By Kelsey Riley
With a full-service Thoroughbred nursery, stallion roster, student program and racing club to oversee, Irish National Stud Chief Executive Officer Cathal Beale has a lot on his plate. He also has an opportunity to see the Thoroughbred business from numerous perspectives, and the TDN‘s Kelsey Riley caught up with him at Keeneland’s January sale in Lexington, Kentucky this week to talk about some hot-topic industry issues.
KR: What brings you to Kentucky this week?
CB: I’m here trying to source some new stock for the Irish National Stud, trying to find some nice mares to support our stallions, and it’s always good to get out to meet people and let people know we’re here.
We’ve purchased two mares for the stud: we got lot 130 [for $60,000], she is a stakes-placed winner at two and in foal to California Chrome, so that’s quite exciting. We got another mare for $20,000 [lot 308] and we’re very happy with her; she’s a half-sister to some stakes horses and nicely bred in foal to a good stallion in Dialed In. It’ll be interesting to see how the market receives those yearlings in a couple years in Europe.
KR: Your flagship stallion is of course Invincible Spirit. How is his 2019 book coming together?
CB: He’s nearly completed. He’ll be limited again to in and around 100 mares for longevity, to try to keep him going for as long as we possibly can, but we’re delighted with his book. He had such a fantastic year last year with three Group 1 winners, two of those being 2-year-olds, and 19 stakes winners. It was a fabulous year for him on the track so people will continue to support him.
Limiting the book is something we do in particular with him because of his age . We don’t want to over face him at this stage of his career but he’s been remarkably fertile and we want to keep him that way. We haven’t covered Southern Hemisphere and we just try to get him to peak in the four months of the season when we really need him, and the other eight months are his own time. It’s the decision we made to cover no more than two mares per day with him to give him every chance. Last year his fertility was exceptional again so it’s great that he can keep going.
KR: Two others you have on the roster are Decorated Knight and Free Eagle, who were both very top-class middle distance runners. Both have been featured as TDN value sires in recent weeks, but support of breeders hasn’t exactly been strong; Decorated Knight covered 66 mares last year, and Free Eagle 58. Is it concerning that these types of sires are struggling to get a chance?
CB: I think it’s part of the bigger picture. You have to take a step back to look at the entire model. The biggest problem [the Thoroughbred industry] faces is we’re in a very competitive market for people to be interested in what we do. There are new sports coming along all the time and sports that are reinventing themselves. MMA [Mixed Martial Arts] didn’t exist 10 years ago, in Europe certainly, and now it’s a big sport. So there’s such competition to be relevant and stay on the pages of the daily newspapers.
Ultimately as an industry, we have to unite under the banner that we have to make ourselves as relevant as possible to Joe Public. In doing that, we have to make the return on investment attractive for people coming into the game. We know it’s attractive in terms of fun, but we need to make sure it’s attractive from a monetary sense as well, or as attractive as we can possibly make it. What we have to do is pull everybody together and face in the same direction and make the case to those who pull the purse strings.
If we do that, that then has the knock-on effect of making racehorses more attractive than just something you have to sell as a foal. Breeders are at the pin of their collar at the moment because they’re trying to breed to sell a foal because that’s where the incentive is for them, to sell as a foal, rather than retain the horse themselves and race it, which has been the model for the past 200 years. So they’re choosing what you might deem faster [sires], six or seven furlong horses, for that result. So until we can incentivise breeders to retain their fillies or actually try to race the stock themselves, until we get to the point where it’s affordable for breeders to be able to do that, we’re going to see a fall-off on those sorts of middle distance horses, I think.
Having said that, the markets that are opening up for flat racing especially are global. And the majority of these markets are looking for 10-furlong horses. Hong Kong, Australia, Singapore and all of these emerging Eastern markets are looking for the 10-furlong horse. I think over the next two or three years there might be a migration back towards that sort of horse, and I certainly hope there is because ultimately the Thoroughbred is about the piece of wood at Epsom, as Tesio said. I think that’s the ultimate thing we’re trying to breed so I think if we can get back to that, that’s a positive thing.
KR: When you announced your 2019 stud fees, you said you were lowering a number of them to “reflect the current market sentiment.” Can you expand upon that?
CB: It’s no secret that breeders are under pressure, and certainly commercial breeders have had a tough year. We’ve been listening to people in the barns as we go around and we felt we had to respond to that. We’re in the business of trying to give people a chance to make money on our stallions, because that’s why they come back the following year. It’s a business decision as much as anything else and it’s the right decision in this climate, where breeders are really struggling at the foal sales, particularly this year, to make end’s meet. I felt we had to respond to that by dropping the fees on what we might call our middle-market stallions. We reduced Free Eagle, Decorated Knight, Dragon Pulse, National Defense, Gale Force Ten, and we maintained Invincible Spirit. That was a conscious decision we wanted to make.
KR: You’ve already alluded to the polarisation at last year’s breeding stock sales, and it was probably at an unprecedented level. How do you think this worrying trend can be corrected, and is there a way to stimulate spending at lower levels of the market?
CB: It comes back to that big picture thing. Everybody keeps beating on about prize money and I think that’s logical, but it’s not just prize money: the bigger thing is the return on investment. Prize money is the biggest return you can get but there’s also a big return if you can get a good horse and sell it to a foreign market. You add that up on the plus side, and then you have the costs on the negative side. The VAT increase is an issue in Ireland now; it’s gone up to 13.5%. It seems from a breeder’s perspective that the costs keep creeping up and the prize money keeps-while everyone is doing their best efforts to push it forward, the return on investment of the whole package together really needs to be more competitive. Other markets like Australia in particular have done a great job making conscious decisions to increase return on investment by increasing prizemoney, and we in Europe have to respond to that and make ourselves as competitive as possible for new entrants to enter the market. A new entrant will come and take a look and they’ll want to see what the economic return is on their investment. It’s really important for us to make sure that is as attractive as we can possibly make it. We need to put forward a very clear case to government, or whoever is in charge of making those decisions, that investment in our industry is going to return three, four, five, six times what they put into it in terms of jobs, exchequer returns-we need to stress the fact that we’re extremely good at this in Europe. In Ireland, England, France, Germany, Italy, in particular, we have the land, the people to do these things. It’s an investment worth making for government and it’s up to us to keep making sure we make that case, that it’s not a handout we’re looking for-it’s an investment. Investing in our industry is going to return massively to government and it’s getting that case and making that point. Everything filters down from that. With the issues that are out there at the moment-breeders are struggling, people are struggling to find staff; trainers, if they have more prize money to aim at, can then make more money and pay their staff more. It trickles down; it’s a filter system from the very top and it’s about getting that funding system correct and attractive as possible. Everything else filters down from that.
KR: Are there industry stakeholders making that case to government?
CB: Absolutely. It’s something we have to keep doing and keep trying to improve upon. It’s really about making sure that the case is being made and being made so they can understand what we’re doing. It’s important for us to put it in layman’s terms, to say, for every Euro you put in, here’s what the return on the investment is. And it’s extremely significant. I can only talk about Ireland on this, but there are 30,000 jobs directly and indirectly as a result of horse racing, and if they continue to invest more, there will be more jobs and there will be greater returns to the exchequer if companies are making profits and they’re getting taxed on those profits. If we can convince them of the benefits of that, everything else flows back.
KR: Brexit is a massive concern at the moment too, but we don’t yet have much of an idea of how it will affect our business. Are you seeing any affects of potential repercussions in any parts of your business?
CB: I think people are always inclined to be cautious when there’s uncertainty, but having said that we need to just keep going. There are no prizes for sitting on your laurels and not doing anything, so it’s business as usual to a degree and continuing to push forward and hoping they come up with a solution. There’s a significant amount of work going on behind the scenes in terms of getting the HHH [high health horse] protocol [maintained post-Brexit], and that is absolutely vital not just for the Irish industry but the English and French industries as well. Being able to bring our horses and people across the borders without checks is vital. There is a lot of work going on in Europe at the moment to make that case and get that deal over the line, and that’s a vital piece of legislation to come. Without that we’re probably in a bit of trouble, but I’m cautiously optimistic we can get that done, which will alleviate most of the fears we have with Brexit.
KR: You’re now about a year and a half into your role as CEO of the Irish National Stud. How is it going so far?
CB: It’s just the most fantastic opportunity because no day is the same. We have a stallion business to run, a boarding business, a consignment business, we’re selling our own stock, we have a lot of clients, but we also have an education piece, and a tourism piece. It’s incumbent on us to be at the forefront of explaining these things to government and to allow people an opportunity to get as close to a horse as they actually can, whatever level they’re at. Whether that’s as a tourist that’s paying €12 to get into the stud and see a horse and they may never have seen a horse in their lives before, or whether that’s somebody who has a keen interest in racing, to set up a racing club like we have will allow them to come in and participate in some really nice horses to take them not just to the big days but the small days; get them to every racetrack across the country if we can over the course of the next couple of years with INS racing.
There are various levels, and we try to pitch an option to somebody at every level. That’s the tourism for €12, the INS Racing for €399 or the mares syndicate for €16,000 for a share, or nominations from €1,000 to €120,000; to try to pitch something there at every level so people can take the next step, whatever that may be, and have a good experience and nearly through osmosis learn a bit more about racing and maybe set off a little spark in someone that they want to come back. What we’re really here to do is get people closer and get people a little more involved in racing.
KR: You mentioned the Irish National Stud’s Breeding Course, and you yourself as well as many others in top positions in the industry worldwide came through that course. The course must be something the Irish National Stud is quite proud of?
CB: It’s another way of getting people further along the road in whatever they’re doing. We have 30 students coming in this year and it’s been running for 48 years. I’ve met so many guys here in Kentucky this week who did the course and came out here 20, 30, 40 years ago. It’s still so highly regarded among them and they continue to send people back to us. They’ll suggest someone go to the National Stud and do the course, so we’re excited the 30 are starting next Monday for our 48th year. It’s the oldest and biggest network of people in the bloodstock industry so we’re very proud of it.