Adidas misses goal in Russia
Sanctions hit World Cup sales prospects
In 1980, the Soviet invasion of Afghanistan led dozens of countries to boycott the Moscow Olympics. An undaunted Adidas st i l l sponsored the USSR’s Olympic team, becoming one of the first global brands well-known behind the Iron Curtain.
This year’s soccer World Cup should have had the German company cashing in big on its ensuing decades of expansion in Russia. But another Russian military adventure — this time in Ukraine — has dampened that opportunity.
Vladimir Putin annexed the Crimean Peninsula and invaded other parts of Ukraine’s east in 2014, leading to sanctions that have weakened the ruble and battered Russian consumers and companies. The drop in oil prices from above US$100 a barrel has hurt, too. Add it up and the World Cup may end up providing just a small boost for Adidas in the country.
“Russia didn’t develop to the extent people had hoped, due to sanctions and the oil price, two elements far beyond our reach,” says chief executive Kasper Rorsted.
Adidas started outfitting various Soviet national teams in the 1960s. After the 1980 Olympics, it spent two decades rising to the No. 1 and No. 2 positions among sporting- goods makers in the country with its Adidas and Reebok brands.
Sales in Russia more than tripled in eight years to peak at ¤ 1.1 billion ($1.84b) in the Sochi Winter Olympics year of 2014, and the country became Adidas’ most profitable after China.
Today, Adidas in Russia is just a little more than half the size it was in the 2014 heyday.
For the World Cup, Adidas vowed not to repeat its Russian boom-thenbust mistake. To avoid running empty stores once the soccer-mad supporters return home, Adidas is confining itself to temporary FIFA-run kiosks selling merchandise for fans at stadiums and public viewing festivals in the 11 cities hosting games.
Also, the event should help the brand. Adidas is sponsoring 12 of the 32 participating teams — more than anyone else — including Argentina, Spain, Germany and Russia. Rival Nike is sponsoring 10 teams, among them Brazil, Portugal and France.
The economic opportunity goes beyond shirts and cleats.
Hubertus Hoyt, Nike’s general manager for Europe, says the World Cup is an “ignition point” in the season, prompting consumers to buy the training gear they see on Cristiano Ronaldo or Neymar Jr, and also helps sales of other sports gear.
To reap its benefits, Nike will open a facility for Moscow’s youth in the city’s Gorki Park when the tournament begins.
Adidas sold 14 million official “Brazuca” match balls around Brazil’s 2014 World Cup and 8 million jerseys, a number it seeks to beat this year. Although the tournament and the 2016 Olympics didn’t boost Brazil as much as it hoped, Adidas will keep investing in such countries, Rorsted says.
“Brazil will get its act together, and if you disengage with Russia, it is extremely difficult to get back in,” he says. “Not all investments will pay off, but if you don’t make them, they’ll never pay off. Most of your big bets have to.”