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Champ Cars
Herdez Competition: a model partnership
Herdez Competition Business Director Kevin Lee discusses the team’s partnership with Grupo Herdez and the business of sponsorship in the ChampCar World Series.

By Jamie Longmuir
Photos courtesy Jamie Longmuir
TORONTO, Canada (July 14, 2004) -- On April 16th, 2004, the ChampCar World Series took the green flag at the Toyota Grand Prix of Long Beach to begin a season that many people, including some within the series, thought would never happen. While the tradition of ChampCar at Long Beach continued, something was missing from the wings and sidepods of many of the cars - something far more important than aerodynamics and critical to the health of a racing team - sponsors. One notable exception to the unfortunate trend is Herdez Competition - the two car team featuring Mexican Mario Dominguez and American Ryan Hunter-Reay. While Herdez has announced they will be cutting back their racing program in 2005, their current partnership with the team stands out as a model for business-to-business relationship in the sport of motor racing.

Herdez competition was formed in 2000 when president and general manager of Grupo Herdez, Enrique Hernandez-Pons Torres, his brother Hector Hernandez-Pons Torres, the team's managing director Keith Wiggins and Russ Breeden acquired the assets of the former Bettenhausen Motorsports.

In 2002, the team was joined by Kevin Lee, a former driver with 23 years of experience as president of a large international group, who assumed the role of business director within the team. Lee explains that Herdez values their involvement in ChampCar because "within Mexico, for [Herdez] to be associated with top Mexican athletes is a very good way of showing that they're putting something back into their community. They also have big expansion programs in America and Canada, which are two areas where we race extensively and the series is very popular, so it provides them with an opportunity to increase their brand presence in America and Canada."

At each ChampCar event, Herdez can be found promoting its products both on and off the track. Using Long Beach as an example, Lee explains, "it's a very prime Latino market so, we run a variety of programs there from promotions in supermarkets in the weeks leading up to the race, sampling opportunities at festivals and fares near the track, and at the expo in the track. We combine that with a big hospitality program for bringing in all the major retailers who come and experience the weekend as our guests, and while they're doing that obviously cheering on the Herdez team and taking on a chip of the Herdez brand."

Although the team's primary sponsor is Herdez, and the companies that make up Grupo Herdez, the team has also been able to land several secondary sponsors. Lee explains the team's success saying, "we're a team that has a business view of it - we have full time people whose job it is to get out there and make certain that we're running proper programs for companies and giving them good value for their money, as opposed to having someone just doing cold calling and hoping that something's going to come up."

Nevertheless, attracting sponsorship remains one the major challenge facing almost every team, driver and event in motorsport – and Herdez Competition is no exception. Lee explains, “Nobody is going to give you money in the millions of dollars just to have a good time and to have a name on the side of the car it's a very significant investment for sponsors, and therefore the return on it has to be very significant…so, it's a question of finding companies where the demographics and the activities are right, and then making certain that they understand you've put together a package which is going to work for them.

"It's not a question of trying to impress them, it's a question of making certain that you're giving them something that's going to work for them…we will literally do that dollar for dollar with them. We will show them how the model will work, and how they will get a return from it. We will work with them to help them understand how they can do measurement of it. You have to be able look at the end of each year, in a sponsorship thing, and say that 'this is exactly what we got out of it, and this is exactly what we put into it - and this is the difference, and it must be a profit."

While Herdez Competition has had great success finding sponsorship, the same cannot be said for all of the teams in ChampCar. In the absence of sponsors, some teams have turned to their drivers to provide funding for the season. Lee’s perspective is that “this in no way detracts from them…they have their own sponsor groups that effectively pay for the season. While they have every bit as much right to be there as we do - it's just a different perspective.”

The “split” in open-wheel racing hasn’t made finding sponsorship any easier. In 1995, the series then known as Indycar, split into two competing series – the Indy Racing League (IRL) and CART (now known as ChampCar). Although ChampCar continued running at most of the same venues, the IRL prevented it from running at the largest open-wheel race in the United States – the Indy 500.

"The biggest thing about the split within the American market is that clearly the Indianapolis 500 was a very major and prestigious race - and we don't have that anymore. Since the split, I don't think it's the race that it used to be anyway - but the split's definitely not good for us - it's not good for the Indy Racing League, and it's not good for ChampCars."

While the IRL has primarily focused on oval racing in the United States, ChampCar has continued to maintain its international presence – with highly successful events in Australia, Canada and the United States. In addition, ChampCar has had some success entering new markets – none more so than a massive race held in the heart of Mexico City, which in 2003 sold over 400,000 tickets – including 221, 011 for race day.

When asked if he thinks the series sponsors would like to see the two series unite, Lee responds, "I think we would all like there to be just one open-wheel series. I also feel that what the IRL are aiming to be is not that good from a marketing point of view, and you just need to look at their attendance figures to know that that's borne out. Champ car’s Mexico City race is every bit as big as the IRL's Indy 500 race."

Another challenge ChampCar has had to deal with is the loss of two major engine manufacturers - leaving Ford as the sole supplier of engines for the series. Although many at the time saw the losses as a devastating blow to the series, Lee feels differently saying, "having support from big engine manufacturers, because of the amount of money they put in, will always make a series healthier, but I actually think ChampCar has been a lot better with just the Ford engine, because it really all comes down to the value of a team's work and the value of a driver's work in terms of where you are on the grid.”

Though the competition between manufacturers meant there was more money being poured into the series, it also meant that regardless of the driver and mechanics, the engine a team used would determine whether they were competing to win, or just competing to finish.

“You could be the best team with the best drivers, and if you had the wrong engine before you'd still be towards the back - now we all have an equal chance."

Lee continues, saying that although “we don't have those companies as potential people for our sponsors to do business with…it's helped from a marketing a point of view, in that the field is immensely competitive, and it's immensely competitive based on value, and therefore the show's a lot better.”

While it was recently announced that Grupo Herdez will be significantly cutting back their racing programs in 2005, the current partnership the team has with Grupo Herdez continues to standout as a model business-to-business relationship in the sport of motor racing.

As a recent release from Herdez Competition stated, “Offering enormous exposure in Mexico and the Latino markets in America and Canada, the team, which currently leads in advertising ratings in the 2004 Champ Car World Series, will continue its growth into and beyond the 2005 season.”

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