Adidas estimates that it will earn about £100 million (€112.2m-$164.2m) in four years from the sale of merchandise related to the 2012 Olympics in London, which it has already launched in the U.K. market.
The company is spending roughly the same sum to sponsor the event – including the cost of its deal with the London organizing committee, along with advertising and other marketing expenses around the Olympics. Apart from a direct contribution to sales and global marketing impact, the investment is meant to support the Adidas brand's bid to reach market leadership in the U.K. by 2015 at the latest. This spot is currently occupied by Nike with a market share estimated at about 18 percent, ahead of Adidas at 15 percent and way ahead of any other contenders.
Gil Steyaert, managing director for the Adidas Group in the U.K., Ireland and the Benelux countries, said at a conference in London a few days ago that Adidas had grown faster than Nike in the U.K. in the last years, roughly halving the gap in market share in this interval. Adidas achieved a double-digit sales increase in the U.K. last year and claims to have become market leader in sports apparel. The Olympics could help to address the weakest spots of the Adidas brand in the U.K.: Its market share is lower in London, and it could do with improved sales in running.
Adidas is the official branded sportswear partner of the London Olympics (and Paralympics), as was the case in Beijing four years earlier, but in London it will also be the official unbranded sportswear partner – meaning that it has the exclusive right to sell clothing bearing only the London 2012 logo, without the Adidas logo or stripes. Such unbranded merchandise is expected to generate about half of the company's sales around the Olympics. It is the first time that one company has exclusive rights to produce unbranded apparel for the Olympics.
While the Adidas-branded products will be sold mostly through sports retailers and the six stores owned by the group in the U.K., the London 2012 apparel will also be distributed through stores set up for this purpose by the organizers, mostly in airports and railway stations, and at the venues. Furthermore, Adidas will sell London 2012 clothing through British supermarkets such as Tesco, Asda and Sainsbury's, which it has lately been avoiding in some countries for the Adidas brand.
As part of its deal with the London 2012 organizing committee, Adidas will provide about 1.5 million items of clothing, footwear and accessories to outfit 70,000 volunteers and more than 6,000 officials. Furthermore, it will provide sportswear for more than 1,000 delegates in the British team, known as Team GB, including about 550 athletes.
Unlike the situation with the Chinese team in Beijing, the sponsorship of the British team by Adidas overrides the agreements that British sports federations have with other sponsors – implying that British athletes will wear Adidas apparel in all disciplines, on the field of play, during the medal ceremonies and in the Olympic village (although the team has another partner for formalwear, the Next retail chain in Britain, which it will don at the opening and closing ceremonies).
Branding on these products has to remain discreet, because of an agreement between the sports industry and the International Olympic Committee that came into effect in 2006, dictating that logos on apparel worn at the Olympics should not be more than 20 square centimeters and Adidas should not be allowed to affix three stripes running down the sleeves and legs of the garments.
On the other hand, the World Federation of the Sporting Goods Industry is working hard to ensure that the IOC's guidelines will not lead to covering up the banners of Adidas' stores and other over-diligent actions. It is proposing to set up a dedicated counter to resolve any potential conflicts quickly and smoothly before and during the Games.
Massive support is expected for Team GB, which will field British teams in all disciplines, instead of separate teams for England, Scotland, Wales and Northern Ireland. Enthusiasm was shown by early ticket sales, as tickets for the opening ceremony were 10 times oversubscribed.
The Adidas ranges for Team GB include technical products for the competition, as well as leisure apparel inspired by the team. Under the creative lead of Stella McCartney, Adidas has just launched its second collection of Team GB lifestyle wear. For the time being, Adidas has the right to sell these products only in the U.K.
The worth of the company's investment in the previous Olympics could be debated. As in the case of London, it was partly meant to help Adidas attain market leadership in China. Instead, the company was saddled with large inventories of unsold merchandise, and Adidas actually saw its market share decline compared with Nike and Li Ning in the following two years – even though it has regained momentum in the last months.
Herbert Hainer, the company's chief executive, said that it will be more reactive next time. Unlike the situation in China, where Adidas was sold in thousands of franchised stores, not always with the strongest retail expertise, its retail partners in the U.K. would provide immediate and detailed feedback on sell-out. Furthermore, Adidas has stepped up production in southeast Europe, particularly through its sourcing liaison unit in Istanbul, to quickly adjust production to demand around the Olympics.
The marketing impact should also be stronger, particularly in the U.K. In Beijing, since each Chinese sports federation could have its own sponsor, several brands other than Adidas were worn by Chinese athletes and teams in races and games – precisely the images that are replayed on television. With the new arrangement, the Adidas logo should be on all pictures and footage of British athletes – on their clothing at least, since athletes still have individual rights to pick their footwear.
Adidas has 11 Olympic committees under contract, including France, Germany, Australia, Cuba, Belgium, Greece and Ethiopia. Only for some of them does it have rights to outfit athletes on the field of play for all or most sports.
Among the more long-lasting investments made by Adidas around the London Olympics are so-called AdiZones, consisting of sports playgrounds fitted with playful workout equipment. In partnership with local councils, who provide the land and the maintenance for the equipment, about 50 such branded AdiZones have been opened around the country to promote sports participation, often in underprivileged communities, and the plan is to have at least 100 of them in place by the start of the Olympics. The entire Olympic program is coordinated by Erica Kerner, Adidas' global Olympic director, who held the same job in Beijing and moved to London right after the end of the 2008 Olympics.
The Boston Consulting Group has estimated that entire sportswear sales around the Olympics could reach about £330 million (€370.2m-$541.8m) – not only from the sponsors but other brands as well. Adidas has yet to decide whether it will seek a similar agreement with the organizing committee of the 2016 Olympics, to be held in Rio de Janeiro, Brazil. The committee has yet to issue a tender. The bidders could include Adidas and Nike as well as Olympikus, the Brazilian sports brand made by Vulcabras.