Helmets off, hats on

January 25, 2013, 11:36 PM UTC

FORTUNE — In a September advertisement, New York Giants wide receiver Hakeem Nicks says into his phone, “I don’t care about the money.” He then asks the person on the other end of the line, “How many football caps they offering?”

The commercial was for New Era, which was embarking on its first season as the official on-field cap of the NFL. (It will thus also be the exclusive on-field cap at the Pro Bowl this weekend.) Later on in the same ad, Dallas Cowboys owner Jerry Jones appears, telling a colleague in a ten-gallon: “Ditch the hat, son. We only wear football caps now.” But what’s a “football cap?” Don’t football players wear… helmets?

They do, but not when they’re sitting on the sidelines. And the scores of coaches, trainers, and injured players on those sidelines don’t wear helmets either; many of them have always worn hats. From this season forward, those hats must be New Era caps. If an assistant coach were to don, say, an Under Armour hat on the field during a game, he’d get fined. Snarky sports outlets like Deadspin have ridiculed the fines that the league so zealously doles out. (Redskins quarterback Robert Griffin III was fined for wearing Adidas gear to a press conference, instead of apparel by official outfitter Nike).  For New Era, the deal was a big coup. When Reebok lost its exclusive with the NFL to Nike, it opened the door for New Era to become the league’s on-field cap king.

The cap-maker, headquartered in Buffalo, NY, was already the official hat outfitter of Major League Baseball. But now that New Era is wrapping up its inaugural season as the same partner for the NFL, company president Pete Augustine is ready to declare it a success. “By our unofficial calculations,” he says, “the average number of people on the sidelines wearing hats, including coaches and players, was about 15 per team last year. This year we’re seeing more like 30.” Augustine adds that certain players who didn’t often wear hats now do, which may mean they dig the New Era options. He cites Tom Brady as an example: the New England Patriots captain, who is Under Armour-sponsored, placed tape over the Swoosh on his league-mandated Nike gear. But all winter he has had no issue pulling on New Era’s knit beanie, with its visible logo, as soon as he heads to the sidelines.

MORE: The man who dressed Michelle Obama

The company’s annual revenue is around $700 million, which puts New Era slightly below half the size of Under Armour in terms of sales. The hat-maker has grown more than 43% since 2010, and did not have any down year during the recession. The company has opened new offices in far-flung areas like Australia and Korea (its largest areas of sale outside the U.S. are the U.K. and Japan), and is up to 1,300 employees globally. In other words, it is doing many things right.

So, in the wake of grabbing such a major contract, what can a cap-maker do to innovate and build? For starters, New Era has begun to expand beyond headwear. It just launched a backpack line, and also sells belts, wallets, and other accessories. These new products are geared toward what New Era calls “the uniform of the youth,” which Augustine defines as “basically our hat on a kid that’s wearing denim, a t-shirt, a hoodie, and sneakers.”

But caps make up 90% of New Era’s business. “Moving into other areas won’t be easy,” says Matt Powell, analyst for SportsOneSource, “but they have tremendous brand equity.” That brand equity comes, Powell says, from the fact that for years, New Era has “done a wonderful job maintaining a premium position in the market. Highest retails and best quality products.” New Era has 66% share of the U.S. licensed cap market, and its closest competitor isn’t a fellow cap-maker, but Adidas, which has 15%. Third is cap-maker Twins, with nearly 6%.

New Era also keeps creating new hat lines, since it cannot rely solely on the NFL exposure. (After all, Powell says that grabbing the official sideline deal is “not a big deal to anyone anymore.”) In timing with the new baseball season, the company will launch Diamond Era, an updated take on the 59fifty line: lighter material with better performance than the old cap, Augustine says.

And it has deftly used celebrities and humor in its ad campaigns. In addition to football faces like Nicks and Jerry Jones, in 2011 New Era released a series of TV spots about rivalries, with Alec Baldwin and John Krasinski (Yankees vs. Red Sox) and then in 2012 with Craig Robinson and Nick Offerman (White Sox vs. Cubs).

MORE: 2012 sports endorsement stars (And 2013 prospects)

In additional videos just released this month on YouTube, rappers like The Game, and Big Boi of OutKast, discuss their new records while sitting in a New Era store. “New Era, man, has always been a fixture,” The Game says in his spot. “I kind of remember when New Era took over MLB… I’m rocking with them.” Featuring guys like these two is wise, as it hearkens back to rappers like Jay-Z sporting Yankee hats, which has enormously boosted the company’s cred. (“Since this is a New Era, got a fresh new hat,” Jay-Z raps in “The Prelude.”) The way Augustine sees it, thanks to Jay-Z the Yankees symbol “is considered a classic American logo. There are people out there in the world who want our cap that wouldn’t be able to pick Derek Jeter out of a police lineup.” (A Red Sox fan may not love the theory that the Yankees logo represents America, but nonetheless, Yankees hats are New Era’s best-selling team item by far, in any sport; the company sold 617,000 of the on-field style alone in 2012.)

Michael Burch, a 31-year-old who works in marketing and has a giant hat collection, says that only a tiny handful of his 40 caps are not New Era. He sees New Era as “the authority on fitted hats.” The only issue with owning that title? Trends come and go. In the early 90s, the cool hat for young men was a classic double-bar college hat—by cap-maker The Game—with plastic snaps in back. Now the fitted, flat-brimmed cap is king, but if that changes, New Era will need to adjust quickly. (Five-panel hats by labels like Supreme, for example, are very popular of late.) And as Burch acknowledges, “New Era is definitely playing into the main audience consumer, who right now wants a flat brim, as opposed to trying to get back the guys who liked the script hats back in the day.”

Still, if hat-heads like Burch are any indication, New Era, for the time being, has both the size and the cred: “I’m actually disappointed when a hat I want is made by Mitchell & Ness or, god forbid, Zephyr,” he says.

If the smaller players in the cap business hope to cut into 92-year-old New Era’s market share, they’ll need to come up with the next big trend in urban headwear, or adopt equally clever advertising strategies. A commercial with someone like Beyoncé probably wouldn’t hurt right now.