« Sports bet » lost for Cazoo?

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At the end of 2021, the young British start-up Cazoo, specialist in the sale of used cars to individuals, embarked on an ambitious development plan on the European market, combining external growth and leading sports sponsorship… But very quickly, and in particular in the face of the record losses of the first half of 2022, the Group is backtracking. He announces his withdrawal from European activities, a redundancy plan, and the end of the many partnerships entered into a few months earlier. The story of a story as improbable as it is fleeting, which could have undermined many sports organizations… including OM.

Alex Chesterman is however not at his first attempt. The founder and CEO of Cazoo is even one of the most active tech angels in the United Kingdom, with around forty investments made mainly in a personal capacity and in digital universes. Today, in addition to his activity at Cazoo, the nearly 53-year-old businessman has retained his seat on the board of Zoopla Property Group, an online real estate research and transaction company he created in 2007, and his position CEO of SMH Fleet Solutions, a digital vehicle fleet management company.

And it is precisely the replication of the business model of digital start-ups on physical goods services that is pointed out. Built with fundraising since 2018, the year of its creation, Cazoo is now close to $2 billion raised in total, including $800 million from its listing on the New York Stock Exchange in August 2021. Enough to satisfy the appetite of Alex Chesterman, who has made a series of investments likely to strengthen his presence and his visibility in the United Kingdom, then in Europe.

An avalanche of strategic investment

From 2020, Cazoo’s ambitions are displayed. The Group sponsors the Rugby League World Cup 2021 (not to be confused with the Rugby World Cup) for the largest sum ever committed to the competition. A little earlier was signed for 2 years the shirt sponsorship of the Toffees d’Everton, valued at around 13 million € annually (which came to an end last June without being renewed by Cazoo), while that of the Villians concerns around 11 million € annual and should end at the end of this season. The amounts of the deals made with the Wales rugby team and with the English Football League have not been filtered but each contain 7 figures. On the cricket side, Cazoo has signed a multi-year contract with the English and Wales Cricket Board for an amount of €3 million per year.

These first heavy investments in a very competitive market largely contributed to the €115 million deficit recorded for the 2020 financial year (vs. €20 million loss in 2019), but the desire to disrupt the used car market remained intact. Beyond these marketing efforts, the English firm has invested much more massively in an ambitious external growth policy.

In 2021 and early 2022, Cazoo acquires Drover, Vans 365, Cluno, Swipcar and Brumbrum, five companies offering private vehicles for subscription or purchase, respectively in England for the first 2, in Germany, in Spain and Italy for a total amount close to €250 million. During the same period, the Group also acquired the two companies created by its own founder, Smart Fleet Solutions and SMH Fleet Solution, owners of used vehicle maintenance, preparation and reconditioning centers for €26 million and €86 million respectively.

In the meantime, in December 2021 and in the light of the annual closing with a record deficit of €620 million, Cazoo reaffirmed its desire to invest again in order to internationalise, like its partnership with the World Snooker Tour on a trio of eponymous tournaments, the Cazoo Series.

Sports fans as a prime target

In order to promote its recent acquisitions locally, Chesterman is making major new commercial efforts in several sports.

In 2022, the company is expanding its portfolio by becoming in a few months one of the most important sponsors of darts with the Professional Darts Corporation for 8 major tournaments and 2.8 million €, and by committing to golf on the Open of France for €1.75 million.

But it is in football that Cazoo allocates most of its marketing budget. In quick succession, before the start of the 2022-2023 season, Real Sociedad, Valencia, Marseille, Lille, Friborg and Bologna formalize an often broad sponsorship agreement with the used vehicle sales company, for a total certainly higher to €30 million annually.

This is how Cazoo was regularly named as « one of the 20 most expensive brands in terms of sports sponsorship agreements until the first half of 2022 », GlobalData estimating the Group’s annual investment at €82 million per year. . An unexpected windfall for sports organizations which had suffered greatly from the Covid period and were offered particularly attractive conditions.

The business realignment plan

But the idyll was soon and already coming to an end. In June 2022 Cazoo faced « the combination of rising inflation and interest rates with supply chain issues caused by the pandemic and war » and announced a plan to cut 15% of its workforce. aimed at preserving cash at the expense of growth. Confirmation takes place in September 2022, with the company announcing an “orderly halt to its operations” in Europe, to focus on the English market in which it performs. The objective is to save €113 million by the end of 2023, and to find the way to profitability. A massive blow for the clubs who started their collaboration 2 months earlier…

The quickest to react will undoubtedly have been Olympique de Marseille. Two months after the announcement, the Phocaeans announced their next partner as part of an unprecedented partnership. CMA-CGM, one of the world leaders in maritime freight and the largest private employer in the city, has signed up for 2 years from 1er July 2023. The amount of the operation has not been disclosed, but it would be slightly higher than that paid by Cazoo since his contract did not include women.

No panic on the side of LOSC where its President Olivier Létang argues that the current contract will be maintained until the end of the season, and announces discussions to come regarding its possible early termination. Same story on the Spanish, Italian and German side who declared until recently not to have had any particular contact with Cazoo, and would visibly assert the validity of their current contracts.

Faithful to its historic responsiveness, the British seller was quick to shed certain recent acquisitions. In the last quarter of 2022, Aramis acquired Cazoo Trading Italy, formerly Brumbrum, and Renting Finders took over Swipcar for amounts that remained confidential.

The austerity of the realignment plan announced by Cazoo should soon pass an important stage according to them, with the cessation of current operations in France and Germany. In the meantime, the company has published encouraging Q3 2022 results with in particular a 103% increase in turnover compared to Q3 2021 to €395 million, a unit gross margin up to €550 compared to €200 in the previous quarter and a level of cash of 350 million € in addition to a stock of more than 170 million €. The opportunity for the board to confirm the profitability target at the end of 2023.

The speed with which Alex Chesterman’s austerity strategy was implemented may have overcome his relative disbelief at the start, he who experienced only one exit from his many investments, that of a site for the sale of sporting goods elsewhere… For the time being, the negotiations around the termination of the partnerships entered into in Europe seem far from successful. Be that as it may, Cazoo will have marked the world of sports sponsorship to the point that it will certainly be more difficult to convince if by chance Chesterman dreams again of European development in the coming years.

Francois-Xavier Gerard
François-Xavier Gérard, member of the Sport Business Observatory, holder of the Global Excutive MBA from NEOMA, is an expert in the organization and management of organisations.

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