The way ahead: Super Group outlines its US assault with a global Betway brand strategy

As a launchpad for potential future success, the reverse merger with a so-called blank-cheque company has gone from a little-known, seldom-used financial vehicle historically viewed with suspicion to a popular and accepted route to the public markets. And the gambling industry wasted little time jumping on the SPAC bandwagon such is the clamor to crack America. The latest to reveal its hand was Super Group (SGHC), the company behind Betway and multi-brand casino Spin, with the unveiling in April of a $4.75bn SPAC merger with Sports Entertainment Acquisition Corp. (SEAH) to form a New York Exchange-listed global gambling company.

Discussing the decision to go public, which will see SGHC’s existing shareholders hold 88% of the combined group, SGHC CEO Neal Menashe namechecks the parties on the other side of the table at SEAH: US investors Eric Grubman (chairman and CFO) and John Collins (CEO). “These are two individuals who have come from Goldman Sachs, the NFL and NHL and have a lot of knowledge and experience, particularly in the US,” he explains to EGR. “From our point of view, it was the perfect timing, but we were not actively looking for it. We were introduced to Eric and John and there was an instant chemistry and the whole SGHC project snowballed from there.

“The metrics of the deal made sense and, most importantly, we found two unbelievable individuals that are now joining our board,” explains Menashe. “This is not just the normal SPAC where people move off into the sunset. Our SPAC partners are staying and lending their expertise to help Super Group in the long term as we move into the US and globally. For us it was a perfect way to bring us all together.”

The CEO’s comments are echoed by SGHC president and COO Richard Hasson, who waxes lyrical about the operator’s new support. “From the first time we met them, it felt like a perfect match. For the last few months we’ve known them, it really does feel like a genuine partnership. We are looking at opportunities together, as if we’ve already gone through the SPAC process and it really feels like an excellent match,” he adds.

Under the microscope

By announcing the decision to go public, SGHC pulled back the curtain on its Betway and Spin operations and offered investors and the media a window into a company that has tended to avoid the limelight. While the Betway logo seems to be plastered everywhere in the world of sport with more than 60 brand partnerships, including appearing on the shirts of Premier League club West Ham United, the senior people behind this opaque business have kept a low profile.

Licensed in 23 jurisdictions and employing 3,500 staff, the operator revealed in its glossy presentation that it boasts more than 2.5 million active customers and accepted $42bn in bets in the 12 months to 21 March 2021. Interestingly, the average bet size is under $2, which sounds particularly low on face value, yet you have to take into account this includes slots. These naturally tend to be a few cents per spin. This statistic emphasises that the company has a large, casual customer base rather than relying on VIPs and the RG issues this can create.

Meanwhile, the Betway sportsbook offered 7.3 million markets, 374,000 in-play events, and recorded a stable ~10% trading margin in 2020. SGHC said that when it comes to its geographic mix, the Americas accounted for 48% of the $1.1bn NGR achieved in the 12 months to the end of March. Indeed, the Betway brand has established a strong presence in Latin America, particularly Brazil where Betway holds a podium position for brand awareness, according to Nielsen research. Europe was 21%, Africa 12% and the rest of the world made up 18% of the total. Shifting the balance of the pie is now the aim with the assault on the US, a market with a TAM of $53bn at maturity.

The opportunities presented by greater expansion into the US market have proven very lucrative for a long list of European operators, including William Hill, Entain, and Flutter Entertainment, with each choosing to expand for different reasons. “The US as an opportunity is a platform for us to accelerate our growth, and it is also a perfect vehicle for the world to understand the Super Group business and our brands,” Hasson explains. “From that point of view, this merger helps with some of the backstory for Super Group globally and of course helps us to engage with regulators,” he adds.

SGHC has market-access deals in 10 states, yet it is a market that has become a more crowded one, while the top-tier sports betting giants have a stranglehold on some online betting states. The US is characterized by high revenue, but also high costs as DraftKings has demonstrated with its mammoth losses mainly due to marketing. While the market may be daunting to some, the US market is too big to ignore, and many have crossed the Atlantic either through market-access deals with local operators or through the medium of M&A.

SGHC is somewhat late to the party, choosing in February to ink a brand license agreement for Betway with Digital Gaming Corporation (DGC) and giving it access to 10 US states. However, SGHC subsequently entered into an agreement to acquire DGC, the company revealed simultaneously with the SPAC merger announcement. Despite it being three years since PASPA’s repeal, Menashe remains upbeat, which he attributes to Betway’s global pedigree and not only its existing US sponsorships with teams such as the NBA’s Chicago Bulls, but its wider partnership deals.

“What we have shown historically is our ability to replicate our success. We are experts in entering new markets and scaling in those markets, and some of those have been similar in competitiveness to the US market so we have got a good track record,” he explains.

“When you combine that with the high brand awareness of the Betway brand, then the operational scope of Super Group, which employs 3,500 people with many years of experience coming to the table, I am confident in our ability to replicate that success on a state-by-state basis in the US,” he adds.

Providing further context on that bullish confidence in a global ability to drive US success, Hasson reveals how that impacts at a wider level: “We view our market as the globe. We do not necessarily look at the states and think, well we must end up with a 40% market share for the US market to make sense. We are a scale business looking at incremental revenue across numerous states, and in numerous countries outside the US.

He continues: “We, as Super Group, have great operating leverage within the business. We have great sales and we do not necessarily have to be in position number one or number two in any given state or any country for that market to make sense.” But why has it taken the company this long to enter the US? In response, Hasson explains: “While we’re well positioned to capitalize on that opportunity [the US] because of that experience, what we needed was a well-capitalized investor to really build out that business in the US.

“This SPAC and the DGC acquisition are part of a global strategy. In the US we are looking at things on a state-by-state basis, the same way that we look at say Europe on a country-by-country basis as part of our global rollout.”

As the SGHC COO alludes to, the SPAC deal has not only enabled Super Group to add critical US market expertise and investment, but it has also allowed the firm to formalize that existing US-facing relationship with DGC by bringing the firm in-house through acquisition. While the acquisition itself has yet to be concluded at the time of writing, Menashe says the existing DGC management team will remain within the original business for the time being.

Bang for your buck

SGHC forecasts that group NGR for 2021 will hit $1.5bn and EBITDA will amount to over $350m, giving an NGR margin of 23%. As well as having a debt-free balance sheet, the reverse merger means the combined operation will have $205m of unrestricted cash to accelerate growth, which throws up the possibility of future M&A. Discussing this, the two executives, who have a combined 35 years of gambling industry experience between them, come back to one key word: agility. They are referring to an ability to make quick acquisitions due to the absence of debts and any necessary existing financial reshuffling inherent in so many M&A deals.

Menashe says: “As a business, we are already employed in looking at opportunities, whether they be marketing opportunities or buying other businesses. However, the fact is we would have to look at every opportunity as it came around to see where we can deploy it.

“The difference is, we generate money. We have got cash on the balance sheet, which is generating profits so what we would do and something that we have always done is to look at how we can deploy the best ROI for the individual business as possible,” the CEO adds.

Despite the clear balance sheet, Menashe discloses little on the financial costs of securing and expanding the business in markets including the US, however he highlights the key role of data in determining the strategy at the firm since day one. “We will look at marketing decisions and marketing opportunities very much on a data-driven basis and make decisions on that basis. From the get-go it has been very much about the return on marketing,” he explains. “We will combine the global brand with data-driven marketing and based on our experiences of the market, we understand how to invest. In the last five years alone, we have spent about $1.3bn in marketing. We know how to invest and we will invest.

“What we have not done historically and do not intend to do going forward is spend marketing money for the sake of spending marketing money. We do it where it makes sense to be able to generate a great return on investment.”

Menashe goes on to say that all of this is underpinned by the data acquisition and retention strategies the business has executed. “We will continue to do that in a way that is global in nature, but localized in approach in terms of brands, partnerships, and sponsorships. We look at and price every market individually, which is something we have been doing for over two decades. Different returns will come at different times in each market, but it is something we have done and will continue to do all over the world,” he adds.

Expanding on the firm’s relationship with data, Menashe asserts that Super Group’s data and analytics technology sits at the center of the firm’s relationship with customers and its wider strategy. Feeding into this, he highlights the acquisition pillars of tailored sponsorships and marketing with new customers where the bulk of the marketing dollars will be spent and later on in using data and analytics to monetize and retain those customers through customized experiences.

“Our business is quite simple: it is the cost to acquire the customer and then it is the lifetime value, and the difference between the lifetime value of the customer and the cost to acquire them is your return on investment,” Menashe explains.

“If you are acquiring at too high a price and your lifetime value is too low, well, then you are never going to make money, or you are acquiring so much but they are leaving out the back door at the same time. So, it is all about getting the cost of acquisition right, getting the lifetime value right, and that all comes down to localization, data, and systems.

“That is how we built the business. It is all about the systems and interventions. It is all about everything to do with the lifecycle of the player and a customer’s journey. That goes for marketing as well in terms of connecting those for the retention of your customer base. When you multiply that by multiple countries and multiple languages, all of that is the scale that the Super Group business underneath has always operated in,” he adds.

Single occupancy

As first disclosed in the group’s SPAC presentation, the key to SGHC’s global strategy and something which sets it apart from the likes of Entain and Flutter, is the use of a single sports betting brand (Betway) rather than a pantheon of brands. Aside from the obvious savings on brand development, Menashe highlights the resonance with players as another benefit when used across multiple territories.

The SGHC CEO reveals that Betway will serve as the group’s main operating brand in the US market, drawing on its global visibility, with Spin potentially serving as secondary brands in those states where igaming is legalized.

“Our offering has broad appeal in terms of not only the Betway and Spin brands individually to customers who want a pure gaming or pure sports betting experience, but also there are great opportunities in terms of cross-selling as well. We have got quite a broad mix.”

He adds: “Spin is a totally different sort of business model because of casino orientation, with lots of different genres and different customers. You can basically keep and breed individual business units so it is very key that they are all separate,” Menashe explains.

For SGHC, its understanding of the nuances between sports and casino/igaming customers is reflected by its choice to segregate the two brands as part of its worldwide approach.

“In terms of the two offerings, it is not like we are cannibalizing one of them by having two offerings. We are appealing to different types of customers, different segments of the market, and being able to produce entertainment for more customers that they find appealing, be it in sports betting or in the casino brand.

“Customers find the brand that they are most comfortable with in terms of the brand, the experience, its identity, and other points,” he adds.

At the time of writing, the Super Group SPAC has yet to be formally concluded, however the executives explain that this is merely a formality and that they have already begun looking forward. Discussing the potential next operational market expansion for the firm, Menashe reiterates the group’s global gaze, citing the potential opportunity of an expanding total global market that could be worth as much as $100bn by 2025.

“We do not aim to be the biggest operator in the global market. Our aim is to be open for business in more countries than any one of our competitors with a single brand, Betway, and to follow that with a very important igaming offering in Spin,” he asserts.

Hasson highlights the potential problem of narrowing a very globally focused vision to a specific market but suggests this could also be a luxury in that it can choose to expand at its own convenience and not when dictated to by the permutations of that individual market.

“In terms of our ability, we have proven we know how to enter markets and we know how to scale those markets once we are in,” he explains. “We have teams that are constantly looking for the next opportunity, assessing the commercial viability of many markets at any point in time, and positioning ourselves favorably to capitalize on those markets when they do open or regulate.

“It is important to know this is a marathon, not a sprint. That is very important. It is not about the short term but about the long-term view.” If this analogy proves to be correct, SGHC and its Betway brand could possibly end up in a medal-winning position in the US once the dust settles. And that would truly be some achievement for this 20-year-old operator.