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Are They Sailing Or Selling?

Oct. 20, 1986
Oct. 20, 1986

Table of Contents
Oct. 20, 1986

Playoffs
USC
America's Cup
Steve Largent
Horse Racing

Are They Sailing Or Selling?

The America's Cup syndicates, hit by high expenses, have turned to corporations to bail them out

The letter was one of those computer-generated appeals for money that begin, "Dear Friend." It rambled on for four typewritten pages about how this cause was worthier than all the other causes that would cross the desk of the reader in the next week or month or year. The difference was that this letter was signed "Sincerely, Walter Cronkite," and it asked for money to support America II, the New York Yacht Club's entry in the America's Cup trials, which began Oct. 5 off Fremantle, Western Australia.

This is an article from the Oct. 20, 1986 issue Original Layout

It is a measure of the change that has come to the America's Cup since 1983 that the NYYC is asking strangers for money. Harold Vanderbilt and J.P. Morgan must be spinning in their graves. Yet that is what the America's Cup has become, a game so expensive that even the richest sportsmen in the richest country in the world can no longer play it by themselves. Of the 13 challenging syndicates now lined up along the Fremantle waterfront, America II's is the best organized, best equipped and best funded. Yet as recently as August the NYYC syndicate claimed to be $3 million short of the $15 million it needs to pay the bills. The group's goal is to close out fund-raising by the first of the year. "We're bullish on it. We're going to make it," says Casey Wondergem, director of development. No other U.S. syndicate can say that with such certainty.

Because America II was the first American challenger out of the blocks in 1984, it lined up major corporate sponsors quickly. Cadillac and Amway each chipped in $1 million in cash and kind, and Newsweek magazine forked over $1 million in free advertising. What these sponsors got in return was, in effect, bragging rights. Cadillac, for instance, was entitled to name a special, limited-edition America II Eldorado (1,987 of them). Amway, an international giant in the door-to-door-sales field, could associate its line of soaps, cosmetics and household products with an America's Cup challenge and, by inference, with the New York Yacht Club.

Dennis Conner's Sail America challenge from the San Diego Yacht Club was hanging by its syndicated thumbs until a little more than a year ago, when it hired an expert to organize a marketing campaign complete with video presentations. By appealing to corporate patriotism and, ironically, by bearing down hard on the theme of Conner as a winner, the syndicate has signed up seven major sponsors, each of which has contributed between $500,000 and $2 million. The toughest to land was Anheuser-Busch, brewer of Budweiser beer, which allowed itself to be wooed for 10 months before relenting in May. Sail America's marketing director, Charles Ward, claims to be within $3.5 million of his syndicate's $15 million budget, which is fortunate because Conner has ordered up four 12-meters, all christened Stars & Stripes, in his search for the perfect boat for Fremantle.

Regionalism has both helped and hindered the six American challengers. While America II has played down its Eastern connection by omitting, whenever possible, reference to the New York Yacht Club in its promotional material and by signing up 34 affiliated yacht clubs scattered from Maine to Texas, Heart of America, the Chicago Yacht Club entry, has trumpeted its Midwesternness at every opportunity. The opening salvo of Heart's fund-raising campaign was a poster depicting a 12-meter yacht sailing through a field of ripened wheat. Buddy Melges, Heart of America's 56-year-old skipper, has crisscrossed the heartland like a born politician, shaking hands, having his picture taken, letting people sign practice sails for $10 a pop, and promising, all the while, to bring the Cup to Lake Michigan in 1991.

Possibly the toughest terrain to plow for funds has been California, where three challenges have been chasing each other in and out of the revolving doors of the state's corporate headquarters in search for support. Conner's San Diego-based syndicate has the edge, since everybody from the executive suite to the typing pool knows that Conner has a personal score to settle with the Australians. Beyond that, Conner's vast experience in 12-meter sailing gives him the look of a winner. Even so, Sail America has had rough sailing. At one point the syndicate received a $200,000 grant from the Mellon Foundation designated to pay the interest on outstanding loans.

Up north, San Francisco's Golden Gate Challenge has played to civic vanity and the region's pride in its position at the cutting edge of computer technology. The syndicate boasts about the 60-odd scientists and academicians who have contributed expertise to its design effort, and skipper Tom Blackaller, 46, paints word pictures of the possibilities for 1991: "Think about it," he says over and over again, "half a million people lined up along the city waterfront to watch the America's Cup being sailed on San Francisco Bay."

The Eagle syndicate, based in Newport Beach, Calif., the heart of fiscally and politically conservative Orange County, has emphasized its philosophical connection to the frugal but spectacularly profitable Los Angeles Olympic Games. The syndicate's executive director, Gary Thomson, was an associate of Peter Ueberroth on the 1984 Olympic organizing committee. One of Thomson's first acts as the syndicate's director was to commission a study predicting the financial benefit Orange County would reap by hosting the America's Cup. Whatever Newport Harbor's fund-raising may lack in pizzazz has been made up for in splashy graphics. The 30-foot-long stylized eagle painted on either side of the boat's hull makes her look fast even when she's tied up at the dock.

Occasionally the six American syndicates have been unable to get out of their own way. American Express had nearly $1 million to give away; all the U.S. syndicates had to do was agree on a formula for sharing the wealth. They couldn't, and after months of trying, American Express gave up. Philip Morris offered to sponsor a 12-meter regatta on San Francisco Bay with donations to the American syndicates based on the outcome of the races. Four syndicates agreed, but two balked, and again a major contributor put its checkbook back in its pocket.

The selling of the America's Cup, which has reached a frenzied peak this year, began in 1974 when Alan Bond, a pudgy 36-year-old millionaire from Perth, Australia, turned up in Newport, R.I., and scandalized the yachting establishment by announcing, "Anyone who considers that racing for the Cup is not a business is a bloody fool."

Newport was full of bloody fools that year, most of them snorting in unison at the bumptious Aussie and his brash promotion of a godforsaken real estate development on the Indian Ocean called Yanchep Sun City. Bond did not win the America's Cup in 1974, or in '77, or in '80, but he did sell Yanchep Sun City to a Japanese group for $12.2 million in 1978, and that was just the beginning. Today Bond is a national hero for having paid the bills for the boat that brought the America's Cup to Australia; his current worth is estimated at $500 million. That makes him one of the 10 richest men in the country. His Bond Corporation, through its many and diverse holdings, is so thoroughly enmeshed in the business of the 1987 America's Cup that his 12-meter syndicate seems, at times, to be merely a conduit for transferring money from one section of the Bond empire to another. His Swan Brewery is the major backer of the syndicate; his TV network will help provide the principal television feed to the rest of the world; his Airship Industries will lease blimps to his television network to carry cameras over the race course; and his importing firm will supply French champagne for his syndicate's galas.

Bond's crosstown rival for the right to defend the America's Cup is Perth millionaire Kevin Parry. Parry, 52, who once worked as a furniture maker, now owns gold and diamond mines, television stations, film companies and the like. In the beginning Parry had difficulty lining up corporate support for his fledgling Kookaburra syndicate, but when it became apparent earlier this year that the syndicate had produced not one but two excellent 12-meters and that Parry was prepared to spring for a third, the funds began to flow in Kookaburra's direction.

Notable among the new Kookaburra backers is Carlton & United, the Melbourne-based brewer of Foster's, Australia's best-selling beer—notable because Perth and the rest of Western Australia is traditionally Swan territory. The invasion of the West by Foster's, which, in fact, was a response to the earlier invasion of the eastern market by Bond (recently Bond added an eastern brewery, Castlemaine Tooheys, to his empire), launched what the Australian papers are calling the Beer War. Foster's ad campaign will star Australia's favorite entertainer, Paul Hogan (Crocodile Dundee); Swan ads will feature the familiar rumpled face of Australia II's designer, Ben Lexcen, who, incidentally, is a contracted consultant to the Bond Corporation.

To appreciate the significance of the Beer War it helps to know that the Australian beer market is worth $5 billion a year. The U.S., with 15 times the population, spends only $12 billion on beer.

Until recently the Sydney group was one of the have-nots among the four Australian syndicates vying to become the defender of the Cup. Then the Sydney people hired Powerplay, a promotional firm, to handle its fund-raising. "They had picked a wimpy, insipid name for the boat—Sunshine—that just had to go," says Bob Pritchard, Powerplay's managing director. Powerplay renamed Sydney's 12-meter Steak 'n Kidney, which is Cockney rhyming slang for Sydney, and though the establishment shuddered, the average bloke loved it. "We started to nod off when Powerplay came to us and began to talk about the America's Cup," says Mike Rule, head of the Registered Clubs Association, which represents 4,300 licensed (to sell beer) clubs and two million blue-collar members. "Then they got to the name of the boat. That's something that will appeal to the battlers [Aussie for good ol' boys]."

Corporate sponsorship is not new to the Cup, but open corporate identification with individual boats is. When the British syndicate representing the Royal Thames Yacht Club belatedly acquired a major sponsorship from White Horse distilleries of Scotland, the name of its latest 12-meter was, in effect, changed from Crusader to White Crusader. The Kiwis formally named their syndicate BNZ Challenge when the Bank of New Zealand came aboard. However, of all the sponsors who have bought their way into the '87 America's Cup, the one most candid about its commercial motives is KIS France, a French multinational corporation that is the sole backer of the challenge from the Sociètè des Règates de Rochelaises. The company's founder and President is Serge Crasnianski, a 43-year-old engineer and nuclear physicist who admits he knows nothing about sailing. He named the syndicate's 12-meter French Kiss and his tender Kiss Me lender. 'I am a businessman first and last, Crasnianski said. "I look for profits, success, expansion.... When French Kiss wins, KIS France wins, I win, and so do our products."

Crasnianski is spending money in Fremantle because his company does business in Australia. "The America's Cup is no longer merely a sporting event," he says. "It is an investment opportunity. How else can I justify spending $15 million to $25 million on a boat race?"

The last barrier to the complete commercialization of the America's Cup is Rule 26 of the code that governs international yacht racing. The rule says in essence, that while yachts are racing "no advertising shall be displayed on the hull spars, sails and equipment...." Not long ago the International Yacht Racing Union ruled that Crasnianski had gone too far and that the name French Kiss constituted advertising. Last week the YRU reversed its earlier ruling and allowed the name. Michael Fay, executive director of the New Zealand syndicate supports the move. "The money needed for the .987 challenge is huge," says Fay Sponsors must have their money back." If New Zealand were to win the Cup Fay, an investment banker, would get his money back and then some. He and his business partner own the right to the 1991 Cup if it should be sailed in New Zealand.

The government of Rhode Island estimated in 1983 that the America's Cup was worth $100 million to that state's economy. A study made earlier this year by the University of Western Australia's Centre for Applied Business Research Predicts that the 1987 Cup will boost the Western Australian economy by $384 million and 14,000 new jobs. Increased tourism the study says, will account for 1141 million and will generate $67 million worth of new industrial output Construction associated with the America's Cup will reach $38 million, which in turn will generate another $51 million worth of jobs in related industries. Best news of all-the effects of this economic growth will continue to be felt for several years even if Australia loses the Cup.

"I'm not sure we'll really come to understand the economic impact until we see the aftermath of 1987," says Michael Campbell, a spokesman for the Canadian challenge for the Cup. "If Australia is able to demonstrate that the numbers they've been talking about in terms of economic benefit are real...then I think we'll begin to see a lot of people viewing the America's Cup in a dramatically different way."

If by chance the America II syndicate were to win the America's Cup and the competition did return to the eastern seaboard of the United States, it is very probable that the New York Yacht Club would have to create a new venue for the races. Since 1983 large chunks of what was once Newport, R.I.'s working waterfront have been Chewed up by developers of condominiums and time share resorts. Right now Newport could not accommodate the 9 syndicates it handled during the 1983 races, much less the 17 or more that could reasonably be expected to show up should the Cup return to American waters...make that American markets.

Somehow, in spite of war, depression, scandal and apathy, the America's Cup has survived for 135 years. It will probably survive rampant free enterprise, too. If anything finally sinks the Auld Mug, it is likely to be the burden of hype it has taken on, the deadweight of promotional copy such as the following excerpt from an Australian brochure called "Supporting the Cup Means Business":

"The glamour, glitter and tradition of the America's Cup will create an unbelievable atmosphere. Corporate heads will rub shoulders with Royalty international heads of State, entrepreneurs, financiers and key decision makers. It will be the yachting extravaganza of the year. And the business opportunity of the decade."

What's a nice sailboat race doing in a paragraph like that?

PHOTOROGER GARWOOD/WHEELER PICTURESThe New York Yacht Club's syndicate displays its true colors by hoisting spinnakers that trumpet the group's major sponsors.PHOTODAN NERNEY/DOTThe Chicago folks, led by Melges, made a pitch to the Midwest with a poster.PHOTO[See caption above.]PHOTOSALLY SAMMINSBeer War fleet: New Zealand (top), Australia III and Kookaburra sail for the suds.PHOTOROGER GARWOOD/WHEELER PICTURES[See caption above.]PHOTOCARLTON & UNITED BREWERIES LTD.[See caption above.]TWO PHOTOSAds in U.S. magazines and newspapers appeal to national pride to raise the cash.