Sep 28, 2009 at 07:23 PM
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UFC finally paying off for Xyience?

There have been a lot of reports lately about how the UFC's explosion in popularity is opening new distribution doors for one of its biggest sponsors, Xyience and it's flagship product Xenergy.

The long documented history behind Xyience and the UFC is not a simple one of sponsor and property.

In 2007, Xyience signed a $15 million sponsorship agreement with the UFC. In January 2008, the company went bankrupt citing the large expenditures to advertising and promotion with an inability to gain a critical mass of distribution at retail. During the proceedings Frank and Lorenzo Fertitta, co-owners of the UFC, were listed as creditors of Xyience with $12.5 million in unsecured claims and $5.3 million in secured claims. There were also claims of death threats made between current (at the time) and former managers of the energy drink company. And finally, complaints that the Fertittas financed Xyience's sponsorship to secure a UFC loan. The case continued to devolve into an ugly spiral of accusations and an amended sponsor agreement, whereby Xyience was replaced on many of the sponsor assets they had once held, including the mats.

In mid 2008, Xyience's assets were bought in Chapter 11 by Manzen, LLC and the company was brought under new management. Earlier this year, Xyience, Inc. former CEO, Russell Pike, was indicted by a federal grand jury in Las Vegas for tax evasion.

“What happened under the old regime, Xyience, Inc., is upsetting –-people were hurt. It reflects a type of business mindset that recent history has shown to be more common than one would have thought,” says the Csaba Reider,the company's new CEO . “We were prepared for there to be bumps along the way, but hopefully we’re getting ahead of the noise. Our focus is on developing a great product that meets the needs of our consumer and strengthening relationships with our retailers and distributors."

Back to present, Xyience is again the official energy drink of the UFC and there is no denying that the UFC has exploded in terms of popularity since the two companies began their business relationship. So it seems a logical assumption that retailers would want to get their hands on products (and packaging) that taps into the excitement of MMA with the 18-30 year old audience (a sweet spot at retail).

“The increasing popularity of the UFC and MMA in Canada give Xyience and Xenergy a great deal of brand awareness among consumers. How we leverage our UFC affiliation so that it’s effective at the retail level varies by market, so it’s critical to approach these retail relationships as true partnerships,” explained Reider.

Some retailers say that Xenergy has outperformed in the energy drink category.

“A combination of weather and record-setting low temperatures, as well as the proliferation of the energy shot category has resulted in a very tough year for energy drinks. Yet Xenergy has outperformed historic leaders in the category for two reasons, its UFC affiliation and taste,” says Norm Dickinson, director of marketing for Quickie Convenience Stores. “Xyience provides a standee of its athlete, UFC Fighter Wanderlei Silva, which has been very effective in merchandising the product, grabbing the consumer’s attention and making the initial sale. Repeat sales are based on the product taste and on its being sugar- and calorie-free. We’re looking forward to continued success with Xyience in the months ahead.”

In the states, Xyience recently ran a regional promotion with Circle K that allowed customers the opportunity to win a bike from fellow UFC sponsor, Harley Davidson.

Through televised broadcasts of UFC events, the Xyience brand reaches some 100 million-television households in North America. As a part of Xyience's UFC sponsorship relationship, its logo receives prime positioning on the mat and bumpers of the octagon. Xyience is also a sponsor of UFC Undisputed, the video game produced by THQ and released in May 2009 that to date has sold over three million copies. The brand has significant exposure in the game, with the Xenergy and Xyience logos appearing on the mat and bumpers of the game's octagon and on the shorts of prominent fighters featured inside the game.

Meanwhile on the East Coast, Xyience through new distribution deals last week secured major exposure through roughly 7,000 independent retailers in key metropolitan areas, including New York City and Philadelphia.

“The choice to move forward was an easy one. Xyience came to us with a great product and effective packaging that includes the UFC logo in an eye-catching position on the front of the can,” explained Guy Battaglia, High Grade Beverage/Briar’s USA’s corporate vice president. “Excitement about the UFC throughout the U.S. is on the rise, and Xyience is a big part of the sport. Fans therefore identify with the brand, and because Xenergy is a great tasting drink, those fans will translate into customers for our retailers.”

With a clean slate and under new management, can Xyience finally fully leverage UFC appeal at retail?