Describe the key success factors of creating and developing this event.

After reading the case, reply on the following questions:

  1. Describe the key success factors of creating and developing this event.
  2. Describe the business model of Absa Cape Epic
  3. What would you recommend Kevin Vermaak do for the future?

Will buy whoever answers first in depth

Connect with a professional writer in 5 simple steps

Please provide as many details about your writing struggle as possible

Academic level of your paper

Type of Paper

When is it due?

How many pages is this assigment?

9B13M051

BEYOND EPIC: BUILDING THE BUSINESS BEYOND A SINGLE EVENT Greg Fisher and Michael M. Goldman wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality. This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Copyright © 2013, Richard Ivey School of Business Foundation Version: 2013-07-05

As Kevin Vermaak watched the final day of the ninth edition of the Absa Cape Epic Mountain Bike Race in March 2012, he felt a sense of pride. The multi-day mountain biking event he had conceived while on a beach in Costa Rica in 2002 was now well established as a premier global cycling race, drawing participants to Cape Town (South Africa) from almost 50 countries and generating more global TV coverage than any other mountain bike race in the world. Yet the success of the event also fostered a sense of restlessness within Vermaak, as he pondered what more could be done to build on what he and his team had created. Vermaak admitted that the race was created “as a business with a clear mission and a rigorous approach to financial sustainability.”1 To date, the business had centred largely on a single event — the Absa Cape Epic Mountain Bike Race (Absa Cape Epic), taking place for eight days in March every year. Vermaak knew that much of the early success of the Absa Cape Epic was because his team had focused unrelentingly on making the event “an unsurpassed and unforgettable mountain bike and African travel-experience.”2 He also suspected that the lessons they had learned, the infrastructure they had put in place and the reputation they had established could provide a platform for new opportunities. He had numerous ideas for generating growth for the business, but he did not want to distract the team too much with the tenth edition of the race coming up in 2013. “In what direction should I steer the business?” he wondered as he surveyed the neat but sprawling tented city that had been set up to host the grand finale of the 2012 race on Lourensford, a picturesque wine farm outside of Cape Town. “And how should we spend our time in the upcoming year to ensure that we seize on and exploit the right opportunities but also deliver the absolutely best possible Cape Epic in 2013?” CREATING THE ABSA CAPE EPIC While living and working in London, Vermaak had travelled to Costa Rica to compete in La Ruta de los Conquistadores (La Ruta) — a three-day mountain bike race created in 1992 — which took competitors along the path of the Spanish Conquerors of 1560 in their exploration of Costa Rica from the Pacific Coast to the Caribbean. “La Ruta was popular but it was very expensive,” reflected Vermaak, who grew 1 Nic Dawes, “The Loneliness of the Long Distance Entrepreneur,” Absa Cape Epic Ride Guide, Bicycling Magazine, Cape Town, 2007, pp. 6-7. 2 Ibid.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 2 9B13M051 up in the Eastern Cape of South Africa. However, La Ruta provided Vermaak with an idea that awakened his entrepreneurial spirit. As he recalled:

I was destined to be an entrepreneur and work for myself. I lived my life up until I started the Epic with an assumption, rather than a dream to work for myself. Hence there was a feeling of relief when I had finally had an idea for which it was worth resigning and making a full commitment. I had completed an Electrical Engineering degree at UCT [University of Cape Town], commonly regarded as the toughest course on campus. Doing well in my degree (Cum Laude), gave me the confidence that I could achieve anything if I really tried hard enough. I had a feeling of invincibility that has stayed with me since university days. That was possibly the biggest lesson learned from my tertiary education, as I never actually worked a single hour as an engineer. I was always willing to try something different and sought out “out of the ordinary experiences” hence starting the Epic business did not seem like a massive risk, it was just giving me what I wanted.

While in London, Vermaak had initiated and led numerous expeditions to exotic international locations. His involvement in these expeditions provided him with the confidence and insight to launch the Absa Cape Epic:

My “holiday expeditions” and the planning required to complete them, and the PR [public relations] efforts around these expeditions, gave me invaluable experience. Leading the first ever combined mountain bike, climbing and snowboarding expedition to Mustag Ata (a 7,546 metre mountain in China), and crossing the Himalayas on my bike a few times gave me an insight into the type of people that travel the world for adventures. I used my international adventure network to launch the race and get international entries into the first races. Living overseas gave me an appreciation of what international clients would want at an event in South Africa.

Vermaak knew that South Africa was a wonderful potential venue for a world-class mountain bike event. He recognized that “the terrain, beauty, people, services and facilities in the Western Cape would make it possible to organize a far superior race.” He went about creating a business plan for the concept and “three months later I’d packed up eight years in London and was starting a new life in Cape Town.” Recognizing the need to market the race on a global platform, he sought a relationship with an experienced global partner:

At that early stage of the project, I did not think I had the expertise in mountain biking. I did not have mountain bike contacts, only a few months earlier I had participated in my first mountain bike stage race. I sent two German companies a proposal and my thoughts on a race in South Africa. Initially it was my idea that they would be equity partners. I chose to work with Planet Talk — a small consultancy that did work for the TransAlp and Adidas — as they seemed more committed partners. But a few months into the project, I realized that the more valuable skills required were linked to project management, international marketing, company establishment, South African people skills, and the mountain bike experience could be gained simply by visiting a few races. Also, I was the one taking all the risk and making the financial and lifestyle investments (relocating back to South Africa). The outcome was an amicable agreement that they would henceforth be fee-earning consultants, and I would own it 100 per cent. They remained a fee-earning consultant for eight years.

Vermaak spent the first half of 2003 developing the company’s brand, logo and ethos and refining the basic concept so that he could begin selling entries for the inaugural event scheduled for March 2004 (see

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 3 9B13M051 Exhibits 1 and 2). He and the small team he had assembled promoted the event at the Pick n Pay Cape Argus Expo (at 105 km, the largest timed cycle event in the world, involving a road ride around the Cape peninsula that attracts 35,000 participants annually). They hosted a launch party that was attended by more than 80 very important people (VIPs), sports journalists and guests, launched a website, and arranged training camps for potential riders. Vermaak was delighted and relieved when entries for Southern African participants were sold out in three days in June 2003. By December 2003, Adidas International had signed on as a sponsor. “Adidas sponsored primarily because they trusted and worked well with Planet Talk,” noted Vermaak. Three months later, 546 riders from 27 countries participated in the inaugural event. Later that year, the 2004 Absa Cape Epic (then presented by Adidas) was named the Best Mountain Bike Race in South Africa at the South African (SA) Cyclist of the Year Awards. The Absa Cape Epic route of approximately 800 kilometers (500 miles) changes every year but always includes approximately 15,000 meters (49,200 feet) of ascent over rugged, unspoiled terrain in South Africa’s Western Cape Mountains. Riders see wide-open plains, majestic mountains, deep ravines, indigenous forests, spectacular coastlines and flourishing vineyards. The race website describes “dusty and demanding gravel paths, strenuous rocky uphills, thrilling technical downhills, magnificent river crossings and stunning forested single tracks.”3 As described in a media guide:

Teams of two riders register in one of five different categories (Men, Ladies, Mixed, Masters and Grand Masters). The minimum age for participation is 19 years old. Each team must remain together at all times during the race and are expected to reach the finish line by 5 p.m. daily. After each stage, the winners of the day receive prizes and the leaders in the overall classification are awarded leader jerseys. Race nutrition, water and isotonic carbohydrate drinks are available at the feed zones to revive tired riders during the race. At night, all riders and race crew sleep in the tented race villages that are set up prior to arrival and taken down immediately after the start each morning by the race crew. Organizers also provide carbo-loaded breakfasts and dinners, bike servicing, masseurs and stage location specific entertainment every evening.”4 (See Exhibit 3.)

BREAKING EVEN AND GROWING THE BUSINESS The 2005 Absa Cape Epic attracted 866 riders from 32 countries, including Olympic medallists and top World Cup riders. Premium-upgrade packages, including overnight accommodation, physiotherapy services and bike repair services, were included for the first time as an option for competitors. Vermaak ensured that footage of the event was available to TV channels across the globe and the 2005 event generated more than 2,500 global TV hours:

This was a requirement for us to get the Adidas International sponsorship; they were only interested in the international TV coverage, so we followed a well-established TV distribution model by engaging with a German TV distribution agency that works with Adidas Outdoor. In the early years we were more well known in Europe than South Africa, since we were attracting international well-known mountain bikers, and putting them in a TV production riding through Big 5 game reserves — this was very well received by TV audiences in Europe.5

3 Absa Cape Epic, “About the Race,” www.cape-epic.com/content.php?page_id=23&title=/About_the_Race/, accessed September 20, 2012. 4 Absa Cape Epic Media Guide 2009 5 Email communication with Kevin Vermaak, September 20, 2012.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 4 9B13M051 Despite the positive response to the race by both riders and the media, the event still did not break even financially. Vermaak was able to keep the Absa Cape Epic going because of the timing of cash flows from one year’s event to the next. Vermaak explained:

In the early days we collected the entry fees when participants entered the race in June/July and incurred most of our expenses when they rode the race in March the following year. In some cases I was able to stretch payments to creditors for an event staged in March until the entry fees for the following year’s event had been collected. Paying for the 2005 event with the 2006 entry fees allowed me to keep the Cape Epic going, even though our income was not yet covering our costs on a single race.6

Recognizing that this approach to cash flow management was not sustainable over the long term, Vermaak knew that he needed to adapt his model and create a more sustainable capital structure for the business. The first thing he did was secure a loan of R3 million (US$375,000) from the Industrial Development Corporation (IDC), a financial institution owned by the South African government. “This suggests that Vermaak’s business model and his numbers were thoroughly put through the wringer,” suggested journalist Nic Dawes.7 Next, Vermaak convinced Absa, one of South Africa’s leading banks and a member of the Barclays Group, to come on as title sponsor:

In 2005, Absa was the biggest sponsor in SA sport. It was unthinkable that a blue chip brand would sponsor mountain biking, let alone Absa. After the success of the first race, many smaller companies that were sponsoring mountain biking approached us. I set a personal secret threshold for our title sponsor — they needed to have at least a marketing budget of R100,000,000 (approximately US$12.5 million in 2005) otherwise they would not be able to maintain/support our ambitious growth curve. I approached Absa through the executive assistant to the CEO. He had entered the 2006 Epic and I spotted his email signature on an inquiry he had sent to the race office. I approached him and he channelled my proposal to the right people. With Absa we had a company with a marketing budget in excess of R1 billion (US$125 million).8

For Absa, the Cape Epic provided an opportunity to offer its business bank clients unique access to the race experience. Absa recognized the fit between the teamwork ethos of the race and the partnership brand positioning of Absa Business Banking. As part of its sponsorship package, Absa received “access to entry” rights to the event, which provided it with opportunities to invite important clients to participate. Furthermore, Absa valued the corporate social investment focus of the race, which aligned with the bank’s corporate social investment focus. The sponsorship objectives were defined and measured annually in terms of demand generated, potential for future corporate finance deals, cross-service opportunities and engagement levels among employees and clients. Oscar Grobler, Absa’s general manager of Business Banking Services, suggested in 2006 that Absa

recognized the value that sports and lifestyle activities present in establishing and building new relationships with various segments of the market. This strategy is underpinned by Absa’s drive to take banking to the next level by building partnerships to provide effective financial solutions for customers — both on a national and provincial level.9

 

6 Interview with Kevin Vermaak, December 6, 2010. 7 Dawes, “The Loneliness of the Long Distance Entrepreneur,” 2007, pp. 6-7. 8 Email communication with Kevin Vermaak, September 20, 2012. 9 Kevin Vermaak, “Dear Mountain Bike Enthusiast,” The Cape Epic Newsletter, March 31, 2006, www.cape- epic.com/data/files/newsletters/newsletterfriday31march20061122143309.html, accessed September 20, 2012.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 5 9B13M051 More recently, Absa was pleased to notice the increasing numbers of senior-level executives and decision-makers participating in the event, resulting in an extension of Absa’s sponsorship to include Absa Capital, Absa Private Bank and Absa Wealth clients.10 As a result of the new cash injections from the Absa sponsorship and from the IDC loan, the 2006 version of the Absa Cape Epic presented by Adidas attracted 1,046 riders. By 2007, those numbers had increased to 1,206 riders from 43 countries, including seven of the top 10 ranked UCI (Union Cycliste Internationale) mountain bike riders. From the beginning, the race entries quickly sold, with lottery applications oversubscribed by four times.11 Since 2005, Vineyard Races had been part of the grand finale (final day) of the Absa Cape Epic. Vineyard Races, which catered to all fitness levels, offered a selection of one-day mountain bike and trail running races on routes separate from the Absa Cape Epic but at the same venue as the finish of the Epic. The starting times for the routes, including a children’s fun ride, were designed so that the majority of participants could complete their race and then “wind down and cheer in the Absa Cape Epic riders.”12 The final day of the 2007 race attracted a crowd of 10,500 spectators at Lourensford, which was now being touted by the world’s elite mountain bikers as the “Champs-Élysées of Mountain Biking,” an explicit reference to the traditional finish line for the Tour de France, the world’s most prestigious road bike race. In 2007, a daily 26-minute TV highlights package was distributed globally, a world first for any mountain bike stage race. The 2006 Absa Cape Epic was the first mountain bike stage race, and one of only four stage races across the globe awarded UCI classification of Hors Categorie (beyond classification — the most challenging bicycle races possible). The other three stage races with the Hors Categorie classification were the Tour de France, Giro d’Italia and La Vuelta a España. Vermaak commented:

Receiving support and affirmation from the UCI was a huge milestone for the race. We had successfully convinced the international mountain biking community of the merit of a race like this. By guaranteeing that the race always ends at least three weeks before the World Cup season begins, we made it possible for the top riders to participate. Not only does this make for great viewing, but it offers amateurs the opportunity to compete against their heroes.13

Pat McQuaid, UCI’s president, stated:

The event format chosen by the organizers has made the Absa Cape Epic into a model to be followed by all those who are still searching for innovative solutions, and the UCI is delighted with their enthusiasm and above all their competence. The Absa Cape Epic is a totally unique event, whose promotion of cycling on a continental level is absolutely vital as part of the UCI’s strategy to globalize the sport.14

From a business standpoint, 2008 was noteworthy as it was the first year that the Absa Cape Epic made a small profit. Also around that time, Vermaak forged a relationship with a business mentor, the chair and retired chief executive officer (CEO) of a top 40 listed company in South Africa. This relationship provided Vermaak the opportunity to explore alternatives, such as ways to further refine the organization’s business and operational model to make the most of what he had created. One logistical 10 E-mail communication with Lynn Naude, Absa, July 20, 2012. 11 Email communication with Kevin Vermaak, October 5, 2012. 12 “Welcome to the Vineyard Races,” www.vineyard-races.co.za/vr/, accessed September 20, 2012. 13 “History of the Absa Cape Epic,” www.mtbonline.co.za/club/capeepichistory.htm, accessed September 20, 2012. 14 Absa Cape Epic 2012 Event Summary.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 6 9B13M051 enhancement initiated internally for the 2009 event was to keep the overnight stops the same for at least two nights, with riders doing a circular route starting and ending at the same place on certain days. This enhancement was appealing to both the riders and the event organizers as it meant fewer logistical disruptions during the race. As the reputation of the Absa Cape Epic developed, demand to be associated with the event increased, allowing for profit generated by the event to grow. In 2012, net profits grew by 55 per cent over the prior year; and, in 2011, the growth in profits over the prior year was 78 per cent, suggesting that the event was becoming the kind of sustainable business Vermaak had in mind when he had created the race (see Exhibit 4). “The Absa Cape Epic is organized and presented with the riders as the focal point,” explained Vermaak. “Rider satisfaction, well-being and enjoyment are our primary goals.”15 The experience of the rider allowed the organization to generate revenue in three primary ways: entry fees, sponsorships and rider sales. Entrants in the 2012 race paid R35,400 per team (approximately US$4,425). Different types of sponsorships were available, including a title sponsor (Absa), headline sponsors (Exxaro and Telkom Business), venue sponsors and others. In addition to acquiring marketing rights, many race sponsors leveraged their investments by providing critical services. For example, Telkom Business provided the telecommunication infrastructure for the event; venue sponsors provided locations for race registration, overnight stops and the race finish; and the other sponsors provided a range of goods and services, such as vehicles, clothing (Craft), bike wash services (Pragma), provision of food (Woolworths) and bike servicing (Cycle Lab). The organization also had a long list of supplier partners that helped ensure the event was professional in every respect. The third revenue stream was rider sales. Rider sales referred to the extra goods and services that participants purchased before, during or after the event, including accommodation, DVDs, clothing and massages. The race website played a critical role by marketing the event to a global audience and by providing a platform whereby, prior to the event, participants could interact with each other and with the race organizers. The race website also allowed supporters to track the progress of riders during the event and provided a window on the event for the media. In addition to the race website, the organizing team invested heavily in providing high-quality coverage of the event: they paid for the creation and distribution of video coverage of the event, hired a team of professional photographers to cover the event and wrote interesting stories surrounding the event, which then found their way into magazines, newspapers and blogs. Vermaak pointed out that generating all the media coverage was “a complicated and expensive thing for us to pull off. We have two helicopters, satellite uplinks, two production units, host broadcast facilities for independent teams, and a team of photographers” throughout the event16 (see Exhibit 5). Over the years, international media interest in the race had continued to increase, while rider participation from abroad was actively kept below 40 per cent to encourage South Africans to participate in the event. In 2012, 49 countries were represented in the race with international riders making up 34 per cent of the field (of which more than 60 per cent were drawn from Europe). The Absa Cape Epic was broadcast in 175 countries, attracting more than 4,400 hours of global TV coverage. With these numbers underpinning the event, the Absa Cape Epic was reportedly the largest full-service mountain bike stage race in the world. Because of the event’s complexity and intensity, the race originally relied heavily on an intricate combination of unique company-owned assets. Initially, Vermaak and his team acquired and created specialized infrastructure assets that allowed them to establish a fully functional race village in remote 15 Interview with Kevin Vermaak, June 5, 2012. 16 Dawes, “The Loneliness of the Long Distance Entrepreneur,” 2007, pp. 6-7.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 7 9B13M051 locations. Some of these assets included portable showers that could be mounted on the back of a truck, portable toilets, large and small tents, portable washing machines, state-of-the-art bike-washing equipment and security systems to protect bikes and other equipment. However, over time, the need to own such assets had diminished. Vermaak explained:

In the beginning, much of these specialized assets did not exist so we bought and built them ourselves. However, now with the proliferation of quality mountain bike races in SA, there is a market for quality service providers to provide these services, and we are now employing a strategy of selling these specialized assets to expert service providers in exchange for cash and long term discounted service contracts which reduces our cost and streamlines our business.17

GROWING THE BUSINESS In 2007, Vermaak told a reporter: “We’ve built a really scalable infrastructure, our accounts and the structure of the company are what you would expect to find in a much bigger business, so we can easily snap on new things. I’ve got some ideas.”18 The Absa Cape Epic brand was owned and managed by a company called Grandstand Management, which Vermaak founded and ran. The business was divided into Operations and Events, with a director leading each division (see Exhibits 6 and 7). The operations director, Richard McMartin, “runs all matters relating to operations of the company: HR, finance, legal, facilities, IT, reporting etc.” explained Vermaak. “Their structure would not change if we started and managed 10 new/other events. They exist to completely free up the Events Division to focus exclusively on organising, managing, and marketing the Cape Epic.”19 A total of four people comprised the operations team, including McMartin. The event director, Kati Csak, led the team that coordinated route design and permission requests, rider registration, race rules, emergency and medical services, the marshals, timing and results, and optional extras available to riders, as well as management of the crew and volunteers. The events team also oversaw the planning and implementation of infrastructure, through different divisions under the event umbrella, which, explained Vermaak, “staff up considerably closer to the race.” The organization therefore expanded from 21 full-time employees to more than 700 people who played a role in making the event happen. “Because of skill sets and where I can add the most value, I get involved in elements of the event management, too,” 20 explained Vermaak. In addition to McMartin and Csak, the heads of Marketing & Communications, Sponsorship and Hospitality also reported to Vermaak. An event management forum comprising all division heads met monthly to provide a structure for “efficient decision-making and new idea refinement.” Vermaak explained, “We also have quarterly team getaways for team building, training, blue-sky thinking, event updating, etc.” “Observing the team in action, it is evident that they love what they do and they are passionate about the race. They seem to have a great respect for and understanding of each other,” reported a volunteer who had worked on the race since 2008. 21 In 2007, Vermaak and his team decided to leverage their learning from the Absa Cape Epic to launch a five-day, 200-km (125-mile) trail-running event starting on the Southern Cape Coast and finishing in the 17 Email communication with Kevin Vermaak, October 5, 2012. 18 Dawes, “The Loneliness of the Long Distance Entrepreneur,” 2007, pp. 6-7. 19 Email communication with Kevin Vermaak, September 12, 2012. 20 Ibid. 21 Case writer’s discussion with a race volunteer, December 5, 2010.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 8 9B13M051 Cape Winelands. The event, called The Cape Odyssey, saw the first running of the event in October 2007. Similar to the Epic, runners needed to enter as a two-runner team, and the organizing team put great emphasis on “taking excellent care of the participating athletes, with the goal of providing an unforgettable African-style trail running experience.”22 To achieve this goal, 24-hour service was provided, which included water points, tented accommodation in the race village each night, dinner, masseurs, entertainment and a carbo-loaded breakfast to start each day.23 The Cape Odyssey was hosted a second time in October 2008; and, although participating runners had nothing but good things to say about the race, the organizing team felt that the trail running market was not as valuable as the mountain biking market and the race had not been run since. Also in October 2008, Grandstand Management hosted the inaugural Cederberg Escape, a three-day full- service individual mountain bike stage race. The race route included three out and back loops from the race village in the picturesque Cederberg mountain range.24 Entries for this 60 km to 90 km per day race sold out quickly, with increased demand for subsequent editions. Participants described the race as a “mini Cape Epic, where they “immediately felt at home,” as “Grandstand really know how to put an event together.”25 Although positive feedback was received, the Cederberg Escape was not hosted again. Having built a significant “event-organizing machine,” Vermaak recognized that larger events with bigger budgets might be better suited to effectively exploit the team’s expertise. In 2011, two Exxaro executive committee members participated in the Absa Cape Epic, as part of a charity drive. Exxaro was a listed mining group in South Africa with a Black Economic Empowerment rating. The two executive committee riders were joined by three other senior managers and an executive from an external company. Exxaro also sponsored the grand finale, where it hosted a hospitality suite for invited stakeholders. Although the Exxaro executives were pleased that their participation raised R1.5 million (US$187,000) for charity, they noticed the virtual absence of any Historically Disadvantaged South African (primarily Black South Africans) riders — probably fewer than 10 out of the 1,200 total participants. Although many reasons could account for this low turnout, including a traditional lack of resources, lack of interest and limited access to support structures, Exxaro was interested in encouraging mountain biking in all levels of South African society. By the end of the grand finale, Exxaro’s CEO, Sipho Nkosi, expressed the wish to one day see someone from one of Exxaro’s rural mining communities participate in (and even win) the Absa Cape Epic.26 By August 2011, Exxaro had signed on as the official development academy partner to the Absa Cape Epic for a period of five years. Through the Exxaro Mountain Bike Academy and Exxaro’s association with the Absa Cape Epic, the business hoped to remove the “elitist tag associated with mountain biking, expose many to the healthy outdoor benefits of mountain biking and take the sport to rural communities.”27 Exxaro entered 12 teams in the 2012 race and planned on entering 20 teams for 2013.28

22 “Introducing the Challenging Cape Odyssey Race,” www.southafrica.com/blog/introducing-the-challenging-cape-odyssey- race, accessed September 20, 2012. 23 Ibid. 24 The Cederberg Escape Mountain Bike Classic, www.capetownmagazine.com/events/The-Cederberg-Escape-Mountain- Bike-Classic/2008-10-24/11_37_9219, accessed September 20, 2012. 25 Cederberg Escape 2008, www.rudeawakenings.co.za/report/mountain-biking/cederberg-escape-2008, accessed September 20, 2012. 26 Exxaro MTB Academy Charter. 27 Ibid. 28 Interview with Lizette Kohn, Exxaro, July 16, 2012.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 9 9B13M051 WHAT NEXT? As Vermaak watched the large crowd of more than 15,000 spectators enjoying the live music performance, aerobatics display and hospitality at Lourensford on the final day of the 2012 Absa Cape Epic, he wondered what more could be done to build on the capabilities and asset base of the company. “The Absa Cape Epic is recognized as being a ‘best in class’ event in the mountain bike community, but it is still not that well known outside of the mountain bike world. What would it take to generate a broad audience following similar to that of the Tour de France?” he wondered to himself. Vermaak considered how Absa could leverage its title sponsorship internationally through the Barclays brand, and what implications doing so would hold for the race. He was also excited about the new direction the Exxaro relationship might open up in South Africa and wondered how to best take advantage of that commitment. With 85 per cent of this year’s riders stating they would return to ride again and other performance metrics showing double-digit increases, Vermaak felt a mixture of comfort and restlessness:

Should we focus on building just this race or should we work to establish a global series of mountain bike stage races similar to the Grand Slam in tennis, the Majors in golf or the Formula 1 circuit in motor racing? Should we diversify out of mountain bike racing to make the most of our capabilities and assets? How should we spend our time in the year leading up to the 10th running of the event in 2013 to ensure that we continue to build on our past success, stay true to our vision and ethos, but still leverage the opportunities that lie before us?

 

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 10 9B13M051

EXHIBIT 1: ABSA CAPE EPIC’S SELECTED KEY EVENT MILESTONES 07/01/2003 International marketing partners, Planet Talk GmbH, recruited to market the race

internationally 16/05/2003 The Cape Epic website is launched and the inaugural newsletter is distributed to 2,546

worldwide subscribers 17/09/2003 – 25/09/2003

First-ever trial ride of the route completed successfully

09/12/2003 Adidas International announce their presenting sponsorship 01/06/2004 The 350 SA regional team entries for 2005 Cape Epic sell out in less than 5 hours 09/10/2004 The international block of entries sells out for the first time 09/04/2005 Inaugural Vineyard Race attracts 550 participants 30/06/2005 The first-ever public lottery, introduced due to the massive demand to ride 2006 Cape

Epic, closes and 500 lucky teams are invited to ride the race and complete their online registration

06/10/2005 The Cape Epic wins Platinum at the SA Logistics Achiever Awards ahead of major SA industrial companies

26/10/2005 The Cape Epic is the first-ever mountain bike race to exhibit at the Sportel TV Rights Fair in Monaco and surpasses 2,500 hours of global TV hours to become the most televised mountain bike race of all time

24/10/2006 Absa announces a 3-year extension to its title sponsorship and the all-new 2007 route is launched at the glittering Route Launch Charity Gala at the Hilton Sandton in Johannesburg

31/01/2007 Toyota announces sponsorship as Official Vehicle of the Absa Cape Epic 24/03/2007 – 31/03/2007

1,206 riders from 43 countries, including 7 of the top 10 ranked UCI XCO riders, ride the toughest race yet. A daily 26-minute TV highlights package is distributed globally — a world first for any mountain bike stage race

31/03/2007 10,500 spectators attend the final day at Lourensford; 1,100 riders ride the Cape Times Vineyard Race; 1,017 riders finish the 2007 Absa Cape Epic

30/10/2008 New route concept announced — multiple days in one stage location. Prologue to take place beneath Table Mountain. Traditional finish in Lourensford

04/04/2009 Race registration takes place with the backdrop of Table Mountain. After the prologue riders begin stage 1 in Gordon’s Bay, staying 2 nights at their next destination in Villiersdorp, then Greyton and Oak Valley.

31/10/2009

New 2010 route announced — keeps the same multiple stage route concept after 2009’s success. Diemersfontein marks the start of stage 1, arriving in Ceres where riders will stay 3 nights. Route touted to include more singletrack than ever before.

38/03/2010 Stage 2 in Eselfontein, Ceres voted the best stage in Absa Cape Epic history 26/10/2011 2011 route announced – prologue is reintroduced, Tokai forest. Stage 1 begins in

Saronsberg, Tulbagh. Other towns include Worcester and Oak Valley 27/03/2011 – 03/04/2011

2011 Absa Cape Epic finisher’s rate at 88.2% with participants representing 54 countries. Riders rode 707 km with 14 550 metres of climbing. Proud Winning team 36One-Songo Specialized finishing with a winning time of 28:44,44.0. Burry Stander, riding with Swiss partner and multiple world champion Christoph Sauser, is the first-ever South African to win the race.

25/10/2011 CRAFT is announced as new cycling apparel sponsor after 8 years with Adidas 02/02/2012 Grand Masters category for 2013 is announced — where both riders must be over 50

years of age Source: www.cape-epic.com/content.php?page_id=25&title=/Milestones/, accessed September 20, 2012.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 11 9B13M051

EXHIBIT 2: ABSA CAPE EPIC’S VISION AND ETHOS Vision

To create the world’s premier mountain bike race in which every serious amateur mountain biker desires to participate and every professional mountain biker aspires to win.

Ethos

The individual philosophy of the founder of the Absa Cape Epic is the foundation for the Untamed African Mountain Bike Race. On March 11, 2003, the Absa Cape Epic was awarded Proudly South African status.

1. The Absa Cape Epic is organized and presented with the participating athletes as our focal point. Their satisfaction, well-being and enjoyment of the race are our primary goals. We aim to deliver an unsurpassed and unforgettable mountain bike and African travel-experience.

2. We will endeavor to source all products, services, and human resources for the Absa Cape Epic in South Africa, to stimulate general economic activity and to support local job creation.

3. The Absa Cape Epic will promote the culture and beauty of South Africa and introduce the South African mountain bike scene to the world.

4. We will work closely with legal and environmental authorities to make the Absa Cape Epic a sustainable success on the global mountain biking circuit.

5. It is our hope that the Absa Cape Epic will introduce the mountain biking experience to the local

communities through which the race will pass. In partnership with existing South African cycling development bodies, the Absa Cape Epic will endeavor to develop mountain biking and cycling in the previously disadvantaged communities.

6. We are committed to transformation at all levels of sport in South Africa and will eagerly participate in activities and initiatives that further the transformation of all cycling formats in South Africa.

Original Logo Source: www.cape-epic.com/content.php?page_id=118&title=/Company_Ethos/, accessed September 20, 2012. This statement has also appeared in media material since the inception of the event.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 12 9B13M051

EXHIBIT 3: ABSA CAPE EPIC’S DAILY COMPETITOR EXPERIENCE 05:15 Rider wake up siren 05:30 Rider bag check opens 05:30 Bike park opens 05:30 Breakfast opens 06:15 Start check-in opens 06:30 Breakfast closes 06:45 Rider bag check-in closes 06:45 Seeded start chute close 06:50 Bike park closes 07:00 Race start 11:00 First riders arrive 11:00 Showers/basins open 11:00 Massage tent opens 11:00 Bike wash opens 11:00 Bike park opens 11:00 Race hospital opens 14:00 Race office opens 17:00 Riding cut-off time (subject to

change) 17:00 Personal race nutrition hand in opens

17:30 Rider bag check-out closes 17:30 Entertainment starts in rider dining

marquee 18:00 Final race results posted 18:00 Start sheets for the following day

posted 18:00 Bike wash closes 18:00 Dinner opens 18:30 Personal race nutrition hand in

closes 18:45 Awards ceremony in the rider

marquee 19:00 Dinner closes 20:00 Race hospital closes 20:00 Race office closes 21:00 Showers close 21:30 Massage closes 22:00 Bike park closes 22:00 Lights out race village

Source: Absa Cape Epic Media Guide 2009.

EXHIBIT 4: SUMMARY OF FINANCIAL RESULTS FOR ABSA CAPE EPIC, 2010–2012 2010 (ZAR) 2011 (ZAR) 2012 (ZAR) Approximate Income 29.2 million 36.0 million 42.7 million Revenue Split

Sponsorship 43% 44% 43% Entry Fees 43% 42% 45% Rider Sales 11% 11% 9% Other 3% 4% 3%

Increase in Net Profit Before Tax over the Prior Year# — 78% 55% Entry Fees Per Team of Two Riders 25,200 29,900 35,400 Note: ZAR = South African Rand; US$1 = Approx. 8 ZAR # Increase in Net Profit Before Tax over the Prior Year = (Profit before tax from the current year – Profit before tax from the prior year)/(Profit before tax from the prior year) Source: This table was created by the authors from the Absa Cape Epic management accounts supplied by the operations director at Grandstand Management.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 13 9B13M051

EXHIBIT 5: ABSA CAPE EPIC’S MEDIA HIGHLIGHTS South African Media Values South African media values were tracked by Newsclip for a 12-month period up to May 31, 2012. Overall, the 2012 media value increased by 30% from 2011. Broadcast made the biggest contribution to the overall increase, as this nearly doubled from 2011. A key off-event activity period is the Route Launch week in October. This week was marked by an increased media coverage compared with the 2011 event and provided even more year round exposure for the Absa Cape Epic.

Overall SA Media Value Composition of South African Media Value

Global Media Values Absa Cape Epic produced four television products (Daily News, 26-minute Daily Highlights, 24-minute International Racing Highlights, 52-minute Event Documentary) plus customized short reports for international news stations. With 4,400 broadcast hours across 175 countries, it remains the most televised event of its kind in the world. In addition to the above, local audiences could once again watch the Prologue and Stage 7 live on SuperSport. These two 5-hour broadcasts were streamed live online to international audiences — a first for the event. The Daily Highlights saw the most growth in 2012 with an increase of 20% in takers and 129% in number of transmissions. Half of all takers broadcast the shows within a 24 hour window. Top News Broadcasters in 2012 Bloomberg (Worldwide), Euronews (Worldwide), France 3 (FRA), ZDF (GER), RTL (GER), RAI (ITA), SF 2 (SUI)

Global Broadcast Hours Number of Transmissions per Product Type

Source: Absa Cape Epic 2012 Event Summary.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 14 9B13M051

EXHIBIT 6: ABSA CAPE EPIC’S TOP MANAGEMENT TEAM Kevin Vermaak – CEO and Founder While pursuing an I.T. Professional Services career in Europe, this Cape Town native and UCT Engineering graduate took some time out to lead the first-ever combined mountain biking and snowboarding international expedition to Muztaq Ata in Pakistan/China in 2000. He also completed numerous mountain bike epics in Tibet, Nepal, Pakistan, Norway, Costa Rica and Europe. Renowned for always thinking “outside the box,” Kevin conceived the idea for the Cape Epic whilst participating in La Ruta de los Conquistadores in Costa Rica in November 2002. Not wasting any time, he returned to South Africa in February 2003 to establish the Cape Epic. Kati Csak – Event Director Kati was born and grew up in Konstanz, Germany, and holds English and German business degrees. After having lived in London, Maine and Vermont, she left the northern hemisphere in search of paradise, which she found in South Africa and made Cape Town her new home in 1997. Kati is an experienced and well-travelled events manager. Before joining the Absa Cape Epic in January 2005 she proved her skills in a number of prestigious events, including the international press launches for the Mercedes Benz SLR McLaren and BMW GS1200 Motorbike. With her move to the Absa Cape Epic she has followed her heart — Kati could easily be described as a universal-sportsperson with a keen interest in cycling, paddling, snowboarding, triathlon, diving and generally anything active.

Richard McMartin – Operations Director Born in Durban and raised in the Natal Midlands, Richard discovered a love for sport and adventure at a young age, which has shaped a well-rounded sense of balance and enjoyment in life. A water sports fanatic, he has paddled most rivers and coastlines that Southern Africa has to offer. After working in London, Richard returned to South Africa in 2005 and joined the Absa Cape Epic team, where he is the Operations Director. Richard holds a BComm PPE degree from the University of Cape Town.

Source: www.cape-epic.com/content.php?page_id=200&title=/The_Team/, accessed September 20, 2012, and Absa Cape Epic Media Guide.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.

 

 

Page 15 9B13M051

EXHIBIT 7: ABSA CAPE EPIC’S ORGANIZATIONAL STRUCTURE AND VALUES: GRANDSTAND MANAGEMENT

 

Note: Number of people in each team reflected in parenthesis (#) Company values 1. Accountability – We individually take ownership of the tasks for which we are responsible, and see

them through to completion before and during the event 2. Attention to Detail – We tirelessly focus on the detail – this is our key organisational trait 3. Build on Experience – we implement processes to embed learnings and innovations from previous

races 4. Candour – we tell it like it is. We don’t sugar-coat constructive criticism, and team members expect to

receive communication in this fashion. Candour must always be executed with respect. 5. Communication – Our unique business environment, where every team member’s work impacts on

other teams’ work, requires robust, pro-active communication. It is acceptable that pro-active communication is sometimes at the expense of personal productivity.

6. Customer Focus – We provide unrivalled customer service to our riders, sponsors, suppliers and crew

7. Efficiency – we train, we mentor, we challenge and we inspire ourselves and our colleagues to work as efficiently as possible

8. Integrity – Don’t be a chop 9. Pioneering – We’re creating something without precedent in the sport of mountain biking and

therefore are always willing to explore new ideas 10. Premium – We work with premium-quality brands and suppliers to emphasise our status as the

world’s premier mountain bike race 11. Relationships – we seek to create and maintain personable relationships between team members

with all our current and past partners including sponsors, suppliers and crew. 12. Relentless Quest for Perfection – since our mission is to be the premier race in the world, only

perfection is good enough, which negates the requirement for comparison 13. Respect – We respect the function, input and time of every other staff member. We respect every

team member for his or her contribution to our overall success 14. Results – We recognise effort, but results are king 15. Sports Participation – we love participating in sport, be it ballet, karate, yoga or mountain biking. Source: Constructed by authors based on discussion with staff at Grandstand Management and email communication with Kevin Vermaak, October 5, 2012.

A ut

ho riz

ed fo

r us

e on

ly b

y Jo

ha n

C ru

yf f I

ns itu

te fr

om O

ct 2

4, 2

01 9

un til

J un

2 4,

2 02

0. U

se o

ut si

de th

es e

pa ra

m et

er s

is a

c op

yr ig

ht v

io la

tio n.