In what seems to be an unusual pairing, a major Belgian brewery has become a significant partner in the Eddy Merckx Cycles company. Diepensteyn, the holding company of Palm Breweries’ CEO Jan Toye has come on board and now has a stake of almost twenty percent in the company, helping it to plan for the future after some testing years.
At the same time, the main shareholder Sobradis turned an existing loan into capital. The two factors together have raised the company’s capital by 7.4 million euro, and is something that Eddy Merckx Cycles managing director Kurt Moons believes is crucial.
“The capital increase was necessary for several reasons”, Moons explained to Trends magazine. “Firstly the bicycle sector is enormously capital-intensive. In addition, we have a lot of new plans we want to realize and a strong financial basis is the very first requirement for that.”
Sobradis now controls about 67 percent of the shares. Diepensteyn has become the second largest element, with the remainder of the shares being held by Moons and Merckx.
Merckx founded the company in 1980, a couple of years after his retirement from cycling. He was – and remains – the world’s best-ever cyclist, having a palmares which is unmatched by any other rider. The Belgian was able to capitalize on his name after constructing a bicycle factory at his farm in Meise.
In 2008 he opted to sell the company to Sobradis in 2008. Merckx maintained a minority interest of around 15 percent and became an advisor, but otherwise relinquished much of the control. Sobradis had big plans and, after years of careful, conservative planning by Merckx, decided to ramp things up.
Merckx now believes the extent of that was a mistake. “The company wasn’t ready for something like that at the time. You have to learn to walk before you can run. They saw things too big and they didn’t listen to me. But you know, I was no longer the big boss and in the end I had to abide by their decisions,” he said.
Despite having a relatively modest turnover of less than six million euros in 2009, the company decided to sponsor the Quick Step UCI ProTeam for 2010 and 2011. This was a considerable expense and with the company losing money in recent years, the decision was taken to step back from that level.
“In our own country we support Topsport Vlaanderen-Mercator and Wallonie-Bruxelles-Crédit Agricole,” explained Merckx, talking about plans for 2012. “But in other countries where we have commercial interests we are also active as a sponsor. For example the Eddy Merckx-Indeland team in Germany.”
Moons doesn’t rule out returning to that level in the future, recognising that that the partnership with Quick Step gave the brand a lot of exposure, and also showed that the frames were reliable in demanding conditions such as Paris-Roubaix.
There is hope now that Diepensteyn’s involvement will help build the business. Moons underlines what he sees as being the value of the company coming on board and taking that large stake in the company. “Diepensteyn’s contribution exceeds the injection of capital,” he said. “Our new partner can offer our company added value because in the past Palm Breweries has faced similar challenges as Eddy Merckx Cycles currently does. In the meantime they have acquired a lot of know-how about distribution, brands and internationalisation. From now on we can benefit from it.”
Toye realises that the links between a beer company and cycling are not obvious ones, but he suggests there is a logic to the company’s involvement. “There were two reasons to invest in Eddy Merckx. Firstly it is a tangible product that we understand. In addition we ourselves are real brand-builders and we are happy to share our expertise in that area,” he said.
What’s clear is that the company is thinking ahead and planning strategically. The new investment follows a recent move of the factory from Merckx’s farm to Zellik. This rented location provides much more floorspace and also allows better options for transport, being less than a kilometre from the Brussels ring road.
Sobradis, Diepensteyn, Moons and Merckx hope that the changes will help the company grow and become a stronger force in the industry. While Merckx is a huge name in the sport, the company bearing his name has not yet reached the same level of influence.