While announcing an expansion of its long-standing partnership with the European football authority, UEFA, the Big a reported gains in market shares and new records in sales of football products in connection with the current FIFA World Cup ahead of the quarter finals later this week, where it will have three national teams under contract – Argentina, France and Germany – or more than any other brand (Germany just beat Argentina today). Only two teams sponsored by Nike – Brazil and Portugal – have made it to the quarter finals. The other contenders are England, which is sponsored by Umbro; Italy, sponsored by Puma; and the Ukraine, sponsored by Lotto.
Speaking in Berlin at the Adidas World of Football stadium, a replica of the city’s Olympic Stadium erected in front of the German Parliament where 10,000 people can watch the games on two giant TV screens for €3 a ticket, company officials cited further gains in market share in football products in the 1st quarter of this year. Quoting independent consumer research, they said Adidas’ share of the European football apparel and footwear market grew slightly in the 1st quarter of this year to 37 percent, with an increase to 51 percent in Germany from 47 percent in the same period a year ago. Its market share in the USA declined by 2 percentage points to 46 percent, but company officials said this was due to Nike’s higher sales in low-priced channels that Adidas is not touching.
In a conference call with analysts the day before Adidas’ presentation, Nike executives played down the impact of the World Cup on their football business, while indicating that it grew by 19 percent in the financial year ended May 31, reaching the previously stated goal of $1.5 billion. In spite of this high sales score, the Nike group, including Converse, doesn’t pretend yet to have become the leader in the footwear market, but it claims a comfortable 60 percent share of the global basketball market, estimated to be worth $4.0 billion at wholesale. Charlie Denson, president of the Nike brand, said “the battle for the hearts and minds of football crazy kids will not be won or lost in Berlin this summer, but over four years, and we’re excited about the future.”
The next day in Berlin, Adidas officials claimed to have increased their lead over Nike in football. Herbert Heiner, chief executive of Adidas, said he was confident of reaching football sales of over €1.2 billion this year, with an increase of more than 30 percent from 2004, and company officials stressed that this doesn’t include football-inspired lifestyle products developed by the company’s Sports Heritage division, which carry the trefoil logo. Nike officials have indicated that they include these kinds of products into their football figures.
Adidas claims it raised slightly last year to 35-36 percent its share of the performance segment of the global football apparel and football market, with Nike coming out as a distant second at around 25 percent. Adidas officials estimate the performance market to be worth about €3 billion at wholesale in normal years, with shoes and clothing taking up similar shares and Europe representing 50-60 percent of the world pie. Due to the World Cup, the global market should go up by 10-15 percent, driven by apparel, according to Adidas officials.
Adidas is going to invest this year more than €250 million in ordinary and extraordinary marketing action related to football, or nearly 20 percent of its turnover in the category, but it feels that it’s going to have a positive impact on the brand overall because of the huge audience that the sport garners worldwide. On the other hand, Heiner said the company has executed its best integrated marketing campaign ever around the World Cup, with a major contribution coming from the introduction of new and innovative products every month since last October, creating a lot of demand at the retail level.
While unveiling its own results for the past financial year, Nike produced its own set of superlative figures relating to the World Cup. The company indicated that, since the launch of its World Cup program in March, it has sold 2.4 million units of national team kits. The “Joga Bonito” campaign, featuring TV commercials and many interactive gimmicks, appears to have struck a chord with consumers: Nike reported that the videos had been viewed globally more than 100 million times. The spot featuring Ronaldinho, the Brazilian whiz-kid, was even downloaded 1.8 million times in the first eight weeks.
Adidas has apparently sold more replicas than Nike, and it started earlier. The Big a says it has already sold a record 3 million replica jerseys so far this year, or double as many as in 2002. That includes no less than 1.5 million shirts emblazoned with the symbols of the German national team, compared with 250,000 four years ago, and 450,000 French team jerseys. Last year Adidas’ management had predicted sales of 600,000 German replicas. Germany and France are the biggest two football markets for Adidas, and they will both compete in the quarter finals this weekend.
To respond to the unexpected demand, Adidas has developed a sophisticated supply chain mechanism, ordering the raw materials in advance, manufacturing the shirts in different colors at various factories in the Far East and in Europe, and resorting to air freight when necessary. Adidas has also sold over 1 million pairs of Predator Absolute football boots and 750,000 F50 Tunit boots. Sales of its Teamgeist footballs have gone over 15 million, compared with 6 million units for the Fevernova played during the 2002 World Cup.
The demand for the Teamgeist was so high in Germany that big discounters such as Lidl and Plus bought the ball through grey channels and offered it at higher prices than the sporting goods stores, using it as a magnet to attract customers. Adidas officials say the pattern was relatively isolated and the problem has been solved. They have been only a few cases of fake products or ambush marketing in Germany.
For Adidas, this year’s football sales will be 50 percent higher than those achieved by the company during the last World Cup. Going forward, the plan is to stabilize footwear sales above the level of €1 billion in 2007 and to record another increase in 2008. At the end of its presentation in Berlin, Adidas announced the signature of a new long-term partnership with UEFA, covering the Euro 2008 championships and Austria and Switzerland where the Big a will again act as official sponsor, supplier and licensee, like in the previous championships in Portugal. Furthermore Adidas will be the official supplier of the ball for the UEFA Champions League until 2009, but it will not do so only for the final match like before. Starting with the 2006/07 season, it will supply the balls for all the 32 clubs taking part in the Champions League. Until now the run-up matches have been played with the ball of the home team, wherever it was located.
Many observers, even in Germany, are betting that Brazil is going to win the World Cup, and this would undoubtedly help to consolidate Nike’s image in football on a global basis. Nike has certainly benefited from the team’s reputation in its home country, but Heiner points out that Adidas’ sales in Brazil grew by about 30 percent lately even though it wasn’t sponsoring the national squad. On the other hand Denson, who recently witnessed the excitement around the World Cup first-hand in the country, said he was particularly pleased with the execution of Nike’s program at retail level, which is expected to strongly boost the company’s German sales this year.
For its part, Puma is already thinking one World Cup ahead and announcing an aggressive marketing campaign for the 2010 edition in South Africa. The brand sponsors all the African teams that made to the World Cup, along with some other leading African sides like Cameroon, but none of them has made it to the quarter-finals. Its current World Cup campaign includes a tramway that drives through the streets of Berlin with the slogan “United for Africa.” To prepare for the next edition Jochen Zeitz, the Puma chief executive, who is fluent in six European languages, is reportedly learning Swahili.
The broad appeal of the World Cup is highlighted by a new study commissioned by In Front, the Swiss-based company that sold the TV rights for the tournament. It indicates that about 37 percent of the viewers so far are women, but the female share varies widely from about 50 percent in Argentina to 24 percent in the Czech Republic.
