RYU bows out of UFC sponsorship
April 8, 2013
RYU formally announced that it is no longer a sponsor of the UFC. In its recent Form 10K (page 5) filed this April, it stated that it no longer will cater to the MMA Marketplace.
Despite an initial positive outlook for the company, it failed to find an adequate financial return on its investment in the sport of MMA.
RYUentered the MMA landscape at the beginning of 2012 as an official sponsor and was a part of UFC broadcasts and PPV. It also opened a store and training facility in Las Vegas. It boasted several former Nike executives which brought an instant credibility to the brand. The brand received good PR including glowing articles about the prospects of the brand.
RYU sponsored fighters with former UFC vet Jon Fitch as its main fighter. RYU aspired to be a lifestyle clothing brand for MMA fans however it did not pan out. As noted in a July 2012 Sports Business Journal article (via MMA Payout), the success depended on the consumers:
While RYU is getting some good buzz, SBJ notes that its success will depend on how well the products sell. A selling point for the brand is that the clothing uses natural materials as it prides itself on being “95% sustainable” and stresses the newest performance technology. Compared with the likes of Nike and TapouT, RYU clothing is much more expensive than it competitors. The question is whether consumers would be willing to spend more on this new brand.
It turns out, consumers did not.
A director resigned although the release did not state that it was related to the financial results of the company. It has moved its headquarters from Las Vegas back to Portland, Oregon where it originally had offices.
On page 9 of its Form 10K, RYU noted a gross loss of $1,115,157 which it attributed to its product development and a write off. It also showed a bigger net loss related to selling and marketing expenses, production creations costs and administrative costs which amounted to $9,868,603.
The company notes that the company will “need to raise substantial additional equity” in 2013 in order to continue RYU as planned.
It goes on to state that 2012 sales fell short of expectations and management cites its UFC partnership in which it tried to position the brand as a “premium performance apparel brand.” The company suffered losses as a result of lower than expected sales from its sponsorship of the UFC.
RYU is undergoing a rebranding strategy which will appeal to a broader base of consumers according to its filing.
RYU’s demise in MMA might be attributed to an assortment of factors. It did go into the endeavor with both feet as it became an official sponsor, opened up a training facility in Las Vegas and sponsored fighters. However, it failed to sell its product as it had envisioned. This could be attributed to the higher price point on its apparel. As we indicated early on, the question was going to be whether consumers would buy a hoodie that was priced $10-$20 higher than a competing brand. Further, the Jon Fitch sponsorship did not work out as Fitch lost his first bout as a RYU sponsored fighter in seconds to Johny Hendricks.
We will see if the RYU brand will continue on without MMA. But, RYU’s story in MMA reflects the fact that despite the best plans, it all depends on the consumers.