Intersport is signing up for three years as a sponsor of the Tour de France, ensuring a lot of signage along the famous French bike race, which runs on July 1-23. Some co-branding action is planned with Nike, another important sponsor of the Tour. A special bike model from Intersport’s private Nakamura collection will be marketed with the colors of the race.
The financial details of the deal could not be determined, but executives of the world’s largest retail organization in the sporting goods sector indicate that they are negotiating other important sports marketing deals intended to strengthen the visibility of its retail brand. Intersport remains a sponsor of the UEFA Cup and the Super Cup, the international hockey, handball and figure-skating championships and other important events in athletics, ski and other sports.
Meanwhile Intersport International Corp. has found another high-powered conglomerate to act as its licensee in a new part of the world. The Al-Futtaim Group, one of the largest in the United Arab Emirates, has agreed to open five 1,000-square-meter Intersport stores across the UAE market by 2009 under an exclusive licensing agreement announced last week. The same company may also play a role in Intersport’s expansion into other countries on the Persian Gulf at some point.
The first Intersport store is scheduled to be inaugurated during the 1st quarter of 2007 in the big and glamorous Festival City retail park of Dubai, which belongs to Al-Futtaim, close to an IKEA store and other well-known international banners. Al-Futtaim is the licensee of IKEA, Marks & Spencer, Toys ‘R’ Us and other major retailers in the UAE. The group began as a trading company in the 1930s. It now controls some 40 different firms involved in retailing, automotive, electronics, travel, logistics, insurance and other sectors, employing about 10,000 people. Based in Dubai, it has expanded into Bahrein, Kuwait, Qatar, Oman, Egypt, Singapore and Pakistan.
Intersport recently entered two other promising emerging markets – Poland and Turkey. While making its first move into the Middle East, Intersport has now extended its Russian licensing deal with the big Hemslade Trading group to include the Ukraine and all the other European and Central Asian countries belonging to the Community of Independent States (CIS). Corresponding roughly to the ancient Soviet Union except for the Baltic States, they together have more or less the same population as Russia.
The two partners have put together a 5-year plan that involves the opening of 40 Intersport stores in the Ukraine, 10 in Kazakhstan, 5 in Belarus, 3 in Uzbekistan and 3 in Moldava. The first stores will open later this year or in early 2007 in Kiev, where the international Serbian-based group reportedly started to look for suitable locations several months ago, even before signing the new contract with Intersport.
Intersport signed its licensing deal with Hemslade for Russia in December 2003, targeting a total of 300 stores in the country by 2008. A subsidiary of Hemslade, Delta Sport, has been the exclusive distributor of Nike throughout the CIS region and Serbia for many years. Nike took over the distribution for Russia from Delta a couple of years ago, but it recently decided to extend the contract for the rest of the CIS for a few more years.
Originally Intersport wanted to work with a partner that was not involved in the wholesale distribution of any major brand. However, because of the peculiar structure of the market in that part of the world, Intersport is now closing an eye on Delta’s franchised Nike shops in Russia and other parts of the CIS and on Hemslade’s other wholesale activities with Nike and some other specific sporting goods brands that it distributes in the territory. Besides, Intersport wants to continue to provide a multi-brand alternative to big brands like Adidas, Reebok and Puma, which are opening their own single-brand stores all over the CIS region.
In any case, Hemslade has done an excellent job at planting the Intersport banner in Russia. It now has 93 stores in the country and the door count should rise to 120 by the end of this year. Igor Roganovic has been placed in charge of the Intersport organization throughout the CIS. He replaces and reports to his brother Milovan who is now as chairman in charge of all the various retail banners operated by Hemslade in Russia and the CIS markets.
The extension of Intersport’s contract to the whole CIS area is a logical step in view of the strong growth that is now taking place in the sporting goods market outside Russia, especially in the Ukraine and Kazakhstan. As outlined in our 1,000-page research report on the CIS, the total market in the region was worth an estimated $4 billion in 2004, with an annual growth rate of 16.5 percent that should take its total value up to $6.1 billion in 2007 and to $9.3 billion by 2010. Russia now represents about three-fourths of the entire CIS market, but its share is certain to drop in the next few years. These figures include the so-called “uncivilized” segment represented by the open markets, which still play a strong role in the less developed areas, but the “civilized” portion of the market could well grow from $2.9 billion in 2004 to $5.7 billion by 2007.
No such estimates exist yet for the market in Dubai or in the Middle East generally. Various sources indicate that the market may be worth about $100 million in the Gulf States, where it is growing at an annual rate of 10-15 percent, and less than $300 million the Middle East and North Africa as a whole. The world’s largest indoor ski dome was opened in Dubai a few months ago, but the fitness and wellness segments are said to be those enjoying the biggest growth. A large part of the local population is affluent, multi-national and largely westernized in terms of purchasing habits.
Adidas and Puma control the distribution in the Gulf States. Adidas has many franchised concept stores and claims the leadership. Nike continues to work through distributors, one of which has a chain of about 12 sporting goods stores in the area, called Sun & Sand. The Athlete’s Foot has a presence there. Go Sport is becoming a significant player through a local franchisee, but Décathlon has given up on the region after realizing that its format doesn’t match the characteristics of the population. A large wholesaler, the Alsa Group, is considering the launch of a chain of at least 7 relatively large Surf & Turf stores in 2008-10, focusing on action sports and on the sports lifestyle segment of the market, which seems to need some energizing.
