Stars and Stripes

How Adi­das chief Kasper Rorsted is up­ping the ante in the com­pet­i­tive U.S. mar­ket at a crit­i­cal time.

Footwear News - - CONTENTS - By Peter Verry

How Adi­das’ top ex­ecs are ac­cel­er­at­ing their suc­cess­ful strat­egy in the U.S. mar­ket.

There’s no ques­tion Adi­das has found a win­ning game plan in the U.S. mar­ket, but now the ath­letic gi­ant is fac­ing a new chal­lenge: to main­tain mo­men­tum. ➵ Much of the suc­cess has come un­der the watch of CEO Kasper Rorsted, who has ral­lied the team to pro­duce more hot prod­uct, pump up tech and cap­i­tal­ize on re­la­tion­ships with celebri­ties and in­flu­encers. ➵ Since as­sum­ing the role in 2016, the exec (who se­cured the No. 2 spot on FN’s 2018 Power List) has over­seen sig­nif­i­cant sales growth in the North Amer­i­can re­gion, in­clud­ing this year’s Q1 and Q2 bumps of 21 and 16 per­cent, re­spec­tively. ➵ In that time, Adi­das’ mar­ket share has also ex­pe­ri­enced tremen­dous growth.

Ac­cord­ing to data pro­vided by The NPD Group Inc.’s re­tail track­ing ser­vice, the brand owned 6 per­cent of the footwear mar­ket in the 12-month pe­riod through Septem­ber 2016, trail­ing Nike and Jor­dan Brand. But it has jumped over the Jump­man, earn­ing the No. 2 spot, trail­ing only the Swoosh with 11 per­cent of the mar­ket, ac­cord­ing to re­cent data from NPD.

The achieve­ment was pow­ered by suc­cess­ful shoe fran­chises (most no­tably, the Ul­tra Boost and NMD), win­ning over sneaker diehards with styles from famed brand part­ners in­clud­ing Kanye West and Phar­rell Wil­liams, and a re­newed love for long­time fa­vorites such as the Stan Smith.

As the busi­ness con­tin­ued its up­swing, U.S. pres­i­dent Mark King left the com­pany in July and was suc­ceeded by 20-year Adi­das vet Zion Arm­strong, who most re­cently served as the area’s GM. While there’s a new leader in charge, how Adi­das ap­proaches the U.S. con­sumer —

which in­cludes deep­en­ing its roots in sport — hasn’t changed. “The plan is ex­actly the same. We built it to­gether in con­junc­tion with our part­ners in Ger­many, and we will con­tinue to bring that plan to life,” Arm­strong told FN. “It hasn’t been per­fect ev­ery step of the way, but the progress we’ve made has been heavy, so there’s zero change in strat­egy.”

But not ev­ery move to win con­sumers over has been fruit­ful.

“They’ve had some prod­uct mis­steps over the last 18 months or so; they be­gan to make in­tro­duc­tions that weren’t quite so suc­cess­ful — EQT, Pro­phere,” ex­plained Matt Pow­ell, se­nior sports in­dus­try ad­viser with NPD.

Also, the in­sider said Adi­das is hurt­ing from the lack­lus­ter per­for­mance of the iconic Su­per­star sil­hou­ette, which had been one of its top-per­form­ing styles at re­tail.

“Su­per­star is in ma­jor de­cline. At one point, it was 20 per­cent of Adi­das sales in the U.S.,” Pow­ell said. “That’s a dan­ger­ous po­si­tion to be in, liv­ing on a block­buster item.”

Ac­cord­ing to NPD, the brand has had just one sneaker ap­pear on a quar­terly best-seller list this year: the NMD_R1 in Q3.

But Pow­ell doesn’t see this as a neg­a­tive. In­stead, he be­lieves it’s an in­di­ca­tion of the mar­ket seek­ing va­ri­ety. “The con­sumer is look­ing for unique prod­ucts; they don’t want to look like ev­ery­body else. And that re­quires a broad range, as op­posed to a very nar­row port­fo­lio,” the ex­pert ex­plained.

And Rorsted sees that as an op­por­tu­nity. “What’s im­por­tant is, the sum out­paces the mar­ket,” he said. “Of course we’d like to be in the top 10, and we’ll be there in some quar­ters, but from a sta­bil­ity stand­point, it’s more im­por­tant that we have a set of fran­chises that are out­grow­ing the mar­ket.”

Here, Rorsted and Arm­strong dis­cuss Adi­das’ con­tin­ued North Amer­i­can growth, the fu­ture of its re­la­tion­ship with West and his Yeezy line, and how pol­i­tics play into de­ci­sions re­gard­ing with whom to align.

What are you do­ing to fuel suc­cess in the U.S. mar­ket that your com­peti­tors aren’t?

Kasper Rorsted: “We were the first to com­bine pop cul­ture and sports [with West]. Sec­ond, [we have] a re­lent­less fo­cus on driv­ing in­no­va­tion into our prod­uct. And third is in­te­grat­ing sus­tain­abil­ity into our busi­ness model like no one has ever done be­fore, through Par­ley [for the Oceans, to pre­vent plas­tic pol­lu­tion]. We’ve done all three of these things ear­lier than our com­peti­tors.” Zion Arm­strong: “Our growth is com­ing off a small base be­cause we weren’t a com­pet­i­tive player in the mar­ket [in 2014]. We’ve seen tremen­dous growth be­cause we were so weak early on. We’re see­ing the re­sults right now from the in­vest­ment from [Ger­many] into truly win­ning in North Amer­ica.”

West once had the hottest shoe around, but there’s a lot more com­pe­ti­tion now. How do you keep the mo­men­tum go­ing?

KR: “With cer­tain prod­ucts, [we will fo­cus] on brand ac­ti­va­tion, short­ness on the vol­ume, and other shoes will be more com­mer­cial­ized like we did with the [‘Triple White’ Yeezy Boost] 350 V2.”

Do you think mass pro­duc­tion of a spe­cific style could ham­per buzz and de­mand for the style?

KR: “No, I think the brand can carry much broader prod­ucts than it has so far, and we’re just get­ting to phase 2 in what we’re do­ing with Kanye. If we didn’t con­tinue to re­new the prod­ucts he’s bring­ing out, even­tu­ally you could get some fa­tigue. But I don’t think there’s risk for fa­tigue with what we’re do­ing. Ac­tu­ally, it’s on the con­trary.”

ZA: “The Kiths and the Pack­ers — they’re not see­ing chal­lenges with this. And what we’ve seen with the most re­cent scarcity drops — Desert Rats and 700s — is that sell-through has been in­stan­ta­neous. We’re mak­ing sure the pipe­line is full of new­ness and, at the ap­pro­pri­ate time, com­mer­cial­iz­ing what’s been in the mar­ket for two years.”

Have West’s con­tro­ver­sial po­lit­i­cal views caused dis­rup­tion for Adi­das?

KR: “Kanye brings dif­fer­ent points of view out. We want cre­ators to have free­dom and some­times have a dif­fer­ent point of view, some­thing peo­ple could re­act to in a pos­i­tive or a neg­a­tive sense. That is what Kanye brings to the ta­ble. If he brought a com­mon po­si­tion for ev­ery­body, I

think peo­ple would not re­act the way they do. And in many ways, we’re very sup­port­ive of what he does, but it doesn’t mean we’re sup­port­ive of ev­ery state­ment. We’re not sign­ing up to his state­ments; we’re sign­ing up to what he brings to the brand and the prod­ucts he’s bring­ing out.”

Does Adi­das con­sider ath­letes’ or celebri­ties’ so­cial and po­lit­i­cal views be­fore align­ing with them?

KR: “It is a fac­tor, but we sign ath­letes on how they per­form first and fore­most. What’s im­por­tant to us is that the ath­letes with whom we en­gage are in ac­cor­dance with our com­pany. I can­not fore­see us sign­ing some­body who is, for ex­am­ple, a de­lib­er­ate racist, be­cause that is a con­tra­dic­tion of what we stand for. If peo­ple were in­ap­pro­pri­ate, we would can­cel con­tracts. We’ve done that with ath­letes or as­so­ci­a­tions. For in­stance, we didn’t be­lieve the In­ter­na­tional As­so­ci­a­tion of Ath­let­ics Fed­er­a­tion val­ues aligned with us any­more, so we can­celed the con­tract.”

ZA: “At the same time, we’ve en­hanced our sports mar­ket­ing con­tracts to en­sure that we’re in­clu­sive, so if some­one comes out through the LGBTQ com­mu­nity and a team drops them, we won’t sup­port that team. That’s ground­break­ing.”

What do you make of Nike us­ing po­lar­iz­ing for­mer pro quar­ter­back Colin Kaeper­nick in ad­ver­tis­ing?

KR: “They’re mak­ing a point of view, and we’re try­ing to make the same point of view, and that is that sport unites; we don’t be­lieve it should sep­a­rate. It was a good stance to take; I’ve been very trans­par­ent about that in­ter­nally at Adi­das, also.”

What did you think when Pres­i­dent Don­ald Trump went af­ter Nike on Twit­ter?

KR: “I have not seen ev­ery tweet he’s made [about Nike]. I can only look upon us and speak about us. We have cre­ated thou­sands of jobs in the U.S., and I as­sume that our com­peti­tor Nike has cre­ated even more jobs than we have. We look at it as if we can cre­ate jobs and get peo­ple to ex­er­cise, we think it’s good for so­ci­ety.”

Are you afraid that if you did some­thing Trump didn’t agree with, he would come af­ter Adi­das pub­licly?

KR: “There has to be a busi­ness rea­son for ruf­fling any­one’s feath­ers. We op­er­ate in 75 coun­tries; we have a lot of dif­fer­ent politi­cians in the coun­tries. My job as CEO is not to have a po­lit­i­cal opin­ion about ev­ery sin­gle coun­try in the world. It’s to make sure we have the right lead­er­ship teams in the dif­fer­ent coun­tries and be­come a good cit­i­zen in the coun­tries where we build a sus­tain­able busi­ness. That does not mean we don’t have a po­lit­i­cal po­si­tion about the EU, but we very sel­dom have a po­si­tion on any given in­di­vid­ual that rep­re­sents a coun­try.”

Are you wor­ried about Brexit in re­gard to busi­ness with the U.K.?

KR: “It’s un­re­al­is­tic to be­lieve that the Euro­pean and English econ­omy will not be neg­a­tively im­pacted by Brexit. Any­one who would state some­thing dif­fer­ent will sim­ply be against facts. It will im­pact any in­dus­try, in­clud­ing ours.”

How is Adi­das pre­par­ing?

KR: “You can’t pre­pare for the fun­da­men­tal eco­nomic setup of the EU. What you can pre­pare for is a dif­fer­ent dis­tri­bu­tion method­ol­ogy, so right now, we’re build­ing ware­house ca­pa­bil­i­ties in the U.K.. Any global com­pany deal­ing with the U.K. will have that is­sue, and ev­ery U.K. com­pany that deals with the rest of Europe will have that is­sue. It’s one of the most of un­wise po­lit­i­cal de­ci­sions in the last 30 years.”

Is­sues sur­round­ing women in the work­place have been in the spot­light this year. How are you fo­cus­ing on this is­sue?

KR: “Women’s em­pow­er­ment is not new in our com­pany. More than 32 per­cent of the lead­ers in our com­pany are fe­male. And we’re [fo­cus­ing on] equal pay and pro­mot­ing in ap­pro­pri­ate ways.

“The first 18 months as the CEO, I was men­tor­ing three fe­male lead­ers — one from Europe, one from the U.S. and one from Asia — to set the tone from the top. I be­lieve it’s im­por­tant that if you want it to be taken se­ri­ously, if I don’t spend my time on it, why would I ex­pect any­one else to spend their time on it?”

ZA: “With some up­com­ing an­nounce­ments, my front­line, my di­rect [se­nior leader] re­ports are 50-50 male-fe­male — maybe even slightly higher. We’re ex­cep­tion­ally proud of that. We also have a women’s en­ter­prise re­source group in Port­land [Ore.], and they al­ways give me the feed­back on how we can im­prove. We’re happy with the progress, but we still have a long way to go.”

What is your take on new­com­ers such as All­birds, which has cap­tured a lot of con­sumer at­ten­tion this year?

KR: “It’s good for the in­dus­try that you have com­pa­nies push­ing the borders and com­ing up with new in­no­va­tion. The rea­son why it’s good is be­cause smaller and ag­gres­sive com­pa­nies keep larger com­pa­nies on their toes. But the vast ma­jor­ity of these com­pa­nies will not have a long life cy­cle, speak­ing sta­tis­ti­cally. If you look so far, there are few niche com­pa­nies that have made in­roads.”

Would you ac­quire one of these com­pa­nies if they got hot enough?

KR: “I don’t think we should buy the brand; I think we should buy the tech­nol­ogy or busi­ness model. If you look at our in­vest­ment in Car­bon [dig­i­tal light syn­the­sis tech­nol­ogy], that’s an ex­am­ple. For us as a com­pany, [that’s a pri­or­ity]. It could be com­pa­nies that sup­ply ma­te­ri­als or with a spe­cial­ized com­pe­tence in dig­i­tal de­sign.”

“We’re [fo­cus­ing on] equal pay and pro­mot­ing in ap­pro­pri­ate ways.” — Kasper Rorsted

Zion Arm­strong

Kanye West

Adi­das x Par­ley NMD_R1

Phar­rell Wil­liams

Adi­das x Phar­rell “Hu Holi” col­lec­tion

Adi­das Yeezy Boost 350 V2 “Zee­bra”

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