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UP399 What Castore Did Next
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Unofficial Partner
Episode 399
Tom Beahon, Castore
[00:00:00] Hello, and welcome to Unofficial Partner, the sports business podcast. I'm Richard Gillis. Today, we've got a conversation with Tom Beehan, who is one of the co-founders. Along with his brother, Phil of the cast store sportswear brand, which is one of the success stories of British industry over the last 10 years. Today, the brothers' shareholding in the firm is valued at around 500 million pounds following. A recent capital round led by a us merchant bank and investor the rain group. Which valued the company at 950 million. This investment will contribute to Stores attack on the sportswear industry dominated by added S. Nike Puma. And Michael Rubin's online retailer fanatics. This week has store added to its portfolio of around 50 team partnerships across football, cricket, rugby in formula one. When it signed new deals for the next season. With Everton and club Bruges in Belgium.
[00:00:50] This is a conversation that goes in lots of different directions. Taking us inside how the business works and what he sees from his perspective on some of the big trends that we talk about on Unofficial Partner a lot.
[00:01:00] Tom Beahon, Castore: Whenever I hear teams make big grandiose statements about selling their content directly to fans and this stuff, I do often raise an eyebrow and I'm not sure I can think of too many examples, not to say it can never be done.
[00:01:15] I mean, as an entrepreneur, I'm always rooting for the guy that's trying to do something differently, but I can't think of many examples of where that's worked well. I know with New Zealand rugby, Silver Lake made a A not immaterial investment , in those guys. And as I understand it, a big part of the thesis was selling content direct and putting out these third party broadcasters.
[00:01:38] But I think that's really, really difficult and it will be a long journey before those investments start to pay dividends.
[00:01:46] Richard Gillis, UP: Unofficial Partner is the leading podcast for the business of sport, a mix of entertaining and thought provoking conversations. With the who's who of the global industry? To join our community of tens of thousands of people. Sign up to the weekly Unofficial Partner newsletter and follow us on Twitter and Tik TOK.
[00:02:09] Do you get weekends?
[00:02:11] Tom Beahon, Castore: Um, I mean, so I would never complain, Richard, 'cause obviously it's a great privilege to do what we do, but at this time of year, the honest answer is not so much. Less so because you are kind of site in the office working, to be honest. But probably more because there's kind of some big sporting events pretty much every weekend.
[00:02:31] So on Saturday, I was, uh, I was down at Twickenham for the BAF Northampton Premiership Rugby Final. Uh, there's quite a bit of cricket. Coming up when
[00:02:42] the test match start, a couple of weeks before that you had Lennster playing at the top of the marina. So yeah, it's, uh, there's worse things to be doing, that's for sure.
[00:02:53] Richard Gillis, UP: And I suppose there's just, that's every weekend of the year though, isn't it? Cause you've got kit deals and various things, relationships all over town. Haven't you?
[00:03:01] Tom Beahon, Castore: Yeah, and do you know what, so again, it sounds really boring, Richard, but you do have to be. Disciplined because if you're not careful, yeah, you'd never, well one, you'd never see your family, but I was going to say more importantly, maybe equally importantly is a better way to describe it. You, you literally would never stop like every weekend of the year that something will be going on.
[00:03:24] So yeah, I've learned this the hard way, just a little bit more disciplined in how you manage your time.
[00:03:30] Richard Gillis UP It's interesting listening to the story and the way people talk about you now, because there has been a shift. So there is the initial. These two blokes, two brothers, great British success story, the Andy Murray thing, and then there was Kit Deals and it was all that trajectory.
[00:03:48] And now it all feels a bit more grown up. Does it, does it feel like that from the inside? Is it,
[00:03:55] there's lots of, you know, lots of people talking about your money and the, all of the investment and Reign Group and all this stuff.
[00:04:02] Tom Beahon, Castore: I was just going to say Rich, I'm really glad it looks that way from the outside. Um, no, I guess there's certainly truth in that. So when you start the way I describe it is you survive almost exclusively on instinct, like your entrepreneurial instincts and your work ethic and your, Passion and all of those great things, which are 100 percent incredibly important. But of course, as you grow a business, you hire more staff, the market dynamics evolve internally, the business model evolves. So whilst all of those things that got you off the ground. The entrepreneurial drive, the passion, the making decisions quickly and the agility. All of those things are still incredibly important, but you can't survive on them alone. So you do have to evolve, learn to think more strategically, learn to plan more strategically. Bringing better people around you, which is just not an option at the start. You don't have any, very much money at all to bring in kind of experienced people. So it is an evolution. And I mean, I'm definitely not kind of a font of all knowledge on this point, but certainly from Castor's perspective, when I speak to other entrepreneurs, I can see. How they make the mistake of not evolving and they have a level of success. And then struggle to go through to that next stage. And I mean, it's a binary number. So it's not once you, you, you reach 1 million revenue or 10 or 50, it'll be different depending on the business and the sector, but whatever the number is, every business reach that reaches that point where you have to intuitively know. Okay, the things that have made us successful so far are no longer going to be the things that make us successful tomorrow and you have to disrupt yourself, which I know sounds a bit cliched, but that is what you have to do, which sounds really easy. But actually, when you've had success or you're in the middle of success, it's quite a hard thing to do.
[00:06:09] Richard Gillis UP How do you go about judging success in your game? Is it, there's obviously financial measurements, But is there anything else as well? What, what are the sort of softer things that you look, you look at and say, yeah, okay, we're getting better at that. And we're not as good at that. And there's stuff like that.
[00:06:23] Well, I'm always interested in terms of how businesses run.
[00:06:26] Tom Beahon, Castore: Yeah, so it's really interesting and it's a great question. So, I guess the first thing to say is the undisputably, categorically, financials are the key way that you measure success and performance. I think part of that is, again, maybe particularly because we're in a sports industry, like we're competitive by nature. This, this, that is literally how you keep score. What is your revenue growth? What is your gross profit margin? Your operating profit margin? Any other key KPIs that you measured? You set yourself a target. Did you achieve that target or did you not? It's binary. There's always, I love listening to kind of when you hear CEOs of publicly listed companies. Give their quarterly or full year results and it's the weather. It's Brexit. It's an election. There's a million things that have happened, which of course are outside of their control that have affected their performance. But ultimately, if you set yourself a financial target, you either achieved it or you didn't.
[00:07:30] And I quite like that clarity. I think that's helpful for everyone. Of course, there's always mitigating circumstances. But. You can't move the goal posts when it comes to numbers, which, which I quite like that kind of clarity in terms of how you go about things. But, and again, I've learned this the hard way, Richard, if you just look at the business or measure the business through the lens of numbers, not only will you miss things that are really important. But you start making dumb decisions because as you get bigger, the levers that you can pull to hit numbers, multiply. So really simple example, we now have a far bigger customer database that we did two years ago, three years ago, five years ago. If we were to go to flash sale this afternoon for three hours only you can buy this t shirt for this price You could do make it up a million pounds revenue in an afternoon. So you feel good about yourself That's money that's coming to the bank, but you've damaged your brand By doing that, if you're just trying to grow, you go and hire too many people, you hire the wrong people, you don't really think through and consider the structural impact on the business, the cultural impact on the business. So those things, I always say, They're impossible to measure, but you can always feel them. And what's interesting, you mentioned earlier, raising investment as we've been through that process of bringing in institutional money, completely understandably, those guys don't necessarily think like that. So if I'm behind on my numbers and every quarter, I'm going for a conversation with them.
[00:09:24] And so don't worry guys, we may have missed all of our financial targets, but the good news is culture is fantastic. They're going to say, well, maybe everyone's
[00:09:31] a bit too happy and you need to, you need to, uh, maybe crack the whip a little bit more so that there's no, I don't think there's any perfect formula. But as a, as a founder, as a CEO, it's your job to intuitively feel what does the business need? Does it need a super intense focus on its numbers? Or actually, are you at a moment in the journey, in the cycle where you can afford to sacrifice the numbers ever so slightly? Because you're investing for fitting things that may not pay dividends, so to speak, but will will benefit the business in the long term. And you see it. I mean, great example of the moment in the media is Boeing. And obviously it's really serious. They make aircraft that we all travel in. By all accounts, they've been overly focused on the numbers for too long and share price went up and up and up, which is great. And no doubt people got very well rewarded for that. But by focusing on that, maybe they slightly took their eye off the ball in other areas. And eventually the chickens come home to roost. So again, it manifests itself in all of these different ways, but the founder's job is to just intuitively know where that balance is.
[00:10:45] Richard Gillis UP , it's really interesting because there's also sort of romance in your story, you know, as in two brothers. It's all of that backstory that you've told really well in the, in the growth period. And there's a bit of me that doesn't want that to be then just become another.
[00:11:00] Corporate sort of entity that just, you know, is a name that, that gets banded around and then consultants come in and it all becomes about shareholder value and all of that story, which I'm sure is, is fantastically lucrative in many ways. But there's a bit of the story that I think brand wise, looking at it just purely from a marketing perspective, that actually is quite valuable and probably easy to lose at some point.
[00:11:26] Tom Beahon, Castore: Oh, completely. I wouldn't, I wouldn't cite examples because it wouldn't be fair, but there's so many examples where brands lose the thing that made them successful. And I mean, it's, I'll be honest, I do think it maybe gets overstated the impact of an individual or in our case, two individuals because there's. 500 people now in our business. And yeah, whilst I'd love to think that what I get up and do every day is the key driving factor. I'm probably overstating my own importance in my head, uh, to motivate myself when that alarm goes off at 5am every day, but notwithstanding that, there's no doubt that brands are emotive beings when, when a consumer is. Purchasing a Castor product. Partly it's a logical decision. I'm
[00:12:15] going to go for a run. I'm going to try and get fit and this brand or this product has sweat wicking fabric or is flexible. That, that seems quite good. So there's absolutely part of that, but a significant part is a motive. Do they connect with your story and your journey?
[00:12:31] Can you inspire them through? The athletes that you partner with, the teams, how you tell those stories, so that when that person's buying a t shirt and a pair of shorts to go for a run in, there's a subconscious part of their brain that's like, yeah, I want to, I want to try and be like those athletes, or I see some parts of myself in those stories.
[00:12:51] And I guess it linked the two points are inextricably linked, because if you want to focus on the bottom line and hit the numbers and everyone gets paid a bonus and all the rest of it. Which, by the way, we live in a capitalist society, there's nothing wrong with that per se, but you cut marketing, you don't invest in telling those stories, you don't invest in taking that risk that may not pay off, but if it does, could be the thing that takes you into a new level, and if it does pay It's, it's, it's kind of telling that story again about a brand that wants to be bold and ambitious and a challenger and a disruptor. So again, I'm not saying that entrepreneurs and founders are better than everyone else because I'm sure there's many businesses where the opposite is true and you do need the consultants or the experienced people. But in my personal opinion, As a brand, the X Factor, the secret source is often something that you can't measure in a spreadsheet.
[00:13:51] It's something that is a spirit that hopefully the founder or the founders embody. And if you can bottle that spirit and transform it across a group of people, actually some incredibly exciting things can happen if you take that away. You're just the smaller version of Nike who added us. Why do you exist?
[00:14:12] Richard Gillis UP A few, well, a few years, I say it's, it's more than that. It's probably 10 years ago. I interviewed Kevin Plank, you know, Under Armour. And again, he was right in the middle of the founder phase and there was a sort of, a zeal or you could see it. You know, he was, it was an obsession., were they in your mind when you set up?
[00:14:31] Was that because that feels like that there are sort of echoes and I'm not, I'm not saying that you're a version of them or but were they in the, the consideration set?
[00:14:40] Tom Beahon, Castore: Absolutely yes is the short answer. So, certainly in the early days, Under Armour did a phenomenal job of challenging the big guys. I'm 34 years old and, It's the first and only time in my life, hopefully, until Castor came along, that I can remember anyone having the audacity, that's what it felt like, you
[00:15:01] had the audacity to challenge the big, the big two and, and it, it was exciting as someone, I was, I was playing football at the time, it was living and breathing the sports world and, and it was like, wow, this hasn't happened before, like, good on them, you always wanted them to be successful, Because we all love the David Vega live story and they did have that zeal and that obsession, so certainly we were inspired by those guys and I mean, I think it's been well documented that maybe they've had had more challenges recently,
[00:15:32] which there's probably a lot of reasons for that, but you use the word there, Richard, which is That's completely the right word of obsession.
[00:15:40] You need to be obsessed by this and I often get asked by people now or what does it take to be successful as an entrepreneur? And I always say to them, look, there is no simple answer. There is no simple formula. It's not one plus one equals two. But what I can say is that. You need to be deeply passionate and genuinely obsessed about what you're trying to do.
[00:16:03] And again, that links to your earlier point around, certainly when you start, and if I think back to when we started Castor, you don't get the results of your labor. So you put so much into it, you sacrifice so much, you're so dedicated. And, Disciplined and passionate and it doesn't flow through. So to keep going, keep grinding away, keep swinging for the fences when there's no evidence that what you're doing is, is, is working or is going to have any form of financial kind of payoff is not for the faint hearted and You do it because you love it.
[00:16:42] You do it because you want it to be successful because you believe it can be successful. And it's so, it's so funny and ironic how as you grow and you get all these other stakeholders, investors, banks, the media, staff, partners, they just take away from that because completely understandably they're thinking about other things.
[00:17:01] They are thinking about the bottom line. But actually I, I would kind of try and remind myself of why did we start this thing? And if you, if you don't stray too far from that founding ethos, which was for us wanting to create a British sportswear brand that competed on the global stage with Nike and Adidas. Kind of whether we got as big as them or not was irrelevant to us. It wasn't a numbers thing. It was, we want to be British. We want to compete on the global stage. If you don't forget that, in my mind, you can't. Kind of can't go too far wrong. However, that manifests itself financially.
[00:17:36] Richard Gillis UP one of the things that we talk about a lot on here, is team brands. Okay. So this is a question I've got for you, I want to run this by you.
[00:17:42] So obviously football. And the Premier League, we'll have that conversation, but then when you look across sport, you've got things like the 100 franchises, you've got WSL, women's teams, you've got things like Live Golf, sort of franchises, IPL, you've got Which is much more established,
[00:18:01] I think it's the hardest job is to build team brands. from scratch. Because on here you get people coming on talking about the big event. So the big event draws a crowd, the NFL comes to London, people go, it's great, and off they go again.
[00:18:17] The week in week out stickiness that we know from football, And you're right in the middle of that, but also you see it, you know, in these other sports and they're really, really trying to build that out and it's really hard work. So I don't know what you, what you think about that because it's so important in the landscape of the business of sport.
[00:18:39] It felt like , you probably have got a head start in terms of what works and what doesn't.
[00:18:45] Tom Beahon, Castore: Yeah, it's, it It's such an interesting point. So, I mean, a lot, a lot to go out there. So I'll, I'll, I'll try and be succinct building a team brand undoubtedly is incredibly difficult. I think there's, there's huge evidence of that. And I think live golf is a really, really interesting concept and case study for many reasons. Maybe we can, we can get into those reasons in more detail, but certainly at a high level, if you look at the capital that has been invested in LiveGolf versus the output, however you want to measure it, whether it's financial eyeballs on TV or social media, all these other things, That isn't an economically coherent argument, other than it being sovereign wealth funded. There is no private investor that would invest that quantum of capital for that output so far. And I do think that so far point is interesting because I do think there's going to be a lot of evolution in LiveGolf and golf more broadly. But you look at the opposite end of the spectrum almost and where Castorp broke into the market was partnering with. Often, not exclusively, but very traditional. All fashioned clubs that had, to use your expression, hugely sticky fan bases, deeply engaged, passionate audiences or communities, um, captive audiences. If you wanted to use a financial term, they're not, they're not going anywhere. They're not changing the team that they support if there's a bad season or a bad decade. So from a financial perspective. Traditional team sports display very, very attractive characteristics. The, the question we asked ourselves and have looked to try and execute against it was, can you introduce innovation to what has been a very traditional status quo driven market? So if I look at a football club and say, I can look at data over the last 10, that tells me what is the average attendance of that team?
[00:21:02] How does it fluctuate depending on whether they're winning or losing? There's multiple other data points that I can look at. Often the clubs can share with me the merchandise revenue that's been generated over that longer period and you can get yourself comfortable that, you know, It's very, very resilient recession or growth market interest rates, high or low, whether it's raining, whether it's sunny, people are buying these products.
[00:21:27] So we looked at that and said, well, why is this market not evolved? It's been dominated by Nike and Adidas. It had been dominated from a merchandise perspective by a very small number of third party retailers. And we, we asked ourselves, is that really the optimal market? Is that really working as well as it could?
[00:21:51] Do we think we could offer something different and better to the clubs? And then hopefully something different and better to the fans? And we only had the comfort or the confidence to go after the market opportunity in the way that we did. Because the downside is protected, fans don't change the team that they support, ever. They very rarely stop buying the shirt of the team that they support. So, it was a risk, but we felt that the upside not only warranted that risk, but the downside protected it. That is not necessarily true if you're partnering with some of these kind of new age, new era teams that are trying to be built.
[00:22:33] That's not to say that they're not great opportunities, because often they are, but the risk reward dynamic is very different. And therefore the way that we structure those deals economically and from a legal perspective is very different. I like traditional because I can hang my hat on it and the upside is completely protected.
[00:22:54] Yeah,
[00:22:55] Richard Gillis UP The risk question is interesting because again, when I, when I talk to people who working on the club side and they look in them with, I find the kit relationship really, you know, it's fascinating because it's just, it's really emotive, isn't it? People just get. It just goes, I'm just looking at some of the launches this week, you know, and, and the big sort of splashy videos and all of that, that's become a genre, a marketing genre all of its own, but the kit relationship, that risk question, I'm, my reading is that there's a few clubs, let's take the Premier League, you know, let's say the top six for cliches rally, who are able to then, get cash for their, for their shirt.
[00:23:33] So they, they, you know, there, there's a marketing value in the IP, which allows the, the organization, you know, the company to, to say, right, okay, here's something, and we can make upside in the shops and we're on the retail. But that's quite a small group. And then within that, but below that, you've got the question of, well, how many, you know, how much is Castor going to charge me for this for each shirt and how much am I going to sell it for?
[00:23:56] Where am I going to sell it? Are they going to run my retail operation for me? Who gets the customer data, them or me? Is it easier just to give all that to fanatics? And where is that? You know, so you've got all of these sort of variables at play. And the other risk is under buying. You haven't got enough shirts to give away, which again, is a waste of money from their point of view.
[00:24:17] So they're balancing stock at the end of the year, not sold, can't do anything with it. And then Shit, we didn't charge it, we didn't buy enough of them, and away we go. So that, that bit, and I guess I, I think particularly, I think we are getting to, and one of this is an, again, a point that comes across lots of different bits of the sports business is the ownership of the, the customer or the relationship with the customer.
[00:24:40] So just talk me through that in terms of where you sit and what the aspiration is.
[00:24:47] Tom Beahon, Castore: Yeah, so everything you've said there is correct. And I'd maybe add one additional point, which is not the introduction of financial fair play, because it's been here for
[00:24:57] a while, but certainly the way that FFP is now biting, I think has had a relatively material impact on the market. And again, how clubs as well as brands, you. Think about these potential partnerships. So I guess to start with how I view the context of the, of the market, you said that the, the very top teams, let's call it the top six in the premiership, uh, Madrid, Barcelona, By Munich, really the only one in Germany, PSG, the, dare I say it, the super league
[00:25:35] in inverted commas teams, they're the clubs that Nike and Adidas will look at and say, they give us global brand equity. We will invest part of our marketing pot and generally roller foam consumer brands that are growing a decent clip will have marketing budgets, 10 ish percent of revenue. Nike. 40 billion, give or take revenue, 145 billion market cap. Last time I checked, that's a big chunk of change that they can afford to invest in these partnerships and more importantly, they do not need a financial return directly from that partnership. They put it in the same bucket as sponsoring Tiger Woods, LeBron James, Drake, Taylor Swift, whoever else it may be. Because that is giving the swoosh, uh, hero, global visibility, global desirability, so that the very, very top guys in each market live in a world of their own, ever so slightly. The market that existed before Castor came along, you then had a huge So there was a big drop in the fees that those brands would be willing to pay clubs because the simple analysis or calculation they made was, and I won't name a team because it would be unfair, but if I've got Real Madrid and Barcelona and Bayern Munich winning the Champions League every year, wearing my logo, what additional benefit really do I get from it? Club X that is not doing that. Is that really doing anything that those clubs are not doing? They asked themselves that question. The answer is no. So therefore they over invested at the top and were not that interested thereafter. So, and of course, none of this is completely binary. There's always kind of middle ground, but that was generally the, the, the state of affairs that existed in this market.
[00:27:36] So then the option, if you, if you were an aspirational club, But you weren't in that global elite was either to accept a second tier offer from Nike or Adidas or to go with, and again, I won't name names, but probably not unfair to describe as tier two brands, brands that would never try and partner with the top teams were not particularly aspirational. They would create a nice kit and they deliver on time and they do a decent job. But certainly to my mind as an entrepreneur, we're not super innovative. We're not super creative and that dislocation in the market left a huge gap as we saw it to partner with a number of very ambitious teams with large, deeply passionate, deeply engaged fund
[00:28:28] basers. Often international, if not global fan bases. So if you look at someone like Glasgow Rangers, for example, they've got in fact, they've got fans in kind of a hundred, literally a hundred countries around the world. That's not an overstatement. So we were looking at teams like that as well as Newcastle, Feyenoord, Bayer Leverkusen in Germany, Sevilla in Spain and saying, okay, we think we can do this better.
[00:28:53] We think we can think about these partnerships better. The Nike or Adidas can. They're not prioritizing them. They're focusing their resources elsewhere. We will prioritize them. Um, as soon as you have that mindset, you then start to ask yourself the question of, well, what is the revenue opportunity here? Has it really been maximized? Someone like the, the Republic of Ireland international team traditionally hasn't sold a lot of product, uh, Republic of Ireland jerseys. In America, that made no sense to me because you've got a huge Irish diaspora in America, deep emotive connections to the, to the motherland. Why can you not go and market that shirt over, over in the US? It's a pretty big market to tap into. So by thinking about the opportunity differently, you then say, well, what channels do I need to engage with those fans through? Which type of products am I selling them? Is it only the traditional replica jersey, or is there a broader? opportunity there. Can you elevate that product? Can you think about data differently? Can you share that data with the club? What value does that add to them? All of this was incredibly, and still is, incredibly nascent. A lot of, a lot of us use the words data and analytics
[00:30:11] and kind of LTV and all of these nice metrics, but it's still very, very nascent. And there's no doubt in my mind that we're a long, long way away from the top of this market in terms of how teams can interact with, engage, and ultimately monetize their fan communities.
[00:30:31] Richard Gillis UP So just to build on that, then there's a, to really maximize that, so the lifetime value and, you know, all of that, that issue, you've got the second bit of the question is, I'm wondering how many clubs? Is it worth them doing their own retail operation and how many would just say, right, no, actually we're better off third partying this, just putting this out and, and coming to some sort of arrangement about the fan data or whatever it is, they're better at it than we are.
[00:31:05] And, uh, you know, they'll, we'll get a better , service doing it that way, we're going to have to give something up. And is that something that it's tempting to think of your new sort of chart? We mentioned rain group, you know, the new money. Is part of that looking at this equation, this bit of the supply chain.
[00:31:25] Tom Beahon, Castore: but part of it is yes, absolutely. So I guess to answer that question directly to my mind, someone who's done a lot of these partnerships in the last five years and And I've seen the good, the bad and the ugly. I've got the scars on my back from when it doesn't work. I would say that almost all clubs would be better served financially from outsourcing, retail, almost all clubs outside of the top. And again, I use that broadly because some people will take offense to that. So, and the reason for that is very simple and it's, and it's economic. So if you're one of the top teams in the world and I'll use round numbers for ease, But if you can generate a hundred million sterling revenue from merchandise, which the top teams are kind of not along, not, not, far off that number, the upside from doing it yourself makes the investment worthwhile. Cause these, it costs a lot of money to invest in warehousing and customer service staff in running an e commerce platform in dealing with different currencies and languages in dealing with import and export tax duties. All of these things are expensive and there's a significant upfront investment required before you realize the benefit of that investment for those top teams. That investment is worthwhile. They will get enough back to make it, to make that investment pay for itself. And then they keep all of that upside for teams that don't do that level of revenue, the cost involved in maximizing it versus the upside they can probably generate. And again, this isn't binary, you'll get the rectums of this world where they're on an amazing fairy tale growth journey, but actually the upside means that probably. You will benefit more as long as you do the right deal with the right margin share and up from payments and controls and data sharing agreements and all of this important stuff. But probably you'll benefit from outsourcing to a partner who has an inbuilt economies of scale leverage that you will not have yourself. If I'm buying 10 million football shirts a year and the fabric to make 10 million football shirts a year, I'll get a better price than anyone who wants to do it for themselves. The same applies to warehousing. The same applies to a website platform. Every other part of the value chain, you will get a cost benefit if you're applying economies of scale. So the question then becomes one that is not economic or financially driven. It's a motive and it's asking clubs asking themselves very fairly and I would do exactly the same if I was a chief commercial officer or CEO of a football club. I want to be in control of anything that touches my fans. If I'm engaging with fans, I want to be in control over it, particularly something as emotive as a, as the shirt launch, which as you referenced earlier, you can, you can do the most amazing launch with a great marketing video and 50 percent of people won't like it.
[00:34:50] That's, that's kind of the nature of the beast when it comes to these things. It's why we love it. Um, but clubs want to have. Is there a model where an outsourced provider can do the heavy lifting, provide a lot of the infrastructure, but the club retain some front end control over how they interact with the fans and that in theory can give you the best of both worlds, both financially but also emotively.
[00:35:22] I
[00:35:23] Richard Gillis UP And presumably the fans won't know, and it's a sort of white label thing that you're talking about there, is it? I mean, it's that they won't know who's in charge of the levers behind, they don't care particularly.
[00:35:33] Tom Beahon, Castore: think the latter point, yeah, the fans are not necessarily first as long as the shirt turns up on time and it's the product that they ordered, which is, believe it or not, harder than it should be when you, when you talk about these kinds of volumes and breadth of product skews, but correct. Absolutely. There's a, there's a brand on the shirt. So there's the Castor brand on the jersey. But actually all of the backend infrastructure, the big reason that we did the fundraise, we raised 150 million sterling, give or take of growth capital last year. The big reason that we, that we raised that money was to go and invest in infrastructure because we could see that the market was moving in this direction, that clubs didn't want a binary. Either Nike and Adidas do nothing. They give them a shirt and do absolutely nothing else and leave the club to do it all, which is not easy. Or they want someone like Fanatics at the other end of the spectrum who says, well, I'll do it, but then I'm controlling it all. And you can't, you can't be involved in that. Actually, we think there is a third way here, which is a lot more collaborative and allows the clubs to remain in control of a lot of that value chain.
[00:36:43] Richard Gillis UP Does it sort of go in and out of fashion that conversation? Because I remember, I mean, am I right to say that the Nike Man United deal This is 20 years ago. , part of that was a big setup of the merch. They were owning the merch, they devolved to Nike, their whole merch store.
[00:36:58] And then they took it back in on the Adidas deal. Is that right? Is that how the,
[00:37:03] Tom Beahon, Castore: That's exactly right. There was a guy called David Daly, uh, who ran
[00:37:06] Nike's UK business, great guy, David, um, got a huge amount of time for him and David did that deal. And there was a number, it was Man United, Juventus, I think Barcelona, they did it for a period where Nike said, okay, we want to control this.
[00:37:21] And I guess they saw a not dissimilar opportunity to the one that we've seen. I can't profess to have any compelling insight as to how Nike thought about this strategically, because. I mean, I was, I think I was probably 11, 12 years old when this was happening, but I, I guess the, uh, the realization they came to was when you're doing 40 billion revenue a year, it makes far more sense for them to focus their resources on selling Nike trainers. than it does selling 10 percent more Man United or Barcelona or Juventus shirts per year. So Nike almost outgrew the, the opportunity would, would be my sense. Um, maybe you can get someone on from Nike to, to verify that, but that's how I would analyze it as an outsider. Yeah,
[00:38:15] Richard Gillis UP interesting. We did a thing, um, at, so the ECA, you know, European club association had a, had a, a conference, two day conference in Madrid a couple of weeks ago, and we did a turn on stage and we did a, a thing, but it was really interesting talking there because and obviously that's the bulk of clubs and there's the famous ones, but also lots of others in the pyramid.
[00:38:37] the conversation, I was quite struck, I came away thinking, I wonder what a football club is now, or what people expect a football club to be, because there are, there are sort of stories that, okay, you should be, like you mentioned Wrexham, you should be a content hub, you should be an entertainment company, should create content and, and monetize sponsorship that way.
[00:38:57] And then there's the other bit of. This bit of the conversation was you should be an Amazon type organization. You should have seamless customer service and, you know, a point of, point of sale and our expectations are almost limitless, you know, in terms of customers. So if you want to turn your fans into customers, then be careful because there's a whole load of stuff that comes with that.
[00:39:17] And then the other, then the third strand, which felt like, quite popular was, I mean, I hear I'm, I'm standing here in Brighton and, you They bought a central midfielder for 5 or 10 million and turned it into 100 million. Be a football club, you know, is the other, the other way of looking at it. So in terms of, you know, do what you're really good at, which is football and players and performance and all of those things, do you sense that, and they're bombarded with advice, you know, that was the other joke.
[00:39:48] But if you're in on the commercial side of football, you're not sure of people coming in and saying, Well, you should do this. You should do that. Do you sense a shift? Do you think actually all of that D to C aspiration? It might be people are saying, Hang on a minute. This is harder work than we thought.
[00:40:07] Tom Beahon, Castore: yes, very simply. We've seen a huge change, or probably a better way to describe it is a gap between aspiration when it comes to D2C and the reality of just how hard and sophisticated it is your operations need to be. To actually make that happen. And by the way, this is not just sport that's faced that
[00:40:31] challenge. There's, there's so many, I guess, broader consumer brands that, that generated the lion's share of their revenues through third party wholesalers. Partly driven by COVID and other factors said, right, the world is digitizing. We need to sell directly to our customers or fans. Let's cut out the retailers. They tried that for a couple of years. It almost all cases failed. Revenue didn't materialize in the way that they hoped. The margin benefit didn't materialize in the way that they hoped because there's a lot more cost that goes into it. And now for all intents and purposes, they've, they've reversed back.
[00:41:10] So I think. And again, it will be a different conversation for each club, but for me, it's a case by case scenario where you say, can I realistically in source this part of the business? Or is it just too complex and difficult that someone else who is a specialist in that area? Can do it better than me.
[00:41:34] And the conversation I always have with clubs when we talk about not just becoming their kit partner, but, uh, managing their e commerce and retail operations is look guys, you're not outsourcing control. We want to ensure you maintain control in terms of big decisions, anything that looks different from a brand perspective, anything that the fans will notice. We want you right in the center of that conversation. That stays with you, but you are outsourcing risk. So we will underwrite the profits that you guys can make or have made. Historically from these operations, I'm building growth for the term of our contract. We'll build that in very simply, as we said earlier, because not only do we have hopefully an expertise because you learn quite a lot about this stuff, the more clubs you do it for in the more different sports, you'll say, Okay, that works quite well in Formula One.
[00:42:32] Why don't we apply that best practice to football? But very simply, we have an economy of scale benefit. that underwrites the risk for us in a way that it can't if a club is doing it themselves. So I do think it will be different for every club. I don't think there's any simple answers, but whenever I hear kind of teams make big grandiose statements about kind of selling their content directly to fans and this stuff, I do often raise an eyebrow and I'm not sure I can think of too many examples, not to say it can never be done.
[00:43:05] I mean, as an entrepreneur, I'm always rooting for the guy that's trying to do something differently, but I can't think of many examples of where that's worked well. I know with New Zealand rugby, Silver Lake made a A not immaterial investment , in those guys. And as I understand it, a big part of the thesis was selling content direct and putting out these third party broadcasters.
[00:43:27] And, uh, I don't want to misspeak. Certainly that's my sense. I don't know that as a fact, but I think that's really, really difficult and it will be a long journey before, before those investments start to pay dividends.
[00:43:41] Richard Gillis UP And from your point of view, is it a sort of mitigation against, renting the shirt for three years or whatever, because there's a, there's a fluctuation there. I'm just wondering if having a more concrete retail relationship with a club does mean that , it's just harder to get rid of you once you're in, I guess.
[00:43:59] Yeah. Thanks.
[00:44:01] Tom Beahon, Castore: No, I mean, the way I would think of it, Richard, is. The club knows that I've got real skin in the game. So of course I have that anyway, because anything that has my logo on, I've got a vested interest in it selling well and being high quality and all of that good stuff. But if I'm running that website or retail store, or I'm responsible for opening new stores, I've got a real skin in the game.
[00:44:25] Our interests are completely aligned. So the way I describe it to my team internally is Think about this opportunity, guys, as if you're doing an MBO, a management buyout of the merchandise business for that team. How would you think about growth for the next five years? What investments would you make to unlock that growth? You just don't have the same mindset if you're purely a supplier. So that paradigm shift, although simple, is, is really transformational in how you think about the opportunity. Thanks, Ian. Hopefully think about unlocking growth. So that that is a big part of it. Of course, the other part which is worth mentioning is whilst we do these partnerships, because we believe we can grow the revenue and connect with more fans and sell more, sell more products internationally, uh, the other big reason that we do the MR Sell more castor products, and when you operate that website, you have real li live data flowing in. That gives you insights as to what works and what doesn't, the ability to understand that data so that we can hopefully grow the Castor brand and drive more desirability for the Castor brand is very powerful. That's not new, like Nike and Adidas have been doing these partnerships for years with exactly the same goal. The method of doing it and trying to understand data to inform decision making around product and marketing. That is a little bit more innovative.
[00:45:55] Richard Gillis UP I was interested about Adidas's behavior when they took the Newcastle shirt. So for those people who didn't know they, they sort of announced very, very early almost into the last February. Sort of final season of your deal that they were coming in.
[00:46:09] There was a sort of slyness to the behavior that I thought was actually quite unbecoming for a very large global organization. It, there's a sort of line between cheekiness on social media. And actually I thought that was pretty on the hand. So what did you, and whether or not you see it as a sort of, well, you know, come at us, it's Adidas.
[00:46:35] Tom Beahon, Castore: I mean, I think, I think there's a couple of factors. Castor is probably not dissimilar to how Under Armour were 15, 20 years ago, as you described earlier. We're the challenger brand, we're the disruptor. We've, we've kind of partnered with quite a large number of teams in a relatively short space of time.
[00:46:57] And we've partnered with a number of teams that Adidas, Adidas. Directly where we're pitching for trying to win. So I think, and again, I've, I've got no, as I said earlier, no insight directly as to how those guys will think, but it wouldn't surprise me if there was an element of let's just slap these upstarts down a little bit and show them who's boss.
[00:47:20] Which, you know, it's, it's a competitive market. We, we love the competition. You know, you're never going to win. Everything business is, is very similar to sport in that sense. So. Yeah, you dust yourself down and you get on with it. Um, I mean, would I have done it the same in their shoes? I don't know. I think Adidas is an interesting one because they've obviously got a relatively new CEO involved and there's a huge elephant in the room whenever any Maybe. CEO of Adidas is speaking to anyone, which is the Swoosh and Adidas was the brand that was the dominant market leader in the fifties and sixties and seventies. And then it's been completely and utterly dominated by, by Nike. So I don't know, it's probably easier for them to slap down and upstart a little bit than it is to go and try and Take something off Nike that Nike really wants.
[00:48:14] Um, so yeah, it's, it's all, all, all part of the game. We, we don't take it personally.
[00:48:19] Richard Gillis UP You've also got the Yeezy question with Adidas, of course, you know, that's always in at the moment. You can't talk about Adidas without this huge Big hole that, that, you know, the Kanye West stuff created for them. I don't know, you know, that's a really, for any CEO of that company.
[00:48:38] Tom Beahon, Castore: Well, yeah, I mean, it's Bjorn, the currency, uh, was joined the business at the perfect time because the share price fell. I think it was 20, 25 percent after the Yeezy debacle. Bjorn came in afterwards and, you know, Kind of the only way was up, so it wasn't an easy situation to come up, come into, but as a brand Adidas has been around such a long period of time that probably fair to assume it's going to outlast any kind of short term problem, like, like Yeezy, so really came in at the perfect time because he could put all of those problems down to his predecessor and say, look, what a brilliant job I've done when actually, you know, Really, we're probably going to revert to the mean anyway, so, um, good luck or intelligent, I don't know, probably somewhere in between.
[00:49:31] Richard Gillis UP Um, outside of football, I'm a golf fan. I see the brand on golf courses increasingly. That's, that's an area that you're, you're in, you're in tennis with the Murray, you know, Formula One is an interesting one to me. Cause again, I don't, it's sort of counterintuitive to see a sportswear brand in there, so that's interesting that that's happening.
[00:49:49] Give us a, give us a sense of where you think. The growth markets are obviously looking at your latest figures. There was, it's a 70%. Am I right in saying 70 percent still UK within the UK? Is that right? Or am I off being there?
[00:50:03] Tom Beahon, Castore: No,
[00:50:03] Richard Gillis UP it, there's, there's, international, but there's also sector by sector.
[00:50:07] Tom Beahon, Castore: Yeah, so it's less now. We still very much think of ourselves and I describe Castore as a British business. We're a proudly British business and the UK is still our biggest market, but non UK markets are the fastest growing and, you know, It's probably inevitable before overtakes the UK. So, um, which I certainly don't see as a bad thing. Um, but I guess taking each of those points then. So Formula One, I guess is a really interesting case study. And, uh, by definition it's global. They, they race all over the world. There's no. Home Stadia for F1 as there is almost any other sports team, which gives them that global fan base, which is a great place to start, great history, great heritage.
[00:51:00] Traditionally, it's been, and I think still is a very premium sport, which, which aligns well with Castore as a premium brand. But the real opportunity we saw in F1 was the market from a merchandise perspective had been I mean, I was, I was going to say quasar monopoly, but it was a monopoly and that Puma had the whole market to themselves.
[00:51:24] And I think Nike and Adidas had always struggled with, they like their logo to be the only one on the shirt as much as possible. And that's obviously changed as the sport is commercialized, but in F1, you've got a huge number of logos all over the product, which doesn't really fit with what they do. And, and of course for. 90 percent of the TV coverage, the driver or the athlete is sat down with a helmet on, which again, doesn't particularly fit with how those guys would think of sports marketing. So Puma had the market to themselves. And I guess as with any monopoly, there's no real incentive to innovate or disrupt or provide the best. Possible kind of quality or service. So we thought that that market was ripe for disruption and demonstrated all of those characteristics that we look for in terms of deeply passionate fan bases, very international fan bases, but not very much innovation. So to go in there partner with, I guess two of the. Top leading teams in Red Bull racing and McLaren racing and help them expand the product range, elevate the product range, but most importantly, to connect with and monetize those fans that are coming to Formula 1 in ever greater numbers has been a fantastic opportunity. So where we saw we saw this happening, but I would love to say that we assessed how big the opportunity would be.
[00:52:59] Um, we, we didn't, it's been a very happy surprise, but we did kind of time our entry to Formula One with the Drive to Survive Netflix series, which has introduced a younger audience to the sport, a far more mixed demographics, you know, get far more females watching the sport and engaging with teams than at any time in history.
[00:53:20] So, so those partnerships have been a great success for us, not just in terms of. Kind of the financial opportunity that's there, but the brand desirability that they've helped us build as well. Um, so F1 is, is fantastic and we see that sport continuing to go from strength to strength. I think it's only just scratched the surface in the US and, and South America, which is incredibly exciting. Moving on to golf, again, a far more competitive market. There's a lot of brands. that operate within the golf landscape from a merchandise perspective. But to make it even more competitive, you're not only competing with Nike and Adidas to supply the kit for the golfer, but you're competing against Goldman Sachs and JP Morgan because they will pay to have their logo on that player's kit. I'm, I'm as ambitious and as competitive as anyone, but you need to pick your battles in this life and compete against Goldman Sachs and JP Morgan in terms of dollars per square inch, probably not a battle that you're going to win, certainly not sustainably. So, from a, from an athlete partnership perspective, you have to be. It's really, really selective. It's very easy to, to let your kind of ego or ambition get carried away and you can spend a lot of money very quickly in well in sport generally, but particularly in golf, because those big banks and insurance firms participate in it. But it is very, very well aligned with the Castor brand in terms of its premium positioning in terms of the, the affluent demographic that play golf. But the vast majority, and you can pick up a kind of consistent theme here, the vast majority of golf merchandise historically, has been purchased physically. People will buy their golf polo or cap from the club of which they're a member. And that is kind of how the market has always worked. So to to try and inject some digital expertise into that market, we think that's something that not many other people are thinking about or trying to do.
[00:55:33] So it can be not just the premium performance product quality that we, that we bring, but that digital approach to the market, we think gives us an edge.
[00:55:44] Richard Gillis UP I guess it's also the player led Uh, nature of golf is fundamentally different than teams, which is where you're normally playing in, you know, in other sports, football, rugby, cricket. So I'm wondering what that does to the equation. Because first of all, I was really quite interested in how underwhelming Tiger Woods brand, new brand was.
[00:56:05] That was a really odd, that was like, took me by surprise. I thought you can't muck that up, you know, but. It seems you can. And then, but then there's the sort of, so other than Woods, there are very few players that can, that really sell ticket, you know, again, we got golf agents on and we get golf people and they say, well, you're probably looking at less than 10 players, you know, that, that sell tickets or, uh, material on the commercial side of it.
[00:56:32] So, and then that's why I think Liv is interesting because you have got a team construct. And again, I'm not a big fan of Liv, but as a product, but I can see when I first sort of saw the, the plan, I thought there's a lot in it to like. I just don't like the, you know, the sort of execution, the way it's gone ahead.
[00:56:51] But there's a, um, The player bit, how does that change? Cause again, you're going to have to spend a lot of money to get on one of those top shirts and whether it's doing the same job as a football club, you know, you haven't got that fan base in the same way, ,
[00:57:09] Richard Gillis, UP: but those individual sports, we talked to quite a few people are athletes running into an Olympics or golfers, tennis players, there is an incentive for them to behave much more like a sort of internet creator model rather than a classic sort of brand ambassador.
[00:57:25] And again, it gets to the, there's a similar, there's a parallel to the thing that we talked about, about football clubs, you know, what do you want to be, you know, be a football club, be good at what you're good at. You can sort of start to see, you know, as YouTubers become boxers and, you know, hashtag united, YouTubers playing crap football.
[00:57:42] All of this is. is fine. It's a piece of entertainment, but actually that's a different thing. And I think there's a sort of, again, you get a lot of people saying, well, you should do this, you should do that. And they're saying, well, hang on a minute, I've got a win as well. You know, it's really, it's, it's, that's what sport's about.
[00:57:58] Tom Beahon, Castore 2: You're completely right. So I think you'll always have a level of novelty. So what the YouTube boxers do and some of the other crazy content that the athletes will be challenged to make on behalf of various brands. But personally, I think that will be the exception rather than the ball. So I'm a big fan of any form of.
[00:58:26] Innovation or disruption. So what's happening in boxing now and the investments that the Saudis are making and making these great fights happen over there, what Liv are trying to do in terms of build this team model and a more content centric model in golf. Whenever you do anything innovative or disruptive in life, you'll never get it.
[00:58:49] Perfect. You'll never get it right first time. So there will always be bumps in the road, but that doesn't mean that it's not the right thing to do. And it doesn't mean that you're not making progress. And again, kind of looking at golf, a younger audience, which I think Liv is clearly targeting, engaging with the sport is no bad thing.
[00:59:10] I think a lot of other sports would look at that and say, actually, yeah, is there, is there lessons that we could learn there? And. What's happened with IPL in cricket, what's, what's happening in other sports, they're clearly trying to shorten the format, make it more content friendly, make it more appealing to a demographic that maybe doesn't want to sit down and watch a game in a pub for two hours in the way that has happened years gone by.
[00:59:39] Not all of it will work out, and that's fine, that's creative disruption, that's capitalism, but the gradual move to more disruption, to more test and learn, particularly from a selfish perspective, with Castor, as a challenger in this market, we always think we can be more agile than Nike and Adidas. The more that teams and individuals and sports try and evolve and innovate, the The more we love it because we think that opens up opportunities for us to, uh, to, to find partners and try and create mutual value.
[01:00:12] Richard Gillis, UP: Brilliant. Listen, thanks so much, Tom, for your time. I really enjoyed chatting with you
[01:00:17] Tom Beahon, Castore 2: no, no, thank you, mate.