Herbert Hainer on Adidas's Reebok Marathon
The U.S. was always a challenging market for us. When we took over Reebok in 2006, we saw it as a way to expand here. I felt we could position Reebok as a premium American fitness and training brand and use it to build our market share. I was confident in our plan for how we would make Reebok succeed.
But there were surprises. We had to do much more cleanup work than we thought. Reebok was over-distributed: We didn't want to be in places like Wal-Mart (WMT) or Tesco anymore. About 30 percent of the revenue was at price levels of $39 and below. You earn neither image nor money with those prices.
There was also jealousy left and right. When you've been competitors for 20 years, it's hard to suddenly be friends. We wanted to give some leverage to Adidas, so we took over the NBA sponsorship from Reebok. That did not get us a lot of applause at Reebok, of course.
We started to invest in new products, but it takes 18 to 24 months to see those changes. Reebok lost market share, and sales kept going down for three years. Financial analysts and investors were asking, "Do you people really know what you're doing?"
Some people in the company began to question our plan. I spent a lot of time at Reebok, holding town halls and talking to people in the cafeteria. They wanted to see the light at the end of the tunnel. After we had at least cleaned up the market and were seeing an uptick, the financial crisis hit. I thought, "Bloody hell, not now!"
If I could do it again, I would have managed expectations better. We didn't give a time frame for how long this would take, and I didn't replace people fast enough. Still, Adidas and Reebok are both growing.
Right now, our biggest challenge is the rising costs of raw materials. We'll have to increase Reebok's prices, which will take trial and error. We have to protect our margin, but we also don't want to lose too much volume. We want to build on our success: The good thing now is that our brands are in demand.