The tie-up between Adidas and Reebok has begun to take shape with the spectacular transfer of Reebok’s exclusive licensed apparel deal with the National Basketball Association (NBA) to Adidas from the next playing season until 2017. The newly formed Adidas Group says that Adidas can help spread the practice of basketball and the image of the NBA much more widely than Reebok, particularly in Asia and in other parts of the world, thanks to its much wider international presence. However, Champion Europe will retain the rights for the Europe, Middle East and Africa (EMEA) region until 2011.
Like the transfer of Reebok rights to the Liverpool football team to Adidas soon after the acquisition, the new NBA deal illustrates well a new strategy outlined by the top management of the Adidas Group in London yesterday to differentiate the Adidas and Reebok brands in the minds of the customers. While Adidas will be positioned primarily as a team sports brand, Reebok will concentrate more strongly on individual athletes. In fact, Reebok’s loss of these two key team contracts will be offset by a new 4-year contract for the vector with a star footballer, Thierry Henry, who is currently a Nike icon. The charismatic anti-racist striker for Arsenal and the French national team will switch to Reebok from the beginning of August, after the football World Cup.
One big advantage of Adidas’ new NBA contract will be an immediate increase in its visibility as a performance brand in the important U.S. basketball market.Adidas’ licensed range will give Adidas increased presence in the NBA’s only existing store, located on New York’s Fifth Avenue, and possibly also in the shelves of many U.S. retailers.
Adidas sees exciting prospects also in China, where basketball ranks as the most popular sport, with 300 million participants. Adidas has much better tools than Reebok to exploit the NBA deal out there, starting immediately with its network of about 2,100 franchised stores in China. The three most popular basketball players in China all belong to the Adidas group, starting with Tracy McGrady in three stripes, along with Yao Ming and Allan Iverson in Reebok. Reebok will continue to associate its brand name with charismatic individual players like Ming and Iverson.
Adidas already has a global marketing deal with the league for NBA branded apparel. The new NBA deal allows Adidas to outfit all NBA, WNBA and D-League teams and to sell replica of their uniforms for 11 years all around the world except in the EMEA region, where the basketball organization has a deal with Champion Europe since 1991.
The NBA is becoming more global as 20 percent of its 450 players now come from outside the USA. Adidas will provide marketing support to the NBA’s new “NBA Europe Live” program due to be presented in October of 2006 and 2007 by EA Sports, an interactive software company. Four NBA teams will compete in five European countries against the top Euroleague Basketball teams and conduct training camps.
While Reebok will continue to co-brand a line of basketball shoes with the NBA, Adidas plans to launch an “Adidas Superstar” range next year featuring all the 30 NBA team logos. Meanwhile, the deal with Thierry Henry confirms that Reebok will retain its presence in soccer. It is one of the investments which Adidas is committing to lift Reebok’s performance-related business, which currently makes up just 40 percent of its sales, against 60 percent for lifestyle-oriented products. Under the new positioning defined by Adidas, Reebok would retain that lifestyle edge, but performance-related sales should still make up at least half of the brand’s sales. At the same time, the balance between performance and lifestyle at Adidas will move from a 80/20 ratio to 70/30.
While investing more into anything that speaks of indivividual achievement, Reebok will continue to emphasize its American team spirit by striving to keep its apparel licensing deals with typically American sports properties such as the National Football League (NFL), the National Hockey League (NHL) and Major League Baseball, although Nike is said to be making a strong pitch now for the NFL deal.
In another move intended to clarify its positioning, Reebok is ditching many derivatives of its various logos to concentrate on only three trademarks for its distinctive ranges, just like Adidas. The vector will remain the primary mark, adorning sports performance products, while Rbk will be used as a secondary brand for Reebok’s lifestyle offering. For the classics range, the Reebok name will continue to be spelled out and accompanied by the British flag.
Among the novelties developed by Reebok before Adidas seized control is the KFS range of running shoes, to be launched at retail in July. An upgraded range of women’s shoes, called Pulse, has enabled Reebok to reach some accounts like Nordstrom. For its part, Adidas is launching a new line of women-specific fusion shoes called Sleek.
Adidas itself will continue to concentrate on soccer, basketball, running and sports heritage. The company reaffirms its global leadership in soccer but indicates that, after the World Cup, the brand’s marketing focus will switch to running. While Adidas sold about 22 million pairs of running shoes last year, it intends to lift the tally by 50 percent by 2010, representing sales of more than €1 billion. A large-scale advertising campaign targeted at recreational runners will be launched next year.
Adidas and Reebok will both cover all the segments of the running shoe market, using different technologies and ensuring sure that their product launches don’t overlap. Together the two brands sell about 35 million pairs of running shoes a year, representing an estimated 35 percent of the global market.
On the golf side, the company believes that the integration of TaylorMade-Adidas golf and Reebok’s Greg Norman apparel line in Carlsbad, California should help the group to reach the annual €1 billion goal in the global €5 billion golf market in the mid-term. Greg Norman will be positioned as a lifestyle-oriented brand, while the Adidas brand will concentrate more strongly on performance golf apparel and footwear.
The integration between Adidas and Reebok was marked last week by the group’s first joint general marketing meeting, held at the brand-new Adi Dassler Brand Center in Herzogenaurach. The star guests of the opening were Steffi Graf and Andre Agassi, who appeared on stage holding hands and declared their loyalty to the three stripes – new-found in the case of Agassi.
Managers on both sides insist that the integration is proceeding remarkably smoothly, in spite of the cultural divide and the decades-long competition between the two companies. Regular audits by external consultants among Adidas and Reebok employees show that their attitudes and opinions are way more positive than in other merger cases. Group executives indicate that the respective staffs will be “co-located” in common offices in certain countries, leading to the layoff of about 500 employees in the short-medium term, but they declined to provide any details for the moment.
In general, the joint company will uphold the executives in charge of sales and marketing of the respective brands in each European country, but in most of the countries it plans to retain just one managing director to oversee all the back-office functions of the group. To avoid criticism about any kind of bias in favor of Adidas managers, the selection process is being supervised by an external consultant. The company will retain two general managers in the UK due to the size of the market, but this will be the exception. In some countries the group will opt for co-location to reduce costs, but in other markets two distinct structures will remain in place.
No major new appointments or resignations were announced in London aside from the promotion of Michael Schaefer as the new creative director of Reebok, based in the USA, after ten years with the company. The Austrian designer worked previously for Puma. Two other Reebok veterans, John Frascotti and Glen Giovanucci, have been named as heads of two new units for the brand – respectively covering the sports performance and sports lifestyle sectors.
Along with the planned retirement of Paul Fireman, the most high-profile departures so far are the resignation of Ken Watchmaker, Reebok’s chief financial officer, and David Pace, head of legal affairs. Frank Dassler was confirmed as head of legal affairs for the entire group.
