CAN adidas GET BACK IN THE GAME?
No guarantee German sports giant will recover after being bruised by tie-in with rogue rapper Kanye West
IN the American trainer market, Nike — with the likes of superstar Michael Jordan leading their team — have been nailing the threepointers for years, leaving Adidas playing catch-up.
So when the German company got in bed with the American rapper Kanye West, now known as Ye, and launched a lucrative footwear range it looked like they had elbowed their way back into the game.
The rapper’s ‘Yeezy’ range was hugely popular and at the height of the brand’s peak a pair of ‘Yeezy 500 Salt’ trainers were being traded for an astonishing £4,171. His designs captured the younger generation stateside in a way Nike had with their tie-ins with Chicago Bulls legend Jordan.
Then it all went horribly wrong. West started posting anti-Semitic bile on social media and last October Adidas pulled the plug on the deal.
On Wednesday the company posted a 70 per cent hit to annual profits and warned worse is set to come if they decide to ‘burn’ the £500million leftover Yeezy stock that can no longer be sold.
The affair has been an embarrassment for Adidas, although analysts say issues have been building for years — adding that West was papering over the cracks.
Declining sales in China — a key market for the sports industry — as well as a string of failed merger deals, such as the £2.2billion paid for Reebok in 2005, have failed. The company’s other celebrity partnerships have not sizzled, in particular Beyonce’s Ivy Park fashion line which flopped.
But the fallout from the West saga will be felt on the pitch, with Adidas likely to scale back on their huge marketing spend meaning team and player endorsements could be slashed.
Their major contracts are with Mohamed Salah at Liverpool, Paris Saint- Germain’s Lionel Messi, and Damian Lillard of the Portland Trail Blazers as well as teams such as Manchester United, Bayern Munich and Juventus. ‘Adidas will always sponsor the Manchester Uniteds and Bayern Munichs,’ says business analyst Mark Josefson, ‘but will they continue to endorse the lesser-known teams? It is a big question mark.’
Player endorsements are a vital part of the industry but the feeling is that with Adidas in crisis Nike have once more stolen the initiative.
In recent years Nike have also been smarter in their marketing, backing players such Colin Kaepernick, the former NFL quarterback who became famous for kneeling for the pre-game national anthem in protest at racial injustice in the United States. Nike also released an award-winning advert with the slogan ‘Believe in something. Even if it means sacrificing everything. Just do it.’
‘Nike is undoubtedly better at tapping into the zeitgeist than Adidas,’ says Josefson. ‘ Making your brand cool is a very difficult thing to do and Nike are experts.’
But losing is not something Adidas are used to. Founded in 1924 by Adi Dassler and his brother Rudolf in Herzogenaurach, their small hometown in Bavaria, the two men grew the company from the kitchen of their mother’s house into a sporting powerhouse.
Interestingly, the brothers fell out and Rudolf went off and founded Puma (originally called ‘Ruda’) who are muscling in on the big two and this week announced a £10m-a-year boot deal with Jack Grealish.
Forever tarnished by Adi’s Nazi party membership, Adidas nevertheless created the shoes that helped power the African American athlete Jesse Owens to four gold medals under the gaze of Hitler at the 1936 Berlin Olympics.
But it was football rather than athletics that made the brand’s name as they launched the first screw-in studded boot. Franz Beckenbauer then led West Germany to victory in the 1974 World Cup wearing the iconic three stripes. To this day Copa Mundials, World Cups and Predators are worn and worshipped across the globe.
And amid the doom and gloom there is evidence that the company can be turned around. New chief executive Bjorn Gulden, who took over in January, engineered a spectacular revival at, of all places, Puma.
‘Adidas has all the ingredients to be successful,’ he said this week, ‘but we need to put our focus back on our core product, consumers, retail partners, and athletes.’
Rita Clifton, former chairwoman of the marketing consultancy Interbrand, says: ‘The Adidas brand has been one of the most valuable since its inception. It has a much more sustainable longterm value than Kanye West.’
But investors are sceptical and by 2025 Nike could be more than double the size of their German rival with sales of nearly £80bn, compared with roughly £30bn at Adidas.
Three more points to Nike.