Liverpool’s Performance Didn’t Earn Apparel Deal Renewal, Adidas CEO Says
Adidas AG (ADS) declined to renew its apparel deal with Liverpool because the price was too high given the 18-time English soccer champion’s poor performance, the chief executive officer of the world’s second-biggest sporting goods maker said.
Liverpool, which is also a five-time European champion, has replaced Adidas with a club record, 6-year, 25 million pound ($38.3 million) contract with Warrior Sports, a subsidiary of New Balance Athletic Shoe Inc. The accord, Warrior’s first major soccer contract, begins next season and is worth almost double the current agreement with Adidas.
Liverpool has struggled to recapture glories that made it England’s dominant team during the 1970s and 80s. It hasn’t won a league championship since 1990 and last season was overtaken by Manchester United as the holder of the most titles. Liverpool didn’t make the Champions League, Europe’s top club competition, this season and is seventh in the Premier League, 13 points behind leader Manchester City.
“The gap between their performance on the field and what the number should be is not in balance,” Adidas CEO Herbert Hainer said in an interview in Munich yesterday. “Then we said, ‘Okay we will not do it. That’s the end of the story.’” Liverpool didn’t respond.
The team’s lack of success hasn’t stopped it signing other commercial agreements. London-based bank Standard Chartered (STAN) is paying a record 81.5 million pounds to have its logo displayed on its jerseys for four years and the team’s sales department has also signed new sponsors like Turkish tourism.
The contract with Warrior may benefit the team further because it allows Liverpool to retain control over all merchandise not related to the clothing the team wears, something that it had ceded to Adidas. Still, it will no longer be able to rely on the company’s vast global supply chain.
“It all depends on the success and the effort and the popularity, the exposure on TV, revenue you can generate by merchandising,” Hainer said. “This all has to be brought in line between what you offer and what you get. We thought their asking and the delivering is not in the right balance.”
Adidas faces a big year ahead as the main partner to the two biggest sports events taking place: soccer’s European Championship and the London Olympic Games.
Hainer said from a commercial point of view the soccer event will be a bigger boost, while the Olympics is the biggest platform the company has to show its commitment to sports. The company enjoyed record 1.5 billion euro ($1.9 billion) in sales in 2010 because of the soccer World Cup in South Africa. The CEO said it will do even better this year.
“We will definitely beat the 1.5 billion euro revenue target in 2012: there’s no doubt for me,” said Hainer.
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