The audience at Cheerleading Worlds 2013 expected pyrotechnics from the Cheer Athletics Panthers. Lithe and powerful as their mascot, the team of 36 teenage girls took the stage at Walt Disney World Resort and proceeded to show gravity who was boss. As gasp-inducing as their handsprings and back tucks were their uniforms: micro-crystal-drenched mesh with a muscular feline appliqué draped chest to hip. The effect was radical, as though Bob Mackie had been appointed wardrobe master at your local high school.
Karen Noseff Aldridge, founder of uniform company Rebel Athletic, had risked her startup's entire $10,000 marketing budget to establish her brand at the event, the cheerleading calendar's big kahuna. "Overnight, everybody knew who we were," says Noseff Aldridge. "Following the reveal of that uniform at Worlds, we took in over $600,000 in 72 hours."
The roughly $300 million market for cheerleader apparel is dominated by traditional sideline squads that rally crowds at high school and college games. A smaller but bigger-spending segment is All-Star--teams, like the Panthers, that live to compete. All-Star cheerleaders buy their uniforms from the specialized gyms where they train. Gym owners buy uniforms from manufacturers and sometimes act as their sales reps. As in Olympic figure skating, aesthetics matter in All-Star, where uniforms are sexier and flashier than their school counterparts.
That bias toward bling has helped make Rebel one of the most exciting companies to hit cheerleading in years. In 2012, Noseff Aldridge jump-started couture in a rut-stuck industry, employing trained fashion designers to satisfy customers' wildest flights of fancy. She operates her own factory in China, where, she says, employees are paid above-market wages to perform intricate, highly customized work in small batches, enabling her to compete on price while staying ahead in quality and design.
Rebel, based in Dallas, turned a profit after 12 months. In 2015, its revenue approached $20 million. The Dallas Cowboys and Atlanta Falcons cheerleaders use its practice wear and uniforms. "Karen has given us a whole new way to look at uniform construction and design. She's a trendsetter," says Brad Habermel, an owner of the Plano, Texas-based mega-gym Cheer Athletics, home of the Panthers. "She's brought real excitement to this industry."
But even as Rebel generates buzz and profits, a mighty opponent wants to swat it down. Varsity Brands is a $1.2 billion company owned by the $3.5 billion private-equity firm Charlesbank Capital Partners. Thanks to an aggressive campaign of acquisitions, rebate plans that make it expensive for gym owners to switch suppliers, and other strategies, Varsity Spirit, the corporation's cheer division, commands north of 80 percent of the uniform market, as estimated by competitors. The company also wields outsize influence in virtually every aspect of the industry, including the camps and--most important--the competitions, which also serve as merchandise showrooms for apparel vendors.
Having established a name in All-Star, Rebel is now making a run at Varsity's traditional sideline business, where schools present a very different customer universe. Here, too, Varsity dominates thanks to longstanding relationships with school coaches. "They grew up in the Varsity system," says Noseff Aldridge. "All they know is to buy Varsity." It's another chance for Rebel to play the "challenger brand": an upstart using unexpected tactics to tackle an entrenched player. Mark Barden, a partner in the consulting firm Eatbigfish, which coined the term, says Rebel is among the purest examples of a challenger brand he has seen. Noseff Aldridge "is incensed by the way Varsity works and wants to fix it," he says. "You need that sense of righteous indignation to fuel a small group of people up against formidable odds to go back and back and back again to try and win."
A challenger brand can't do something just better: It must also do something that's different--dramatically so. "Our focus is to do everything 180 degrees different from Varsity," says NoseffAldridge, who is intense and smart, her rapid speech interrupted by occasional sizzles of irritation. She has codified that intent in Rebel's "Customer Charter." Six of the charter's 10 promises are explicit reversals of Varsity practices. For example: "We will respond to every phone call and email within 24 business hours" and "We provide the same level of service to every size of program." Noseff Aldridge was herself--of course--a cheerleader. Born in Taiwan to a Chinese mother and American father serving in the U.S. Army, she lived with her maternal grandparents until age 5. Then her parents brought her to Fort Hood, Texas. "In a small town in Texas," she says, "you were a cheerleader or you were nothing."
She wanted to be a professional dancer. Instead, Noseff Aldridge acceded to her family's wishes and attended Southern Methodist University law school. She left shy of graduation, and in 2007, she launched a company with her former law school study partner. Fortune Denim was their super-premium jeans brand for women, with empowering messages sewn into the waistbands. Within nine months, they had racked up $1 million in sales. Jennifer Aniston and Eva Longoria wore the brand. Elle came calling.
So did the recession. Fortune lost 40 percent of its customers within weeks. The partners shuttered the business, and Noseff Aldridge started doing private label for brands like Neiman Marcus and Abercrombie & Fitch. She also indulged her love for dance by teaching adult hip-hop at gyms around Dallas. One day, a fellow instructor mentioned she was having brunch with Billy Smith, the owner of Spirit Celebration, an independent cheerleading and dance competition company. ("Independent" translates to "not owned by Varsity.") "I had never crashed a brunch before," she says.
Noseff Aldridge told Smith about her business. Smith, in turn, explained that he required thousands of jackets, decorated with embroidery and crystals, to use as awards at his competitions. "He said, 'Let me show you what I've bought,'" recalls Noseff Aldridge. "And he goes into the trunk of his car and brings me this jacket. And he's like, 'Can you make this?'"
Noseff Aldridge thought about her manufacturing connections in Los Angeles and China. She asked what he was paying. "I said, 'I think I can do better than this. And what's more, I can design a better product,'" she says. "Right at that moment, I got into the cheerleading-apparel business."
Billy Smith is the link between cheerleading's past and present. He has been part of the industry since 1980, when Varsity was itself a challenger brand. Now he's an enthusiastic supporter of Rebel and other small companies struggling in Varsity's shadow.
If you want to know how Varsity became Varsity, Smith's your guy. Talk about kismet: He lives in the former home of Lawrence Herkimer, who patented the pompom and, in 1948, popularized cheerleading through a nationwide program of summer camps. (He died last year at age 89.) Smith relates the story of how all this started, on the day when "Herkie talked to Jeff and was not happy with him," says Smith. "And Jeff quit."
Jeff is Jeff Webb, Varsity's founder, chairman, and CEO. Webb had joined Herkimer's company, National Cheerleaders Association, as a camp instructor in 1967. In 1974, Webb tried to buy part of the business, and after Herkimer refused to sell, Webb left to form his own company. Over the next couple of decades, Webb and Herkimer competed head-to-head on camps and uniforms; and Varsity branched out into competitions. Herkimer sold, bought, and resold NCA. He was no longer the owner in 2004, the year Varsity acquired NCA.
NCA is just one of dozens of cheerleading-event, -apparel, and -camp companies that Varsity has gobbled up over the years. About two dozen still operate as distinct brands under the Varsity umbrella. Others were absorbed or simply closed. (Varsity Brands is a portfolio business comprising Varsity Spirit; BSN, a team-sports apparel and equipment arm; and Herff Jones, a class-ring and graduation-apparel arm. Charlesbank bought the company in 2014 for $1.5 billion.)
Varsity's hardball tactics are structured to keep Rebel and other rivals off the playing field. All-Star cheerleaders live to compete, and Varsity owns most of the important competitions. Worlds, where the Panthers uniform put Rebel on the map, is a production of the U.S. All Star Federation, which is largely controlled by Varsity. Teams appearing in Varsity competitions can wear whatever uniforms they want. But rival apparel makers can't show their wares at those events, which are important showrooms for cheer merchandise. (Varsity's vice president of public relations responded to Inc.'s initial inquiry but ultimately declined to make an executive available for an interview. The company's outside PR firm did not answer several requests for a meeting.)
The events are also critical to Varsity's rebate program, Rebel's biggest obstacle. Gyms collect fees from cheerleaders to participate in competitions. Varsity typically signs gyms to two- or three-year agreements that provide a cash rebate for Varsity competitions their teams attend, which helps those gyms' bottom lines. That rebate extends to purchases of Varsity apparel. Noseff Aldridge estimates gyms get anywhere from $1,000 to more than $20,000 back if they buy uniforms and practice wear exclusively from Varsity. (The average price of an All-Star uniform is between $200 and $300.) Varsity also owns gyms, which Rebel can't touch.
Some small competitors just throw up their hands. Tish Reynolds launched Just Briefs, a maker of cheerleading practice wear, in 2005, and grew the business to $3 million. But "Varsity kept telling [customers] you've got to buy your uniforms from us," says Reynolds. Varsity acquired Just Briefs in 2010 and closed it, even though it hired Reynolds as part of the deal. She recently left to start Just Briefs Apparel. Like virtually everyone interviewed for this article, Reynolds praised Varsity for its contributions to the industry and says it sells high-quality products. "I just think Jeff [Webb] is very driven," says Reynolds. "There is enough out there for all of us. Why make it so difficult? It's like he has to have 100 percent. He can't be happy with just 95 percent."
Challenger brands typically build their strategies around distinctive, hard-to-replicate strengths, says Barden. Noseff Aldridge is the David in this battle, small but wielding a mighty slingshot. She is backed by a successful family business that loaned her close to $2 million--since repaid--for her startup. That business is Pacific Northern, a manufacturer of retail jewelry displays with 95 employees in Dallas and some 2,000 in China. Noseff Aldridge's mother, Tina Noseff, and two uncles, Richard and Eddie Lee, launched it in 1988.
More important to Rebel's long-term success is the groundwork her relatives laid for operating in China. Connections there allowed Noseff Aldridge to buy and run her own factory in Guangzhou Province. Instead of the typical high-volume, low-cost approach, she has adopted Pacific Northern's model of rapid prototyping and using teams to work on small orders. Rebel also differs by auditioning sewers and production workers and paying them better than local rates. Even with higher human capital costs, outsourcing allowed Rebel to undercut Varsity by 25 to 30 percent, says Noseff Aldridge.
Challenger brands also take an outsider's view by applying insights from other industries. That's true of Rebel, whose founder got her start in premium jeans. The word couture was not a part of cheerleading's lexicon until Rebel popularized it. "If you have $340 or more to spend, you are going to get your freakin' dream uniform," says Noseff Aldridge.
Couture customers--who make up 40 percent of Rebel's business--speak in person or via Skype with a designer. They exchange images and ideas until the customer is satisfied. At that point Rebel creates a prototype for customer approval, makes adjustments, and sends out a rep or a fit kit to collect measurements for every team member. "We bring that concept to life one time for your team, and then it is buried and never done again," says Noseff Aldridge. Rebel employs 13 creative designers and is hiring more. All are fashion school graduates who experiment lavishly with crystal mold shapes and dyeing processes. The company has created a number of proprietary fabrics, as well as innovations like the "bodyskort," a one-piece, fitted uniform with a skirt in front and shorts in back; and the "locked skirt," with panels that prevent the garment from flipping upside down when its wearer does.
Challenger brands also need allies, says Barden, to "find synergies and efficiencies, and hope to make a bigger impact." Last fall Noseff Aldridge formed the Rebel Alliance to strengthen relationships with independent events producers and support small cheer-products suppliers. Among other things, Rebel has offered to help Alliance members source in China and to provide marketing, legal, and financial consulting. "Anything we can do to help make their event better, their gym better, their business better or stronger to compete against Varsity, we will do it," says Noseff Aldridge.
The Alliance's birth coincided with one of Varsity's most audacious moves--and for Rebel, its most shattering. In October, Varsity--in a deal widely criticized on industry chat boards--acquired JAM Brands, the second-largest event producer and by far Rebel's most important marketing partner. Just a few months earlier, JAM Brands co-owner Dan Kessler had explained why his company had chosen Rebel to be its exclusive uniform sponsor. "They were edgy. The look was real," said Kessler. "We felt there was some good synergy there."
That synergy vanished last fall, while Rebel was negotiating to renew the partnership. "Suddenly those talks just fell apart," says Noseff Aldridge. A few weeks later, Varsity and JAM Brands announced their union.
JAM Brands ran most of the high-profile competitions that Varsity doesn't own. Together, they control roughly 90 percent of the major events, say competitors. The JAM Brands competitions had been Rebel's most effective platform for marketing to elite cheer teams. "Not partnering with an event company is one thing," says Noseff Aldridge. "But being locked out of partnering with an event company--knowing that a competitor is now going to be in your booth space showing its product--it's a double whammy."
One notable trait of challenger brands, says Barden, is their ability to turn constraints into opportunities. Barred from major competitions, Noseff Aldridge took a page from the book of another challenger brand, Kenneth Cole. In 1982, unable to afford a space at a trade show for his upstart shoe company, Cole did business from a borrowed truck nearby. City rules forbade his parking there unless he was filming a TV show or movie. So Cole made the full-length film The Birth of a Shoe Company while hawking his wares.
Noseff Aldridge's spanking new division is called Rebellion Rising Productions. On the weekend of February 19, her crew--with a police escort and film permit in hand--was expected to park a tour bus outside the Dallas venue of the NCA All-Star Nationals, one of Varsity's biggest events. Cheerleaders and their parents will be welcomed onboard the "Rebel Dreambus," which will be fitted out like a 1950s movie-star dressing room and wrapped in Rebel branding. There they can try on and buy merchandise and, of course, be interviewed for a documentary. The subject of that documentary? Bullying. "Isn't that crazy?" says Noseff Aldridge, laughing.
The archetypal challenger brand is, of course, Apple, whose slogan is the challengers' rallying cry. Others include:
Challenged: Coke, Pepsi
In addition to appealing to an increasingly health-conscious market, Snapple played up its homemade origins and quirky personality. (Wendy, "the Snapple Lady," was a far cry from faceless Big Soda.) It also gained traction working with small distributors serving restaurants and delis, rather than with supermarkets, where its competitors held sway.
Challenger: Under Armour
Challenged: Nike, Adidas
Having popularized the word wick, Under Armour competed on product innovation, including compression garments that help muscles recover quickly. Initially unable to afford mega-buck, mega-athlete endorsement deals, the company now partners with emerging stars, as it did three years ago with Stephen Curry of the Golden State Warriors.
Challenged: Procter & Gamble
Method's elegant designs emphasized eco-friendliness, unlike those of the chemical competition. Method used a limited budget to go big rather than frequent, binding a multipage booklet titled "People Against Dirty" into women's magazines.