85,000 participants each year, and are growing in popularity. Sports clubs, academies and schools also add significantly to participation levels: in 2015, Dubai’s Sports City’s academies (football, rugby and cricket) alone are expected to attract a total footfall of around 1.4 million.

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#360business: Golf in Turkey on the rise and the future looks bright

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Turkish Airlines Open at the Montgomerie Maxx Royal club.

For a country where the sport is not even 20 years old, Turkey has done remarkably well to establish itself as one of the most sought after destinations in the world for golf aficionados. It is now ready to overcome its next challenge – developing the local golfers.

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The first golf course in Turkey was built in 1895 – Istanbul Golf Club is a nine-hole facility in the middle of the city – but it took the country almost 100 years to get its next one (Kemer Golf & Country Club in Istanbul and the Old Course at National in Belek opening in 1994).

One of the decisions that changed the golfing landscape of Turkey forever was taken by the government in the early 1990s, when inspired by the success of some of the golf resort clusters in the United States and Spain, Belek in Antalya region was chosen as the site for the first Turkish golf cluster.

Since then, golf has enjoyed an upward curve in the country, and during the week of the Turkish Airlines Open, a KPMG report was published which called Turkey the ‘Rising star of golf’.

According to Ahmet Agaoglu, the charismatic President of the Turkish Golf Federation, his country is now on the verge of making another quantum leap because of a variety of factors.

“One of the things we haven’t been able to do well, and I think I must take some blame for it, is we do not have many local golfers,” said Agaoglu.

“But things are going to change. We already have the highest percentage of junior golfers in the whole of Europe, and we are putting in place a long-term plan to develop junior golf further.”

Agaoglu said the growth could have been faster but for a couple of obstacles, mainly lack of playing facilities across the country.

“I think one major obstacle came around 2006 from the constitu- tional court because of environmental organisations and NGOs. It is a problem that many developing countries face, with these organisa- tions thinking golf is not right for the environment,” he said.

“I completely, absolutely, 100 per cent disagree with that. Look at the Scandinavian countries. They are most environmentally sensitive.

And if there are 108 golf courses in Sweden, and 120 courses in Fin- land, then golf is not dangerous for the environment. It takes time to make these NGOs understand that golf is safe, and in fact good for the environment.

“So, a rule existed from, I think 2006 to 2013, that land owned by government cannot be used for golf courses, and it was luckily lifted.

“Right after that, there is a very good plan by the Ministry of Tourism and Ministry of Forestry, and 23 new golf course projects have been approved in Antalya region alone and 10 in Turkish Riviera, Ankara and Samsun region.

“The other reason why golf is not growing at the right pace is because 90 per cent of the golf courses are commercial golf courses. So, only two golf courses in Belek out of 11 run our junior golf programmes because the others consider them- selves commercial golf courses.

“I appreciate their business model, but they are not helping grow the game in the country. We are running our programmes through the golf course in Ankara, in Istanbul and there is a nine-hole golf course coming up in Samsun which will be operational from May 2016, and this will help increase the number of golfers in the country.

“I also think that the municipalities should be involved with sports, and also golf. That is their duty to the citizen. They should build at least one public golf course in each city. The Samsun course is actually a brainchild of their mayor and he has taken the lead in getting it built. Other cities must follow his example.”

The visits of golfing icons like Tiger Woods and Rory McIlroy for the Turkish Airlines Open has also played a huge role in ramping up the interest in the sport among the local population and in consolidating Turkey’s position further in the world golfing map.

“I think the best way to illustrate the impact of the Turkish Airlines Open would be to have a look at the statistics about the number of golfers coming to Turkey,” said Agaoglu.

“In 2011, we had 529,000 rounds played in Belek, which dipped by nearly 10 per cent in 2012 for a variety of reasons.

“But more importantly, after we hosted the first tournament in 2013, that number has started to climb again by four to five per cent every year. This comes at a time when tourism numbers in most markets are going down.

“This jump in the number of rounds played is only because of the tournament. We are back to 2011 numbers. The tournament has played a huge role, and I must say that the support of Turkish Airlines has been vital in this process.

“We would not have gone anywhere if they did not share our vision. To have a big name backing your event is very important. When you speak to a player like Tiger and invite him for your event, the first question they tend to ask is who is the title sponsor?”

Agaoglu pointed out various other points on how golf is benefiting the Belek region and why more golf courses will be good for Turkey.

Beautiful scenery.

“There are almost 50 staff employed by an 18-hole golf course, and then there is the staff at the attached resort,” he said. “These are all permanent employees. This is fantastic for any region to have so many employment opportunities.”

Andrea Sartori, Global Head of Sport at KPMG, said during the release of their report: “Our findings show that Turkey has great development potential. With a progressing tourism industry, fantastic climatic conditions, a highly successful junior programme, and the commitment of stakeholders and sponsors to continue to sup- port the game, golf in Turkey looks to have a very bright future.

“But there are other avenues which haven’t been even explored at the moment.

“All golf course development has been done around golf resorts in Belek. They are yet to experiment with golf course development around real estate. Now, the purists may scoff at the idea of housing around a golf course, but some of the most successful developments in recent times have been based on that model.”

Agaoglu has no doubts the future of golf in Turkey is extremely bright.

“We started to seriously think about golf and how we can use the Belek region with the KPMG Conference that was held here in 2010. At that time, nobody even thought that we will have an event on the Final Series of the European Tour and we will have players like Tiger Woods and Rory McIlroy coming and playing here,” he said.

“However, we have done that in such a short period of time, and I am sure we can overcome all other obstacles soon.” 

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