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Danica deal just one of many for MainGate: Firm looks to relocate as profits soar 828 percent

June 5, 2006

With a deep history in motorsports, it would be understandable if officials for Indianapolis-based MainGate were focused solely on their recently signed exclusive licensing deal with racing diva Danica Patrick.

After all, Patrick's merchandise outsold all other Indy Racing League drivers combined last year, and since MainGate has taken over making, distributing and selling her merchandise this year, sales have tripled, company officials said.

But with the company busting at the seams and a wave of new business from various customers coming in, there's more to be mindful of than motorsports.

That doesn't mean Danica-mania is dying down at MainGate's bustling complex. The company's mobile Danica Patrick retail outlet packed up shortly after the checkered flag waved over the Brickyard to head to the next IRL race at Watkins Glen, N.Y., June 4. Then it's off to Texas Motor Speedway for the June 10 race.

"Danica Patrick hasn't yet approached the status of the biggest NASCAR stars, but she's clearly the biggest name in open-wheel racing," said Gary Jowers, president of Super Shot Sports, a Charlotte, N.C.-based licensing firm.

Jowers estimated sales of Patrick's licensed products would be 35 percent of big-name NASCAR drivers such as Tony Stewart and Jeff Gordon. But that should still ring up seven figures in annual sales, Jowers said.

"Having exclusive control of Danica merchandise is a sizable piece of business," Jowers said. "Having won a contract like that certainly shows you know your way around the licensing business."

MainGate co-owner Dave Moroknek thinks Danica Patrick-related business could approach that of one of the biggest drag-race icons, John Force, whom Main-Gate also handles.

"I've been involved in open-wheel racing 13 years, and I've never seen a driver not only with such popularity, but popularity that translates to sales," Moroknek said of Patrick.

One-stop shop

Moroknek's eyes open wide as he examines the printing presses cranking out shirts bearing Patrick's likeness during a walk through the plant off West Morris Street, but he has a much broader vision for the company.

MainGate, which was founded as a National Hot Rod Association licensee in California in 1963 and moved here in 1985, is using its unique cadre of services to expand far beyond the world of racing.

MainGate is a unique turnkey operation in the licensing industry, with the ability to not only make, warehouse and distribute licensed products ranging from baseball caps to coffee mugs, but also to run e-commerce and retail operations that reach fans directly. The company also sells its merchandise through retailers such as Meijer and Wal-Mart.

Few traditional licensing firms have the mobile retailing and e-commerce capabilities MainGate boasts, sports licensing experts said.

"The principals of this company come from an eventing background, and that helps them set up these retail operations often weaved into large events," said Milt Thompson, president of Grand Slam Cos., a locally based sports marketing consultancy. "This approach can be very attractive to an athlete or event holder looking for a one-stop licensing firm."

Many licensing firms oversee product design and manufacturing, then distribute products through mass retailers and other outlets, Jowers said. It's not uncommon, he added, for licensing firms to outsource such things as warehousing and distribution. With its own trucking fleet and drivers in addition to its design and production staff, Maingate is directly involved in every aspect of a project.

Beyond racing

The company recently signed deals to handle various forms of merchandising for the New Jersey Nets, Pokemon USA, and the National FFA, among others.

The diversity movement is being led by two former Indianapolis Motor Speedway executives, Moroknek and Bruce Lynch; and Ned Walliser, a former NHRA manager. The trio recently purchased the firm from its employees.

"It's a smart move to diversify," Jowers said. "Sports audiences, even for the strongest enterprises, can be fickle. It can be a tough business, especially if you rely heavily on a small number of clients."

Under Moroknek's leadership, Main-Gate-formerly known as Sport Service Inc.-has increased revenue almost 20 percent annually each of the last three years, and profitability has jumped an astounding 828 percent since 2002. Sales for the company have reached $30 million, and its work force has grown from about 70 to 110 since 2002, Moroknek said.

He has a simple explanation for the company's improved profitability.

"It's blocking and tackling," Moroknek said. "It's all about getting a better handle on the seemingly little things. We've increased our profitability by making better deals, renegotiating royalty structures, better buying and improving our efficiencies."

Nothing escapes the trio's attention. Moroknek and Lynch are regulars in the 53,000-square-foot production and warehouse facility. If the design, coloring or wording isn't exactly right on a shirt, hat or other product, Moroknek and Lynch have been known to send it back to the drawing board.

"Bruce and I have rejected more shirts off the press in the last couple years than have been done in the last 40 years before," Moroknek said. "We're employing a broader array of fashion designers. We're not just hiring guys who can draw cars anymore."

Sometimes, Moroknek admitted, it's a gut feeling that leads to a product's rejection.

"There are four basic elements to this business," he said. "Having the right product at the right place at the right time at the right price. Saying it is simple. Getting there isn't."

Incentives welcome

These days, MainGate officials are concerned about more than moving licensed products. They're looking to move the company into a new 100,000-plus-square-foot facility by year's end.

"In a perfect world, we'd move within two miles of our current facility," Moroknek said. "But we're looking at all possibilities, and that includes neighboring states and even an East Coast location."

Indianapolis' central location, Moroknek said, helps the company keep its cost of shipping goods in and out of its warehouse down, and is also ideal for serving its nationwide client base. But he said if another city with a more aggressive incentive package than Indianapolis came along, MainGate would listen.

Before being recruited by former MainGate CEO Tom Brazill, Moroknek worked at IMS for a decade. He left as senior director of marketing and consumer products to join MainGate in 2002. He previously worked stints in marketing and licensing for the New Jersey Nets and the National Basketball Association. Moroknek quickly moved to bring Lynch into the company, and when Brazill left in October 2004, Moroknek took over as president and CEO.

Moroknek fortified relationships with such clients as the IRL, IMS, Harley Davidson and NHRA, but he also expanded MainGate into corporate and general retail licensing.

Moroknek said MainGate used to make a fair amount of cold sales calls, but does much less of that today.

"Ninety-nine percent of our marketing effort is just taking care of the customers," he said. "We're not a brand, and we're not trying to be a brand. We're just trying to portray the brand image of our clients."

The National FFA came to MainGate on a referral from the NCAA. MainGate will handle the sale of licensed goods at the agricultural organization's annual convention this October. The convention is attended by more than 50,000 youths nationwide and will be in Indianapolis this year.

"Our merchandise is very popular among our members, and that revenue is very important for our programs," said Mickie Miller, licensing specialist for National FFA, which is headquartered in Indianapolis. "MainGate is also responsible for our licensing image, and that's very important to us."

Terry Angstadt, who worked in the licensing business 10 years before joining the IMS marketing staff, said Main-Gate's mobile retailing operations have helped set it apart from other regional and national players.

MainGate's capabilities, industry experts said, helped the local company land the Pokemon account, which calls for a 16-city tour this summer.

"As simple as items like hats and Tshirts look, it can be a complicated business," Angstadt said. "Some of the operations this company is taking on are pretty ground-breaking."
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