It was worth it! Alltech founder claims $100M in business as result of WEG

The WEG 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 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.

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.

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.

WEG 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.”

Read more: http://www.kentucky.com/2010/11/14/1523715/alltech-founder-claims-100m-in.html#more#ixzz1A5zqa4xW

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