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Business of Boxing: There Could Be Some “Broccoli” on the Table For Pacquiao

Posted on 08/11/2011

By Charles Jay

On the endorsement carousel, one of the next stops, and a rather unusual one, for Manny Pacquiao is a deal with a company called State Street Produce, which is not nearly as iconic or as successful as Hewlett-Packard but is using the Pacquiao brand to establish a brand of its own. State Street has primarily been a business-to-business supplier, moving product, imported largely from Mexico, to restaurants.

The people from State Street regularly with lettuce, cucumbers, green onions, bell peppers, carrots and other vegetables, but now they are about to throw a lot of broccoli, if you know what I mean, at Pacquiao, and they hope they don’t get cauliflower ears from it.

The company, headed by Ted Ludeman, reports an increase of 300% in sales over the last two years, according to its website, and that is, for the most part, attributed to its move from Santa Barbara, California to San Antonio. Now they are looking to make a head-long charge into the retail side of things, and they are planning to use the biggest attraction in boxing to get it done.

The retail line that State Street will launch is called “Pacquiao Produce,” and it will make very liberal use of the fighter’s image in its packaging, as well as the trucks it uses to transport its products. Certainly one of the engines that drives this deal is that the PacMan will be the face of the company, but in a sense, it goes much farther, in that, for all intents and purposes, as far as retail outlets are concerned, he IS the company.

The base compensation associated with Pacquiao’s deal is not chicken feed, though modest compared to his HP deal; he is to be paid about a million dollars over a three-year period. But there is a bigger back end here. And that is part of a growing trend among celebrities in taking the extra step in terms of endorsements. The traditional way of doing business was for an athlete or other celebrity to take the money, do the ad, and be done with it.

Now, select celebs are becoming much more entrepreneurial about the venture. George Foreman has been a glowing example of this from the world of boxing, and LeBron James’ management team has made this a normal practice. They basically trade a little on the front end for increased royalties and equity, and they are, in a way, gambling on themselves as a principal driver of retail sales, in the hope that the payoff is bigger – much bigger.

As a company, State Street is rolling the dice as well. This does not appear to be the kind of company that would reel in a top-name celebrity as a de facto partner. According to information available at the website, this outfit, which is about twelve years old and not well-known outside of Texas, pulls in revenue of a million dollars at best, with a small office staff. While they will put Pacquiao’s picture on all of their retail packages, the big product they plan to promote is an energy drink.

There’s a very crowded market out there, and for good reason. Energy drinks are the fastest growing segment of the beverage industry, and they are expected to grow to around $19.7 billion worth of sales by the year 2013. There is a dominant player: Red Bull, which has over 42% of the market in the United States, and 40% worldwide (Monster is far behind in the U.S.).

Red Bull’s sports marketing “spend” amounts to ten figures by now, and that kind of money is going to be impossible for a company like State Street to overcome, but there is room for others in the space. Pacquiao’s drink may actually have an edge over some of those competitors, because of the worldwide exposure and free advertising he can snag in association with his high-profile fights. And his own strong personal brand is something that will resonate with many customers.

We also wouldn’t be the least bit surprised if State Street, under the label “Pacquiao Produce,” has their eye on some action outside U.S. borders. The market for so-called “functional drinks” (which includes energy drinks, sports drinks and nutraceutical drinks) in the Asia-Pacific area was $17.4 billion last year, and some estimates have it growing to $23.4 billion by 2015.

Pacquiao may not be able to hit a grand slam home run with this one, but he can certainly hit a triple. And that will be good enough to put a considerable amount of that “broccoli” in his wallet.

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