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A MUST READ

posted on Oct 26, 2009 03:12PM

http://www.bcbusinessonline.ca/bcb/top-stories/2009/10/08/golden-%E2%80%A8opportunities

Alda will get paid for 70,000 bottles that they are expected to deliver for the Olympics and in turn they have to pay VANOC a cash fees for being the Olympics supplier.

Golden  Opportunities

Peter Severinson | Image: Robert Kenney | Published: October 08, 2009

While many still fret over  what the Games will ultimately cost, others are crunching the numbers to figure out how they’ll make a buck from the circus .

Joey Holt’s small, spotless gift shop is not designed for locals. There’s no street entrance to Fairmont Gifts; you’ll only spot it by wandering through the lobby of the Fairmont Hotel Vancouver. The store is designed for visitors, it is packed full of Olympics merchandise and, Holt says, it is currently doing very well indeed.  

The Olympic pins, for example, are a hot seller. They take up next to no space, dangling from a swivelling rack on the corner of the cash counter, and two or three of them, retailing for $8 to $10 each, can be crammed into even the most overpacked carry-on. Like all the 2010 merchandise, they’re meant to be more than just trinkets. “We always want to make their stay a memory,” Holt says of the hotel’s customers. “And when they have something from the Olympics, they’ll have that memory. . . . Even if it was in the summer, they can say, ‘We were there, look, we have the T-shirt.’ ” 

Mister Clean

In July New Westminster’s tiny Alda Pharmaceuticals Corp. was just another small business among the many thousands spread across the Lower Mainland. Then, in August, they became an Olympic supplier: the official supplier of hand sanitizer and disinfectant cleaning product, to be exact, which will be available in bottles and dispensers to Olympic staff behind the scenes and to the general public at Olympic events. “What it means for us is zero to hero overnight,” jokes CEO Terrance Owen.

The company of six has developed a line of proprietary disinfectant cleaning products and has largely been an R&D company since it was founded in 2003. They were preparing a marketing push to expand their sales into pharmacy chains when health-product giant Johnson and Johnson pulled out of its Olympic sponsorship deal in November 2008. Owen saw a chance to enter the marketplace with a splash.
“We went to the first meeting [with VANOC] and four of us were at the table,” Owen recounts with a laugh. “They said, ‘We’ve normally dealt with larger companies than yours. How many people do you have?’ And I said, ‘You’re looking at them.’” But the people at VANOC were keen to bring on a local company, so once the product had

been tested and approved, Alda was signed on to supply some 70,000 bottles of hand sanitizer for the Games, about as much as the company sells in a year.

But the trick with this contract is that it doesn’t make money; it costs money. Alda is paying between $3 million and $15 million for the privilege of being a supplier (Owen wouldn’t disclose the actual figure). Although VANOC will pay for all the product Alda ships to them, Owen says he doesn’t expect to recoup the cost of the sponsorship. The Olympics, he explains, is more about marketing – showing potential clients that the product is up to world-class standards and that the company can deliver big volumes on a deadline.

“We were going to spend a lot of money on marketing, so we decided, ‘Well, let’s spend a lot of money on marketing using the Olympics sponsorships; let’s just spend it a lot faster,’” Owen says. And it’s already starting to pay off, he adds, as news of the deal reaches the buyers in his industry. “People are calling us rather than us having to bang on doors and beg people to take on our product. The endorsement of the Olympics has certainly
made our life much, much easier.”

Holt started carrying the Olympic swag last February and says she began to see a pickup in sales almost immediately. Even visitors who have no intention of being here for the Olympics want a little piece of it, apparently, whether in the form of a combat-worthy jogging jacket, a small inukshuk in matte stone for the fridge or a plush toy for the little ones. (The mascots are another hot seller. Holt says kids just love the “creatures.”) 

And if the hunger for 2010 trinkets is good for small retailers, it’s even better for VANOC. With its growing list of expenses and a yawning advertising shortfall, the organization needs to take advantage of any Olympic revenues it can leverage at this point.  

“Our product is out there in so many different stores. It’s actually quite surprising,” says Dennis Kim, VANOC’s director of licensing and merchandising. Already, more than 2,000 retail outlets across Canada are selling the assorted stuff, he explains, and at the time of writing – about six months before the Games – more than 400,000 plush toys had been sold. (A three-foot-tall earmuffed sasquatch can be yours for a mere $350.) Total retail sales from merchandise are expected to hit $500 million, and VANOC collects a royalty of five to 10 per cent of the retail price on every item. 

Kim’s department oversees seven official Olympic stores (six in YVR and one in Whistler, all run by outside companies), the online shop and all agreements between VANOC and the 41 licensees who create Olympic merchandise and sell it to retailers. VANOC put out requests for proposals to potential merchandise makers in 2006, and Kim says they had a “tremendous response”: more than 200 companies came forward, for example, just in the apparel, head-wear and hard-goods categories. “We had difficult choices to make in terms of whom we were going to partner up with.” 

Still, sales will have to do better than those of any other winter Games if revenues from merchandising are to meet targets in the latest VANOC budget. Merchandising royalties were originally slated to bring in about $35 million in Vancouver’s bid to host the Games, but that target has now been raised to $54 million to help VANOC deliver a balanced overall budget.  

“The tricky part about our revenue forecasting is that the sales come near Games time, so that’s when we’ll really know: post-Games,” Kim says. “Hopefully we actually exceed those numbers.”

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