The Northeast suffered a chilly spring, but Greg Grauel, Reebok's vice president of merchandising, sat sunburned last month behind his desk at the company's leafy headquarters outside Boston.
He had just returned from prowling the sidelines of a Tampa Bay Buccaneers mini-camp in Florida. His big discovery, other than a need for better sun block: The Super Bowl champion Bucs' practice shorts are black, bake in the hot Florida sun and should be changed to a lighter shade.
Welcome to Onfield Apparel Group, Reebok's NBA and NFL merchandise and licensing business, where a dizzying parade of team apparel lines are marched out and sold. That's not to mention the generic NFL Equipment brand Onfield created, slapping the logo on everything from tight-fitting T-shirts to warm-ups. Baltimore Ravens
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| Corporate showrooms display Reebok’s latest ideas for NFL- and NBA-themed merchandise. |
star linebacker Ray Lewis is now advertising the brand in print and TV commercials.
"It's really mind-boggling how much is going on," Grauel said, sitting yards away from the NBA and NFL showrooms that feature the new lines for clients and visitors. "Right now it's the [NBA expansion Charlotte] Bobcats, San Antonio Spurs [championship gear], new Lions and Falcons uniforms, several NFL teams debuting new jerseys."
Also hanging in the showroom were jerseys that Reebok plans to debut at the 2004 NBA All-Star Game, a style the company calls DFunkD.
In the two years since Reebok hatched Onfield, the licensee has added all 32 NFL teams and 19 NBA teams (the other 10 plus the new Charlotte franchise will come on board Aug. 1, 2004).
These deals marked a major reversal for the NFL and NBA, which previously relied on a bevy of licensees that saturated the market with similar products. In the heyday of sports licensing in the mid-1990s, companies such as Logo Athletic, Pro Player, Starter and their competitors had combined revenue of $1 billion, said David Baxter, Onfield's president. Those companies no longer exist, crushed by the competition and changing fashions.
"While they hit some very high numbers, they weren't substantial enough to be maintained across the board," said Baxter, who ran Logo Athletic when Reebok consumed it in early 2001. "We are trying to create a business model that will allow us and the league to turn this around and build a long-term business that will eventually help us to make money."
Does this mean Reebok is losing money on Onfield, which reportedly has guaranteed the NBA and NFL more than $200 million in royalties over a 10-year period?
Actually, Baxter replied, Onfield is ahead of schedule and covers its costs. But despite being a public company, Reebok will not disclose financial information about its infant unit.
"The company has been fairly close-mouthed because of the contract they signed with the various leagues that prevents them from talking publicly," said John Shanley, a sneaker analyst with Wells Fargo Securities.
All indications are Onfield is a very small but growing part of Reebok's $3.1 billion in revenue. In the company's most recent quarterly report, it said the "sports licensed apparel business continues to perform well and ... these products are experiencing strong sell through at major specialty and sporting goods accounts."
The leagues won't disclose figures, either, though the non-TV revenue the NFL hands over to its teams dropped for the third consecutive year in 2002.
"We are confident the business will grow this year," said Mark Holtzman, the NFL's senior vice president of consumer products.
He would like to see Reebok emphasize its new NFL shoe line. Only 20 percent of the league's players wear Reebok shoes, while the other 80 percent run on Nike's. "They are a major partner of ours," Holtzman said of Reebok. "It is incumbent on them to have a certain number of players."
Reebok is in an aggressive campaign to sign more NFL players to endorsement contracts, and expects to have more than 400 by the end of the year. Reebok will not disclose specifics, but it has about 300 of the league's 1,600 players under contract.
In the NBA, Onfield has about 35 percent of the merchandise business, and that is a big reason why that league pursuit will be up by about 50 percent this year, said Sal LaRocca, the league's senior vice president of global merchandising. "In the first two years they have exceeded our expectations not only in sales generated, but in the way they handled relationships with the teams," he added.
Back in his office, Reebok's Grauel spins his chair around and grabs a fat book out of a bookcase. In meticulous detail, the publication lays out in colorful storyboard fashion each NBA and NFL team, their apparel lines and what new merchandise is due out and when. Each team can have dozens of lines, many of which change each year. Grauel and his team must be experts on the peculiar tastes and dislikes of 32 NFL cities, soon all 30 NBA hometowns, and sometimes even the coaches' and owners' wives who often have their own distinct thoughts about what the team lines should look like.
Later in his week, Grauel was to entertain NBA equipment managers expected in for a look-see at the latest offerings. The following week, it is NBA vendors for three days. By the end of the summer, Reebok will have visited every NFL team. Last year, one of Grauel's executives worked as the Green Bay Packers' equipment manager for a day.
The stakes couldn't be higher.
"The NFL is the only league that has an apparel runway that moves product like you can't believe," Grauel said. "So when the quarterback comes off, helmet comes off, hat goes on, it sells. Coach wears a hat. Everyone on the sidelines in the NFL wears their team apparel. This all translates to retail."
