Alltech founder claims $100M in business as result of WEG

Expects $100 million in new business

ssloan@herald-leader.comNovember 14, 2010 

Its sponsorship wound up costing more than triple its original $10 million price tag, but Alltech's founder expects his company's investment in the World Equestrian Games to offer quite a return, leading to $100 million in new business by this time next year.

It's the endgame of a sponsorship that surprised many when it was announced in June 2006, given Nicholasville-based Alltech's small number of equine products and relatively low profile. It also was a major learning experience for the company, founder Pearse Lyons told the Herald-Leader.

"It has been absolutely worth it," he said early this month.

Jack Kelly, who oversaw the Games' organizing committee until mid-2008, called it the "most unusual and amazing sponsorship" he's seen over his career of working with events that attracted $200 million in sponsorships.

"It was unique given the amount of the sponsorship for a first-time sponsor and the ability of a company to build all or a great part of their marketing around the sponsorship every day," Kelly said.

More than money

Lyons said the $100 million in new business — at least that much, he says — will come from several of Alltech's divisions.

Sales of its Kentucky Ale beer have doubled year over year since the 16-day Games, which ended Oct. 10. "We expected there to be a spike during the Games," Lyons said, "but we didn't expect there to be another spike after the Games."

The Games also saw Lyons meet a leader of one of the country's largest beer distributors, he says: L. Knife and Son Cos. The company doesn't distribute the Kentucky Ale family of beers yet, Lyons said.

The centerpiece, of course, is the company's primary business: equine feed supplements, which have seen sales rise since the sponsorship was announced. In 2006, they accounted for 2 percent of Alltech's roughly $300 million in annual sales. Now they're up to about 5 percent of $500 million in sales.

One of those that's spending more is California-based O.H. Kruse Grain and Milling, which buys ingredients from Alltech for its equine products. The company was impressed enough to become Alltech's "official feed partner" for the Games, said Dave Spaulding, a sales manager.

"They're going to become a bigger player," he said of Alltech.

Rick Burton, a professor of sport management at Syracuse University, said Lyons' estimation that Alltech could yield $100 million in new business from the sponsorship is "very feasible."

"Even if they would only make $30 million, they could say it's break-even, and this is something that raised their awareness," he said.

While the finance people at the privately held company are crunching the numbers — "we have to be a successful business," Lyons reiterated — the company's leader focuses primarily on how the Games bolstered Alltech's image.

Lyons pulled out a thank-you note written to him by former U.S. Labor Secretary Elaine Chao, "My little niece who loves horses thinks the WEG are actually called Alltech," the note read.

Said Lyons, "You can't put a price on that."

But even with the high price, Jim Host, the businessman and former state commerce secretary who helped lure the Games to Kentucky, said Alltech's expense was well worth it.

"This is the best business decision he ever made because the branding and business recognition have been phenomenal," he said.

The beginnings

When planning for the Games began, Host and Lyons acknowledged they had no idea the expenses would climb so high, and Lyons said Alltech knew little going in because it had never done an event sponsorship remotely close to that size.

In fact, Lyons said, it wasn't until a few weeks after the announcement of the $10 million deal that he was told Alltech would probably be spending two to three times that amount, as is typical with large event sponsorships, said Syracuse's Burton.

Asked if he would have re-thought the decision knowing he would spend more than $30 million, Lyons said, "Absolutely." But he wouldn't have reversed it.

"We knew it was a target we would have to make ourselves into a super brand," Lyons said. "Nobody has ever spent the amount of money we spent on an equestrian event."

A company often associated with sponsorships of equine events is Rolex, which is famed for its sponsorship of the Kentucky Three-Day Event.

While the company declines to disclose its general return on sponsorship investments, spokesman Peter Nicholson said that "after 50 years of equestrian support, Rolex knows that crown-jewel events like the World Equestrian Games and the Rolex Kentucky Three-Day Event pay dividends."

"Our exposure and continuity in these world-class events generate current and future business," he said.

Scott Kelley, director of the University of Kentucky's Center for Sports Marketing, said Alltech's and Rolex's sponsorships are likely different. Image building among the high-end audience is probably Rolex's primary goal, but Alltech could have more specific sales goals with a variety of demographics.

He added Alltech did a "good job of execution" toward its goals.

"There were a lot of pieces to the sponsorship, and some of those pieces didn't revolve specifically around the grounds," he said, noting the Alltech Fortnight Festival of entertainment events across Kentucky during the Games.

Rolex has an association with equestrian sport that will be a model for Alltech to follow, added Syracuse's Burton.

"Alltech is starting down that path and will be looking ultimately for that same kind of residual awareness," he said.

Deep involvement

As time passed before the Games, Alltech became wrapped up in the event, with Lyons volunteering his staff more and more to do even the tiniest tasks for WEG organizers.

Kelly recalled how the committee once put together a promotional brochure, and he mentioned to Lyons that he wanted to have it translated into other languages.

"Within 48 hours, his staff had translated it into almost 30 languages," he said. "That shows his enthusiasm, passion and the ability to make quick decisions and act on those decisions."

And Alltech brought the support that didn't come as much from elsewhere, Kelly added.

The Fédération Equestre Internationale, the governing body of the Games, "has a lot of international reach, but views this as something that comes around every four years," he said. "Alltech jumped out internationally from the very first day."

As the final days before the Games approached, the sponsorship became less about just promotion and more about the actual running of the event.

During the final days, Alltech would put its staffers to work raising millions more to bolster less-than-expected ticket sales. The company's business partners paid $1.875 million to bring 62,707 schoolchildren to the Games. The money was used to pay face value for all grounds passes and event tickets given to children ages 12 and older. Those younger than 12 got in free to the grounds, as was the standing policy of the Games.

The company also created the Commonwealth Club to sell ticket packages to businesses, raising $1.1 million that way. Alltech's employees also staffed discount ticket booths downtown that spurred $90,000 in sales and operated a toll-free phone line that moved another $500,000.

Host said it was Alltech's efforts that saw "attendance going to 507,000 when we didn't think it would get higher than 300,000 to 350,000."

In all, Lyons said, Alltech's budgeted expenses for the Games were about $32 million, though that might have climbed upward and perhaps as high as $35 million.

That doesn't include the cost of his staff, more than 80 of which he lent to the Games' organizing committee to help with finance, marketing, operations work and more.

Lyons said that grew out of a request from the organizers for temporary staffing help.

"It wasn't so much a question of 'My gosh, we're in trouble,' as it was they had gotten to the critical point," Lyons said.

He said he was never told the committee had trouble paying any bills, but noted Alltech's finance department did implement cash-management procedures to help stretch out the time spent paying people and speed up the intake of money.

Lyons said he is certain every company or person owed by the Games' committee will be paid, though he stopped short of saying Alltech would guarantee that.

Lyons predicted the Games will break even and estimated the chance they lose money to be 10 percent to 15 percent.

Continuing into 2014

Some have called Lyons the "savior" of the Games, but he said he prefers Alltech be called the "resource" or "asset."

And he intends the company to be the same resource at the 2014 Games in Normandy, France — even though the French government has already pledged $69 million, the bulk of what the event will cost. That dwarfs the approximate $10 million title sponsorship that Alltech is in the process of negotiating again.

Lyons said he intends to work with the organizers to begin marketing the 2014 Games earlier and will fix what he called a "terrible" 2010 ticketing system that was primarily online-only.

Host and Kelly said they both think the Normandy organizers will welcome Lyons' close involvement.

"They would be foolish not to take advantage of his expertise," Host said, adding, "There's no way the Games could have been successful without the help that Pearse and his group gave, and he paid all the costs of that."

Those were costs that were well worth it to the Nicholasville company, Lyons said, adding: "The world now looks at Alltech in a different way."

Reach Scott Sloan at (859) 231-1447 or 1-800-950-6397, Ext. 1447.

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