Coming through in the clutch: by aggressively pursuing major league licenses, Drew Pearson Companies has become the nation's largest black sporting goods concern.

IT'S 10:20 A.M. ON A SUNNY, HOT Tuesday in March, when an imposing white Texas businessman, wearing an alarmingly red suit with white cowboy boots, steps through the doors of a one-story brick building set in a suburban business hub just outside of Dallas. He doesn't have an appointment (the reporter waiting in the lobby does) and the receptionist already has three calls on hold, but it doesn't matter. Drew Pearson has made a promise to him--and he'll wait until it's kept.

Ten minutes later, the formerly anxious Texan leaves smiling. What did he want? Satisfaction for a missed shipment? A stronger position on a distribution deal? Heck no--this good ol' boy's got him a football autographed by the one and only "Mr. Clutch!"

People respect Pearson, 43, as an adroit businessman, but they still revere him as Mr. Clutch, the former All-Pro and all-time leading wide receiver for the Dallas Cowboys. With a record of 489 receptions for 7,822 yards, Pearson was known for outstepping any defense the National Football League (NFL) deployed.

Now he's running a deep pattern down the corporate playing field as CEO of Drew Pearson Companies (DPC). And Addison, Texas-based DPC is scoring some serious points in the sporting goods arena.

The world's largest black-owned, licensed sports and character apparel manufacturer is making a name for itself--generating gross revenues of $77.5 million in 1993--by turning out some nouveau styles in baseball caps. Last year, DPC saw sales jet 115%, from $36 million in 1992. It is the second consecutive year that sales have more than doubled. That leap also moved DPC up to No. 15 on the BE INDUSTRIAL/SERVICE 100, after debuting at No. 74 on the 1990 list with $10 million in sales. DPC is one of only six companies with licenses with the NFL, the National Basketball Association (NBA), Major League Baseball (MLB) and the National Hockey League. Thanks to its impressive gains in the $30 billion sporting goods industry, where black representation is less than 3%, Drew Pearson Cos. has earned its place as the 1994 BE Company of the Year.

LEADING THE INDUSTRY, WITH STYLE

These days, everybody from New York to Los Angeles is wearing something or someone on their heads: from the Dallas Cowboys and the Chicago Bulls to Mickey Mouse and Bugs Bunny. Don't look now, but the one the teenager in your life is wearing is probably a DPC cap. In fact, DPC caps can be found worldwide, in such countries as Japan and China and in Europe. DPC's sales growth has catapulted it to the top spot among licensed headwear companies in the U.S. The nine-year-old champs even ousted Starter Sportswear Inc., a $356 million company that reported $56 million in headwear sales in 1993.

Pearson owns DPC along with the firm's president, Kenneth W. Shead, 47; executive vice president of marketing, Mike Russell, 33; and CFO David Briskie, 33. Pearson and Shead each own 26%. Russell and Briskie each own 22%, while outside investors share 4%.

DPC has captured about 15% of the market in headwear, which accounts for 98% of its sales. In general, sales for sports apparel featuring embroidered team logos and cartoon characters was $7.49 billion in 1992, up 18% from $6.34 billion in 1991, according to the National Sporting Goods Association (NSGA). While T-shirts had the greatest sales ($2.59 billion), cap sales showed the greatest gain, jumping from $135 million to $497 million.

So far, DPC has more than 36 agreements with the major sports leagues, entertainment properties (including The Walt Disney Co. and Warner Bros. Inc.), the National Collegiate Athletic Association (NCAA), 27 of the 117 historically black colleges and universities (HBCUS) and the Negro Baseball League.

Last year, DPC shipped 24 million caps to 6,000 retailers nationwide, including Marshall Field's, J.C. Penney, Wal-Mart and Footaction. This year's hot ticket item is DPC's "Jagged Edge' cap. The graphic embroidering on this designer hat features an asymmetric, zigzag pattern with a striking contrast in colors, threads and the logos of pro sports teams.

"It's the flair and style that goes into every cap that makes DPC popular among the hotly contested preteen and teen market," says Carmine Lengua, a buyer for a Foot Locker sporting goods store in New York City. "DPC caps are real fashionable. Customers will come in and ask for Sports Specialties or Starter caps, but many of them, especially teenagers, generally gravitate towards new and exciting things. They want to be trendsetters."

FROM THE LOCKER ROOM TO THE BOARDROOM

The handsome and charismatic Pearson is a consummate example of the ex-athlete who made a seamless transition from the fame and glory of professional sports to success in business. A gray, double-breasted suit fits just as well on his trim frame as did the blue and white jersey--stamped with the No. 88--that he wore during his 11-year career with the Dallas Cowboys. He proudly adorns his right hand with his Super Bowl XII championship ring, one of two he earned during his career.

It was by virtue of that career that Pearson earned the sobriquet Mr. Clutch--for his numerous fourth-quarter, game-winning catches. There was the 83-yard reception to beat the Los Angeles Rams in the 1973 playoffs; a 50-yard scoring catch in the closing seconds to upend the arch-rival Washington Redskins on Thanksgiving Day in 1974 and the incredible 50-yard Hail Mary touchdown catch that devastated the Minnesota Vikings in 1975 during the NFC playoffs.

But Pearson's NFL career was cut short in March of 1984 by a liver injury suffered in a car crash (in which his younger brother Carey was killed).

He had planned on playing another three or four years. This made perfect sense, says Pearson, because "I had never been hurt and missed only three games during my pro football days."

Now, he jests about the wad of money he gave up in a divorce settlement that February, believing he had earning power. He was right in the middle of negotiating a $400,000 contract for what would have been his 12th season. But he was taught what every athlete eventually learns: No one's invincible.

This was a hard lesson for a man who had been playing organized football since age 7. Pearson grew up in South River, N.J., one of seven children. His father, a chemical worker, always wanted a pro ballplayer in the family. Shortly after graduating from the University of Tulsa in 1973, Pearson signed on as a free agent with the Dallas Cowboys.

After his auto accident, Pearson says, he floundered from one gig to the next. Poised and articulate, Pearson worked as a color analyst for NFL games with CBS. But the television network decided not to renew his contract. He was then hired as a wide receiver coach for Dallas. That soon became boring: "I wanted to do something more productive during the week."

In the meantime, Shead and Russell had been pressing him to start a marketing company to reproduce corporate logos on headwear, T-shirts and other sports apparel. Shead, whose powerful frame served him well during his college fullback days, says that the idea of selling licensed sports items came to him some 14 years ago when he was a national account manager for Xerox Corp. He led the nation in sales in his product category, entry-level word processors. "I made Xerox a ton of money--$4 million to be exact," says the St. Benedict's College graduate with a degree in marketing. "After a while, I got the inclination that if I spent the same time and energy working for myself, it would pay off."

Shead went to work on a business plan to sell gold jewelry with NFL and NBA team logos and mascots. But when he sent his proposal to the major sports leagues, he recalls, "They didn't take to the idea because of the negative association with gold chains back then."

When Shead met Russell while working at Exxon Office Systems in 1983, the two began massaging Shead's original plan. But this time the focus was on headwear. "From a cost standpoint, it made a lot more sense, because you have one size fits all at about $1.50 per hat," says Shead.

Now all they needed was a name that would sell. It was at regular weekend barbecues that Ken came to know Drew. Shead had worked with Pearson's brother Andre while at Xerox. "I used to always tease Drew about how I could show him how to make more money outside of football," Shead recalls with a grin. Even though Pearson got a kick out of that notion, he says he was very "skeptical of going into business at first, because as an athlete you're always being approached about making business deals."

But Shead and Russell's persistent conversations and shrewd presentations finally broke Pearson's resistance. Besides, he needed another way to replace the $225,000 income he'd earned during his last year as a professional athlete.

In the beginning, the business was run out of Shead's kitchen. Even the first 500 business cards had his personal phone number and address. But they got by with a little help from friends--a $100,000 ante from four private investors, including former Dallas Cowboy quarterback Roger Staubach, who still owns 2% of the company.

BREAKING BARRIERS TO FINANCING

As a premier wide receiver, Pearson took some vicious tackles. He's absorbed some tough hits as an entrepreneur too. The intangibles he learned from the game have helped him in business: Perseverance, determination, dedication and teamwork. "That's really all you have when you come out of the game," he says, "that and your name.

DPC's climb to top-ranking status has not been an easy one. "Don't judge me by the heights I've reached but by the depths from which I've come," says Pearson, paraphrasing Frederick Douglas. "We've had to make tremendous sacrifices to get here." DPC officially opened its doors on September 20, 1986, occupying the space that had once been the Cowboy locker room. Initially, the company sold T-shirts, caps and jackets to high school sports teams. The Dallas Sidekicks, a professional soccer team, was the company's first major client. Early trials included missed royalty payments and a lawsuit against a Kansas City, Mo.-based distributor who reneged on a sales contract. While DPC generated first-year sales of $3 million, such tribulations forced Shead and Pearson to go without salaries during that period.

As with most new enterprises, the number one barrier was securing financing. Initially able to get a $20,000 loan from a local bank, DPC was turned down for additional funding by the same lender. No bank in Texas would touch them. Pearson admits that because of his name, he could always get a meeting with bankers in Dallas. "I would spend hours in the bank lobby just signing autographs," he explains. "But by the time I sat down to present our business plan and proposal, they weren't as receptive."

It was through a relationship with another headwear company that DPC landed a $5 million line of credit from Merchants Bank in Kansas City, Kan. The owner of the company was on the board of the bank. It was through his guarantees that DPC got the loan.

So what if Pearson couldn't rest on his All-Pro laurels to get the money? "We did everything we needed to survive," he shrugs. "That included riding other peoples coattails." Indeed, thanks to the bank's willingness to back DPC, it was able to get other lines and letters of credit. The company now has lines of credit totaling $25 million with some 15 offshore manufacturers and distributors.

To keep pace with the competition and to reduce costs, DPC entered into joint agreements with manufacturing plants overseas--mostly in the Pacific Rim, including Hong Kong and Taiwan. But that didn't prevent problems from cropping up. Many of those same manufacturers were doing business with other sporting goods companies. "Because we were the small guys, our quotas would be limited or often our orders would get pushed back to get out our competitors' products," Pearson says. Today, however, DPC has the muscle to exert a great deal of control over production.

Another block DPC had to break free of was lack of credibility in the marketplace. Many retailers just weren't ready to take chances with the rookies. Of course, a little smash-mouth play from rivals didn't help. "Many of them tried to discredit or eliminate us," Pearson quips. "We would go on a sales call to a retailer for the first time, and it felt like we had been there before. Our competitors had gotten there before us and bad-mouthed the quality of our product, pricing and delivery."

SCORING IN THE LICENSING GAME

But no challenge has been greater than competing for major licenses--the most important key to gaining market share in the sports apparel business. Sports-starsturned-entrepreneurs quickly learn they'd better have more than a name going for them. You need a dam good business plan and a well-thought-out marketing strategy before you even step onto the playing field.

DPC won its first major license in 1986 with the U.S. Olympic Committee to supply all of its corporate sponsors for the 1988 Olympic Games in Korea. But the company faced its toughest fight when it applied for a license in April of 1986 with Walt Disney. "Disney really challenged us for almost a year," says Shead.

Pearson and Shead went to great lengths, including making four trips to New York to meet with Disney executives, to land the license. "We really screwed up in our first marketing strategy evaluation," Shead concedes. "We took things for granted in terms of distribution. Disney was inundated with licensees, so unless we could deliver something new in the way of a product or distribution channel, they didn't want to talk to us."

Pearson and Shead were able to keep the deal on the table, thanks to the efforts of Malik Ali, director of Disney's minority business enterprise division in West Palm Beach, Fla. "We're deluged with thousands of applications, so it helps when potential licensees understand the market, the players and the challenges," he says. "DPC was new to the game. When you're a rookie, even if you have talent, it takes time to learn all the rules. I helped them rework their plan."

Pitching the idea of producing adult character headwear (Disney only did children's caps at the time), DPC got the license in February 1987. Today, it is the leading headwear licensee for Disney, generating around $20 million in sales (and paying about $2 million in royalties). Six months after the Disney victory came licenses with the NFL and MLB.

Professional baseball was still reeling from the fallout over derogatory comments about blacks made by former L.A. Dodger's executive Al Campanis on ABC-TV's Nightline. Campanis' statements threw the spotlight on the lack of black representation in sports as an industry--and created some daylight for blackowned companies like DPC to break through. "What is luck? What is opportunity? Well, luck is preparation to meet opportunity," says Shead. "We had prepared ourselves to capitalize on an opportunity that exploded after that statement. "

DPC had been turned down several times by NFL Properties, the licensing arm for professional football. The NFL was doing business with 154 companies and not a single one was minority-owned, says Pearson. That was the platform he took to a meeting of Rev. Jesse Jackson's Fairness In Athletics Commission, which was held in conjunction with Operation PUSH's annual convention in Chicago. The day before the convention's kickoff event, Pearson ran into Rev. Jackson in the hallway of PUSH headquarters. "I told him the issue I wanted to address," Pearson recalls. "He agreed it was viable and promised to let me speak at the press conference scheduled that next day.'

The return flight from "Chi-town" had barely touched the strip at Dallas/Fort Worth Airport before Pearson phoned former Dallas Cowboys President Tex Schramm. "I knew Tex had a lot of pull because of his relationship with the NFL commissioner at the time, Pete Rozelle," Pearson explains. "Tex thought I was coming to meet with him about getting another job with the Cowboys. So, he was totally surprised when I brought up the issue about the NFL doing business with minority companies."

With a sample cap tucked under his arm, Pearson made an offer he felt Schramm couldn't refuse: The league could draw some positive publicity by bringing a former Dallas star into the fold in a business capacity. Not incidentally, Pearson is quick to note, "He was very impressed with the design and quality of our product."

Pearson met with Schramm that Tuesday. The following weekend, the NFL owners were getting together in San Diego for their league meeting. By the time Schramm returned the following Monday, DPC had received a call from NFL Properties to set up a meeting in New York and discuss possible licensing arrangements.

A month later DPC was granted the right to use NFL and team logos--but only on golf caps. It took another six months before DPC was allowed to put the NFL seal on baseball caps. In the meantime, a telephone call came from the executives at MLB Properties; a licensing agreement shortly followed.

MASTERING DISTRIBUTION ALLIANCES

But even after securing licenses with the major sports leagues, DPC had to deal with some tight stipulations. "They didn't want us to go into already established markets, such as the sporting goods stores," says Shead."So, we had to open up new tiers of distribution with C-grade retailers." That meant breaking into the large national chains of drug, grocery and convenience stores, such as Stop-N-Go, 7-Eleven and Krogers.

It took a year for DPC to convince the leagues to allow the company to do business with department stores, sporting goods shops and other mass retailers. After winning that match, several victories soon followed, including licenses with the NBA (1988), Walt Disney Children's Headwear (1990) and Warner Bros. (1992). Last year, DPC landed its first major deal to do sweat shirts and T-shirts, as well as caps, when it was granted licenses to print the logos of NCAA teams.

Pearson admits getting a license isn't only tough on minorities but everybody who applies "because it's a treasured and valued commodity." Consider this: MLB Properties, which earned $2.4 billion in 1992, processes over 400 product applications a year; 80% of them are rejected.

The biggest barrier to landing a license is the cost of entry, says Thomas B. Doyle, NSGA's director of research and information. "Depending on which league you're dealing with, just to get in the ballgame will cost you $50,000 or more," says Doyle. "That's the initial fee you will have to pay the league just if they like your concept. After that, you're talking about royalty payments that can be as much as 10% to 15% of your revenues."

Right now, many licensers feel the market is saturated in the product categories that consumers really buy into--caps, sweat shirts, T-shirts and sports jackets. So, its going to be even tougher to get a license, especially with the major sports leagues, says Tracey Benson, licensing editor for Sporting Goods Dealer, a New York City-based trade magazine.

Solid relationships with distributors helped DPC get its product line into stores that the company couldn't have otherwise afforded from technological, sales or delivery standpoints. In fact, in 1992, DPC bought majority owner-ship--for roughly $2 million--in one of its major distributors, Fresh Caps Inc. in Minneapolis. Fresh Caps' huge warehouse and DPC's tiny, 20,000 sq. ft. distribution center in Carrollton, Texas, together ship several hundred shipments a day.

That alliance evolved during the course of a three-day trade show in 1987 where the two companies had neighboring booths. Fresh Caps produced painter's caps and was looking to put Disney characters on them. DPC already had a Disney license and needed a producer with a ready-made client base. That led to DPC adopting a strategy of sub-licensing their rights to headwear companies who could not get licenses from the major sports leagues. Essentially distributors would pay DPC a fee to buy caps imprinted with NBA, NFL and MLB team logos and then resell the hats to their customer-base of retailers. At one time DPC had nine distributors (who produced about 25% of the company's revenues); it's just four now. While that means Shead and Pearson must spend more time in the field, cutting out some of the middlemen means DPC can garner a greater share of the profits.

But even if you have the facilities, the clients and the licenses, it's still not a done deal.. For instance, NFL Properties renews its licensing agreements every two years, says Gene Goldberg, the league's director of retail licensing. "At that point we reevaluate the company's track record; if it has been doing things aboveboard, there's no reason to stop doing business." DPC is one of only 11 companies with headwear licenses from NFL Properties.

ESTABLISHING BRAND RECOGNITION

Now that Pearson is an owner, not just a player, he is quick to acknowledge the contributions of every member of his team. "As an athlete you get caught up in the fame and glory," he says. "Everywhere you go everyone tells you how great you are. When we started this business it was important to set up a team. I don't claim to know it all. The key for me was to surround myself with people who have the expertise I don't."

Stroll through the white halls that house DPC's employees and you will see modern art in the making, as intense designers sit in front of Macintosh computers, mixing and matching electronic strokes of color to come up with the perfect pattern. The design team is led by director of creative services Irma Choate, 27, who has a degree in visual communications from the Art Institute of Dallas.

"This is where it all begins," says DPC's Mike Russell, who holds a bachelor's degree in management from the University of Oklahoma. "We've got two dozen new styles for baseball caps in development right now. Because the life cycle of any product is now three to six months versus what used to be 12 to 18 months, we have to have something new coming out all the time."

That's why DPC pours thousands of dollars into design technology. Original drawings are scanned into the computer and once the design is complete, a key is hit to transfer it to Macs in the Minneapolis plant and factories overseas. In two weeks, the caps are ready to ship.

But the real challenge now, says Russell, is to find different ways to pull in more information about DPC's target customers. "Drew, Ken and I get out in the field," he asserts. "But we just can't go to the malls and ask people to design a hat." One way DPC plans to generate innovative designs is by sponsoring design contests at local community colleges. The goal is to provide scholarships of up to $2,000 to the winners. "We see a lot of these people as our retail clients' customers," notes Russell who, as the youngest of DPC's top executives, is the most in tune with the company's youthful target market.

But for DPC to expand its turf in the sporting goods industry, it's going to have to score more points in the promotional arena. Bluntly put, DPC simply doesn't have the brand name recognition of competitors such as Starter, Russell and Champion. Gaining it will be key to DPC's ability to compete, concedes Larry Lundy, director of client services with Irving, Texas-based Advantage Marketing Group (AMG), which represents DPC. "To support the next decade of growth," says Lundy, "DPC is going to have to aggressively and strategically market its trademark."

The company has taken steps in that direction by adding a new logo to every product--a stylized version of Pearson's initials with a star (one reminiscent of those sported by a certain Super Bowl championship team) in the middle and Drew Pearson Companies written underneath. The company already has a winged Clutch Player logo as its trademark. "But no one really knew what that stood for," admits Pearson, who recognizes that many of DPC's customers were born long after his playing days as Mr. Clutch. "Now, I want the D(STAR)P to become as recognizable as the S in Starter's line."

Establishing brand identity costs, however. National advertising is the one area where DPC has been dominated by its major competitor, Starter Sportswear. Starter has signed up some of the nation's leading celebrity sports figures, including Dallas Cowboy running back and reigning Super Bowl MVP Emmit Smith. (Ironically, Smith, the NFL's leading rusher for the past two years, is also an AMG client.)

Sports figures get anywhere from $10,000 to $1 million for sporting a company's cap, jacket or shoe. Even putting hats on the heads of athletes on the sidelines of NFL games costs as much as $200,000 annually.

"Starter is a much bigger company than ours," notes Russell. "We may not have the same marketing budget that they have. But at the same time we aren't sitting here crying in our beer."

According to Russell, it will be at least another year before DPC begins to develop a national advertising campaign featuring professional athletes as endorsers of its products. In the meantime, DPC will gain exposure through such tactics as providing branded caps at the NFL's quarterback challenge, a charity event sponsored by FootAction, and getting popular black entertainers, including the vocal group Jodeci and comedian Martin Lawrence, to sport DPC headgear.

On the upside, because of its licenses with entertainment companies like Warner Bros. and Disney, DPC may not be as reliant on using popular sports figures to maintain sales growth. DPC is poised to take advantage of the latest marketing craze: cross-licensing. At the crest of this wave are caps and T-shirts that mix and match sports teams with popular cartoon characters, such as Warner Bros.' Looney Toons or Hanna Barbera's Flintstones.

Bugs Bunny and Fred Flintstone are at least as popular as Starter's Emmit Smith and have loads of staying power (there's no such thing as a career-ending injury for a cartoon). And with a new movie coming out about Fred's lovable Bedrock family, DPC expects to "yabba-dabba-do" all the way to the bank.