The Adidas Group is set to take over the distribution of Reebok products in Spain from its long-time distributor at the end of this year, but no formal announcement has yet been made on this or other similar moves being contemplated in other parts of the world. On the other hand, the group has just announced the establishment of a joint venture with Vulcabras of Brazil to take over the distribution of Reebok in Brazil and Paraguay from Apr. 1 through the end of 2015. The financial details of the deal, which has yet to be approved by Brazilian authorities, are being kept confidential.
The Adidas Group has also started negotiations with Vulcabras on a similar joint venture operation for Reebok in Argentina, where the Brazilian company recently bought a large shoe manufacturing factory to service the market with locally produced Reebok and Olympikus sports shoes, due to the country’s import quotas on similar products from abroad.
Adidas, which will be the controlling shareholder in the Brazilian joint venture, says the transaction in Brazil will allow it to add about €100 million sales to its consolidated revenues for the next nine months. As a result, the Reebok segment of its global business should generate a mid-to-high single-digit sales increase this year, instead of the previously projected low-medium single-digit gain.
Vulcabras has been the exclusive distributor and licensee of Reebok footwear and apparel in Brazil and Paraguay since 1992. It is also Reebok’s exclusive distributor in Argentina since 2004. Vulcabras has 15 Reebok stores and factory outlets in Brazil. The company has large factories in Brazil that assemble specially developed Reebok shoes for the national market, and they will continue to supply the new joint venture.
With gross sales of 600 million reais (€220m-$340m) in Brazil and Argentina last year, the Reebok brand represented the biggest source of revenues for Vulcabras until it bought last year Calçados Azaleia, one of the largest shoe companies in Brazil, including its Olympikus brand of sports shoes. The acquisition raised the company’s annual consolidated sales to more than 1.8 billion reais (€660m-$1.1bn), turning the group into one of the 10 largest suppliers of sports shoes in the world. Its only other major activity was and remains the manufacture of safety boots in PVC.
In 2007, the group’s deliveries of sports shoes amounted to 11 million pairs for the Olympikus brand, which continues to be distributed for the most part in Brazil alone, 3.5 million pairs for Reebok in Brazil and 2.3 million pairs for Reebok in Argentina. It was also a major supplier of Reebok branded clothing. Adidas was estimated to be the third largest player on the Brazilian sports shoe market in 2006 with shipments of 3.8 million pairs, coming after Olympikus and Topper, the sports shoe brand of Alpargatas.
Vulcabras, whose sales have been growing at a compound annual rate of 30 percent for the past five years, is now determined to expand the international presence of Olympikus, starting first in Argentina, where over 1.5 million pairs should be sold this year, and with other Latin American countries soon after. Milton Cardoso, chief executive of Vulcabras, indicated that the now integrated group is not planning to return to the European market with this brand before about five years’ time.
Pedro Grendene Bartelle, chairman of Vulcabras, will be the chairman and president of Adidas’ new Brazilian joint venture. His son Pedro Bartelle recently became marketing manager of the Vulcabras group. He and his brother Alexandre together own more than 70 percent of Grendene, the large publicly listed Brazilian supplier of thongs and other shoes trading under brand names such as Rider, Grendha, Ipanema and Melissa.
