Adidas: Another Winner at the World Cup?

The German giant hopes to leverage its World Cup ubiquity in its battle with Nike

By Nathan Thornburgh Monday, July 12, 2010
    • Laurence Griffiths / Getty Images

    Adidas expects to sell 13 million of its Jabulanis, the official World Cup ball

    In mid-may, Michael Ballack, the captain of Germany's national soccer team, took a spikes-up tackle that left him writhing facedown on the turf, his right ankle shredded and his World Cup over before it began. Germany's coach called the foul "brutal"; the tabloids howled for justice. But there was a special pain at Adidas headquarters in the southern German town of Herzogenaurach, where Ballack was known not just as Michael (the way the rest of Germany refers to him) but also as the Capitano. He was to star as a character in "The Quest," Adidas' graphic-novel-inspired ad campaign showing Zinedine Zidane assembling a sort of Justice League of top players (Argentina's Lionel Messi as the Spark, Spain's David Villa as the Blaze, and so on). "It's a reminder that this is sport," says Erich Stamminger, head of global brands for Adidas. "You cannot just partner with one player. You need a portfolio."

    Adidas' portfolio for the World Cup is robust: it sponsored 12 of the national teams in South Africa, including favorites like Spain, Germany and Argentina. It is the official FIFA sponsor and creator of the Jabulani ball, which fluttered, soared and sailed over goals throughout the first round of action but is still expected to be a top seller. (Adidas estimates it will sell 13 million Jabulanis.) It has already sold at least 6.5 million national-team jerseys — more than double its jersey sales from the 2006 World Cup. The 2006 games netted Adidas about $1.6 billion in sales, and projections are for $1.9 billion this time, despite the recessionary environment. In the first quarter of 2010, the Adidas Group, which includes Adidas and Reebok brands and is the world's second largest footwear company, after Nike, posted a net profit of $222 million — a huge improvement over the $6.5 million for the same quarter in 2009. Adidas-brand soccer products account for about 14% of the Adidas Group's sales.

    The real game for Adidas, however, is being played out in fields far from South Africa: the ongoing showdown against footwear leader Nike. It's like an old grudge match between two powerhouses — think Brazil vs. Argentina on the pitch — with plenty of ups and downs over the years. In the past year and a half, Adidas has been falling further behind its old rival, particularly as the Reebok brand floundered. But Reebok is on the rebound, and Adidas is hoping to ride its traditional strength — soccer — for even more momentum this year. "With the Reebok turnaround gathering pace and the FIFA World Cup," said Adidas CEO Herbert Hainer in a May statement, "we have a lot of reasons to be optimistic."

    The contest between the two companies may be a global game, but each field is slightly different. In Asia, for instance, the struggle between Nike and Adidas has revolved around a decidedly mundane problem: inventory. After the Olympics wound down and the recession started up, says Christopher Svezia, an analyst at Susquehanna Financial Group, Nike had the nimbler operation. It was able to tailor its inventory and distribution to the decreased demand, whereas Adidas says its China sales have been hampered by too much old product that needs to be cleared out before new product can come in. As a result, Svezia says, "Nike has returned to growth the past two quarters or so in China, but Adi has not. They're pretty far behind."

    In Latin America, the two companies "are pretty competitive," says Svezia, with Nike slightly ahead. Europe, however, in terms of brand recognition, still belongs to the home team: Adidas leads in major markets like Germany and France. But Nike has edged ahead in others, like soccer-mad Italy. And Adidas stumbled in Eastern Europe in recent years, as Russia's currency weakened. Unlike Nike, which uses local partners in Russia, Adidas opened its own stores there — an expensive, risky strategy. Adidas is by far the market leader in Russia, but it took a hit when the value of the ruble began slipping in 2008.

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