Now, This Should Get Adidas On Its FeetRichard A. Melcher
Adidas is on a roll. Slashing across court in the German sporting goods company's three-stripe tennis shoes and clothing, Steffi Graf won the Wimbledon women's singles title on July 4. Three days later, Adidas was bought out by Britain's Pentland Group--and the doubles combination promises to give U.S. rivals Nike Inc. and Reebok International Ltd. a run for No. 1. "This is a sport," enthuses Pentland Chairman R. Stephen Rubin, whose family controls 54% of Pentland. "We're going to have fun."
Rubin is paying $411 million for the 80% of Adidas that Pentland doesn't already own. And it will take tens of millions more to reinvigorate one of the world's best-known but faded brand names. A key part of Rubin's plan to compete with free-spending Nike and Reebok is to open the taps of the $2.8 billion Adidas to upgrade products, improve distribution, and sign up more big-name endorsers.
WINNING QUALITIES. Adidas' biggest challenge will be in the U.S., where its market share is just 3% vs. Nike's 29% and Reebok's 23%. Adidas missed most of the 1980s boom in aerobics, basketball, and leisure wear and developed a reputation for tardy deliveries among some retailers. Its new Equipment line of performance shoes is designed to make up some of the ground it lost to Nike's Air and Reebok's Pump lines. "Adidas has simply fallen off the table," says Rob Strasser, a former Nike executive who now heads an Adidas consultancy, Sports Inc. Rubin hopes to lean heavily on another Adidas adviser, former Olympics chief Peter Ueberroth, to boost the brand's profile.
If Rubin's past is any guide, the competition could get fierce. The bow-tied former lawyer has already chalked up some shrewd investments. He turned a 1981 investment of $77,500 in then little-known Reebok into an incredible $777 million windfall by the time he sold out last year. He used some pocket change from that deal to buy up the Pony footwear and the Speedo bathing suit brands, which he has begun to revive with new products and marketing.
Pentland picked up control of Adidas from the embattled French businessman-turned-politician Bernard Tapie. Facing financial collapse and a suit for alleged fraud, Tapie bailed out of Adidas, which he bought two years ago from the heirs of founder Adi Dassler. With Tapie's future clouded, Adidas has been racked by morale problems. Rubin wants Adidas Chairman Rene C. Jaggi, who threatened to resign, to stay on.
Rubin brings to Adidas a special expertise he developed at Reebok: outsourcing in low-cost Asia. "Pentland is the best in the business at finding quality sourcing at the best prices, which is fundamental in this business," says Michael Birkin, chief executive of consultant Interbrand Corp.
MAKING A SPLASH. It will take more than a price edge, however, to compete fiercely in Europe, where Adidas is strongest. In Germany, its single largest market, Adidas' market share has plummeted 10 percentage points, to 40%, in just two years. Gernot Schilling, a buyer at giant German retailer Kaufhof Holding Aktiengesellschaft, says that Adidas simply missed the wave of image-conscious shoes and apparel. "They didn't realize that athletes were no longer the primary market," he says.
Now, Nike and Reebok are flooding Europe's airwaves with splashy ads and spending big on the Barcelona Olympics to introduce to a new audience stars ranging from basketball giant Michael Jordan to Kenya's distance runners. They are beginning to chip away at Adidas' stranglehold on endorsements from athletes in East Europe and the former Soviet Union. "We are committed to being the major player in Europe," insists Peter McGuigan, managing director of international operations of Reebok.
The 54-year-old Rubin, a swimming enthusiast, clearly relishes the challenge. He says he has no intention of pushing Adidas into the volatile fashion end of the business. And he would like nothing more than to strike a blow at the big boys, especially Reebok, with whom relations ended frostily. For someone whose family began as a small shoe wholesaler, Rubin is now solidly in the big leagues.
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