Plotting strategy in his office 10 miles from the headquarters of archrival Nike, Erich Stamminger contemplates what it's going to take...
PORTLAND — Plotting strategy in his office 10 miles from the headquarters of archrival Nike, Erich Stamminger contemplates what it’s going to take for Adidas to knock Nike off its pedestal as the No. 1 athletic shoe and apparel company in the world.
“We all know that this does not come overnight. Even if you do everything right, you will not in 12 months change the world,” said Stamminger, the president and CEO of Adidas America, who also serves as global marketing chief for its German parent, Adidas-Salomon.
Adidas is mapping out ways to beat Nike at its own game after announcing early this month it will buy No. 3 Reebok International, based in Canton, Mass., for $3.8 billion.
Even combined, Adidas and Reebok will still trail Nike in annual sales — $8 billion for Adidas and $4 billion for Reebok last year — or a total of $12 billion compared with $14 billion for Nike.
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But the merger, if approved, will instantly add a good chunk of the domestic market to Adidas, which has always competed head-to-head with Nike around the rest of the world.
Adidas, with about 9 percent of the U.S. athletic-footwear market, will get another 12 percent share from Reebok — for a total of 21 percent compared with about 36 percent for Nike.
It could also boost the bidding for the top athletes in every sport, industry analysts say.
Stars who have not yet signed major deals, like D.C. United soccer player Freddy Adu and golfer Michelle Wie, for example, along with “a handful of others are now in a great position because they will take advantage of what may not be a bidding war between the two companies but will certainly be a much more compelling race,” said David Carter, founder of the Sports Business Group, a marketing firm.
Outbid on celebrity
Adidas has resisted paying top dollar for celebrity athletes or has been outbid by Nike in the past — including for NBA star LeBron James, who made headlines in 2003 when he signed an endorsement contract with Nike worth an estimated $90 million.
“We are not ready to pay any amount people are asking for,” Stamminger said about the negotiations with James. “We set ourselves a limit. But it finally came down to the money. It just went beyond our limits.”
He said that Adidas could have afforded to outbid Nike, but started talking to James at about half the final price before eventually dropping out.
When asked whether there was a limit to the endorsement deal Adidas signed with soccer star David Beckham, Stamminger laughed. “I can tell you one thing, it was not about price,” he said, noting that Adidas founder Adi Dassler grew up with soccer in Germany in the early 20th century and could even be seen at matches personally changing shoes for players well into the 1950s.
“Soccer is our No. 1 priority,” he said as a digital display outside his office counted down the minutes until the 2006 World Cup. “This is our lifeblood.”
Choosing athletes for Adidas endorsement contracts is a study in making sure the athlete’s potential is a good fit for marketing plans and product lines, Stamminger said.
But he declined to talk about how good a fit Reebok will make as a corporate addition to Adidas, citing Securities and Exchange Commission restrictions on executives involved in a pending merger.
“I don’t see how the addition of Reebok helps them in their quest to run against Nike,” said Jack Trout, a veteran sports-marketing consultant. “Does this mean Nike is not going to get their hands on the big athletes? I doubt it.”
Instead, Trout said, Adidas has to support two separate and distinct brand identities when Nike is intensely focused on a single identity represented by a universally recognized symbol, the “swoosh” logo.
“Most people probably don’t know what the Adidas logo looks like. But everybody knows what the swoosh is,” Trout said. “It’s a tough problem they face and I don’t see how Reebok helps Adidas with that problem.”
Adidas Chairman and CEO Herbert Hainer of German parent Adidas-Salomon, has said the Adidas and Reebok brands will remain separate, and Stamminger confirmed it.
“There’s going to be an enormous amount of work that needs to be done to integrate those two companies,” said Michael Atmore, editorial director of Footwear News, a leading trade publication in New York.
When asked about the three separate logos for the three Adidas divisions — performance shoes and clothing, street fashion and sports style — Stamminger said the company was unlikely to consider blending the designs or substituting a single design.
Stamminger — a 19-year Adidas veteran who worked his way up the company’s marketing ranks — said he’s also unlikely to change his low-key style after the merger. He said he prefers to avoid the kind of celebrity attention given to Nike founder and Chairman Phil Knight, a former track star who enjoys attending major sports events such as the Wimbledon tennis championships.
“I don’t need to read my name in the newspaper,” Stamminger said. “My focus is the brand. This brand is what the consumer wants to see and wants to buy.”