CNBC's Sports Product Of The Year: Power Balance
It is just silicon with a mylar hologram on it. But hundreds of thousands of people across the world have spent some serious money to wear them on their wrist.
If the qualification for CNBC's Sports Product Of The Year is a breakout brand that rocks the sports world, Power Balance bracelets are the only logical choice.
It has spawned imitators like EFX Performance and Power Force. It has been cited by at least one retailer as the most pilfered item in its store. And with more athletes wearing the product without taking a dime of endorsement money than perhaps any other product in sports history, sales don't appear to be slowing down. In fact, Amazon just named it one of its best selling items during the holiday season.
But the rise of Power Balance doesn't come without controversy. Although stars and consumers who wear it swear that it helps them perform or function better, the company's executives have backed off their original claims that the bracelet could help with strength, balance, flexibility and focus. There are no studies that the company points to that proves it works and its new language is fairly ambiguous. On its Web site, Power Balance says the bracelet is "based on the idea of optimizing the body's natural energy flow, similar to concepts behind many Eastern philosophies." The hologram, they say "is designed to resonate with and respond to the natural energy field of the body."
At least one study, performed by the University of Wisconsin-Lacrosse and filmed by ESPN's "Outside the Lines," showed that the test that Power Balance users often give to convert new prospects is problematic because there’s a tendency to do better on a test the second time around whether someone is wearing a bracelet or not.
“We absolutely understand that there are going to be skeptics and what we do is we just encourage people to try the product for themselves and let them tell our story and their story,” said Josh Rodarmel, who founded the company in 2007 along with his brother, father and a close family friend. “Try it. If it works for you, great. If it doesn’t, send it back. We offer a 30-day money back unconditional guarantee, no questions asked. But to this point, we’ve had far less than one percent ever return the product.”
Power Balance was recently chastised by the Australian government and fined by Italian and Spanish governments over claims which the company no longer makes. In Spain, where the Department of Health estimated Power Balance sold 300,000 bracelets in the country worth approximately $13 million, they fined the company about $20,000. Italian authorities fined Power Balance approximately $463,000 for deceptive marketing. The company's Italian distributor was also fined about $66,000.
“The issues in Australia, Italy and Spain are in regards to previous marketing and advertising messages that we are working to correct, while also offering dissatisfied customers a full refund,” Rodarmel said. “We believe in Power Balance, as do athletes across the world. Everyday we continue to see, hear and learn about how people around the world believe that our products have positively affected their lives and we will continue to invest both our time and resources in producing the best and most innovative products.”
So why is Power Balance still our sports product of the year? Because no matter what the skeptics have said, consumers don’t seem to care. There is that infinitesimal return rate and no news story has seemed to slow down sales. The company says it will do more than $35 million in sales, that’s up from $5.6 million last year and $187,000 in total revenues in 2008.
“It has been crazy and it definitely comes in waves,” said Mitch Modell, chairman of Modell’s, the East coast sports chain who has the bracelets in most of its stores. “They’ve spent no money in marketing, it’s virtually all grass roots and when the kids see the players wearing them, they have to have it.”
The list of players that aren’t paid and have worn the product is astounding. In the NBA alone, those players include Kobe Bryant, LeBron James, Carmelo Anthony, Kevin Durant and Paul Pierce. Paid endorsers, who the company insists wore Power Balance before they were ever compensated, include Shaquille O’Neal, Derrick Rose, Odom and Brandon Jennings.
“I wear Power Balance everywhere, on and off the court,” Jennings told me. “It’s on my wrists everywhere I go and it’s something that I have and I feel like I’m always going to be on balance and always have a lot of energy. It’s like jewelry for me now.”
If the NBA isn’t your thing, you’ve likely seen Power Balance on the wrists of Drew Brees, Mark Sanchez, Matt Stafford and Michael Vick. Coaches from Pete Carroll to Marvin Lewis to TCU’s Gary Patterson have sported the bands. It even moved into the poker space. When 21-year-old Joe Cada won the World Series of Poker and $8.5 million last year, he was wearing a Power Balance bracelet.
Josh Rodarmel has seen how the business has grown through celebrities firsthand.
“So we see that David Beckham has the product and we see a picture of him wearing it,” Rodarmel said. “Then, the next week, we see his kids are wearing it and his friends his pictured with are wearing it.”
The story of Power Balance is even more remarkable when you consider that they just started to get traction in the United States this year. Three and half years ago, the company bought a small booth at a trade show in Los Angeles. At the time, they didn’t even have the silicon bracelets. They just had the holograms and were pitching people who came by the power of the hologram and the places it could be put. But things changed when an Italian man said he was confident he could sell their product in Italy. So it started it Italy and spread throughout Europe and Asia before hitting the company’s home country. Even with the enormous growth this year in America, Japan is still the company’s largest market.
Despite the fact that Power Balance might be considered a risk from a licensing perspective, Rawlings has already made an investment in the brand.
The company will have a Power Balance branded clothing line that hits stores in January. It’s breathable compression material that features the company’s trademark hologram.
“When people ask us questions about whether it works or not, our response is simply on-field authenticity,” said Art Chou, senior vice president of product for Rawlings, which is owned by Jarden. “It is worn by tons of athletes at the pro level and they say it works and many of them wear it for free, so we feel good about that.”
Power Balance continuing its red-hot rise in 2011 is certainly not a foregone conclusion. How long can it sit out of the big dollar marketing game? How fast can the company keep up with counterfeiters or competitors? Remember, one of the reasons why the yellow Livestrong brands were able to get to the 75 million mark was because it was only a $1 and was backed by a motivational charitable initiative.
No matter what happens next year and no matter how many skeptics are out there, we here at CNBC evaluate businesses and from a bottom line standpoint, Power Balance deserves the honor of CNBC’s Sports Product Of The Year.
Questions? Comments? SportsBiz@cnbc.com