Some of the most influential retailers, suppliers and other executives in the international sporting goods industry will be converging on a football pitch in Herzogenaurach next Friday to mark the departure of Herbert Hainer, the chief executive of the Adidas group for more than 15 years. The players will include staff and former employees, one of which won't have to travel too far: Bjørn Gulden works just down the road, as chief executive of Puma.
The farewells will start the previous day with an event organized by Igor Landau, chairman of the group's supervisory board. The guest list includes key business relationships as well as special partners such as Stan Smith and football club managers, along with top representatives of corporate Germany.
Under Hainer's tenure, Adidas has become an increasingly distant runner-up to Nike in the global market and it has occasionally frustrated investors. However, Hainer has accomplished remarkable expansion at Adidas, turning it into a global organization with at least one robust global brand and almost unequalled international reach.
Some parts of the Adidas group were barely functional when Hainer joined it in 1987. This was shortly before the demise of Horst Dassler, the son of the company's founder, which created further unrest at Adidas. Hainer contended with the group's sometimes chaotic situation in the next years and steadily climbed the ladder. His strategy combined the pragmatic approach Hainer had watched at the butcher's shop run by his parents in Bavaria, the drive that he displayed on the football pitch, and the discipline he learned at Procter & Gamble.
Hainer was strongly pushed forward by Christian Tourres, who led the takeover of Adidas from Bernard Tapie in 1993, together with Robert Louis-Dreyfus. While the late RLD was the charismatic front man and marketing buff, Tourres was the manager who got the company organized again. He had the upper hand and had Hainer installed in the chief executive's seat in March 2001.
What Tourres saw in Hainer was a performance-driven manager who got things done – and in many ways, that is exactly how things worked out. The unassuming Hainer, who often drives himself to work in a polo shirt and slacks, turned Adidas into a well-oiled organization. He built on the Adidas brand in sports as well as in fashion. And he has been widely praised for doing so in a fair and inclusive manner, with steady investment in sustainability.
Along the way, Hainer called some gutsy shots. One of them was to allow the opening of hundreds of stores in Russia, at a time when some other brands were shying away from that market. This Russian business eventually did cause some headaches for the Adidas group, but when Russia was functional it produced juicy returns for the company.
The same could be said for China, which had Hainer's personal interest. He regularly traveled to the country to hold talks with suppliers and to know the market. It was undoubtedly a personal highlight for Hainer that he was allowed to carry the Olympic torch ahead of the Beijing Olympics in 2008 – even though it was Li Ning who carried it into the Bird's Nest.
The issue that consistently dogged Hainer's tenure was the group's inability to substantially raise its U.S. market share. When Hainer took the helm, he pledged to raise that share to 20 percent in three years. Far from achieving that, the Adidas brand actually saw its share decline to about 4 percent in the U.S. retail market for sneakers in 2015, according to NPD Retail Tracking Service.
Hainer couldn't be blamed for lack of trying. He sent over Erich Stamminger, who accompanied much of his rise and leadership at Adidas, taking care of marketing. He tried some investments in American sports and college sports. And then he signed off on the acquisition of Reebok, which was partly meant to reinforce Adidas in the U.S., at a cost of €3.1 billion.
That turned out to be a costly move. The group had apparently under-estimated the dispersion of the Reebok brand, and the proportion of sales of cheap sneakers making very little margin. Hainer himself admitted recurrently that it had been a mistake not to overhaul the brand more rapidly, to turn it into a fitness brand.
One of Hainer's smartest moves was to set up the Originals division. Puma thrived with the sale of “sports lifestyle” products, but it suffered when some of its best-selling shoes lost fashionista appeal. Adidas protected itself from such swings in fashion by making a clear distinction between sports and fashion products, and then ran away with the athleisure trend.
Adidas scored some major achievements in football, which is still one of the easiest ways to get a conversation going with Hainer. The 2006 football World Cup in Germany and the German win at the 2014 edition in Brazil were among the highlights for the Adidas brand under his leadership. Adidas also reinforced ties with major European clubs, through a shareholding in Bayern Munich and a deal worth £750 million (€871.1m-$973.0m) with Manchester United in 2014. The renewal of the Adidas partnership with the German football federation was a file that Hainer was eager to handle before his departure.
Hainer likes to emphasize that the widened gap with Nike has been caused almost entirely by the German group's inability to turn the tide in the U.S. market. Excluding that, Adidas has kept pace with Nike in sales, he argues. Then again, the Adidas group clearly lags behind in terms of profitability: The operating profit (Ebit) for the Nike brand in its latest fiscal year, until the end of May 2016, reached more than the first quarter of sales for the Adidas brand.
That makes a difference in the U.S. group's ability to invest, and is certain to become a focus for Kasper Rorsted, the new chief executive – even though analysts acknowledge that the Adidas organization isn't particularly fat. Since the group has already decided to divest Taylor Made, its golf equipment business, another big question mark on Rorsted's drawing board is Reebok.
The Adidas brand's sluggishness in the U.S. was at the center of sustained criticism of Hainer two years ago. The group had to adjust its forecast three times between August 2013 and July 2014, which was motivated by exchange rate changes, the situation in Russia and the downturn of the group's golf equipment business. Adidas was under attack from Nike in Europe. Some felt that fresh impetus was required at Adidas, including a new chief executive.
With the support of the group's board, Hainer held steady. He gave plenty of autonomy to some of his most trusted managers to come forward with a new strategic plan, Creating the New. The more focused, more centralized and bolder approach appears to be paying off, with sharply-improved results in the last quarters and a soaring share price that allows Hainer to leave the company with more than a pat on the back.
To summarize in numbers, the company's sales reached about €5.8 billion in 2000, the year before Hainer was pushed into the hot seat, and they are projected to reach €19 billion this year. In the same interval, the group's net income soared from €182 million to a projected €900 million. Its market capitalization soared from nearly €3 billion to the current level of about €26 billion. The number of employees moved up from about 13,400 to 56,000.
The growth required the transformation of the World of Sports, the company's head office in Herzogenaurach. After the opening of the “Laces” building in 2011, Adidas has just started on yet another extension of the green campus. An office building called Arena and a restaurant and convention center called Half-Time should be ready for another 2,000 employees in 2018. The company will then entirely move out of the former Adidas head office in the center of Herzogenaurach (it has already sold the compound, sadly including the Villa, the home of Adi Dassler, the group's founder). The return of some footwear production to Germany, with the fully automated Speed Factory in Ansbach, is also an item of particular pride for Hainer.
Hainer earned several prizes for his leadership, including the Bambi for business from Burda, the publishing company; Manager of the Year from Manager-Magazin in 2010; and one of the world's top 100 CEOs as ranked by Harvard Business Review in 2014. He may deserve another prize for publicly standing by trusted friends in times of trouble, although he has also been criticized for failing to speak out more vigorously about the issues at Fifa, one of the Adidas brand's long-term partners.
Many employees appreciate Hainer as an approachable chief executive and a fair team leader. Along the way he has visibly changed: An unfashionable mustache and somewhat defensive demeanor were ditched after a few years, to make way for a firm handshake, an open attitude and sometimes outspoken views about the way of the world.
Learning Italian is one of the long-delayed ambitions that have suddenly moved to the top of Hainer's agenda. He intends to spend more time with his family, to take care of his personal investments and seats on three supervisory boards, at Allianz, Lufthansa and Bayern Munich. He apparently intends to continue residing in his inconspicuous house in Herzogenaurach.
