Tebow Endorsing FRS Energy Drink Puts Oak Investment in Position to Score
Tim Tebow has helped turn a $100 bet on the Denver Broncos into more than $38,000 in six weeks. Fred Harman says his venture capital firm’s wager on the second-year quarterback may also deliver big returns.
Harman is managing partner at Palo Alto, California-based Oak Investment Partners, which five years ago bought a 50 percent stake in FRS Co. The company, which sells energy products, including beverages and powdered drink mixes, signed Tebow as an endorser last year.
Since taking over for Kyle Orton on Oct. 23 Tebow has led Denver to a 7-1 record, including wins in the past six games, and become one of the most talked-about athletes in the world.
Tebow mania has helped drive what FRS officials say is “double- and triple-digit growth” in sales to major retailers.
“We were willing to bet on Tim and his future career as much as Tim was making a bet on us,” Harman, a member of the company’s board and a former general partner with Morgan Stanley’s Venture Capital Group, said in a telephone interview, adding that Tebow turned down an endorsement offer from PepsiCo Inc.’s Gatorade brand.
A $100 bet on the Broncos at the start of their unbeaten streak, with winnings reinvested, would have generated $38,450, says RJ Bell, chief executive officer of Las Vegas-based handicapping website Pregame.com.
Tebow, 24, and the American Football Conference West- leading Broncos are 6 1/2-point underdogs for their home game against two-time National Football League Most Valuable player Tom Brady and the New England Patriots this weekend.
Neither Harman, a former investor in basketball’s Golden State Warriors, nor Carl Sweat, chief executive of closely held- FRS, would disclose terms of their contract with Tebow, who used the company’s products while at the University of Florida. Even though the 6-foot-3, 235-pound left-hander won the Heisman Trophy as college football’s best player and helped the Gators to two national championships, scouts weren’t convinced he would become a successful NFL quarterback.
According to Harman, most endorsers of Torrance, California-based FRS, including Tebow and seven-time Tour de France winner Lance Armstrong, get a “vast” equity stake in the company. He wouldn’t be specific.
“The cash component of our deals are very moderate,” said Harman, 51.
Neither Harman nor Sweat would disclose the company’s revenue or specific sales figures.
According to SymphonyIRI Group, a Chicago-based market research firm, the company’s sales grew 119 percent to $10.4 million in the year ended Nov. 27 at U.S. groceries, gas stations and warehouse stores excluding Wal-Mart. The beverage outpaced growth of 16 percent for the $6.4 billion energy drink category. FRS’s sales growth slowed to 32 percent in the most recent four weeks, as the category grew 22 percent.
“The recent ‘Tebow Effect’ has driven double- and triple- digit growth for FRS with large customers like Safeway, GNC and Publix as more consumers become familiar with Tim’s belief in FRS Healthy Energy and Healthy Protein products,” Sweat said in an e-mail.
Tebow’s agent, Jimmy Sexton, didn’t return an e-mail or a telephone message left at his office seeking comment on his client’s marketing contracts. Tebow also has agreements with Nike Inc. and Jockey International Inc.
Tebow’s success has become one of the dominant storylines in the NFL, often regarding how he uses his football fame to disseminate the teachings of his Christian faith.
Football or Faith
Host Jay Leno included a bit in an opening monologue on “The Tonight Show” this week about Tebow and the Broncos benefiting from divine intervention. The quarterback appears on the cover of this week’s Sports Illustrated, and Fathead LLC added a $99.99 stick-on wall graphic of him “Tebowing,” the kneeling-in-prayer pose he strikes after victories that has become an Internet fad.
“Tim is without a doubt the hottest not only name, but brand, being forged in sports right now,” said Sweat, who graduated from the University of Georgia, a rival of Florida in the Southeastern Conference.
The talk on Tebow isn’t always flattering, whether the topic is football or faith.
Scouts and commentators such as ESPN’s Merril Hoge panned Tebow’s throwing mechanics, saying his inaccuracy wouldn’t permit him to become a winning quarterback in the NFL.
Former NFL quarterback Jake Plummer said he would like Tebow more if he’d stop inundating fans with religion.
“When he accepts the fact that we know that he loves Jesus Christ, then I think I’ll like him a little better,” Plummer told a Phoenix-area radio station last month. Another former quarterback, Kurt Warner, who stressed his religious beliefs during a career that included a Super Bowl championship, told the Arizona Republic that he would advise Tebow to tone done the religious references.
Sweat and Harman say Tebow has far more supporters than detractors.
“We’re seeking out people that are world-class athletes and, more importantly, world-class human beings,” Harman said.
FRS plans to increase its Tebow-themed advertising, according to Harman. The company tried to buy a Super Bowl commercial last season but was rebuffed by the NFL, Sweat said. League spokesman Brian McCarthy didn’t immediately respond to an e-mail seeking comment on why the ad was refused.
While FRS will probably buy “as much TV as we can afford,” the company is also making use of social media. It has about 148,000 Facebook “likes,” up from 3,000 a year ago. The number “skyrocketed” after Tebow joined the company, Sweat said.
Bob Dorfman, executive creative director at San Francisco- based Baker Street advertising, said the risk to Tebow as an endorser isn’t religion but defensive coordinators.
“If defenses catch up to him, and figure out how he works, this just becomes a flash in the pan,” Dorfman said in a telephone interview.
According to Harman, Oak Investment backed companies such as Whole Foods Market Inc., Office Depot (ODP) Inc. and aQuantive, which was acquired by Microsoft (MSFT) Corp. in 2007 for $6 billion. He and Sweat said Tebow can do the same for FRS.
“In my world, there are essentially two camps of folks,” Sweat said. “Those who believe in Tim and those who will.”
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