Business

Adidas Doesn't Need Kanye West

Adidas should drop the rap star and focus on Reebok.

Putting the squeeze on Yeezus.

Photographer: Don Arnold/WireImage

Adidas AG’s boss says Kanye West is a very important part of his company’s strategy. Nevertheless, the global sports brand would survive the end of its relationship with the rap star cum Twitter controversialist.

Kasper Rorsted said on Thursday that “we don’t support” West’s comments on slavery being a choice, after earlier telling Bloomberg TV that the rapper was a “fantastic creator” and a big contributor to promoting his company’s sportswear in the U.S. It’s Rorsted’s first big test since he took the top job in 2016.

The West association, which started in 2013, certainly helped breathe life back into Adidas at a time when it was trailing Nike Inc. But it looks like a liability now.

Gold Digger

Adidas's partnership with Kanye West lifted its valuation above Nike's, but it's slipped again recently

Source: Bloomberg

West’s Yeezy Boost sneakers have helped maintain a buzz around the brand. But his clothing range for Adidas Originals, while a useful marketing tool, appeals to a niche audience. The overall Adidas Originals business had double-digit sales growth in 2017, but this wasn’t all down to Yeezy. Other parts of the Adidas empire did equally well or better. Rorsted said West made a limited contribution to Adidas revenues.

And let’s not forget, much of the Adidas rehabilitation came from millennials wearing its retro styles — not West’s more futuristic garb. It wasn’t just West who helped put the Stan Smith sneaker on the fashionista map. Other trend-setters, such as former Celine designer Phoebe Philo, also sported the style.

There’s always a risk-reward trade-off in working with celebrities. Think back to the controversies around the alleged use of cocaine by supermodel Kate Moss (even though her career rebounded strongly). Adidas has had the reward of working with an edgy artist like West, and now it has the risk.

The company has never disclosed what it pays West. But he won’t be cheap. Adidas marketing costs rose 13 percent in 2017.

There’s also a shelf life on how long a celebrity’s credibility can last, something that West is testing to destruction with his Twitter feed. Rorsted might be better off redirecting the West expenditure toward more cutting edge collaborations for its Reebok brand. West has worked with Reebok on a line of sneakers. But so has hot Russian designer Gosha Rubchinskiy

Go Faster Stripes

Adidas's sales growth has outstripped that of Reebok

Source: Company reports, Bloomberg Intelligence

Note: includes the impact of currency movements

As with the Stan Smith, millennials on both sides of the Atlantic have started to gravitate toward “old-man” sneakers, and the Reebok Classic in particular.

Adidas needs to reinvigorate Reebok, or sell it. The brand’s sales fell 3 percent in the first quarter, excluding currency movements, because of declines in the training and running categories.

I think it would be better to try to revive it, given its fashion cred. Selling out would only hand its potential to a rival. With more clever collaborations, Reebok could fill a Kanye-shaped hole.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Andrea Felsted at afelsted@bloomberg.net

    To contact the editor responsible for this story:
    James Boxell at jboxell@bloomberg.net

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