It seems a logic-defying miracle that horse racing survives and remains so resilient, given the black headlines regularly predicting collapse. Yes, there are problems, but September’s Thoroughbred yearling sale at Keeneland reaped a good harvest, thanks in no small part to strong activity among foreign buyers who’ve been the target of marketing initiatives.
There are definite reservations about U.S. practices. Nonetheless, Thoroughbred buyers came from Argentina, Brazil, Canada, Chile, Dubai, England, France, Greece, Ireland, Italy, Hong Kong, several Eastern bloc -stans, seven groups from Japan itself, Korea, Mexico, Panama, Peru, Puerto Rico, Qatar, 16 individual Russians, Saudi Arabia, Singapore and Venezuela. When Arabian sheikhs, Chinese gamblers, billionaire entrepreneurs, Russians, South Americans and the Amish are buying horses in Kentucky, congratulations are due to Keeneland’s busy marketing executives, who are finding new buyers everywhere.
Horses remain Kentucky’s best known export, and the statistics provide happy reading for the state’s economic health. Keeneland sold $219.8 million in yearlings to enthusiasts dreaming of purchasing the stars of the future.
They were searching for the next bargains like Kentucky Derby winner I’ll Have Another, an $11,000 yearling purchase in 2010; Zenyatta, who cost $70,000 in 2005 as a yearling before capturing the nation’s hearts and winning $7,304,580; or Xtra Heat, a $9,100 Keeneland weanling in 1998 later sold for $5,000 before earning $2,389,635 with 26 victories.
This year’s sale’s success can be diagnosed succinctly as lower supply and greater demand fueled by irrepressible optimism. Although Keeneland grossed 1.6 percent less than 2011 on 405 fewer sales, the market’s scales moved into better balance – the $87,354 average price was up 14 percent from last year and the median surged 50 percent from $30,000 to $45,000.
The foreign market would pick up its pace further, according to members of the industry from abroad, if they got the message that the issues they worry about were being taken on.
Beyond the dollars spent in the sales ring, the regional ripple effect of Kentuckian beneficiaries from buyers’ enthusiasm for horses in Lexington includes restaurants, hotels, car rental agencies, gas stations, van companies, higher farm employment and veterinarians. State and local tax receipts are boosted by the horse shopping.
Every racing professional worldwide knows that Keeneland’s September sale auction, which this year offered 3,604 yearlings, is the best place for volume, great choice and variety. The marathon auction dwarfs its rivals here and abroad. Everyone knows future champion racehorses are available here. That’s why foreign buyers come to Lexington.
“A lot of that is due to Keeneland’s efforts to develop these emerging markets,” said Eaton Sales’ Reiley McDonald. “All those people coming here, buying horses that are really, for the most part, lower end in our market – it has created a really solid feel.”
All in all, the Thoroughbred business is remarkably bulletproof, with new money always entering. The most promising emerging markets are in Russia, China and the Middle East, Keeneland’s Vice President of Sales Walt Robertson believes.
Keeneland’s year-round strategic initiative to build and sustain relationships with horsemen in traditional and emerging markets remains a key to its sales success. Its intensive outreach efforts touch buyers in nearly all 50 states and every corner of the world.
The November Breeding Stock Sale attracts just as heavy foreign buying interest. This year’s dates are Nov. 6-16.
Winning thoroughbreds are the best marketing
Marketing efforts a generation ago were, well, lame. The industry’s former motto, “Let new people find us,” is not how one sells horses. Fortunately times have changed for the better, but getting in still can be hard for newcomers, who enter typically through a hit-or-miss or word-of-mouth process.
Keeneland and Fasig-Tipton’s staffs do a splendid job of macro-marketing their auctions to American and foreign buyers. Individual sellers, though, generally have the view that marketing is the sales companies’ job and they seldom bother to micro-market their yearlings to potential individual buyers. Few breeders engage in target marketing.
They probably should.
Describe typical industry marketing activity to outside corporate marketers and they laugh at its inadequacies. Many operations would fail Marketing 101. One Kentucky breeder in the 1980s marketed his yearlings via hiring camels, an elephant and Bob Hope. Another refused to return phone calls from people she didn’t already know. They both went broke.
The industry achieved its success because horses, not humans, sell the elusive scent of victory.
The best marketer of Kentucky Thoroughbred racehorses to the export market was Sir Ivor, a colt foaled in 1965 at Mill Ridge Farm in Fayette County, sold at Keeneland for $42,000 and sent to Ireland.
Sir Ivor “single-hoofedly”created a new market. He became a sensational racehorse whose achievements invented and ignited a desire among rich owners worldwide to buy and race thousands of Kentucky-raised yearlings in Europe. Although not the first Kentucky-bred to win big overseas, Sir Ivor was the catalyst for a phenomenal surge in overseas demand.
Why? Because buyers recognize that Kentucky is a great place to source quality, tough, sound and fast horses.
Increasing foreign markets is vital and interest is there, but the view from abroad isn’t all rosy. Foreign participants can readily list a worrying variety of industry vicissitudes that include hot-housing, corrective surgery, breeding too many unsound horses, drugs/medication and racing’s decreasing popularity in the United States. For newcomers from overseas, the Thoroughbred business does have an image problem.
Established horse business professionals, however, already know how and why to buy in Kentucky, assured in the knowledge they can get what buyers want: winners.
Kentucky’s horses consistently win more of the greatest races than horses reared elsewhere. Buyers flock here because future racing stars grow here, not in Nigeria or Spain or Utah. Buyers return to where they’ve had success, and Kentucky horses win top races worldwide every year. Four of the last American Horses of the Year were sold by Keeneland. Bluegrass horses are mopping up in Japan and Russia.
Proven track records still trump worries
Horse sales are the epitome of pure capitalism, where demand and supply meet, buyers compete, the outside world’s distractions are briefly forgotten and cultures mingle without need for bodyguards or lawyers. For Arabian sheikhs and business moguls alike, buying at horse sales is the closest they can get to pretending they’re children on Christmas Day.
Englishman Mark Richards purchased colts to race in Hong Kong where annual betting on horse races in Hong Kong totals billions of dollars. Richards requires animals who’ll win top races in Hong Kong. He knows Kentucky-breds have proven that they can deliver.
Headley Bell, who has clients racing in England, says Keeneland and Fasig-Tipton “do a fantastic job recruiting foreign buyers.”
However, an English trainer said he’s unhappy about the decreased number of stallions here who appeal to European owners. The star sires whose progeny won many great European races are dead or retired and haven’t been replaced.
Englishman David Redvers, whose chief client is from Qatar, was a major buyer at Keeneland’s September Yearling Sale, with 14 transactions totaling $2.89 million. “Huge selection” and choice are appealing, but Redvers said the “massive concern” of medication will ultimately end his interest in buying American-breds.
Medication is a minefield European trainers and agents tiptoe through, accepting yet disapproving. They choose carefully because medication is banned in Europe.
Equally important is the surgical alteration of growth plates and joints in foals. Foreign buyers dislike and are wary of invasive surgery.
Australian agent Brett Howard has been buying Kentucky horses for 25 years. Australian breeders import quality Bluegrass bloodlines to keep progressing, he said.
Top English agent James Delahooke, who’s bought many Kentucky-breds that later achieved stardom in Europe, comes to sales buoyed by many past successful purchases and because of better value for the money here versus European auctions. However, for him the “dearth of world-class (grass) stallions” is a bigger inhibitor even than medication.
Many European agents said they lacked orders to buy at Keeneland in September because of the stallion and medication issues plus currency fluctuations.
Irishman Chris Owens purchased eight yearlings at Keeneland for the Malaysia market, where he said his client recognizes the great variety on offer and superior reputation of the horses.
Cash Asmussen, former champion jockey in France, bought for Hong Kong based on the previous success of champion Good Ba Ba, which he purchased at Keeneland.
Advice for foreign marketing
Dan Rosenberg, a former farm manager of the year whom some consider to be the wisest horseman in Kentucky, says that a farm’s most effective marketing ploy is to advertise its list of high-class winners and that the decreasing European buying bench here is because the world’s most appealing sires to Europeans are now based in Ireland and England as opposed to the 1980s when their predecessors were in Kentucky.
Agent Stanley D. Petter Jr., who’s bought thousands of horses for every corner of the world, believes that “the drug issue” (race day medication) is a “deal-breaking turn-off to many European customers,” who are reducing their buying of American horses.
One English-based vet in Lexington in September criticized the too-frequent use of corrective surgeries in foals (periosteal stripping), which produce superficially straight-legged yearlings but who are innately bent.
An English trainer said he loves to purchase Kentucky youngsters who’ve been raised traditionally: kept outdoors in all weathers for toughness, living within large groups for competitive development and running in huge fields. Some yearlings nowadays are not risked in those conditions, and the view is they seldom win races as a result. Hot-housed in stalls and small paddocks, they become shy of other horses and never develop the strength achieved by gallops in fields.
Lexington consultant Jim Schenck bought seven yearlings for clients in September. His current of many stars is So Many Ways, possibly this year’s best 2-year-old filly, which he bought for $22,000 and is now worth about $1 million. He agrees that Kentucky’s main peril to overseas buyers is the reduction of stallions who appeal to Europeans.
How should newcomers enter the horse business?
Carefully. Caveat emptor. Hire top-quality advisors like Rosenberg and Schenck with impeccable reputations and high success rates. Don’t hire the first person you meet, and choose a budget with spare money that you can afford to lose without harming your lifestyle.
Improvements suggested by foreign buyers include: stop hot-housing, solve the drug issue, cull weak/slow/badly conformed individuals from the gene pool, stand some stallions appealing to European and Asian buyers and perform better micro-marketing.
Doug Rawnsley is a Thoroughbred owner, buyer and consultant with past winners across the U.S. and 11 countries. He has bought champions in Canada, England, Ireland, Italy, Singapore and New Zealand and two in the U.S. He can be reached at [email protected].