A $200 million headlock in combined martial arts
It is
not each
day you meet a chief
executive officer named
"Punkass." Especially
the one who operates
a $200 million business.
The
heavily tattooed, bandana-wearing CEO fits right in at TapouT, a
140-employee clothing company in Grand Terrace, Calif. that
caters to
athletes as
well as fans
of mixed martial arts, a combat sport recognized
for its violence.
Apart
from the name, what
makes Punkass and his
co-founders different
is definitely the
determination
they provided
more than a decade ago to some
sport that was
then virtually unknown. They took a gamble
on the
market that barely
existed.
The risk? In
the event the market failed
to grow,
TapouT could have
no place
to go. The reward? If ever the
market increased,
they would
be the first ones in.
Way
back in 1997, TapouT's three
co-founders -- Dan "Punkass" Caldwell, Charles "Mask"
Lewis as well as
Tim "Skyskrape" Katz -- didn't
have college degrees and little
money. However
all three
had been trained in
mixed martial arts and were passionate
fans of the sport. They were confident
that someday; the sport would
be acknowledged
-- even appreciated
-- by the
mainstream viewers.
Hence
they took the kind of step
that would
make little sense to anyone
however their
fellow true believers:
They maxed out their credit
cards to
start a
little operation selling
t-shirts at underground mixed martial arts competitions.
Back
then, mixed martial art was
still a fledgling activity,
well under the radar of other clothing
companies. Right now,
it's almost as
main stream as boxing -- and TapouT's block-letter logo is
now synonymous with the
sport.
The company
sponsors well-known fighters like
Vladimir "The Janitor" Matyushenko and
also Thiago "Pitbull"
Alves. (Along with
tattoos and bulging biceps, nicknames really
are a must-have for
practitioners
of mixed martial arts). TapouT additionally
sells clothing, mouth guards, nutritional supplements as
well as other branded
goods online and
at retail stores
including Macy's and Champs Sports.
All
those t-shirts and vitamins
add up
rapidly.
Last year,
TapouT raked in $200 million in yearly
earnings
-- more than 16 times its $12 million revenue in 2006.
So
how does TapouT maintain
the mixed martial arts market
in the
headlock? Customers
say it is the
early relationship the company developed
with both fighters and followers.
"They've
been right in the mix right
from the start," says
Andrew Lang, co-owner of Lightning MMA, a mixed martial arts gym in
Laguna Hills, Calif. "Those three guys were at
all the events -- they
have this presence, this
rapport with the
fighters."
While in
the late '90s, TapouT sponsored
fledgling fighters for $300 a pop. At
present, sponsorships cost
anywhere from
$3,000 to $1 million.
"We have
a full team working
with our fighters as
well as their managers 24/7,"
says Punkass. "We're worried
about their individual
lives, also.
How's their new baby?
How do they feel after having a
fight?"
The
objective is to get fighters to
put on TapouT gear in and out
of the ring. That, in turn,
has given the company mass appeal
among followers
-- which come
primarily
from the sought-after 18- to 34-year-old male group.
"I
have no idea
who's more fanatic, mixed martial arts people or
maybe NASCAR people," says
Marshal Cohen, chief industry analyst at the NPD Group, a market
research firm. "However
in both case, when you’re that fanatical there's
a great
allegiance to a
brand, and it's really
all about the lifestyle. It's almost
like a club."
To
ensure that club is
growing; Punkass, Mask and
Skyskrape brought a successful
entrepreneur, Marc Kreiner, on board in 2006. Kreiner had
a varied background -- he
established
disco bands in the
'70s and more
recently started an infomercial company -- but he helped get
TapouT products to over
20,000 retailers
around the world.
He also inked a handful of
licensing agreements, together
with a line of TapouT-branded
health supplements
with Champion Nutrition.
"We
are licensing a nutrition line,
energy drinks and TapouT gyms," says Kreiner Marc, now
the president and chairman of
TapouT. "The motto is 'Grow big or go
home.'"
However
TapouT's evolution
had its low ebbs. In 2009,
co-founder Mask -- famous for
his huge
identity
and signature face paint -- died in
a vehicle accident.
Kreiner, Punkass and Skrape were leveled through
the loss of their friend and
also colleague. Plenty
of TapouT employees
got commemorative tattoos in Mask's honor with
the word "believe."
Punkass
states that
Mask's death has been
the company's major
challenge up to now.
Yet
TapouT has other,
less tragic troubles. While mixed martial arts has toned down the
violence a little
in recent years -- the rules,
for example,
no longer
permit
biting and eye-gouging -- several
lingering controversy regarding
the sport's roughness would
limit the development
of its fan base,
which is TapouT's main
audience.
A handful of
smaller companies have also
entered
in the mixed martial arts apparel
company,
including Dethrone Royalty Clothing and
also Hitman Fight Gear. However
when it comes to the
competition, TapouT's main
threat is much
bigger players, like
Nike and Adidas.
So could TapouT be
the next sports apparel
giant, akin to
Under Armour?
It is
unlikely, suggests Cohen, the NPD Group analyst. But for the moment,
at least, the business
does not have
significant competitors
competing
for a
share of the same market, he notes. And
there is plenty
of room to
develop: The
entire sports apparel
market rakes in $12 billion a
year in the United States
alone.
As
TapouT gives
its name to more and more
products, the business
works
the possibility of
diluting its brand and losing "street cred" with
its loyal group
of followers. But
Punkass isn't worried about that.
"I do not see ourselves making TapouT Ken and Barbie dolls anytime soon," he said. "We won't create a product unless it links to our main audience. We stay true to the brand."
