Oct. 21 (Bloomberg) -- In December of 2009 an unexpected package arrived at the headquarters of Concha y Toro, the 127-year-old winemaker in Santiago, Chile.
Inside was an ornate box lined with black silk and holding a leather soccer ball with the Concha y Toro insignia stenciled next to that of the sender’s: Manchester United. An accompanying book laid out the financial benefits of a partnership with the soccer club. Within 36 hours, United executives were on the phone, outlining an agreement signed in May 2010.
The 19-time English champion introduced the Chilean company as its first global wine partner four months later at United’s Old Trafford stadium. Luxury boxes and lounges in the stadium serve only Concha y Toro’s Casillero del Diablo wines and the company’s ads appear on the digital billboards seen on broadcasts of United home games.
The courting of Concha y Toro epitomizes how United officials have made the club among the most valuable brands in sports, Bloomberg Businessweek reports in its Oct. 24 issue.
A 2007 survey conducted by London-based TNS Sport found that the team has 333 million supporters around the world. Last season, when United won its fourth English Premier League title in five years and made it to the finals of the European Cup, a cumulative audience of 4.2 billion watched its matches on television -- the equivalent of a Super Bowl every week, according to Futures Sport & Entertainment.
Aon, Mister Potato
The club’s visibility has allowed it to assemble a roster of more than 30 global corporate partners ranging from Aon, the Chicago-based insurer that pays 20 million pounds ($31.5 million) a year to put its logo on the team’s jerseys; to Nike Inc., which is in the final two years of a 13-year, 303 million pound agreement to produce all team apparel; to Mister Potato, the Malaysian brand that inked a deal in September to become United’s official “savory snack partner.”
“What’s the pitch?” asks Pierre Pang, deputy general manager for sales and marketing at Mamee-Double Decker, which owns Mister Potato. “Three hundred and thirty-three million fans globally, with close to two-thirds coming from Asia. That’s basically along the lines of where our strategy is: The vision of being Asian No. 1 for the potato snack segment.”
Last June, United said it had revenue of 331.4 million pounds for the 2010-11 season, a club record and by far the most among English clubs -- though about 95 million pounds less than Spain’s Real Madrid, which is soccer’s biggest moneymaker.
Unlike U.S. sports, where salary caps and revenue-sharing agreements constrain the ability of rich teams to dominate, in soccer cash is still king. Chelsea, Manchester City, and others have catapulted themselves into the European elite thanks to billionaire owners willing to spend any amount to win.
European soccer’s governing body says beginning in 2014 it will consider banning teams that spend significantly more than they make. That would strengthen the position of clubs with the most revenue -- such as Manchester United, Real Madrid, and Barcelona -- which could use it to buy the best talent. The governing body’s proposed fix could end up locking in the status quo for years.
The people charged with selling the United brand work out of an office 200 miles south of Manchester in the London district of Mayfair, also known as Hedge Fund Alley. The office has oak-paneled conference rooms and an open-plan work space, where staffers dressed like bankers are bent over computers and working the phones. Rent for the London space costs the club 1 million pounds a year, and similar offices are set to open later this year in Hong Kong.
“Our approach has evolved beyond a traditional sports club’s, to being far more like that of a conventional blue-chip company,” Commercial Director Richard Arnold, 40, said in a conference room named for Alex Ferguson, United’s manager. “To arrive at this position we have spoken to companies with reputations as the world’s leading marketing organizations to see how they approach promotion and sales.”
United hasn’t always been successful. George Best and Bobby Charlton helped lead the club to a European championship in 1968, but the team went another two decades without a league title and even suffered relegation to the second division in 1974.
The improved on-field fortunes coincided with the creation of the Premier League in 1992, which made English soccer more global. Matches are broadcast live in 211 territories and income from global television rights now exceeds 1.4 billion pounds. That’s in addition to the 1.78 billion pounds the league earns from its domestic television contract.
United has been the biggest beneficiary of the Premier League’s growth, winning the inaugural season title and 11 more over the next 20 years.
“Manchester United’s timing was great,” said Dan Jones, a partner with the accounting firm Deloitte, which has produced an annual review of soccer finance for the past 20 years. “They started to have huge success on the pitch at the time that all the other developments around media and so on gave them a place to take that.”
In 2005, Malcolm Glazer, the American owner of the National Football League’s Tampa Bay Buccaneers, completed a 790 million-pound leveraged buyout of the soccer team. Glazer and his family have spent 40 million pounds on the team’s marketing strategy, including creating a sales force. Before the takeover, two people worked on selling the Manchester United brand.
“The early months of what we did was spent in very high-depth strategy discussions [with] multiple, multiple iterations,” Arnold said. “Even now, two days a month is spent iterating all those strategies.”
By investing in research like the TNS Sport study, United has been able to get a better understanding of the brand’s value and reach, Arnold said. The result is a strategy that sells access to its stadium infrastructure to major sponsors, while offering limited territorial association rights to telecom and credit card companies, allowing them to sell United-branded products and content. Many of the agreements also include revenue sharing between United and its partners.
In the past year commercial sales have increased 27 percent, to more than 100 million pounds, while the value of the team’s corporate partnerships has risen tenfold since 2008.
The club has done it by creating new forms of advertising inventory, beyond the industry standard. The team’s global sponsors, including Turkish Airlines and Thai beer brand Singha, get physical advertising space at Old Trafford and digital ads during broadcasts of United’s home games.
Since 2008 the club has also signed agreements with regional partners, which are given exclusive rights to promote their companies alongside United within specific geographic areas, though they have little or no visibility in Manchester or on the team’s website.
Arnold said one reason United is able to secure such deals is the time it spends learning about potential partners. “We found there was a CEO of one of the companies we dealt with who didn’t like tea or coffee, he liked Diet Coke,” Arnold said. “When the meeting starts he gets a Diet Coke, not tea or coffee. Everything we do has to express the premium offering that Manchester United is, and you have to be able to do that transcending industry, culture, country.”
The club’s recent agreement with shipping company DHL reflects its commercial power. Arnold’s team sent branded iPads loaded with company-specific presentations to DHL, in an effort to persuade the company to sponsor the jerseys United players wear--during practice.
In August, DHL signed a four-year contract for 40 million pounds, more than what all but four other Premier League teams get from their biggest sponsors.
It’s also an example of how the team is able to slice its rights. In 2009, Standard Chartered, the financial services company, competed with Aon in the race to sponsor United’s game-day jerseys. When Standard Chartered lost out, it signed on with Liverpool, but insisted on being the exclusive corporate name on all Liverpool apparel.
“The training kit thing is a very interesting angle because it’s essentially saying the media coverage that Manchester United get when they’re training equates to smaller teams’ coverage when they’re actually playing,” said Andy Korman, a partner at the U.K. law firm Couchmans, which specializes in sports sponsorship. “So more people are interested in seeing Manchester United down on the training ground than they are in seeing most other teams live.”
United’s sales operation dwarfs that of any of its rivals. Chelsea, United’s chief Premier League competitor in recent seasons, has “a handful” of sponsorship sales staffers, one club executive told Bloomberg Businessweek. Liverpool, the team that comes closest to United in worldwide appeal, hired its first London-based employee earlier this year and didn’t have a commercial director until 2007.
“Any team should look at them and learn,” said Ivan Gazidis, chief executive officer of Arsenal, whose commercial revenue is about one-third the size of United’s. “But not every club is in the position Manchester United is in. So the solutions for any individual club could be different.”
For all their success at bringing in additional revenue, the Glazers have faced resentment from United fans who say the family is using the team’s income to cover the costs of buying it, rather than investing in talent. United, which had been listed on the London Stock Exchange since 1991, was debt-free before Glazer took it private, and now has net debt of more than 300 million pounds.
The Glazers have hired Credit Suisse to help float as much as 30 percent of the club for $1 billion. Analysts say the valuation is unrealistic because it would mean the club is worth more than $3 billion, far higher than a Forbes rating of $1.8 billion. Some of the proceeds from the listing would likely be used to pay off a 500 million-pound bond the team issued in Jan. 2010.
Financial details released in that bond prospectus revealed how much the Glazers’ ownership had cost, fueling a protest campaign. Andrew Green, a financial adviser to the Manchester United Supporters Trust, a group opposed to the Glazers, said the team’s commercial revenue is “a drop in the bucket compared to the 495 million pounds of interest, banking, and other costs” during the family’s ownership.
At the height of the backlash last year, fans brandished gold and green scarves, representing the club’s founding colors, and held up signs at home games with messages such as “Love United, Hate Glazer.” The protest colors have been less visible this season after United spent 50 million pounds beefing up its already potent roster.
Arnold said the club has explored ways to monetize a customer database with detailed information about 11 million fans. It’s expanding its relationships with credit-card companies. Indonesia-based Bank Danamon, Korea’s Shinhan Bank, and Malaysia’s Public Bank already have credit cards bearing the United logo.
The team is also renegotiating its contract with Nike, which currently gives the apparel maker control over the production of all United merchandise, whether its logo appears on it or not.
“Manchester United have grown ... and that will reflect the price,” said sponsorship expert Korman, whose firm’s clients include Nike. “The greater the prestige of the brand, the greater their marketing team is able to go to the manufacturers and say, ‘Look, this is what we believe the deal to be worth.’”
----With reporting assistance from Tony Jordan in Bangkok, Siddharth Philip in Mumbai and Sanat Vallikappen in Singapore. Editor: Romesh Ratnesar, Christopher Elser