SBJ/May 14 - 20, 2007/This Weeks News
The race is on for Dale Jr.
Published May 14, 2007
He comes with a sponsor that has some of the deepest pockets in NASCAR, the ability to generate more merchandise sales than any other driver, and arguably the most recognizable name in racing.
|Budweiser — and its agressive
activation — will almost certainly
Dale Earnhardt Jr. is the ultimate free agent, a driver who delivers as much or more off the track as he does on it.
When Earnhardt announced last Thursday that he’ll leave Dale Earnhardt Inc., the company his father built, at the end of the 2007 season, he made himself probably the most desirable free agent in the history of the sport.
“He is the Michael Jordan of NASCAR,” said Trip Wheeler, vice president of Velocity’s motorsports office. “He’s the anchor tenant in the strip shopping center. Everybody else comes because of him.”
Earnhardt’s selling power is unparalleled in the sport. Of the $2 billion in retail sales of NASCAR licensed merchandise, Earnhardt products are believed to account for at least a third of those sales, some industry analysts say. Others believe the percentage is closer to 40.
That means he loosely accounted for $30 million to $40 million a year in licensing revenue for DEI. At most teams, that money is split among the driver, sponsor and team, although Earnhardt’s deal could have given him a higher percentage.
As a free agent, he’ll also be highly desirable because his primary sponsor at DEI — Budweiser — will almost certainly follow him to his next team. Anheuser-Busch’s team deal includes an option to remain at DEI next year that likely won’t be exercised. It also has a personal services contract with Earnhardt that runs through 2008 to keep him at the forefront of its marketing program.
Tony Ponturo, A-B’s vice president of global media and sports marketing, issued a statement saying that he looked forward to future conversations with Earnhardt and DEI, but he didn’t offer further comment.
“Bud, I’m sure, is locked arm-in-arm with Dale Jr. for whatever his next move might be,” said Steve Lauletta, president of the Radiate Group and a former marketing chief at Miller Brewing. “He’s going to walk into a new owner or start his own program knowing that he’s got several million dollars in his pocket.”
Budweiser’s aggressive activation with Earnhardt “has helped make Dale who he is,” Wheeler said. “Bud spends more than any other team sponsor in the sport and they help sell other sponsorships. A rising tide lifts all boats. Bud spends, Chevy spends and the other teams (within the organization) all benefit from that.”
Industry analysts say that Bud likely spends well into the eight figures on national advertising, on top of the $20 million or so it spends on the team sponsorship, making Bud among the top team sponsors in activation.
Chevrolet also maintains a personal services agreement with Earnhardt, who said at his news conference that he fully intends to drive for a Chevy team next season.
Earnhardt has been front and center as a Chevy ambassador, including recent commercials that teamed him with Big & Rich, Mary J. Blige and others, making Earnhardt Jr. one of the few drivers to star in two national ad campaigns — Chevy and Bud.
The automaker also created a Dale Jr. signature Silverado. Earnhardt’s father had a long relationship with Chevy and GM as well.
Whatever equity Chevy and Bud might lose in the transaction from the DEI No. 8 car to Earnhardt’s next ride is expected to be nominal. Earnhardt said he didn’t expect DEI to release No. 8 to his next car owner.
“Dale Jr. grew up around Chevys. That’s all he knows,” said Jim Campbell, Chevy’s director of retail planning. “That’s something that’s genuine and credible. That’s what comes out when he talks about our cars. He’ll go through his evaluations now, but we’re going to remain interested in continuing our partnership with Dale Jr.”
While some fans might mourn the divorce of Earnhardt from his father’s company — even Earnhardt said he expected fans to be disappointed — marketers don’t expect any real impact on his selling muscle.
“There are some fans who will be disappointed because having DEI as a family business was Dale’s vision,” said Eric Bechtel of Rule 1.02 Marketing. “But if Dale Jr. is driving an IBM car next year, all of his fans will go with him. He’s still the biggest name in NASCAR.”
The only potential loss of equity, Lauletta said, might stem from the separation of Budweiser and the No. 8 car. But long term, “it doesn’t matter. It’s still going to be Bud, it’s still going to be red, it’s going to be the same driver. The bigger questions is if he’s not with an established team and he’s not in the top 35 (in points, which assures a spot in a Nextel Cup race), he runs the risk of missing races. That could be a downer,” Lauletta said.
Other sponsors such as Sharpie didn’t respond to interview requests, while a Wrangler official was noncommittal when talking about future plans. The sponsors most likely have an option to opt out of their deals at DEI to follow Earnhardt.
Cal Wells, a former NASCAR team owner, said practically every sponsor writes an escape clause into its contracts in the case of a driver change. Wrangler and Sharpie were in the first year of their contracts, Wrangler as a renewal and Sharpie as a first-time sponsor.
Where Earnhardt’s departure leaves DEI remains to be seen. Officials at DEI and Robert Yates Racing reportedly have discussed a merger, even though DEI drives Chevys and Yates fields Fords. What’s not up for debate is that DEI loses more than a family member. It loses the draw that brought in millions in sponsorship and licensing revenue.
Joe Mattes, vice president of e-commerce at NASCAR.com, recently surveyed merchandise sales by state and found that Earnhardt sold more licensed product than any other driver in every state.
“He was 50 for 50,” Mattes said. “He’s twice as big as the next best-selling driver.”
And when the top-selling force in the sport goes to a new team and possibly a new car number, licensees and retailers rejoice.
“Change is good,” said Ruth Crowley, president of Motorsports Authentics. “If he does go to a new team, it’s fair to say there will be a spike in sales. Fans are still going to love his marks.”
Mattes said he’ll spend the rest of the season tracking Bud No. 8 sales closer than ever to see how consumers react. With so much Earnhardt inventory in the marketplace, will his fans gobble it up as keepsakes or will it collect dust on the store selves while they wait for new product?
“We’ve never had an opportunity like this to learn,” Mattes said. “There are a lot of times that drivers change, but usually it’s late in the season and it’s not a driver of this magnitude. Certainly, no one ever left a team with so much product in the marketplace.”
Staff writer Terry Lefton contributed to this report.
Where might Dale Jr. land?
Richard Childress Racing
After talking about the need to establish his own identity, would Junior really hop into the No. 3 car?
Dale Jr. says first and foremost that he wants to win a championship. This team represents his best chance.
Junior’s own team generated lots of buzz in the media, but he said just a month ago that JR’s 70-person operation is nowhere near ready to field Nextel Cup teams.
Bobby Ginn has infused this team with the backing it needed to become highly competitive (see Mark Martin), and they drive Chevys. All that Ginn lacks is a superstar around which to build the team’s future.
Impending partnership with George Gillett Jr. would seemingly give Evernham the muscle to lure Dale Jr., but Evernham races Dodges, and Junior wants to drive a Chevy.
Joe Gibbs Racing
Is there enough room in that garage for Dale Jr. and Tony Stewart?
The Business of Jr.
DEI sponsors Primary: