Analysis: Adidas kicks up marketing budget

Comment on this story
br adidas Getty Soccer player James Rodriguez receives his Adidas Golden Boot Trophy in recognition of scoring the most goals during the World Cup on Saturday in Madrid, Spain. Photo: Getty

Emma Thomasson Berlin

SPORTSWEAR firm Adidas probably thought it hit the marketing jackpot when Adidas-sponsored Germany beat Adidas-sponsored Argentina to win the Adidas-sponsored World Cup.

But arch-rival Nike may have stolen much of its soccer branding thunder with quirky videos, innovative boots and amusing Tweets, not to mention the odd sponsorship coup of its own such as signing up hosts Brazil.

Adidas said it had secured “victory on and off the pitch” at the tournament, providing the highest-scoring boots and generating 22 percent more discussion on social media than Nike. But more than half the players displayed Nike’s brightly-coloured shoes and it was one of Nike’s new lightweight “Flyknit” boots worn by Germany’s Mario Goetze that volleyed in the winning goal.

Nike has been eating into its German rival’s market share and some branding experts and investors do not believe throwing more cash into marketing will fix the problem.

Instead, Adidas must spot and set more trends and create a buzz among youngsters.

“At the moment, Nike is cool, very cool. If you ask a 20 year old, they are not going to pick Adidas right now,” said Tammy Smulders, the head of marketing consultancy SCB Partners. “It is not as easy as just writing a cheque. They need to be doing more of the viral, underground activities which brings out the cool factor of the brand.”

After recently issuing its third profit warning in a year, Adidas said on Thursday it would boost spending on marketing to about 13 percent of sales this year and to between 13 percent and 14 percent of sales next year.

Adidas spent 12.4 percent of its 2013 revenue of e14.5 billion (R397bn) on sales and marketing, up from 12.1 percent in 2012 and already well above Nike, which spent 10.8 percent of sales of $27.8bn (R296bn) in the year to May 31.

Adidas chief Herbert Hainer admitted the company was being taken on even on its home turf. But he said second-quarter results – including double-digit growth in Germany, Britain, Spain and Italy and a 41 percent jump in soccer sales – showed Adidas was fighting back.

While Nike can focus on its “swoosh” logo and the “Just do it” slogan it has used since 1988, Adidas has to spread its ad budget across a range of brands such as Reebok, TaylorMade and Rockport, as well as its Originals and NEO sports-inspired fashion labels.

“They are fighting fires everywhere. Pouring money into marketing might put out some fires, but they will continue to burn elsewhere,” said Ingo Speich, a fund manager at Union Investment which has a 1.2 percent stake in Adidas and has repeatedly criticised management in recent months.

While Nike has encroached on Adidas’s home territory, the German firm has failed to make serious inroads in North America. Nike extended its lead to take a 15 percent global market share last year, compared with 10.8 percent for Adidas, according to Euromonitor.

Nike has focused on exploiting social media to target young consumers, while Adidas has relied more on official partnerships with the likes of the World Cup and the National Basketball Association.

The value of the Nike brand rose 13 percent last year to $17bn, making it the world’s 24th most valuable brand, according to consultancy Interbrand, more than double the value of Adidas on $7.5bn.

Even though Adidas was thought to have paid about $100 million to sponsor the World Cup, two Nike World Cup ads are among the top 10 most shared ad videos so far this year, according to marketing technology company Unruly.

“Quite a lot of people thought Nike was the official sponsor. They manage to get the benefits without as large an upfront investment,” said Leah Donlan, a marketing lecturer at Manchester Business School.

Adidas has started to replicate Nike’s tactics and investment in social media will be a big part of its increased marketing spending.

“We know driving higher levels of profitability is absolutely critical to our long-term success, and we will get there. But we will not get there if we are not constantly winning in the marketplace,” Hainer said. – Reuters


sign up
 
 

Comment Guidelines



  1. Please read our comment guidelines.
  2. Login and register, if you haven’ t already.
  3. Write your comment in the block below and click (Post As)
  4. Has a comment offended you? Hover your mouse over the comment and wait until a small triangle appears on the right-hand side. Click triangle () and select "Flag as inappropriate". Our moderators will take action if need be.