Alexander Ovechkin is a goal-scoring machine, having led the National Hockey League three times in the past six seasons. But the Russian superstar found himself in a slump in 2010—enough of a dry spell, in fact, that he resorted to extreme measures. Frustrated with the CCM sticks he’d been using as part of a multimillion-dollar endorsement deal, Ovechkin began experimenting with other manufacturers.
In the high-priced world of sports endorsements, where athlete and brand are contractually wedded, it was as close to infidelity as you can get. To avoid the possibility of legal problems, Ovechkin covered the rival companies’ sticks in black spray paint to obscure their logos.
For Ovechkin, it was an act of desperation. For CCM, which is owned by Reebok, a subsidiary of Adidas AG, it was a branding nightmare. But for another company, it was a golden opportunity. And the timing couldn’t have been better.
Bauer Performance Sports—CCM’s long-time rival in hockey equipment—was laying the groundwork for a major push into Russia and Eastern Europe. The imminent Sochi Olympics would be the perfect spotlight: Hockey, after all, is a Winter Olympics glamour sport. All Bauer needed was a spokesman for its Russian invasion. Ovechkin, a celebrity in Moscow, would do nicely.
When the two sides sat down to discuss an endorsement in the summer of 2011, the talks culminated in a six-year deal for untold millions (Bauer won’t discuss financial terms).
Russia beckons because the hockey market in North America is a mature one that is no longer growing like it once did. “They’ve been planning for this for a while now,” says Trevor Johnson, director of equity research at National Bank Financial. “The Olympics are a good platform, so they want to take advantage of that.”
And as a public company, Bauer can’t stand still—especially as one whose stock price has more than doubled in the past two years, and is now being watched closely by investors to see if it can maintain that torrid pace. There are mixed signals so far: Revenue rose 7% in fiscal 2013, to $400 million. But profit dipped 16%, to $25.3 million, as Bauer spent to acquire smaller equipment makers to bolster its manufacturing operations. That strategy is designed to spur sales at home, while feeding more products into Bauer’s growth markets overseas.
“Russia is our single biggest growth market today,” says Bauer CEO Kevin Davis. “It’s the faster adoption of Western brands by the Russian consumer that is driving our expansion there.”
But while the Olympics and Ovechkin give Bauer two out of three key ingredients for its Russian invasion, the last piece is the hardest one: logistics and distribution. Beyond the challenges the sheer vastness of the nation presents, just finding retailers that can sell the brand properly is a challenge.
Yet the company is pinning big hopes on the strategy working. Bauer isn’t only trying to reinvent the Eastern European hockey market; the company, founded in 1927 by the Bauer family of Kitchener, Ontario, is also in the process of dramatically reinventing itself.
When Ovechkin came into the NHL nearly a decade ago, Bauer was a much different outfit. The company, which has gone through numerous owners over the years, was bought by Oregon-based Nike in 1995, as the global shoe giant launched a foray into hockey. It was a deal that would stamp Nike’s famous swoosh onto the game, doing for skates what Air Jordan shoes did for basketball. Or so Nike thought.
The deal never panned out for Nike, which was often criticized for the sub-par quality and high prices of its gear. As for Bauer, its brand suffered. In 2008, Nike retreated from the business, selling Bauer to private equity firm Kohlberg & Co., and Quebecker-turned-Floridian businessman Graeme Roustan, who pledged to revitalize the brand. The $200-million (U.S.) selling price was barely more than half the $395 million (U.S.) Nike paid for Bauer’s then-parent, Canstar, 13 years earlier. Though Bauer’s headquarters now reside in Exeter, New Hampshire, it has operations in Mississauga, Ontario, and in Saint Jérôme, Quebec, and more than 60% of its shares are held by Canadian investors.