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SPORTS GOODS IN THE UNITED

KINGDOM: ISIC 3693

Euromonitor International

October 2010

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LIST OF CONTENTS AND TABLESSports Goods ............................................................................................................................... 1

Chart 1 Hierarchical Position of Sports Goods Industry ............................................ 2Definitions ............................................................... ................................................................. ..... 2Attractiveness Index ..................................................................................................... ................ 3

Chart 2 Attractiveness Index of Sports Goods Industry Among Other UnitedKingdom Industries in the Category ............................................................. 3

Chart 3 Attractiveness Index of Sports Goods Industry Among Other UnitedKingdom Industries in the Category ............................................................. 4

Chart 4 Binary Diagram of Attractiveness Index ....................................................... 5Chart 5 Attractiveness Index of Sports Goods Industry Among All United

Kingdom Industries ........................................................... ........................... 6

Attractiveness Index: Explanation ........................................................ ..................................... 7

Industry Growth/performance ....................................................................................................... 8Chart 6 Key Industry Indicators 2004-2010 .......................................................... ..... 8Chart 7 Key Industry Indicators Annual Growth 2005-2010 ...................................... 9Chart 8 Turnover of Local Producers and Nominal GDP 1997-2016 ........................ 9Chart 9 Total Market Dynamics and the Role of Local Producers ........................... 10

Role of Imports and Exports ......................................................... .............................................. 10

Chart 10 Imports and Exports 2004-2010 ................................................................. 10Chart 11 Import vs Export Growth ............................................................... .............. 11

Industry Sectors ......................................................................................................................... 11

Chart 12 Turnover of Local Producers by Sector 2004-2010 .................................... 11Chart 13 Industry Sectors Growth Indices 1997-2016 .............................................. 12

Competitive Environment ........................................................................................................... 13Chart 14 Number of Local Producers by Size of Enterprises 2004-2010 .................. 13Chart 15 Local Producers Turnover by Size of Enterprises 2004-2010 ................... 14

Buyers ......................................................... ................................................................. .............. 15

Chart 16 Buyers Expenditure on Sports Goods Industry 2004-2010 ........................ 15Chart 17 Annual Growth of Buyers Expenditure 2004-2010 .................................... 16Chart 18 Buyers Share of Sports Goods Market 2004-2010 .................................... 16Chart 19 Buyers' Investment in Sports Goods Industry 2004-2010 .......................... 17Chart 20 Bargaining Power: Buyers 2010 ................................................................. 18Chart 21 Buyers: Households & GDP 1997-2016 ..................................................... 19Chart 22 Buyers: Education & GDP 1997-2016 ........................................................ 19

Chart 23 Buyers: Education Spending on Sports Goods .......................................... 20Chart 24 Buyers: Agriculture & GDP 1997-2016 ....................................................... 20Chart 25 Buyers: Agriculture Spending on Sports Goods ......................................... 21

Suppliers .................................................................................................................................... 21

Chart 26 Main Industry Costs and Suppliers 2004-2010 ........................................... 21Chart 27 Annual Growth of Main Industry Costs and Suppliers 2005-2010 .............. 22Chart 28 Spending on Suppliers as Share of Total Industrys Costs 2004-2010....... 22Chart 29 Bargaining Power: Suppliers 2010 ............................................................. 23Chart 30 Suppliers: Plastics Products & GDP 1997-2016 ......................................... 24Chart 31 Suppliers: Plastics Products Cost and Price Dynamics .............................. 24

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Chart 32 Suppliers: Corrugated Paper, Paperboard and Containers & GDP1997-2016 ............................................................... ................................... 25

Chart 33 Suppliers: Corrugated Paper, Paperboard and Containers Cost andPrice Dynamics .......................................................................................... 25

Chart 34 Suppliers: Basic Precious and Non-ferrous Metals & GDP 1997-2016 ...... 26Chart 35 Suppliers: Basic Precious and Non-ferrous Metals Cost and Price

Dynamics ................................................................................................... 26Chart 36 Supply Structure ( million, year 2010) ...................................................... 27

Bargaining Power .................................................................................................................... ... 28

Chart 37 Bargaining Power of Buyers and Suppliers ................................................ 28

Bargaining Power: Explanation ............................................................ ................................... 29Future Outlook ........................................................ ................................................................. ... 30

Chart 38 Forecasts 2011-2016 ................................................................... .............. 30

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SPORTS GOODS IN THE UNITEDKINGDOM: ISIC 3693

SPORTS GOODS

The UK sports goods market is highly dependent on consumer spending and demand is

highest around major sporting events.

With a peak of 9% in 2004 due to demand spurred by the summer Olympic Games in Greece

and an even larger 12% hike in 2008 following the games in Beijing, the total market grew by

32% over the 2000-2008 period. A 5% drop was recorded in 2009 as demand faltered, but

2010 is predicted to produce a return to growth. There were essentially two types of buyers:

households and industries purchasing sporting goods as investment items. The main buyer

for the sports goods market is households, which increased its share of the market from 49%

in 2000 to 52% in 2009, as more people put significant focus on leisure time, and demand

quality and reliability from their sports equipment. The proportion was as high as 63% in 2006.Major B2B buyers made sporting goods purchases as long-term assets such as equipment

replacement or upgrades. Sporting and recreational facilities as well as miscellaneous

business service providers were the most significant among business buyers.

The local sports goods manufacturing industry has been struggling in recent years. After

growing by 30% from 2000 to 2006, the turnover of British companies has been shrinking ever

since, losing 26% by the end of 2009. Increasing import penetration and worsening economic

conditions exerted downward pressure on the industrys earnings. 16% of turnover of local

producers was generated from fishing equipment and athletics equipment manufacturing.

However, that represents a sizeable drop from 26% in 2000 a result of more dynamic

growth in revenue from manufacturing of various other sports equipment.

Import penetration in the UK market remained relatively stable at close to 40% throughout the

review period. A rise to 43% in 2009 coincided with a 25% drop in turnover of the local

industry. The demand for imported products increased towards the end of the review period,

as the pound strengthened against the US dollar making imported products cheaper. Goods

from the two biggest trade partners China and the US accounted for 58% of total imports.

The competitiveness of British products overseas has been diminishing since 2000, as a

result of unfavourable foreign exchange rates and strength of global non-British brands such

as Nike, adidas, or Puma. Over the 2000-2009 period, the share of production output sold

abroad shrank from 29% to 25%, although the proportion had been as low as 19% in 2006.

The main export partners were France, Germany and Ireland, with similar shares of 13% in

2009.

The local industry appears to be fairly fragmented, as total turnover is spread between micro,

small, medium and large companies due to the speciality products British manufacturers aremainly restricted to. Some of the better-known British brands and companies include Umbro

and Pentland Group (owner or stakeholder in brands such Speedo, Ellesse and Mitre among

others).

Labour costs took up an increasingly larger share of the sports goods manufacturing

industrys costs. A 25% share in 2000 grew to 38% by the end of 2009. Supplies of plastic

products cost the industry in excess of 7% on average throughout the period. All other

suppliers had relatively fragmented shares in the total costs, not exceeding 4%. The diverse

supplier base shielded the industry from significant supply price shocks and allowed for

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increasing industry profitability, with the profit margin as share of turnover EBIDA increasing

from 13 to 22% over the 2000-2009 period.

It is projected that the sports goods industry will decline by a further 1-2% in 2010, due to

falling purchasing power of British consumers who are likely to reduce spending on non-

essential items such as sport goods during the economic slowdown. However, the industryshould exhibit the first signs of recovery in 2011-2012, as demand from households is

expected to increase due to the upcoming summer Olympic Games, which will be held in

London in 2012. Increasing import penetration and global giants entering markets for niche

sports equipment are very real threats, which will further dampen growth of the local industry.

Chart 1 Hierarchical Position of Sports Goods Industry

Source: Euromonitor International

DEFINITIONS

Category: D - Manufacturing

Division: 36 - Furniture & manufacturing n.e.c.

Group: 369 - Manufacturing n.e.c.

Class: 3693 - Sports goods

This class includes:

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Ski equipment and roller skates:

cross-country skis

snow skis

ski-bindings, ski brakes and ski poles

ice skates (including skating boots with skates attached)

roller skates (including skating boots with skates attached)

parts and accessories of ice skates and roller skates

Water-sport equipment:

water-skis, surfboards, sailboards and other water-sport equipment

Athletics equipment:

gymnasium, fitness centre or athletics articles and equipment

Other sports equipment:

leather sports gloves, mittens and mitts

golf clubs and other golf equipment (including golf balls)

articles and equipment for table tennis (including bats, balls and nets)

lawn tennis rackets

badminton, squash and similar rackets (including short-tennis rackets)

balls

other articles and equipment for sport and open-air games

Fishing equipment:

fishing rods, hooks and reels line fishing tackle, fish landing nets, butterfly and similar nets

Exclusions: boat sails; sports clothing; saddlery and harness; sports footwear; weapons and

ammunition; sports vehicles other than toboggans and the like; boats; billiard tables and bowling

equipment; whips and riding crops.

ATTRACTIVENESS INDEX

Chart 2 Attractiveness Index of Sports Goods Industry Among Other United KingdomIndustries in the Category

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Source: Euromonitor International

Chart 3 Attractiveness Index of Sports Goods Industry Among Other United Kingdom

Industries in the Category

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Source: Euromonitor International

Chart 4 Binary Diagram of Attractiveness Index

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Source: Euromonitor International

Chart 5 Attractiveness Index of Sports Goods Industry Among All United KingdomIndustries

Source: Euromonitor International

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Attractiveness Index: Explanation

The calculated index of attractiveness has two parts, evaluating:

industrys performance in stable economic environment;

industrys performance in turbulent economic environment and industrys resistance to

economic downturn occurring.

The first part of the index represents industrys performance in stable economic environment,

based on historic evidence in the period of 2003-2007. It covers several criteria of industrys

performance:

Industrys historic growth: the compound annual growth rate of industrys turnover over the

last 5 years. It shows the expansion / contraction rates of industrys turnover and reflects its

recent development trend.

Stability of products total demand: coefficient of variation of annual (year-on-year) growth

indexes of products total demand. Coefficient of variation is a ratio between the standard

deviation and sample mean. It complements the measure of average growth rates by giving

the growth stability characteristic.

Average industrys profitability: average EBITDA share of turnover over the last 5 years. Bargaining power of the industry as a buyer among its major suppliers: the importance of

industrys purchases in the markets of its 3 major suppliers. The measure is calculated as the

industrys average percentage share in its suppliers sales. It shows the industrys potential

power to negotiate the prices and other supply conditions of its major intermediate purchases.

Bargaining power of the industry as a supplier for its buyers: the average share of industrys

production in the costs of its 3 major buyers. The measure is calculated as the industrys

average percentage share in its buyers costs. It evaluates the potential power of the

supplying industry to negotiate the price of its production and set other sales conditions.

Barriers of entry into the sector: a share of big companies in the total number of companies

within the industry (250 employees and more). The share of big companies is a proxy for

entry barriers and concentration measure within the industry.

Industry rivalry from abroad, foreign goods (imports) as an external source of competition:

average annual import share in total domestic demand of the product, average over 5 years. It

shows the local industrys opportunities (limitations) to supply the product for local market and

satisfy domestic product demand.

Global opportunities, exports as external possibilities for the industry: average annual export

share in industrys turnover, the average over the last 5 years. It shows external industrys

possibilities to supply the foreign markets with its production and implicitly demonstrates the

competitiveness of industrys production abroad.

The second part of the index reflects the industrys vulnerability in economic downturn and its

likely performance when economic downturn occurs. It is based on several criteria:

The forecasted economic growth: the compound annual growth rate of the industrys

forecasted turnover for the next 3 years (2007-2010 or 2008-2011 is chosen depending onthe timing of the downturn in the industry). It compares the industrys situation before and

after the downturn, thus showing the average growth rates during economic slowdown.

Industry's invulnerability to changes in investment climate: usually, the investment goods and

services connected to investment goods are pro-cyclical, their reaction to changes of

economic conditions are very sensitive. The degree of every product /services engagement

into investment activities is based on its ratio of non-investment (intermediate) purchases of

product to its purchases as of gross fixed capital.

Industrys dependency on private final consumers: usually intermediate goods and services

experience amplified fluctuations in their demand compared to final consumer spending

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categories, which exhibit lower volatility and are less sensitive to economic downturn. The

average ratio of private final consumption expenditures to business purchases of the product

is used to evaluate the sensitivity of the specific production category.

The durability of industrys production: an additional measure of industrys sensitivity to

economic downturn. The durability of the good is determined by the period length of itsservice / usability; for durable or semi durable goods the service period can be extended

(contrary to non-durable goods) and thus the demand for durable or semi-durable goods

would fluctuate more and react pro-cyclically in the light of economic changes.

Industrys resistance to changes in countrys GDP: it is measured as the elasticity coefficient;

how sensitively the industry reacts to changes in countrys GDP.

Industrys dependency on other industries (forward linkage): the variable, measured as the

horizontal sum of all coefficients of Leontiefs matrix inverse. It measures the cumulative

output decrease in the sector, if the final demand for the production of all sectors were to

decrease by one unit. In the phase of economic downturn, it is a measure representing the

power of other industries to affect the industry of interest.

Industrys ability to affect other industries in the economy (backward linkage): measured asthe vertical sum of the coefficients of Leontiefs matrix inverse. It shows how much influence

the industry has on other industries and how strong these links are. It measures the extent to

which a unit change in the demand for the product of the sector causes production increases

in all the sectors of the economy. Every industry that affects other industries strongly could be

called the cornerstone of the economy and thus having more influence on the overall

economic situation than the other industries. Being one of the key industries in the economy

gives it additional strength and resistance to economic shocks.

Each measure of industrys performance is compared across all industries in the country and

is then attributed to a corresponding percentile judged on its performance (scale from 1 to 100).

The better the value of criteria is the higher percentile the industry reaches. The percentiles are

then weighted by their relative importance and the final score is calculated as the weighted

average.

INDUSTRY GROWTH/PERFORMANCE

Chart 6 Key Industry Indicators 2004-2010

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Source: Euromonitor InternationalNote: PPI (Producer Price Index) is a measure of the average change in selling prices over time received bydomestic producers of goods and services.

Chart 7 Key Industry Indicators Annual Growth 2005-2010

Source: Euromonitor InternationalNote: EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is a measure of a company's

earnings that ignores the interest expense, profit taxes, depreciation and amortization.

Chart 8 Turnover of Local Producers and Nominal GDP 1997-2016

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Source: Euromonitor InternationalNote: Shaded areas mark historic slowdown years and current economic downturn.

Chart 9 Total Market Dynamics and the Role of Local Producers

Source: Euromonitor International

ROLE OF IMPORTS AND EXPORTS

Chart 10 Imports and Exports 2004-2010

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Source: Euromonitor InternationalNote: Imports CIF (Costs, Insurance and Freight) is imports value with freight, insurance and other costs

incurred during transportation of goods from the port of origin. Exports FOB (Free on Board) is exportsvalue including freight cost up to the port of origin but excluding all other costs.

Chart 11 Import vs Export Growth

Source: Euromonitor International

INDUSTRY SECTORS

Chart 12 Turnover of Local Producers by Sector 2004-2010

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Source: Euromonitor International

Chart 13 Industry Sectors Growth Indices 1997-2016

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Source: Euromonitor International

COMPETITIVE ENVIRONMENT

Chart 14 Number of Local Producers by Size of Enterprises 2004-2010

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Source: Euromonitor International

Chart 15 Local Producers Turnover by Size of Enterprises 2004-2010

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Source: Euromonitor International

BUYERS

Chart 16 Buyers Expenditure on Sports Goods Industry 2004-2010

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Source: Euromonitor InternationalNote: Other sources of revenue include: remaining buyers expenditure on industrys

products/services, and changes in buyers inventories. Here Investment refers to gross fixed capitalformation, excluding change in stock.

Chart 17 Annual Growth of Buyers Expenditure 2004-2010

Source: Euromonitor International

Chart 18 Buyers Share of Sports Goods Market 2004-2010

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Source: Euromonitor International

Chart 19 Buyers' Investment in Sports Goods Industry 2004-2010

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Source: Euromonitor International

Chart 20 Bargaining Power: Buyers 2010

Source: Euromonitor InternationalNote: The bargaining power table enables the consideration of all main bargaining power evaluation factors,

supplementary to those shown in the bargaining power chart below. By looking at all major factorsaffecting the industrys relationship with buying industries, the table helps to determine the industrysability to bargain with and pressure its major buyers.

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Buyers share in industrys market: expressed as a percentage share of total market size, this

reveals which are the most important buyers for the industry under review. The share is

proportional to the potential bargaining power that the buyers might have.

Industrys share in buyers costs: expressed as a percentage share of total intermediate

buyers costs, this shows how important the industry under review is to each buyer, relative totheir other suppliers. The higher the share, the stronger potential bargaining power the

industry under review might have against its buyers.

Number of potential buyers: the figure reveals how many companies the industry under

review could be potentially selling to. The number of potential buyers is proportional to the

bargaining power of the industry under review.

Level of concentration: expressed as the percentage of total industry output produced by

large companies, this figure shows the degree of concentration of the buyers market. The

higher the figure, the more production is created by large companies, meaning that the

industry has a lower ability to switch and find new buyers.

Import penetration: expressed as a percentage of imported products in the buyers market,

this shows how the buying industry is pressured by imported goods. The higher thepercentage, the smaller the market share that local buyers account for, thus giving them lower

bargaining power.

Chart 21 Buyers: Households & GDP 1997-2016

Source: Euromonitor International

Chart 22 Buyers: Education & GDP 1997-2016

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Source: Euromonitor International

Chart 23 Buyers: Education Spending on Sports Goods

Source: Euromonitor International

Chart 24 Buyers: Agriculture & GDP 1997-2016

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Source: Euromonitor International

Chart 25 Buyers: Agriculture Spending on Sports Goods

Source: Euromonitor International

SUPPLIERS

Chart 26 Main Industry Costs and Suppliers 2004-2010

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Source: Euromonitor International

Chart 27 Annual Growth of Main Industry Costs and Suppliers 2005-2010

Source: Euromonitor International

Chart 28 Spending on Suppliers as Share of Total Industrys Costs 2004-2010

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Source: Euromonitor InternationalNote: Intra-industry trade (the industry itself is among its major suppliers) refers to the exchange of products

within the same industry definition range. The industry classification can include a wide variety of supplychain components from raw materials to finished or semi-finished goods. Consequently, it is notuncommon that one part of a product is produced by one company and then sold to another enterprise inthe same industry to be included in the production of a final product. This trade enables the industryplayers to specialise in a limited range of production and reap the advantage of increasing returns.

Chart 29 Bargaining Power: Suppliers 2010

Source: Euromonitor International

Note: The bargaining power table enables the consideration of all main bargaining power evaluation factors,supplementary to those shown in the bargaining power chart below. By looking at all major factorsaffecting the industrys relationship with supplying industries, this table helps to determine the industrysability to bargain and pressure its major suppliers.

Spending on suppliers: expressed as a percentage share of the industrys intermediate costs,

this reveals which are the most important suppliers for the industry under review. The higher

the share, the stronger the potential bargaining power that suppliers have.

Industrys share in suppliers market: expressed as a percentage of suppliers total market

size, this shows how important the industry under review is to each supplier. The higher the

share, the stronger the potential bargaining power that the industry under review might have

with its suppliers.

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Number of potential suppliers: this figure reveals how many companies the industry under

review could be potentially dealing with, for a specific input. The higher the number of

suppliers per company of the industry under review, the higher the bargaining power of the

industry under review.

Level of concentration: expressed as a percentage of total industry output produced by largecompanies, this figure shows how concentrated local suppliers are. The higher the figure, the

more production is created by large companies. Consequently, the higher the figure, the lower

is the industrys ability to switch and find new suppliers.

Import penetration: expressed as a percentage of imported products in suppliers market, this

shows how the supplying industry is dependent on imported goods. A higher percentage

implies a lower bargaining power for local suppliers.

Chart 30 Suppliers: Plastics Products & GDP 1997-2016

Source: Euromonitor International

Chart 31 Suppliers: Plastics Products Cost and Price Dynamics

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Source: Euromonitor International

Chart 32 Suppliers: Corrugated Paper, Paperboard and Containers & GDP 1997-2016

Source: Euromonitor International

Chart 33 Suppliers: Corrugated Paper, Paperboard and Containers Cost and PriceDynamics

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Source: Euromonitor International

Chart 34 Suppliers: Basic Precious and Non-ferrous Metals & GDP 1997-2016

Source: Euromonitor International

Chart 35 Suppliers: Basic Precious and Non-ferrous Metals Cost and Price Dynamics

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Source: Euromonitor International

Chart 36 Supply Structure ( million, year 2010)

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E u r o m o n i t o r I n t e r n a t i o n a l

Source: Euromonitor International

BARGAINING POWER

Chart 37 Bargaining Power of Buyers and Suppliers

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E u r o m o n i t o r I n t e r n a t i o n a l

Source: Euromonitor International

Bargaining Power: Explanation

Bargaining power is a concept referring to the relative abilities of parties to influence each

other in setting trading terms, especially prices. The graph of bargaining power enables a quick

evaluation of which of the main buyers and suppliers have the strongest effect on the industry

under review with regards to the ability to pressure for better business terms. The roles are

presented using two major bargaining power evaluation factors: share of intermediate costs and

role in the market. Other factors, such as number of buyers and suppliers, concentration ratiosand industry rivalry, are presented in the bargaining power tables above.

The graph is separated into buyers area and suppliers area, depicting the industrys top

three B2B buyers and suppliers. Note that on the graph:

The sizes of boxes in the graph visually represent the importance of and help to evaluate

buyers and suppliers ability to bargain with and pressure the industry under review ;

The arrows indicate the direction of the pressure, with this being either towards the industry or

towards its buyers and suppliers.

Pressure towards the industry (represented on horizontal axis)

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Buyers

Shows how the revenue received from each of the top three buyers is important to the market

of the industry under review. Expressed as a percentage of the industrys market size;

The higher the percentage, the larger the market share of the buyer, thus possibly giving it

higher bargaining power with regards to the industry under review.

Suppliers

Shows how the expenditure on each of the three suppliers is important to the intermediate

costs of the industry under review. Expressed as a percentage of total intermediate costs;

The higher the percentage, the larger the share of costs related to the supplier, thus indicating

a potentially higher bargaining power against the industry under review.

Pressure towards buyers and suppliers (represented on vertical axis)

Buyers

Shows how important the industry under review is to each of the top three buyers costs.

Expressed as a percentage of buyers total intermediate costs; A higher percentage indicates higher possible bargaining power for the industry under review

towards its buyers.

Suppliers

Shows how important the industry under review is to each of the top three suppliers.

Expressed as a percentage of total suppliers market;

A higher percentage indicates higher potential bargaining power for the industry under review

towards its suppliers.

FUTURE OUTLOOK

Chart 38 Forecasts 2011-2016

Source: Euromonitor International