Liverpool Gives New Balance Chance to Score as 200 Million Watch

(Bloomberg) -- Some of the 200 million soccer fans watching Real Madrid battle Liverpool FC in Saturday’s Champions League final are in for a surprise: The English club’s jerseys bear not a triple stripe or a swoosh, but a tilted NB.

Liverpool is one of just a handful of major teams sponsored by New Balance Athletics Inc., the Boston-based sportswear company better known for running shoes. While its larger rivals Adidas AG and Nike Inc. have scores of top teams and provide cleats to most players in Europe’s top leagues, the Reds even making it to the final of soccer’s biggest club competition is a great return on the marketing dollars spent by billionaire Jim Davis’s closely held company.

Liverpool heads a roster comprising Celtic of Glasgow, FC Porto and Athletic Bilbao, teams usually not among the tournament’s final contenders. Sevilla FC, another New Balance team, reached the quarterfinal for the first time this year but just announced a new deal with Nike.

New Balance signed Liverpool six years ago to its Warrior Sports unit. In 2015, it switched the team to a contract with its namesake brand worth 25 million pounds ($33 million) a year as it vowed to become a force in soccer. It teamed up with top players, including Manchester City captain Vincent Kompany and Manchester United’s Marouane Fellaini.

That strategy came with hiccups. Fellaini last year sued the company, claiming the shoes hurt his feet, and New Balance walked away from the contract after the midfielder removed the company’s logo from them. The lawsuit was dismissed this month.

‘The Underdog’

“We haven’t outgrown being the underdog, but we’re growing pretty quickly,” Kenny McCallum, the general manager for soccer at New Balance, said in an interview.

New Balance is seeking to generate more than $1 billion in revenue in Europe alone this year, where growth at close to 20 percent will be about twice as fast as in the U.S. The company’s sales jumped threefold in the 10 years through 2017 to $4.5 billion, and it expects them to reach $7 billion by 2023.

When Under Armour Inc. and New Balance set out to break into European soccer five years ago, “both underestimated the complexity of timely supply of relevant equipment and merchandise, and the sheer sums such sponsorships are commanding today,” said Peter Rohlmann of research firm PR Marketing. “Under Armour is already pulling out.”

New Balance has a good chance to establish itself in the sport -- but as an “also-ran,” Rohlmann said. Even catching up to Puma SE, the No. 3 in global soccer, would be a stretch, he said.

First Phase

New Balance’s McCallum said displacing Puma is just the first phase of its strategy, after which it hopes to attack its bigger rivals.

Soccer cleats are big business. The 85 million pairs sold annually by manufacturers translate into as much as 6.5 billion euros ($7.6 billion) in retail sales, Rohlmann estimates.

Real Madrid, the slight favorite among bookmakers to win Saturday, is equipped by Adidas. And of the 32 nations competing at the World Cup in Russia next month, Adidas outfits 12 teams, Nike 10 and Puma four. New Balance has teams in that tournament for the first time, the long shots Panama and Costa Rica.

While sponsoring top teams “comes with a ticket price,” McCallum said recent inflation in player and club contracts won’t deter New Balance.

“No other sport grabs that amount of eyes and participants,” he said. “The brand is committed, the brand will invest. We have a long-term plan.”

©2018 Bloomberg L.P.

Bloomberg
Stay Updated With Business News News On BloombergQuint