Will Adidas Play Better in Peoria?
In The Royal Tenenbaums, a film about a family of eccentrics starring Gene Hackman, three of the main characters spend practically the entire movie in brightly colored Adidas track suits.
Another marketing coup for Adidas-Salomon CEO Herbert Hainer? More like a lucky break. Adidas, the world's No. 2 sporting-goods maker after Nike Inc., didn't have to pay for the use of its trademark three-stripe apparel.
Hainer could use a few more breaks like that. The onetime professional soccer player is making a major push for the $7.8 billion U.S. market, which accounts for nearly half of global athletic-footwear sales. Hainer, 47, recently traveled to Portland, Ore., for the inauguration of Adidas' new $100 million North American headquarters. His next gig: the mid-March debut of ClimaCool, a running shoe with a $90 price tag and ventilated soles designed to reduce sweat by 20%. "We have never put so much money behind one brand concept as we have behind ClimaCool," says Hainer. But that's not all. In April, Adidas will launch the $130 a3, which is meant to improve the way an athlete's foot hits the ground. Adidas will spend tens of millions of dollars promoting the new footgear as it tries to narrow the distance between itself and Nike.
But this is the athletic-shoe business, where the biggest marketing budget in the world won't guarantee success. To fly off the shelves, the new sneakers have to appeal to trend-conscious teens. "It's an art, not a science," says John G. Horan, publisher of Sporting Goods Intelligence, an industry newsletter in West Chester, Pa. "Even Nike hasn't hit the nail on the head every time."
If Hainer scores with ClimaCool or a3, maybe people will stop comparing him with his predecessor, Frenchman Robert Louis-Dreyfus. A marketing whiz who once headed the Saatchi & Saatchi advertising agency, Louis-Dreyfus turned around a near-bankrupt Adidas in the 1990s and made the $1.1 billion acquisition of French sports-equipment maker Salomon in 1997. Most important, Louis-Dreyfus internationalized Adidas, based in the Bavarian town of Herzogenaurach. He made English the official language, put Americans and other foreigners in top posts, and hired younger staff more in tune with core customers.
Louis-Dreyfus proved less talented at controlling costs. Profits slumped under the weight of the Salomon acquisition, as did Adidas' stock: From a peak of $146 in mid-1998, it fell to $41 by early 2000. Louis-Dreyfus began shifting power to Hainer, a 15-year Adidas veteran, who finally landed the top job in March, 2001. "He felt it was time for somebody new," Hainer says.
So far, Hainer has won high marks for nuts-and-bolts stuff like shortening the product-development cycle and speeding product delivery. Adidas was the best-performing stock on Germany's DAX last year, rising 26.5% even as the index slumped 19.8%. Hainer also kept his promise to deliver 15% growth in profits for 2001, which were $182 million on sales of $5.3 billion. But with the U.S. athletic-shoe market flat, it will be hard for Adidas' boss to move closer to his goal of wringing 40% to 50% of revenues out of the U.S., up from 30% now.
To succeed, Hainer will have to prove he has some of Louis-Dreyfus' marketing pizzazz. That means winning over teenagers like 17-year-old Fabio Mancini. Standing outside a Rome outlet of sports-apparel chain Cisalfa, Mancini is the picture of fashion-slave youth: He wears Calvin Klein baggy pants, a Nike baseball cap turned backward, and a Nike T-shirt. Asked where the Adidas label is, he responds: "In the '80s, raga," using local slang for dude.
O.K., this is Rome, not Peoria. But Mancini's comments illustrate how Adidas is still fighting its image as a shoemaker that has technology, not style. "Their soccer shoes are simply first class," says Marc Michel, who runs an Intersport Taunus sporting-goods franchise in Bad Homburg, Germany. "But Nike has the more fashionable shoes." Between the Olympics and the World Cup soccer championship, Hainer will have plenty of chances this year to convince people Adidas products are hip, too. As the former striker well knows, winning depends on preparation, skill--and a dash of luck.
By Jack Ewing in Frankfurt, with Kate Carlisle in Rome and Andrea Zammert in Bad Homburg