losing game

Runner-Up Strategy

Adidas reuters_filter
Which way to go?
  • Why it matters

    Why it matters

    Adidas’ new strategy may not be sufficient to boost its share price and its market share so it can challenge the most popular brands on the market, Nike and Under Armour.

  • Facts

    Facts

    • The days when Adidas was the preferred brand in arenas, stadiums and soccer fields around the world are long gone, yet the brand still generates annual sales in the €15 billion range.
    • Mr. Hainer’s previous long-term strategy, which was dubbed Route 2015, did not work as the company failed to reach the lofty projects for income and profits.
    • Those who want to see Adidas dominant again on the world stage likely must wait for at least two years, when Mr. Hainer will step down.
  • Audio

    Audio

  • Pdf

Adidas was the undisputed number one in the sports world for decades. Beginning in the 1950s, the brand with three stripes dominated the gymnasiums and soccer fields of the world. And then along came Nike and within a few years, the U.S.-based company had left the German sporting goods maker in the dust.

Don’t expect this to change in the next couple of years. It was made clear on Thursday that while Adidas will grow, its goals are not ambitious enough to equal, much less exceed, the overpowering competition from America.

The only problem is that world market leader Nike already is much bigger, considerably more profitable and continues to increase its market share quarter after quarter.

Adidas isn’t exactly standing still. Quite the contrary as it’s not easy to increase sales by up to nine percent every year, which Adidas chief executive Herbert Hainer is promising. Last year, the brand generated €14.5 billion, or $15.75 billion in revenues and is projected to reach €22 billion within five years. In comparison, Puma, which is number three in the sporting goods sector, most recently posted revenues of only €3 billion. It will be quite an achievement to crank up year-by-year profits by 15 percent until 2020.

The only problem is that world market leader Nike already is much bigger, considerably more profitable and continues to increase its market share quarter after quarter. Adidas, it appears, is content in its role as runner-up for the foreseeable future, which is a curious attitude for the world’s second largest sports company, since second place means a loss to the first place finisher.

Nonetheless, Mr. Hainer chose not to spread it on too thick when unveiling his new, multi-year plan. After all, he missed the targets of the last long-term plan, the so-called Route 2015, by a mile. Sales and margins are well below what was envisioned while the CEO took a personal beating for his failure and the share price collapsed by almost 40 percent last year. This made Adidas the biggest loser on the DAX Stock Index. It’s certainly understandable not set the bar too high after that kind of disappointing performance.

Mr. Hainer had a unique opportunity to bring the brand’s 54,000 employees on board for a big leap forward with a visionary outline that targets the market leader, but he didn’t. Instead, he presented dozens of measures –something like a set of assembly instructions– for the next five years. It wasn’t inspiring to the workforce or investors.

Still, the success-besotted executives at Nike headquarters in Beaverton, Oregon, shouldn’t lean too far back in their chairs. In two years, Mr. Hainer will clean out his desk and retire. Who knows? Perhaps his successor will be more aggressive.

 

To contact the author: hofer@handelsblatt.com

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