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Puma (Germany)

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Puma is the world's #3 sportswear manufacturer. It has a longstanding historic rivalry with the #2 manufacturer Adidas, not least because the two companies were founded by brothers Rudi and Adi Dassler, former business partners who fell out in the late 1940s and spent the rest of their lives as bitter competitors. Rudi Dassler's Puma built up a strong following over the next three decades as one of the two leaders in sporting shoes and apparel but was unprepared for the dramatic changes in the sportswear market which resulted from Nike's spectacular growth in the 1980s. By 1990 Puma was struggling on the brink of bankruptcy. The company was rejuvenated from 1993 onwards by a youthful new management team led by CEO Jochen Zeitz. He continued to build the profile and prestige of the brand as it passed through a succession of different owners over the following decade, until becoming a subsidiary of what is now French fashion group Kering, also the owner of Gucci. Puma has made up for its lack of scale with a small collection of carefully selected endorsement partnerships, which have delivered high profile at comparatively low cost. By far the most successful of these in recent years has been sprinter Usain Bolt, still "the fastest man in the world". A new and equally influential partner is the singer Rihanna. However, Puma's performance continues to lag behind its larger and wealthier rivals. In 2018, Kering announced plans to spin off the business to shareholders in order to focus solely on luxury goods.

Advertising

Who handles advertising? Click here for Agency Account Assignments. The group declared "marketing & retail" expenses of €732m in 2016.

Competitors

See Clothing & Fashion Accessories Sector index for other companies and brands.

Brands & Activities

Although its core business remains sportswear, and especially sports shoes, Puma sees itself as an all-round "sport lifestyle" company, promoting its apparel for off-pitch use just as much if not more than for actual competition. In 2007, the diversified French group then known as PPR acquired a 75% stake in the business. That position had increased to 84% by summer 2013, when PPR changed its name to Kering. The remaining shares are publicly held.

Puma's mission statement since 2013 has been to be the "world's fastest sports brand". Despite strong growth in the past couple of years, Puma still trails some way behind its main rivals Nike and Adidas, with around 6% of the global market, compared to their combined total of 60%. During 2016 it was also overtaken by US rival Under Armour, but had regained a narrow lead by the beginning of 2017. The two groups are neck and neck in revenues.

The main Puma range encompasses a variety of different sporting footwear and accessories as well as sports-inspired clothing. It is focused primarily on two core sports of football and running, supported by golf (marketed mainly under the Cobra Golf brand, acquired in 2010). It also produces apparel and accessories for cricket, sailing and motor racing, three sports where the presence of Nike and Adidas is less keenly felt. Although it was strongly associated with tennis during the 1980s and 1990s through endorsement partnerships with Boris Becker, Martina Navratilova and Serena Williams, it has largely withdrawn from that sport since 2003. There are also licenses to independent companies to produce Puma Fragrances (now managed by L'Oreal), watches (with Swiss company Mywa) and other items. Eyewear is produced inhouse by a separate division of Kering.

One of the key factors in the resurgence of Puma since the 1990s has been its crossover appeal to fashion-conscious buyers. It remains arguably the trendiest of the main sporting lifestyle brands, especially in Europe, and this status has been reinforced by a series of partnerships with fashion designers. It claims to have been the first sportswear brand to do this, in 1998 with Jil Sander. Subsequent alliances included Alexander McQueen (Puma+Alexander McQueen), Yasohiro Mihara (Puma by Mihara Yasohiro) and Sergio Rossi. The group also produces a range of sports-inspired retro apparel under the Rudof Dassler Schufabrik name, as well as top-of-the-range Puma Black Label trainers.

Puma also owns the Swedish casual lifestyle clothing and footwear company Tretorn. In 2009, it acquired Swedish-based merchandising and experiential agency Brandon Company, which became its main promotional marketing arm. In 2011, the group acquired US action sports apparel brand Volcom for around $516m.

Lacking the huge financial resources available to Nike, and to a lesser extent Adidas, Puma's endorsement partners are carefully chosen with a view to delivering maximum effectiveness for a comparatively low investment. In football it sponsors several national football teams, of which the most prestigious is Italy. Otherwise, Puma also has a strong presence among the second-rank of countries, including Austria, Switzerland, Slovakia and the Czech Republic, as well as 12 nations from Africa and the Middle East including South Africa and Egypt. This gave it the winning team at the 2006 FIFA World Cup (Italy), and made it the biggest sportswear partner at the Africa Cup of Nations in 2008, and the 2010 World Cup. Team partnerships include Germany's Borussia Dortmund and Borussia Monchengladbach, Girnodins Bordeaux of France, and a collection of British teams comprising Leicester City, Rangers, Newcastle United and Arsenal. Individual player partners include Antoine Griezmann and Olivier Giroud of France, Spanish player Cesc Fabregas, and Italy's Mario Balotelli.

Perhaps Puma's most noticeable endorsement triumph since 2008 has been through its partnership with hitherto unknown Jamaican sprinter Usain Bolt, one of the heroes of the 2008 Beijing Olympics. Images of Bolt kissing the gold Puma running shoes in which he won three Olympic medals were flashed around the world, and were widely perceived to be the marketing coup of the Games. So noticeable was Puma's logo that Bolt was rebuked for his behaviour by the International Olympic Committee, in response to complaints generally thought to have originated from official sponsor Adidas. Puma renewed its sponsorship deal with Bolt in 2010 with a lavish three-year deal rumoured to be worth as much as $8m a year. That led to more publicity during the 2012 Games in London, where Bolt retained his title as the world's fastest man.

The group also has a strong presence in motorsport, where it is has the biggest presence of any of the main sportswear companies, sponsoring multiple Formula 1 teams as well as drivers including Lewis Hamilton. In 2008 it also established a presence in competition sailing, entering its own boat, il Mostro, in the Volvo Ocean Race. (It finished in second place). Female golfer Lexi Thompson joined the stable in 2010 alongside Ian Poulter and Rickie Fowler.

In 2014, the company took a step in a different direction, signing a multi-year endorsement alliance with singer Rihanna, who becomes ambassador for women's fitness. Together, Rihanna and Puma launched fashion streetwear line Fenty Puma by Rihanna (Fenty is the singer's actual surname). Kylie Jenner, Cara Delevingne, musician The Weeknd and two principal dancers from the New York City Ballet became ambassadors for the Puma range during 2016. The company's total future financial obligations with regard to sponsorship at the end of 2016 were €486m, of which €155m was payable in 2017.

Financials

Reaping the rewards of its sponsorships of multiple African teams in the 2010 World Cup, Puma's revenues for that year rose almost 11% to what was then a record level of €2.7bn. Sales continued to grow for the next couple of years, peaking at €3.27bn in 2012. However net profits plunged by almost 70% to €70m, as a result of a €178m charge for restructuring of less profitable operations. Topline also slumped the year after, with revenues for 2013 falling back to €2.99bn, partly as a result of negative currency fluctuations. Another restructuring charge caused net profits to plunge to just €5m. A further decline in 2014 pushed revenues back to €2.97bn, but net income recovered to €64m.

Exchange rates underpinned a jump in performance for 2015. Combined sales (including licenses) rebounded to €3.39bn, but net income slumped once more to €37m.

Revenues rose by a further 7% in 2016 (or 10% at constant currency rates) to a new company record of €3.63bn. Footwear contributed revenues of €1.63bn, with another €1.33bn from apparel, and the remaining €667m from accessories and equipment. The EMEA region accounted for 38% of sales, the Americas for 37% and Asia Pacific for 25%. The group has begun to build up its portfolio of company-controlled branded stores - 70 locations by the end of 2016 - but just over 78% of revenues still come from wholesale to third-party retailers. Net income rebounded from 2015's lows to €62m. Combined revenues for Kering's sport & lifestyle division, which also includes Volcom, rose 5% to €3.88bn.

For 2017, revenues for the sport & lifestyle portfolio rose by 13% to €4.38bn. Sales of Puma alone jumped 14% to €4.15bn.

Background

Brothers Adi and Rudi Dassler were arguably the biggest pioneers in what is now a massive worldwide sportswear industry. Based in Nuremburg, Germany, they 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 together, 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. Rudi Dassler set up as Puma. So began a fierce rivalry that continued for the remainder of their lives and beyond.

The bitter hostility between the two companies was stoked almost immediately by a dispute over which of the two brothers was first to develop screw-in studs for football boots. That invention is widely credited to Adidas because of the international recognition afforded the West German team which triumphed in the 1954 World Cup. The screw-in studs on their Adidas boots gave them better control on the disastrously water-logged pitch. Yet, according to Puma's version of its history, it was Rudi Dassler who invented the screw-in stud in 1949, and they were worn by several members of the first national West German team in 1950. Puma's first mass-production football boot was launched in 1952 under the Super Atom name, complete with interchangeable studs. As Puma would have it, Adidas merely copied the design.

For the next two decades, Puma and Adidas carved up the international sports shoe market between them. In 1952, Puma was named as the official sports shoe of the US Olympic Committee for two successive Games, but the brand's greatest successes were in football. Although Adidas had secured sponsorship of the West German national team, Puma signed up many of the country's leading players, as well as the national teams of Brazil and Sweden, among others. The Brazilian team triumphed at the 1958, 1962 and 1970 World Cup finals in Puma boots, making star goal scorer Pele one of the best known champions of the brand. Numerous other sportsmen and women achieved glory in the company's products during this period, including footballers Eusebio and John Cruyf, tennis player Guillermo Vilas, and even legendary American quarterback Joe Namath and runner Marty Peters. However, at the time, despite the endorsement of stars, sports shoes had only limited popularity outside the sporting arena and sales remained minuscule by modern standards at less than $40m a year.

In 1974, Rudi Dassler died and was succeeded as head of the company by his son Armin, who had already introduced a number of new production techniques including the use of a vulcanisation process to create a stronger bond between the uppers and soles of shoes, as well as velcro straps to improve flexibility and comfort. The company also experienced considerable success in the US through the launch of a range of running shoes to exploit the sudden surge in popularity of jogging. However, in another strategy which was ultimately to have disastrous consequences for the business, Armin Dassler ramped up production, introducing literally thousands of new product lines and expanding distribution into regular shoe stores and mass-market discount outlets. The result was a sharp decline in profit margins, despite a increase in revenues.

In 1986, Puma went public in Germany, but the next decade was to be one of the least successful in the company's history. Puma-sponsored athletes continued to make headlines: Diego Maradona's Argentina won the World Cup with the infamous "hand of God" goal against England, while Martina Navratilova and Boris Becker secured the brand's mastery of the tennis circuit. Becker in particular served as a walking advertisement for the brand, its logo splashed across his rackets as well as all of his clothing, both on and off the court. However at the same time Puma's profits were nosediving in the face of the rising competition from two American rivals, Reebok and especially Nike, who quickly came to dominate the premium end of the market and were the main beneficiaries of the increasing popularity of sportswear as general lifestyle apparel rather than something to be worn purely on the court or pitch. Another major drawback was Puma's reliance on independent licensed distributors rather than its own directly controlled subsidiaries in key markets such as the US. In the year following its IPO, Puma reported what was to become the first of seven successive years of net losses as it wrote off the value of large quantities of unsold and unwanted inventory. Following Armin Dassler's resignation from an active CEO role in 1988, his successor dropped a third of the company's bloated collection of almost 10,000 different products.

Increasingly strapped-for-cash at exactly the same time that rivals such as Nike and Adidas were beginning to offer ever larger endorsement contracts, Puma was also forced to terminate several of its own more high profile partnerships. A six-year deal with Boris Becker signed in 1985 was cancelled mid-term, and Maradona was dropped when he refused to accept a performance-related deal. Martina Navratilova's contract also ended in 1988 and was not renewed. Instead the group tried to make up lost ground by signing a new roster of younger, cheaper athletes, but the absence of big name stars only accelerated Puma's downfall, especially outside Germany, and it only narrowly avoided bankruptcy in 1990. That year, the Dassler family finally quit the business, selling on their shares to a Hong Kong-based trading company, who then sold them on a year later to Swedish conglomerate Proventus/Aritmos, who already owned a small collection of leisure wear manufacturers including local brand Tretorn. The new shareholders set about forcing a faster turnaround. In perhaps their boldest decision, the company's marketing director Jochen Zeitz, just 30 at the time, was promoted to the role of CEO, becoming the youngest head of any publicly traded European company.

To many observers, this appointment seemed certain to mark the beginning of Puma's death throes, but in fact quite the reverse was the case. Zeitz quickly set about returning the business to profitability by slashing costs, transferring manufacturing from Germany to Asia, speeding production and refining the company's market position. The first step in this path was to reposition Puma as a premium lifestyle product rather than the discount brand it had become. One key development was the launch of a new "Replica" range of retro designs, inspired by the unexpected popularity of the company's older products with a new music-influenced audience. The most successful example of this was the blue suede Puma Clyde sneakers, originally designed for basketball Walt Frazier in the 1970s, but rediscovered and popularised by in the 1990s by rap group Beastie Boys, and several of the new wave of grunge rock groups. Similarly, to harness the excitement surrounding the 1994 FIFA World Cup, but unable to spare the cash for a high profile team sponsorship, Puma launched a worldwide urban "street soccer" tournament, which proved to be a huge success, especially in Europe. In the mean time, some of the low cost endorsement gambles Puma made in the late 1980s had also begun to deliver results, not least that of British sprinter Linford Christie. Within a year, the company was back in the black again, reporting its first profit since 1986.

Seizing the opportunity to take the profit on its investment, Proventus/Aritmos began to pull out of Puma once again in 1996, selling on its shares in several instalments to Monarchy/Regency Enterprises, an entertainment company run by movie producer Arnon Milchan. He set about establishing Puma as the platform for a move into the sports marketing arena, declaring to the media, "I hope to transform Puma into the Julia Roberts of the athletic footwear industry. I believe Puma is my new Pretty Woman". By that point, Puma's US profile had fallen to an all-time low, eclipsed by Nike, but Monarchy/Regency set about changing that with a series of expensive sponsorship deals, including a five-year marketing partnership with up-and-coming tennis star Serena Williams, and a contract to supply shirts to the NFL. In 1999, in a coup which would have been unthinkable ten years earlier, two Puma-sponsored teams, the St Louis Rams and Tennessee Titans faced each other in the Super Bowl. The group also returned to the mainstream soccer arena, sponsoring five teams in the 1998 World Cup. Adding to the general lustre, Monarchy/Regency ensured high profile product placements for the Puma brand in several of its movies.

In 2003, however, it was all change once more as the entertainment company sought to take the profits from its investment, selling on what had by now become a 40% stake through a private placing, most of which was acquired by members of Germany's wealthy Herz family (best known as the owners of Tchibo/Beiersdorf). They in turn transferred their stake to the French retail group PPR in 2007. The latter move served to consolidate Puma's 15-year flirtation with the fashion business, by aligning the brand with the Gucci portfolio. After 2008, Puma has boosted its management team by recruiting several high-powered executives from other fashion and sportswear companies, including Melody Harris-Jensbach, formerly design director at Esprit, and Stefano Caroti, previously a senior executive at Nike Europe. However, Harris-Jensbach left the company again in 2011.

Last full revision 17th July 2016

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