Adidas (Germany)

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Adidas is the world's #2 sportswear company, behind Nike. Once the leading manufacturer of sports shoes and equipment, Adidas was overtaken by Nike in the 1980s and has lagged behind its bigger rival ever since, especially in the all-important US market. Even Adidas's traditionally strong position in international soccer has come under intense pressure from its American competitor. As a result, the 2006 Fifa World Cup in Adidas's home market of Germany couldn't have come at a better time, and was as hard-fought a battleground for these two rivals as it was for the on-pitch teams. The 2010 tournament four years later arguably swung in Nike's favour. Adidas is determined to regain its lead over Nike, especially in the key US market. Towards that end, it agreed in 2005 to acquire rival manufacturer Reebok, then #2 in the US and #3 globally. However even Adidas has struggled to turn around a steady decline in Reebok's sales since then, and the main brand too has suffered something of a plateau in recent years, despite what should have been a big boost from the 2014 World Cup.

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Who are the competitors of Adidas? Rivals include Nike, Puma and New Balance. See also Clothing & Fashion Sector index

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The Adbrands Company Profile of Adidas summarises the company's history and current operations. Subscribers may access the following website links:

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Adidas TaylorMade
Reebok Adidas Golf
Y-3 Adidas Originals

Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 12th May 2016: Adidas and British football club Chelsea agreed to terminate their endorsement partnership six years ahead of schedule. The separation was said to be "by mutual arrangement", but it is Chelsea which appears to have instigated the break. Though it delivered a disappointing performance on the pitch this year, the club is reported to be already in negotiations with another supplier for a significantly higher deal than the £30m a year arrangement it signed with Adidas in 2013. Only a year later, Adidas signed a separate deal with Chelsea's arch-rival Manchester United worth £75 a year. So confident is Chelsea of securing a more lucrative partnership that it will pay Adidas a £40m break-up fee. Their relationship will now end in June 2017, rather than 2023 as planned.

Adbrands Weekly Update 5th May 2016: Adidas is to dispose of the bulk of its poorly performing golf division, virtually the only part of its business which did not report stellar results for the latest quarter. The main athletic sportswear business was up by double-digit percentages in all global markets, and CEO Herbert Hainer said he has "every confidence that 2016 will be a record year". However the TaylorMade golf equipment unit has experienced a prolonged slump as a result of waning public interest in the sport; Adidas has now begun the search for a buyer. "TaylorMade is a very viable business," said Hainer. "However, we decided that now is the time to focus even more on our core strength in the athletic footwear and apparel market."

Adbrands Weekly Update 28th Apr 2016: The best 1Q results of the week arguably came from Adidas, taking analysts almost completely by surprise. Long-serving CEO Herbert Hainer is clearly determined to go out on a high later this year, and the latest quarter looks set to be the German sportswear company's best for quite some time. The group released a trading update ahead of full results next week. These showed that sales jumped 22% in the quarter at constant exchange rates, while net income soared by 38%. Retailers were not as surprised by the figures as investors, having already noticed the enormous popularity of the company's Boost running shoes, relaunched Stan Smith tennis trainers and limited edition specials like Kanye West's Yeezy designer sneakers.

Adbrands Weekly Update 10th Mar 2016: Adidas cheered investors with its best set of results for several years, showing solid growth for not just the key Adidas brand but also previously struggling Reebok. Revenues were up 10% at constant currencies and by over 16% at reported rates to E16.92bn, while net attributable income jumped 29% to E634m. The Adidas brand grew by 12% at constant rates to E13.9bn, while Reebok was up 6% E1.75bn. However those results were undercut by continuing declines in the TaylorMade golf business, down 13% at constant rates.

Adbrands Weekly Update 28th Jan 2016: Ads of the Week: "Your Future Is Not Mine". Choose a different future for yourself, suggests Adidas in a striking new spot from Johannes Leonardo. We don't usually like campaigns that hitch their bandwagon to up-and-coming "creative innovators" but this one does it subtly, preferring to let the pictures do the talking. Featured personalities here include blogger Aleali May, basketball star Iman Shumpert, singer Kyu Steed and artist Design Butler, but most viewers probably won't recognise them. Instead you can just soak up all that super-cool dystopian doom and gloom!

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Free for all users | see full profile for current activities: Whereas Nike's history is tied up with track athletics, Adidas was carried to world prominence as a result of the enormous success of the West German football team from the 1950s onward. Based in Nuremburg, Germany, the Dassler brothers Adolf ("Adi") and Rudi began making sporting shoes during the 1920s, initially for track and field events. Their footwear debuted on the world stage for the first time when it was worn by member of the German team at the 1928 Olympics. By the 1930s the Dasslers were making 30 different types of shoes for 11 different sports. American track star Jesse Owens wore Dassler shoes at the 1936 Olympics, earning four gold medals. But three years later, at the start of World War II, the brothers' factory was commandeered by the German government to make army boots. Adi stayed at home to run the business, while brother Rudi joined the army, and was later captured by Allied forces during the D-Day invasions.

After the war, with Rudi still in a POW camp, Adi made a fresh start, making shoes for US soldiers in the occupation army, using leftover rubber from tires and fuel tanks. When Rudi was finally repatriated in 1947, the brothers went back into business, but quickly fell out, reportedly over their respective wartime activities. They split in 1948, vowing never to speak to each other again, and formed rival companies. The only other thing on which they could agree was that neither would use the family name for his new business. Adi Dassler selected the name Adidas, adopting what was to become the world-famous logo of three stripes in the form of a boot. Rudi Dassler set up as Puma, and so began a fierce rivalry.

Although Adi Dassler's personal preference was for athletics, the sport which quickly earned him the biggest attention was football. In the 1950s he developed the first football boots with screw-in studs, allowing different sizes or shapes to be used. (That claim is denied by Puma, which argues that it was in fact Rudi Dassler who invented the screw-in stud). Worn by the West German side during the 1954 World Cup, they created a sensation. During the first half of the final between West Germany and the dynamic Hungarian team, a torrential downpour turned the pitch into a mud-bath. The German team was able to screw in longer studs during half time, giving the players superior control, and taking them to a 3-2 triumph. Sales of the boots rocketed as a result. Later, the company introduced a new lightweight boot with rubber studs. By the 1960 Olympics in Rome, three-quarters of all athletes competing wore Adidas shoes, including legendary US high jumper Dick Fosbury. Eight years later, Adidas-wearing athletes captured virtually all the medals at the Montreal Olympics.

Later the company began diversifying into sports clothing, kit bags and equipment. In 1970 the company's branded football became the official ball of all international tournaments (a position it has now held for almost 40 years). A year later boxers Muhammad Ali and Joe Frazier both wore Adidas shoes for the so-called "Fight of the Century", and the group also began making tennis rackets and skiwear. But the most important endorsement during that decade came from the still all-conquering West German soccer team. By the time of Germany's 1974 World Cup triumph, Adidas was firmly established as the world's biggest sports brand, and found in German team captain Franz Beckenbauer an articulate spokesman and an invaluable ally. For most of the 1970s the company had only one international competitor, Rudi Dassler's Puma.

Adi Dassler died in 1978, just as his company reached its peak. A year later Adidas unveiled the Copa Mundial shoe, which went on to become the world's best-selling soccer shoe ever. But now the company suddenly had two new rivals in the international marketplace as well as Puma: UK-based Reebok, but more importantly US manufacturer Nike. Both took advantage of cheaper labour costs in Asia to undercut Adidas's pricing, while also giving added value. Meanwhile Adidas was still running production from expensive factories in Germany. During the 1980s, under Adi Dassler's son Horst, the company began to feel increasing pressure from the American company. In 1984 Adidas made what was to prove perhaps its biggest marketing error, turning down an opportunity to sponsor upcoming basketball star Michael Jordan. Instead, Jordan signed with Nike in what became a hugely lucrative partnership for both parties.

This was not a good period for Adidas. The company drifted for several years, not just losing control of the international sportswear sector to Nike, but slipping into third place behind Reebok. Horst Dassler died in 1989, and two years later his sisters sold control of the business, now heading towards bankruptcy, to French entrepreneur-turned-politician Bernard Tapie for $290m. When Tapie was jailed in 1993 for bribing three French footballers to "fix" a match, Adidas, now losing $100m a year, was taken over by its creditors. They eventually appointed financier Robert Louis-Dreyfus to run the company. Having just spent three years restoring Saatchi & Saatchi to profitability, Louis-Dreyfus set about refocusing Adidas, cutting out huge swathes of management and restoring the famous boot logo (which had been abandoned several years earlier). In 1994, Adidas regained second place in the industry from Reebok. A year later, he took the business public, tripling sales and doubling profits by the end of the decade. (In the process Louis-Dreyfus turned his initial investment of just $10,000 into a personal stake worth around $390m.)

As growth in sportswear sector began to slow in the late 1990s, Louis-Dreyfus diversified with a $1.4bn takeover of French ski goods specialist Salomon Sports. However the enlarged portfolio of newly renamed Adidas-Salomon initially proved more of a distraction than a benefit. Salomon's golfing goods division Taylor Made failed to carve a niche in the US, and profits dipped alarmingly. Louis-Dreyfus retired from the business in 2001, handing over to new CEO Herbert Hainer, recruited from P&G. In 2000, as profits began tumbling from the high of E500m achieved in 1999, the group came under renewed pressure from investors. The announcement that Adidas would purchase of a minority stake in Germany's biggest soccer team, Bayern Munich, caused its share price to plunge by 10% mid-year. However performance steadily began to improve, with sales up strongly in 2001, and in the first half of 2002. Since then the company has continued to improve, streamlining its product range to concentrate on the more fashion-oriented side of sportswear. But the US, a market in which Adidas's reputation as a soccer pioneer counts for little, remains its Achilles heel.

In 2004, the company's regained impetus took a dent when it was forced to recall around 200,000 Superstar Ultra and Pro Team basketball shoes because of a manufacturing defect. Although the financial impact was described as "pretty insignificant" at less than E10m, it undermined the group's reputation for quality. Regardless of this the group launched its first ever global branding campaign under the banner 'Impossible is Nothing', featuring appearances from a host of sportsmen and women led by boxer Muhammad Ali. See full profile for current activities

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