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Sport special: Move over Rolls Royce; the Raleigh is back

Date: 21 Mar 2012

Citywealth

Cycling is not your archetypal lucrative sport. It isn’t affluent like Formula One or as influential as the Premier League. It’s not backed by billionaires, run by the rich or at the forefront of money-making design – or is it?

Well, yes, it is actually. So much so that Sir Alan Sugar is a cycling devotee, and Starbucks’ CEO Howard Schultz is also a big cycling fan. Schultz even lunched with the American pro-cycling champion, Lance Armstrong, before one of his departures to the Tour de France. In fact, with a recent report from the London School of Economics (LSE) stating that cycling is worth ¬£3bn to the British economy, the two-wheeled activity is fast becoming a very profitable sector of society – a sector that wealth managers should start to take notice of. It is also attracting ultra high net worth individuals as sponsors, simply because they are passionate about the sport.

Wiggle.com created £200mn value business in 10 years

While much of British commerce has flopped and floundered over the last year, the business of cycling has rocketed sky high. Bicycle sales have recorded a 25 per cent rise since 2009, which isn’t surprising given that 13 million people in the UK are now said to be self-proclaimed cyclists.* In fact, according to the LSE Gross Cycling Report, around two thousand stores operate across a spectrum of activities to meet consumer needs, including servicing, sales, workshops and other speciality areas. The statistics show that, while the UK’s large independent cycle stores hold the fort when it comes to bicycle sales, it’s not just specialist stores profiting from the cycling boom. In fact, other stores reaping the benefits include supermarket retailers, multi-sport outlets, smaller independent stores and e-tailers.

One of these e-tailers, wiggle.com, an online store supplying cycling and sports goods, has created £200mn value business in ten years. The company recently announced that in the year to January 2011 sales rose by a whopping 55 per cent. Pre-tax profits also rose, from £7.1m to £10.2m, driven by a 123 per cent increase in international sales. The e-tailer claimed that over one million shoppers visited the online store every week. Founded in 1999, Wiggle shows no sign of the financial decline many consumer industries are experiencing, with The Telegraph reporting that trade and private equity buyers are lining up to buy them out for £200mn.

Of course, the popularity of cycling is in part to do with the waning economy itself – rising fuel prices and the recession mean that many have re-evaluated their expenditure and mode of transportation for both commuting and leisure. Funded proposals like the government-backed Cycle to Work scheme, or the Mayor of London’s Barclays Cycle Hire, have enabled people to use a bike at an affordable price. And these schemes are doing their job – figures show that 400,000 people in the UK are taking advantage of the tax-efficient Cycle to Work scheme, while 22,000 others daily share the bikes provided by the Mayor of London’s Barclays Cycle Hire Scheme.*

Still, with the ever-shifting patterns of world finances, will the interest in cycling waver as global economies recover? No, apparently, it won’t. Interest is expected to continue rising with a number of Britons – including elite cyclists Mark Cavendish and Bradley Wiggins – tipped to win gold at the Olympics. In fact, the value of cycling looks set for a meteoric rise. “We’ve seen a significant growth in interest with sales up 10 per cent this year,” says Richard Davies, head of cycle to work scheme provider P&MM Employee Benefits. “With the growing support of employers, and as society’s awareness to environmental sustainability continues to increase, cycle to work schemes will be viewed as inherent to development policies. And it’s expected the popularity will grow in the goal to counteract obesity, too.”

Cycling sponsorship attracts billionaires

Of course, it’s not just pro athletes and fitness fanatics the sport attracts – cycling sponsorship also attracts billionaires and big corporations.

Richard Gorman who is involved with F1 and cycling sponsorship says F1 is struggling this year with less logos appearing on the cars. Cycling however is gaining in popularity. “Pro cycling teams in the top tier attract around ¬£8-15million a year in sponsorship” Says Gorman “Usually ¬£6-12million is sourced from a sole, name sponsor and the rest will come from secondary sponsors. The big money is coming in from privately wealthy individuals like billionaires who have a personal interest in cycling. You also get companies like SKY investing in the sport for marketing and branding reasons. They wanted to change the perception of SKY from big, international company to feel more British so they aligned with cycling because it is very British and represents British Society. They were keen to have a Brit’ win the Tour de France and get more Britons on their bikes.”

Gerry Ryan founder of Jayco a business man in Australia with reported net worth of $180mn, who made his money in caravans, is also backing cycling – a sport he has been interested in for twenty years. Cycling Weekly reported that he is providing financial backing to the Green Edge project to bring a pro cycling Australian team to the world circuits. Flavio Becca a Luxembourg business man also supported professional cycling team Leopard Trek to the tune of Euro 15mn, although big corporates like Radio Shack and Nissan have since taken over.
“You even have the phone maker HTC,” says Gorman, “They were on a massive growth curve, a company you had never heard of and suddenly their handset, because of Android, came to the forefront of the mobile phone world. They came in at a low level to experiment then they became a title sponsor, which means the whole pro cycling team gets renamed HTC.” Gorman explains why this is so attractive to sponsors. “In F1 the sponsors simply get a logo on the car but in cycling the company brand or individual name becomes the name of the team. Sponsors really like that.”

A truly global sport
Gorman says there are more reasons why cycling is hot but not in a greenhouse gas kind of way. “It’s a green sport and it promotes a healthy lifestyle.” And high profile names agree, with Sir Alan Sugar publically claiming he lost three stone thanks to his cycling passion. “Cycling reaches everyone,” says Gorman. “It’s great for staff because sponsors can get their employees engaged in supporting a team and in cycling programmes to keep them fit. Cycling is also a global sport and there aren’t that many, truly global sports. The final bigger attraction, is the cost per thousand – the amount you put in versus the return is about 1/10th of the cost of sponsoring F1 and the audiences you reach are huge.”

The British cycling economy: ‘gross cycling product’ report. Grous, Alexander (2011)

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