Hansen Natural Seeks to Stem Rising Fees by Sponsoring Smarter

Hansen Natural is aggressively using sponsorships to establish a foothold abroad. However, the company has learned that it's not easy.. or cost efficient.. sledding.

So Hansen is taking a different strategy according to Chairman and CEO Rodney Sacks, by using what the juice and energy drink-maker has learned in past sponsorships to now pursue a strategy of "ownership" around key properties. In doing so, Sacks thinks that despite steadily rising sponsorship fees, it can reduce its annualized sponsorship cost moving forward.

Here's what Sacks had to say yesterday on the topic:

As I indicated earlier, the – we have tried to sort of split the cost of the sponsorships that we had particularly that are particularly appropriate to Europe, for example, the Jensen Button and the Rossi sponsorships and MotoGP. But despite even though you do that and trying to portion it, obviously it’s weighted heavily and you find that the costs are just moving up on the sponsorships.

I mean the end result is that those particular promotional properties are very beneficial to the company and the brand and will be going forward, because those basically promotional events take place in countries that we are going into, take place in countries where the races are televised, for example, Australia, both of those sports are very popular, Brazil, F1 racing, Formula One is very popular. So they are going after and those are going to prove beneficial as we continue to expand internationally.

Additionally, we took a decision to invest in basically it’s called torque off road truck racing, it’s a series, the previous series had sort of folded. And we decided to invest in a new series and take a different approach to the promotion to sort of take an ownership stake in. So hopefully over a period of time, hopefully we will be able to reduce our ongoing cost of promoting these sports which we think are key to our consumer demographic. And so you had that much higher – that loss that I referred to in the extra series.

We also took an decision to take a controlling interest in a concert series called Epicenter which had a concert in California during the summer. Going on, we have sort of – we lost a little bit of money in that series, but based on what we have learnt and based on our numbers going forward, we believe that that series will effect at least breakeven or probably be profitable, so that will effectively reduce our sponsorship cost going forward. So we are looking at sort of tackling how we go forward with getting into and sort of owning certain key properties and with a view to try and sort of manage our costs on a longer-term basis.

I think I have said over many calls over the years that as we continue to find more success in the extreme sports, the cost of sponsoring extreme sports, athletes, and series it continues go up every year.

For more information on Hansen Natural, visit seekingalpha.com.