As shown by the figures from Vulcabras and Alpargatas in our athletic footwear chart, Latin America is currently the fastest-growing market for sports shoes in the world. The importance of the region for the Adidas Group was underlined by its chief executive, Herbert Hainer, at a press conference in Buenos Aires before the final of the Copa America, where Adidas outfitted five national teams.
He noted that the group's sales in Latin America have been growing at a double-digit rate for the last 10 years, reaching a level of €1.3 billion in 2010. In the first quarter of this year, they grew by 15 percent in local currencies and by 21 percent in euros, amounting to €328 million.
The group is investing heavily in the region, particularly in Argentina where it took over the distribution of the Adidas brand from Gatic in 2002. Just before the conference, Adidas announced an extension of its contract with the Argentine Football Association until the end of 2022. The Three Stripes has been sponsoring the national team for more than 37 years.
Argentina has one of the leading national football teams in the world, and football is by far the most widely watched and practiced sport in the country, where Adidas leads the branded sporting goods market, with an estimated share of 25 percent. Company officials estimate that Adidas and Nike have an almost equal share of 23 percent for footwear in Argentina, but Adidas is way ahead in apparel. Reebok comes in third place with a share of more than 12 percent.
Officials estimate that the branded sporting goods market is worth more than €800 million in Argentina, making it one of the highest in the world for consumption per capita in relation to the purchasing power of the local population. It is probably 30 to 40 percent higher if counterfeit products and imitations are added.
While it has a presence in all the major sporting goods chains and in 1,200 points of sale in Argentina, Adidas also has more company-owned stores in the country than other sports brands. Occupying premium locations, there are about 50 and they are profitable overall.
The Argentine market is growing at an annual rate of between 12 and 15 percent in real terms, excluding inflation. Partly to cope with the rising demand, the longtime shoe manufacturing partner of Adidas for Latin America, the Brazilian-based Paquetà group, recently expanded its 4-year-old Argentinian shoe factory at Chivilcoy.
Besides the assembly of about 10,000 pairs of shoes a day for Adidas, the Argentine plant is now also producing the soles that were previously made at Paquetà's Brazilian facilities to offset the appreciation of the Brazilian real. Cutting and stitching are still done in Brazil.
Paquetà makes a total of more than 350,000 pairs per month for Adidas in Brazil and Argentina, where high import duties and the more recent anti-dumping duties on China force all the major international sports brands to make a large part of their shoes locally. For Adidas, locally made shoes represent more than half of those it sells in Argentina and about 40 percent of those it sells in Brazil. As styles and lasts are rather unique in Brazil, the ratio is trending toward an even split there.
In Brazil, the Adidas brand is probably in third place after Olympikus, the sports brand of Vulcabras, and Nike, with about 20 percent of the market, and Reebok comes next with a 10 percent share. Together, Adidas and Reebok dominate the market with a combined share of 30 percent in branded sports footwear and apparel. Vulcabras, which has been distributing Reebok in the region for a long time, has a joint venture with Adidas Group under which it manages the brand in Brazil, Argentina and Paraguay. Officials of both companies have told us that the deal may be extended after its scheduled expiration in 2015 if it continues to work out well for both parties.
Thanks in part to its sponsorship of the Brazilian national football team, Nike is slightly bigger than Adidas in Brazil. Fernando Basualdo, a longtime Adidas executive who was recently appointed country manager in Brazil, says his goal is to reach the leadership for the brand in Brazil and all over Latin America, coordinating efforts throughout the region.
It's going to be a difficult task. Basualdo is an Argentine native who worked for Gatic in Argentina and then as Adidas' country manager in Chile and Mexico, a country where Nike has a clear leadership, but where the Three Stripes has been closing the gap lately. Together, Brazil, Mexico and Argentina represent about 70 percent of the Latin American market.
