SBJ/20081020/This Week's News

Majestic keeping pace after sale

Editor's note: This story has been revised from the print edition.

On a recent Sunday evening, a man was shopping on MLB.com and ordered a New York Yankees pinstripe jersey with a customized name and number from Majestic Athletic, which has been making baseball’s authentic jerseys since 2000 and exclusively for the last three years. After completing his purchase, the league site warned that the order wouldn’t leave Majestic’s warehouse for two to three weeks.

The jersey arrived in less than 72 hours.

Majestic President Faust Capobianco appears satisfied when told that story. Sitting inside the shell of a building in Palmer Township, Pa., spacious enough to hold several baseball fields, Capobianco explains how the soon-to-be-opened facility will allow the company to ship product even faster than the three-day fulfillment just discussed. “We’re consolidating eight locations,” he said. “That means goods go on fewer trucks before we ship to consumers.”

So does that mean customers will get customized jerseys in two days? Capobianco, a member of the family that sold Majestic to VF Corp. in February of 2007, laughs and won’t guarantee that. However, the 358,000-square-foot facility is the most conspicuous and promising symbol of the acquisition of a family business by VF, a $7.2 billion apparel powerhouse. The licensing business, where shipping and logistics are often more important than design and manufacturing, has seen prior acquisitions go south quickly — see Fruit of the Loom and Pro Player or Converse with Apex. In addition, the integration of a family business within a publicly traded corporation can be fraught with land mines. But 20 months into the deal, Majestic, expert at servicing and selling the hot markets that are the lifeblood of the licensed sports industry, is just getting better. While the company is loath to discuss financial details, MLB sources state that since the VF acquisition, the company has maintained low double-digit growth. Meanwhile, retailers will tell you they haven’t missed a step.

“Majestic has always been so good with speed, turnaround and delivery, we were very concerned about whether they could still deliver to hot markets,” said Mitchell Modell, CEO of the 140-store Northeast sporting goods chain that bears his name and stands to gain substantial incremental business if the Philadelphia Phillies can triumph in the World Series that begins Wednesday. “You worry about bureaucracy slowing companies like that down, but they are still experts at what they do.”

Faust Capobianco’s family sold Majestic to VF Corp.
in February. Majestic, known for detailed products
(inset) and fast turnaround, now adds VF Corp.’s
financial and “back-room” backing.

Echoes Jeff Hennion, Dick’s Sporting Goods executive vice president and CMO, “Majestic is still great at what they do and adding the financial backing and back-room expertise of a VF is only making them better.”

Those “back-room” capabilities added by VF aren’t sexy, but they are the elements that make large retailers chose one vendor over another. Areas like supply chain management and Vendor Managed Inventory under which retailer and vendor share data to remove cost and time from delivery — yielding quicker turns for stores and faster service and replenishment on the retail floor. It also includes the sourcing of materials from VF’s global supply chain, which services the company’s diverse collection of apparel brands that includes The North Face, Lee, Wrangler, JanSport and Vans.

“Majestic always made their factory bend to the demands of sales as opposed to a lot of companies that do just the opposite,” said MLB licensing czar Howard Smith. “As a result, they really haven’t missed a beat. And while we have all seen acquisitions in this business that haven’t worked, this just looked like it made sense from the beginning.”

Synergies are often purported when a merger is proposed, but few combinations are as complementary as this pair. Majestic sells more complex, decorated garments such as jerseys and outerwear in the “upstairs” channel of sporting-goods specialty and fan shops like Modell’s or Dick’s. VF sells basic garments like T-shirts and fleece mostly into midtier stores such as Kohl’s and mass merchandisers such as Target and Wal-Mart. More importantly, the companies were deeply entrenched in licensing: VF is the NFL’s second-biggest apparel licensee after on-field rights holder Reebok. Majestic has been servicing pro teams and plying hot markets for years.

The Majestic Clubhouse Store is the
Philadelphia Phillies’ multilevel team
store at Citizens Bank Park.

“We’re speeding up product development and just getting to market faster,” said Capobianco, whose new 2008 World Series jacket was attracting stares from fans during a visit to Citizens Bank Park for the NLCS. “Both cultures have real sensitivity and an understanding of what it takes to succeed in licensing. That’s why there have been so few hiccups. When a team that wasn’t expected to win breaks a new market, you aren’t doing retailers and consumers a favor by rushing goods out, you are doing what’s expected. To really be expert at that, there has to be a culture of flexibility and routine urgency. You also have to control some aspect of your supply chain so you can ramp up to warp speed when you need to. VF really helps us there.”

“Majestic continues to have great designers, and they continue to deliver fast and on time,” said Brian Jennings, NHL executive vice president of marketing, who counts Majestic among his licensees. “Those are the two things retailers care about most.”

By all accounts, VF has presided over Majestic with the semi-autonomy that has seen it successfully grow some of its other recently acquired brands, like The North Face, which was days from filing for bankruptcy protection when purchased by VF in 2000, but now can tell a singular success story. Other brands with unique cultures like the beach bums and skateboarders that populate Reef and Vans have also done well under VF ownership.

“All those brands have unique personalities, and VF bought these brands because of that,” said Hennion of Dick’s Sporting Goods, the No. 1 retailer of The North Face products. “They are not managing every aspect of those businesses every day, but they are a guiding force and they manage distribution channels expertly, which means those premium brands can focus on product innovation, staying premium and maintaining premium pricing.”

At The Top
MLB’s top licensed teams, in alphabetical order, based on volume from the beginning of this season through August.
Atlanta Braves
Boston Red Sox
Chicago Cubs
Chicago White Sox
Detroit Tigers
Los Angeles Dodgers
New York Mets
New York Yankees
Philadelphia Phillies
St. Louis Cardinals

Source: Major League Baseball

Inside of Majestic’s soon-to-be consolidated manufacturing facilities in Bangor, Pa., you can still find some of the things that make them unique. Next to a big rack holding dozens of Tampa Bay Rays jerseys being rushed to big mall retailers (“Probably more than we sold all last year,” said one Majestic executive) and behind the dozens of headphone-wearing seamstresses at sewing machines stitching Jimmy Rollins and Derek Jeter names and numbers on Yankees and Phillies jerseys, there’s a rack of individual orders for mom-and-pop stores. Like before, they still get equal priority.

“We haven’t forced change,” said VF Activewear President Jim Pisani, “and much of that is because both companies have a clear understanding of what it takes to be successful in a business where you often have a critical 24- to 48-hour window of opportunity. The key is not negating what makes them special, and at the same time servicing retailers at a higher level and investing in things like their new facility.”

League partners have noticed, as well. Steve Armus, MLB vice president of consumer products, said, “VF isn’t there to take over the brand and muddle the customer’s mind-set. They are there to enhance the back end. That is definitely not the mind-set with a lot mergers and that’s why you see a lot acquisitions fail or stumble.”

Footwear companies get all the attention when it comes to the rights for the top domestic sports properties because of their large advertising budgets. So Majestic’s brand is not as renowned as Nike and Adidas, as it has largely eschewed the often cumbersome marketing obligations that weighed down the now defunct licensed apparel companies, like Apex, Pro Player and Starter. The next Majestic television ad will be its first, although MLB does support them with umbrella licensing campaigns. “It’s probably one of the lesser-known brands among the ones that are on field,” Hennion said. “We’re hoping VF can broaden brand awareness.”

The purchase by VF Corp. has meant facility
consolidations and improvements for Majestic.

Michael Johnson, VF Activewear and Majestic Athletic director of marketing, said not to expect TV spots any time soon, “but what you will see is this whole idea of grassroots efforts from Little League to big leagues. That heritage and culture is what we want to get across in stadium, print advertising and grassroots marketing.” On the MLB side, where Majestic’s exclusive for authentic and replica jerseys runs through 2014, “Our hard-core fans know Majestic’s authenticity and the power of the brand on the field,” Armus said. “Next year, we’ll spend a lot more time marketing both [attributes], and make that brand even more authentic to the everyday consumer.”

Along with a brand and a license, VF bought on-field expertise when it acquired Majestic. Whether it uses those capabilities to pursue other on-field opportunities is a leading question around the industry, especially with Reebok’s NFL rights expiring in 2012. “I’m not in a position to say definitively if we’ll expand Majestic as an authentic brand outside of baseball, but certainly within VF, we are preparing ourselves for that opportunity, and looking at all league and college on-field opportunities,” VF’s Pisani said. “I came out of the petroleum industry [at Shell], and I used to think that was difficult. But sports licensing is the most complex business I have ever been involved with. It takes a real expertise to do this well, but we’re focused enough to do it well across any sport.”

While Capobianco enjoys reminiscing in his older buildings about growing up alongside the sewing machines in Bangor, the new and capacious Palmer Township facility about 16 miles away makes him focus on the future. “So far, this is working because it was not a merger that was about driving out costs,” he said, as workmen built endless rows of shelving behind him. “As the economy has toughened, consumers and retailers have gotten more in tune with ‘just in time’ and ‘what’s safe.’ We will always be about ‘just in time’ and what’s safer than what’s on the field?”

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