Adidas Extends China Sports Push in Pact With Billionaire

Adidas Extends Its Push Into China
  • German sports-gear maker to sponsor races and promote soccer
  • Soccer coaching for 20 million students to help promote brand

Adidas AG signed an agreement with billionaire Wang Jianlin’s Dalian Wanda Group Co. to help develop soccer and basketball in China as the German company seeks to capitalize on increasing interest in sports and fitness in the world’s most populous nation.

The sneaker maker will also sponsor two of Wanda’s Ironman triathlon events in China this year, according to a joint statement. It’s joining forces with a company that this year signed a partnership agreement with soccer’s governing body FIFA, and in 2015 bought a 20 percent stake in Spanish team Atletico Madrid.

David Beckham at the Adidas store in Guangzhou.
David Beckham at the Adidas store in Guangzhou.
Source: Adidas AG

Adidas is making an increasingly rare commitment to China by a consumer brand at a time when food companies, drinks makers and luxury labels are struggling there. China’s government has pledged to build a 5 trillion-yuan ($752 billion) sports industry by 2025, including laying down soccer pitches and training kids across the country. President Xi Jinping has said China should host and win a World Cup in the coming decades.

“We see more of our mass consumer segment actually wanting to buy Adidas products,” said Colin Currie, Adidas’s managing director for China. “Chinese consumers want to trade up and buy international sports brands like Adidas and they’re willing to spend on it.”

Adidas on Monday opened its first worldwide dedicated soccer store, in the southern city of Guangzhou, and said it’s doubling to 20 million the number of Chinese children it’s training in the sport through a government partnership.

The company’s shares rose 2 percent to 122.10 euros at 2:12 p.m. in Frankfurt.

Growth Market

Chinese consumers with rising disposable income are increasingly shifting from local sneaker brands to the cache of Adidas and main rival Nike Inc. That comes at a time when many consumer companies and apparel brands are retrenching amid slower consumer spending and a government clampdown on excessive gift-giving by public employees that’s stung apparel and alcohol makers.

“Chinese people are becoming more health-conscious and participation rates in many sports are increasing,” said Cedric Rossi, an analyst at Bryan Garnier & Co. In addition to performance shoes, Adidas’s fashion-oriented Originals and Neo brands are resonating. “They are fully benefiting from this athleisure trend,” Rossi said.

Performance and sports-inspired shoe sales in China are forecast to grow from a combined $12.9 billion this year to $18.5 billion in 2020, according to Euromonitor International.

Nike, which sponsors all 16 teams in the Chinese Super League as well as the country’s national soccer team, reports fourth-quarter earnings after U.S. markets close on Tuesday. For the first nine months of its fiscal year, Nike’s China sales grew 29 percent excluding currency effects, to $2.8 billion.

David Beckham

Greater China, which includes the mainland, Hong Kong and Taiwan, contributed more than a quarter of Adidas’s earnings before overhead costs last year and it’s the company’s most profitable market, Currie said. Sales in local currency grew 18 percent to 2.47 billion euros ($2.7 billion). Adidas’s revenue in Shanghai is nearly as much as Poland and Portugal combined, the company said.

“We will continue to grow in a double-digit manner for the remainder of this year,” he said.

The soccer store opening was marked by an appearance by former Manchester United and Real Madrid star David Beckham. Adidas plans to add 500 stores over and above any closures this year in the Greater China region, on top of a base of 9,000, Currie said. That’s part of a broader plan to open 3,000 stores in China by 2020.

“China wants to be a powerhouse in sport, wants to be on the world stage,” he said.

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