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

Jay Asser 13:35 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.

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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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