Puma confirmed reports that it has established a fully owned subsidiary in Spain, after its 15-year distribution contract with Estudio 2000 expired at the end of last year. However, arbitration proceedings are going on between the two companies to settle their contractual relationship, apparently affecting the Spanish retailers’ ability to order merchandise for the fall/winter 2010-11 season.
Based in Barcelona, Puma Sports Spain S.L. has been set up to take over the distribution, sale and delivery of all Puma products to wholesale and retail stores in Spain from the beginning of this year. The company has hired Javier Ortega, former retail director at Nike, as general manager for its Spanish subsidiary.
Puma is adamant that this unit has had the rights to sell the brand in the country since Jan. 1, and Ortega has apparently started to make contact with key Spanish retailers. But according to CMD, a Spanish trade publication, Spanish retailers are awaiting the verdict of the arbitration court before ordering any products for the upcoming autumn season. As reported by La Verdad, a Spanish newspaper, the arbitration court’s verdict should be issued in March.
On the other hand, it is not clear whether Estudio 2000 is in a position to deliver Puma merchandise for spring/summer 2010 normally from its office in Madrid and its distribution center in Elche, as Puma may restrict its own deliveries to Estudio 2000 until everything is settled.
This is the latest installment in a trademark imbroglio that dates back to the 1960s. Leon de Cos Borbolla, a businessman and race driver from Madrid, then registered both the Adidas and Puma brand names in Spain. While Horst Dassler, the heir of Adi Dassler, settled for the Adidas side, his cousin at Puma, Armin Dassler, staunchly refused to do so.
De Cos then teamed up with several retired Spanish football players to sell Puma apparel in the country, forming the Estudio 2000 distribution company. Vicente and Fermin Bernad, footwear producers from Elche, near Alicante, were drawn into the business to make and sell Puma footwear in Spain. But De Cos apparently lost sight of his own dealings: in the early ’80s, the hard-scrabble Bernad brothers built up a majority stake in Estudio 2000 and the Puma rights that went with it.
In an effort to thwart this business, Puma’s international managers set up their own Spanish sales office and started selling footwear under the DasslerPuma brand. In January 1993 the Spanish Supreme Court finally issued a verdict on the issue, but it was so convoluted that it still prevented Puma from operating properly in Spain.
When he took over the helm at Puma, Jochen Zeitz decided to ignore the lawyers and to start talking with the Bernads. It still took many months, but in January 1995 the two parties reached an out-of-court settlement. This apparently enabled Puma to recover its trademark rights in Spain, but in exchange Estudio 2000 became the exclusive distributor of Puma products in Spain until the end of 2009.
Puma prepared for the transfer with the opening of a new Spanish subsidiary at the start of this year. However, Vicente Bernad told Spanish reporters that yet another disagreement had erupted over the expiration of the 1995 contract, leading to the arbitration proceedings. He reportedly complained that Puma was unwilling to negotiate an extension of the contract, whereas Estudio 2000 wanted to sell Puma for another five years – an option that had been left open in the 1995 agreement.
Other sources indicated that the arbitration proceedings were not about the termination of the contract as such, but about potential compensation to be paid to the Bernads. Puma confirmed that such an arbitration was taking place but declined to comment on its contents.
The Bernads employ some 120 people. They are said to have also an issue with Diesel.
Separately, Puma firmly denied other media reports that it intended to shutter one-third of its mono-brand stores as part of its cost-cutting measures. Puma indeed announced last May that it was stepping up a cost reduction plan launched in the last quarter of 2008, and that this would entail a review of retail operations. It stated this week that it had not yet determined the number of under-performing stores to be closed down, but in any case it would be less than one-third of its existing stores. Puma further denied reports that its sales declined by 5 percent for the full year 2009.