Under Armour : Growth Opportunities In Mexico and Beyond

 

Under Armour

Since its inception in 1996 Under Armour (UA) has been growing at an exponential rate. As the pioneers of compression undershirts and briefs; innovation, aggressive marketing and key player sponsorships have been significant drivers in maintaining a permanent presence in the United States. Under Armour products can be seen worn by celebrities, in movies, and now on more and more collegiate athletic teams. As Under Armour commences its international expansion, the company must not overlook opportunities nearby.

In the last five years Under Armour has outfitted sports clubs throughout the world, ranging from rugby to soccer and hockey to basketball. UA’s most recent, and notable, contract was signed with Tottenham Hotspur of the Barclays Premier League (England). On an international scale, Under Armour’s branding and expansion efforts have been almost exclusively focused toward Europe. This approach can be fruitful, but can also carry a heavy financial burden if UA wants to keep up with the likes of Nike and Adidas in outfitting clubs and sponsoring athletes in Europe. The cost-effective approach that can generate a quicker return on investment for Under Armour rests in Mexico and Latin America.

To say that Under Armour has not had any penetration in Latin America would be false. Under Armour is the official outfitter of Toluca FC (a historic club in the Mexican soccer league), and also had contracts with Tecos UAG (also in Mexico) and Once Caldas (of the Colombian soccer league). Considering the emerging economies and growing populations however, the argument can be made that a larger effort and investment should be made. Under Armour has already missed a recent opportunity for immediate growth.

The Mexican Primera Division was the country’s top flight soccer league. This past year in 2012, in an effort to renovate the league’s image and also separate itself from the Federación Mexicana de Futbol (Mexico’s governing body for soccer) the league was renamed Liga MX. The promise to fans and the media was more transparency, higher TV ratings, and a better product on the pitch. After the announcement that the “new league” would take shape in the latter end of 2012, the league began to pursue a title sponsor. This would be in the same fashion as the Barclays Premier League (England), La Liga BBVA (Spain) and others. In the end the league was not able to secure a title sponsor prior to the beginning of the Clausura season.

Under Armour missed a great investment opportunity to become the title sponsor for the Liga MX for several reasons. First and foremost, UA would benefit greatly from a brand recognition standpoint. As mentioned previously, Under Armour is the official outfitter of Toluca FC and was the same for Tecos UAG. These are only small target segments among Mexican soccer fans as opposed to those who follow Club America, Rayados de Monterrey, and Chivas de Guadalajara. As the title sponsor, Under Armour would not only be known as the logo that sponsors Toluca, but a brand that all Mexican sports and soccer enthusiasts could relate to.

Second, the financial cost of sponsorship would be relatively affordable as opposed to the costs in European leagues. Barclays, for example paid over $100 Million in 2004 just to retain sponsorship rights for the Premier League after initially sponsoring in 2001 as Barclaycard. Soccer critics worldwide have ranked Liga MX anywhere between the 9th and 11th best soccer league in terms of quality, revenue, and prestige. As a result, it can be safely assumed that a title sponsorship of Liga MX would not demand top dollar, but in Under Armour’s perspective a significant discount.

Finally, Under Armour could benefit from product placement. Had UA taken the steps to become the title sponsor of Liga MX, it could have placed several stipulations in the contract about where and how the brand could be viewed and used. For example, Voit is remembered by many Americans as the tetherball used at recess, a volleyball or even a water polo ball. Today Voit seems to have been forgotten in the United States, while it has a large operation in Mexico. Currently Voit is the official soccer ball supplier of Liga MX. In addition all match referees wear Voit made uniforms. Although Voit has been the official ball supplier of the Mexican soccer leagues for three decades, Under Armour could take advantage of competing with a smaller corporation in terms of what it may be able to offer.

Under Armour does not currently manufacture soccer balls, but can make the investment to make a high quality product. Furthermore, as official title sponsor, Under Armour could require that all match referees wear uniforms made by the company. Of course, one would have to take into consideration any existing contract Liga MX may have with Voit and seek to exploit the opportunity once the contract expires.

By becoming the title sponsor of Liga MX, Under Armour would begin brand expansion of Latin America. With many Mexican consumer tastes such as fashion, music and sports that are similar or identical to those of Americans, Under Armour would be able to utilize the same marketing strategies and campaigns (“Protect This House”, and “I Will”) that have made the brand famous in the United States. After fully entering the Mexican market, Under Armour would then be able to expand further south in Latin America and do so at a discounted price in relation to pursuing the European market, which has a high entry level and high risk.

In conclusion, Under Armour must not overlook opportunities like the one recently lost with Liga MX. UA must consider the cost-benefits as well as its leverage position in negotiating product placement. If Under Armour employs this strategy, it can see international expansion accelerate and truly promote a more worldwide following.

7 Replies to “Under Armour : Growth Opportunities In Mexico and Beyond”

  1. Hi, Walter

    Good article indeed. I am a fan of Sports Marketing and Under Armour myself. I agree with what you said up to a point, but even though UA had a big chance of growth in Mexico I think the priorities are not there yet. UA is a sports clothing brand with a strong tech background. They basically invented the base layers, the sports underwear most of us use today.

    The investments made were huge and the markets need to be interesting in terms of ROI. South America is a growing market with excelent oportunities, but also an unpredictable one (Politic, Social, Economic factors). I believe UA made the right choice in starting by sponsoring soccer clubs in Mexico as jersey sales are one of the biggest income source for a soccer club. Also, because Under Armour is perceived as a clothing brand – They’re good at it excelent with fabrics and technology. Just like they did with Tottenham in the UK. Perhaps manufacturing balls in the future is a plan but I don’t think they have a big chance with it now unless they come up with some super innovation. Nike, adidas and umbro clearly dominate the already saturated market globally.

    Back to ROI. Markets need to show ability to consume your products and make your brand prosper even if it is just seen as an investment (Zara in NY City, e.g did register some losses but led other countries to perceive the brand as highly fashionable which led to increase of sales in those countries). But for instante, take the new Under Armour Football cleats that were supposed to revolutionize the market (can be seen here: http://goo.gl/qqb9q). I play American football in an amateur club in Europe and these Super Cleats are showing a thought design concept that is (was?) to be the next step in the functional evolution of football footwear. While I don’t think that the high price tag is exactly a barrier to entry in Europe or the US, I still don’t believe the value is right for this product yet because of the nature of the cleat market’s demographics. It is a high performance shoe for players who perform at the highest level of their sport. The majority of the retail football cleat market is between the ages of 12 to 18 which leads me to think they’re going to have a hard time selling this product over the similarly priced Nike low tops that have been pretty universally accepted by this demographic.

    My point here is that Under Armour invests hugely in progress and technology not only get to were others are in terms of actual offer, but specially to create new oportunities and need. But this must be paid and supported with sales at the same time. Sales in attractive markets with proven financial capacity to justify investment. Mexico and South America should be targeted? Absolutely. But was the time now? Is sponsoring a low profiled soccer league (Globally speaking in terms of soccer Mexico League is not even in the most attractive top ten) with low exposition the answer at this point? I don’t think so, not at the moment.

    Nevertheless, I agree that it was an opportunity with “a significant discount” that could’ve have had good results. I just believe that other markets are more still more attractive right now. It’s all about choices.
    Decisions, decisions, right?

  2. Hi Joao,

    Thanks for your feedback and perspective! I also agree with many of your points and acknowledge that UA’s ultimate success rests with its European penetration. Essentially my thoughts are that Nike and Adidas dominate the Latin American market (rightfully so) and UA may stand a better chance of competing with them in that region without exhausting too much investment. I also believe investing at a discount allows an emerging firm to make mistakes and learn from them without severe consequences, which would not be the case in Europe. By mastering other regions, UA could initiate an “all-out offensive” on the European market. Of course, it won’t be easy because the demographics, consumer tastes, etc. would differ greatly. You may be familiar with Warrior sports, a firm that is the current kit sponsor of Liverpool F.C. In the United States Warrior is known more for hockey and lacrosse equipment and apparel, so I believe it is taking a huge financial risk with this new venture. What’s more, the firm is now, reportedly, in a bidding war with Nike for Manchester United’s new kit contract. Warrior does not have a real presence in soccer at all, so at least Under Armour has been taking more calculated steps in its growth. Thanks for following our blog and hope to read more insightful comments from you!

  3. i would like to contact someone who can help me to get a sponsorship for my kid. He´s 9 years old, he plays tennis, he has diabetes 1 since 2.5 years ago,
    he is a warrior, and i think he could do an excellent job representing your brand.
    i hope somebody could contact me.
    thanks a lot
    kathia

  4. I’m not sure where you are getting your information,
    but good topic. I needs to spend some time learning much more or understanding more.
    Thanks for fantastic info I was looking for
    this info for my mission.

    my web page … dating site

Comments are closed.