Umbro plc

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Umbro plc

Umbro House, Lakeside
Cheadle
Greater Manchester, SK83FT
United Kingdom
Telephone: (44 161) 492 2000
Fax: (44 161) 492 2001
Web site: http://www.umbro.com

Public Company
Founded: 1920 as Humphreys Brothers
Employees: 182
Sales: $231 million (2005)
Stock Exchanges: London
Ticker Symbol: UMB
NAIC: 315228 Men’s and Boys’ Cut and Sew Other Outerwear Manufacturing

Based in Greater Manchester, United Kingdom, Umbro plc is a company devoted to soccer-related products, including uniforms, shoes, equipment, and soccerinfluenced casual wear. The company no longer maintains manufacturing facilities, instead sourcing its products to independent manufacturers, mostly located in China, Vietnam, and Thailand. As a result, Umbro is now primarily a design and licensing company. It owns licensing agreements for the training and game uniforms of many of the world’s leading professional soccer teams—such as Chelsea in England, Olympique Lyonnais in France, and FC Santos in Brazil—as well as national teams, including England, the Republic of Ireland, Sweden, and Norway. All told, the company has produced the uniforms for some 150 football (known as soccer in the United States) clubs. Umbro maintains a network of 47 licensees to source and sell its branded products to 90 countries around the world. Umbro is a public company listed on the London Stock Exchange.

COMPANY FOUNDED: 1920

Umbro was started in Wilmslow, Cheshire, in England, in 1920 by Harold C. and Wallace Humphreys, who opened an apparel workshop with little more than a pair of sewing machines, a motorcycle to make deliveries, and about $50 in ready cash. Originally called Wallace Brothers, the business assumed a truncated name in 1924, becoming Umbro. The company’s “Double Diamond” logo was also introduced at that time. Umbro began making its name in soccer in 1934 when it outfitted the hometown Manchester City team, which would win the FA Cup Final, England’s most prestigious soccer tournament. A year later the Umbro name gained further currency in England when Sheffield Wednesday won the cup wearing the company-made uniforms. Already the prospect of war was looming in Europe and before the decade was out England and France were at war with Germany and Italy. The production of soccer uniforms was put on hold, and Umbro did its part in the war effort. Instead of producing soccer “kit,” its sewing machines produced shirts for the British army.

Umbro returned its focus to soccer in the postwar years, taking on more of a global scope. Soccer’s popularity exploded in countries worldwide during the postwar years—with the notable exception of the United States—spurred in large measure by the World Cup tournament that every four years pitted the best national teams the world had to offer against each other. Launched in 1930 in Uruguay, the World Cup was initially ignored by Europe, so that even the United States was able to post a third place finish in the inaugural event. That situation changed in 1934 and 1938 when the event was held in Italy and France, and the Italian team took the championship both years.

Because of the war 12 years would pass before the national teams once again gathered in Brazil to resume World Cup play. Umbro made its mark on the international stage in 1958 when it outfitted Brazil, which won its first championship defeating the host country, Sweden. Four years later Brazil, led by its legendary star Pele, defended its title, again wearing Umbro uniforms. Umbro became so dominant a brand in international soccer that in 1966, 15 out of the 16 participating countries were outfitted by Umbro. To make the situation sweeter, host country England defeated Germany to win its first and only World Cup title.

UNITED STATES’ ENTRY: 1976

By the 1970s Umbro was a dominant brand in both soccer and rugby. The company entered the enticing United States market in 1976 with a licensing agreement that resulted in the creation of Umbro USA to sell Umbro soccer and rugby uniforms. At the time it appeared that soccer was on the cusp of breaking out in America, its popularity spurred in large part by the New York Cosmos team of the National American Soccer League (NASL). Backed by the deep pockets of Warner Communications, which also provided marketing savvy, the Cosmos signed Pele as well as such high profile players as Giorgio Chinaglia and Franz Beckenbauer. It was a harbinger of things to come in world soccer as a number of well-heeled clubs ultimately emerged and began stocking their rosters with expensive international stars. Unfortunately for professional soccer in the United States, the Cosmos’ model was not sustainable and after the 1984 season the NASL folded.

Before the demise of the NASL, Umbro USA was acquired by Stone Manufacturing, a South Carolinabased underwear manufacturer. Stone was keen on growing the Umbro name in the United States and not overly concerned about the health of the professional game. Rather, it looked to the increasing interest in soccer at the youth level, where a large number of boys and girls were taking up the sport. It was a highly attractive age group made even more alluring by the financial background of the participants. In most of the world, soccer was played by the poor with makeshift balls wherever there was a bit of room. In the United States, however, soccer was the pursuit of prep schools and well-funded suburban public schools. Umbro supported the growth of soccer in the United States even as the Cosmos and the NASL disbanded because the company believed that its investment would eventually pay off.

Worldwide, Umbro faced greater competition in 1980s and lost some of its edge, so that by 1992 the Humphreys family was ready to sell the business and eagerly accepted Stone’s offer of £2.9 million. Under its new American ownership, Umbro adopted a soccer-only strategy. Not only was Umbro able to capitalize on its connection to “the world’s game,” it was able to make the most of its limited resources. The cost of sponsorship had skyrocketed, and the company simply could no longer afford to be involved in multiple sports. Focusing on soccer, Umbro dropped its hub structure, instead allowing licensees in Europe, the United States, South America, and Asia to be responsible for the growth of their own markets.

For a time the strategy worked well, as the period between 1991 and 1995 was a time of strong growth for Umbro around the world, especially in South America. In the United States Umbro did especially well with its branded soccer shorts. Available in bright colors and made of nylon they were so comfortable they were increasingly worn off the soccer field, becoming casual wear for both men and women. Because they were also quick-drying they became a staple on the beach, leading to a line of Beach Soccer apparel. During this period the company also enjoyed a major success with the 1992 introduction of the Speciali, a new extremely lightweight soccer shoe that was quickly adopted by professional soccer players around the world.

COMPANY PERSPECTIVES

Umbro is a globally recognized football brand with a strong heritage derived from more than 70 years’ association with the sport of football. Umbro designs, sources and markets football-related apparel, footwear and equipment and its products are sold in over 90 countries worldwide.

In the mid-1990s, however, other brands of shorts challenged Umbro and the emergence of cargo shorts hastened the demise of Umbro’s fling as an American cultural icon. Elsewhere in the world Umbro was adversely impacted by Nike’s decision to step up its involvement in soccer. Determined to be the world’s most dominant sports brand, Nike, not surprisingly, sought to dominate the game. The German giant adidas was spurred to meet the challenge, and they were joined by the likes of Reebok and Fila in fending off the Nike challenge. As a result, Umbro found the cost of sponsorships increasing beyond its capability. In addition, the national teams and super clubs that commanded these high prices had greater expectations of the sports companies with whom they allied themselves. Although Umbro was able to make money in some parts of the world, it was losing money in many places. In 1998 Umbro brought in turnaround consultant, Jay Alix & Associates, to take stock of the situation. It became apparent to all that Umbro would eventually have to cut its losses and that the sooner the company took action the quicker it would return to health.

One of the principals at Jay Alix, Lawrence J. Ramaekers, was named chief executive and Umbro took a number of steps to turn around the company, the most important of which was the adoption of a new business model. Umbro was recast as a licensing organization, a company no longer interested in acquisitions. Thus, a volleyball brand, Kaepa, which the company had picked up, was divested. Umbro also sold its manufacturing facilities and outsourced all product manufacturing. The company could focus on the Umbro brand and the game of soccer, free of the headaches that came with production. In recent years sporting goods manufacturers like Umbro had come under fire for their use of child labor. In 1997, for example, the English newspaper the Daily Telegraph alleged that Umbro soccer balls were sewn by Indian children for 14 pence each. The balls were then sold in the United Kingdom for £14.99. Sporting goods companies received terrible publicity when such organizations as Save the Children, Christina Aid, and UNICEF launched a campaign to shame them into making changes. Ultimately Umbro and the others agreed to an 18-month phase-out of the use of child labor in Pakistan, where three-quarters of all the world’s soccer balls were produced.

As part of Umbro’s restructuring effort, the U.S. headquarters was closed and the base of operations was returned to the United Kingdom, where a marketing and licensing operation was based. Umbro then struggled to find a company to acquire its U.S. license. Spaulding Sports Worldwide was rumored to be a prime candidate but in October 1998 Signal Apparel Company, Inc., acquired the rights to market Umbro apparel, footwear, and equipment to sporting goods, department, and specialty retailers, and Riddell Sports, Inc., received the license to market Umbro products to soccer specialty stores and sporting goods team dealers.

COMPANY SOLD: 1999

When 1998 came to a close, Umbro and its four owned-and-operated units—located in the United Kingdom, France, Germany, and Hong Kong—posted sales of $196.4 million and a net loss of $16.5 million. In May 1999 the business was sold to venture capitalist firm Doughty Hanson & Co. for £90 million and folded into a new corporate entity, Umbro Holdings Ltd. Hanson made it clear that the firm intended to complete the turnaround already undertaken and then take a profit by selling the business as soon as possible.

Hanson installed a new chief executive, Peter McGuigan, a former Reebok International president. The sell-off took longer to engineer than expected, however, as Umbro took time to craft a new marketing approach. In essence, the brand returned to a previous approach that had been successful, emphasizing a soccer-only identity and playing on its rich heritage with the sport. In this way, Umbro tried to differentiate itself from the larger general sports brands like Nike, adidas, and Reebok. The approach did not mean, however, that Umbro would limit itself to apparel. It launched a sports drink, Umbro Hypotonic, but pitched it to a soccer audience. Nevertheless, traditional soccer gear remained the heart of the business.

In 2000 Umbro reaffirmed its place as a pioneer in the sport by introducing a new Sportswool material, a combination of natural and manmade fibers that passed perspiration to the exterior of the garment, thus allowing players to cool off quickly while remaining drier. The company also introduced the XAI Football Boot, a high-end shoe at a reasonable price point. In 2002 Umbro became the first company to produce a reversible jersey used by an international team. In that same year, the company introduced its line of Premier Pro Training soccer gear.

KEY DATES

1920:: Company formed as Humphreys Brothers.
1924:: Umbro name assumed.
1934:: Association with profession soccer begun.
1976:: U.S. market entered.
1992:: Stone Manufacturing company acquired.
1999:: Company sold to Doughty Hanson & Co.
2004:: Company taken public on London Stock Exchange.

In support of its marketing, Umbro also enjoyed success in sponsorships. In 1999 one of its clubs, Manchester United, won all three championships in which it competed, making the so-called Treble. Another club, Celtic, won the Scottish Treble in 2001, and in 2003 Olympique Lyonnaise won its domestic title wearing Umbro, as did Santos, Galatasaray, and Olympiakos. Umbro signed a number of new sponsorship deals with such parties as the Swedish National Federation and the Kenyan National Team, and club teams that included CSKA, Spartak Moscow, and Atletico Nacional. Umbro also successfully retained the English FA, extending their deal until 2010.

The steps taken by Umbro resulted in strong growth between 1999 and 2003, as profits grew to approximately £33 million. In the fall of 2003 Doughty Hanson put the company up for sale for an asking price of £300 million. Not receiving a suitable offer, the investment firm elected to take Umbro public and make an initial public offering of stock while retaining majority control—at least for the time being. The offering was completed in June 2004, and the stock began trading on the London Stock Exchange.

Umbro continued to build its brand around its soccer heritage, promoting the game around the world in an effort to make Umbro synonymous with the game. During the World Cup year of 2006 the company launched a global marketing campaign based on the “One Love” theme. At the same time, Umbro looked to extend its brand appeal beyond soccer to cutting-edge fashion, hiring British fashion designer Kim Jones to reinterpret soccer fashion. In the United States in 2006 Umbro signed a 15-year licensing agreement with Dick’s Sporting Goods, a move that was hoped would spur shopping mall sales. Overall, Umbro appeared to be well positioned as a soccer-focused sporting goods company. How long it would remain majority-owned by Doughty Hanson remained to be seen, however.