* For a limited period, this profile and selected other Adbrands pages which would normally be available only to subscribers, have been opened to all users. Please note that access to most other profiles as well as the account assignments database is still limited to paid subscribers *
Nike is the world's #1 manufacturer and marketer of athletic footwear and apparel. Almost out of the blue, the company established itself during the 1980s and 1990s as one of the world's most familiar brands; as ubiquitous as a Coke bottle or Big Mac. The Nike "swoosh" logo came to symbolize not just sports culture, but street culture, as the appeal of the star players who endorsed the brand was carried onto city streets. The approach of the new century set Nike new problems. Trainers went (briefly) out of fashion, economic slowdown and labour problems hit Asian performance. But the group has bounced back strongly, retaining its iron grip on the global sporting footwear sector and on US sports-related apparel in particular. Sports culture remains an intrinsic part of modern daily life, and Nike has strengthened its hold on the market as a whole through endorsement partnerships with many of the world's most prominent sports men and women as well as a string of memorable and effective marketing campaigns. A key development has been its erosion of arch-rival Adidas's grip on the global soccer market.
Selected Nike advertising
Nike's main agency is Wieden & Kennedy, which works for the company in most global markets. Media is handled mostly by Mindshare. Click here for agency account assignments for Nike from Adbrands.net. Nike declared what it calls "demand creation expense", comprising advertising, promotion and endorsement payments, of $3.34bn in the year to May 2017. In the US, Kantar (in Advertising Age) reported measured expenditure of $80m for 2016, out of an estimated total of $1.5bn.
Nike's main competitors are Adidas (also owner of Reebok) and Puma. Other include VF Corp, Under Armour, Li Ning, Asics, Fila, K-Swiss and New Balance. See Clothing & Fashion Accessories Sector index for other companies and brands.
One Bowerman Drive
Beaverton, OR 97005-6453
Tel: 1 503 671 6453
Recent stories from Adbrands Weekly Update:
Adbrands Weekly Update 19th Oct 2017: Ads of the Week: "Want It All". Here's a supercharged extended spot for Nike Basketball from - who else? - Wieden & Kennedy, charting the evolution of fictional superstar Dante Grand from the street court to the NBA championships. Nike's not so fictional endorsement partners LeBron James and Kevin Durant are along for the ride to add their authority. The resulting film is pure electricity: you won't be able to take your eyes from the screen for the full two minutes. As a side-note, the ad ties in with Nike's first season as official apparel provider to the NBA, taking over from former sponsor Adidas. However, it got off to a lousy start when - of all the possible players affected - top ambassador LeBron's Nike-made shirt ripped in half during the first game of the season.
Adbrands Weekly Update 12th October 2017: Ads of the Week: "Down But Not Out". So what ever happened to director Michael "Heat" Mann? It's all gone very quiet since his last two movies Public Enemies and Blackhat got a critical mauling. Well it seems he still has good friends at Nike, for whom he has made a few really great ads over the years. This latest, out of Wieden & Kennedy Shanghai and featuring boxer Rex Tso, is pretty good too, even if it doesn't match the football spots he made for the brand back in the 2000s. Revisit his classic Nike/NFL spot "Leave Nothing" over on our Facebook page.
Adbrands Weekly Update 6th Jul 2017: Investors had been bracing themselves for a disappointing final quarter from Nike, but in fact the numbers came in better than expected, as flat performance in the US was offset by surging demand in international markets. For the full year, revenues were up 6% to $34.3bn, including an 8% lift for Nike brand sales to $32.2bn. At constant currency rates, sales from China alone soared by 17%, and other emerging markets by 14%. That helped to lift net income by 13% to $4.2bn. The other big gain was in sales direct to consumers rather than via traditional wholesale channels. This is an area in which Nike plans to invest considerable money and attention. After years of avoiding any direct relationship with Amazon, for example, Nike finally confirmed it will pilot sales of footwear, apparel and equipment via the ecommerce giant in the US, in addition to its own direct channels. Previously, Nike product has only been available on Amazon via resellers. The move towards direct sales was further encouraged by a weakening in wholesale profit margins. Though group revenues were up, costs were up sharply as well, so any move to cut unnecessary expenses would be beneficial to continuing profit growth.
Adbrands Weekly Update 23rd Feb 2017: Ads Of The Week: "What Will They Say About You?". Nike is tackling Middle Eastern female stereotypes head-on in this excellent campaign for Arabic markets for its Nike Women banner. Wieden & Kennedy is, as always, the agency. A measure of just how bold the ad is can be seen in the extraordinarily negative comments it has elicited in social media, in most cases from male Arabic viewers. Presumably TV airtime will be limited in the Middle East, so if that's where you live, this is an ad you need to share virally.
Adbrands Weekly Update 2nd Feb 2017: President Trump's "travel ban" encouraged an unprecedented pushback from CEOs of major US corporations, reflecting the wider public disapproval of such a blinkered and ill-judged executive order. Perhaps the most high-profile protest came from Google co-founder Sergey Brin, who personally joined public protesters at San Francisco airport. However, other tech bosses including Apple's Tim Cook, Facebook's Mark Zuckerberg, Microsoft's Satya Nadella, Twitter's Jack Dorsey, Uber's Travis Kalanick and AirBnB's Mark Chesky, among others, also voiced their opposition to the ruling. Netflix CEO Reed Hastings said Trump's actions are "so are so un-American it pains us all. Worse, these actions will make America less safe (through hatred and loss of allies) rather than more safe." Starbucks' Howard Schultz wrote to all staff to voice his dismay over Trump's policies on Muslim refugees, Mexico, and the Affordable Care Act and vowed to hire 10,000 refugees over the next five years in the 75 countries where Starbucks has stores. In a joint letter to staff, Ford Motors executive chairman Bill Ford and CEO Mark Fields stated "We do not support this policy or any other that goes against our values as a company." Nike's Mark Parker also wrote to all staff to express the company's opposition to the travel ban. "Nike stands together against bigotry and any form of discrimination. We've learned that on the field of play, where fairness and mutual respect are the rule, not the exception." In the latest development, Amazon, Microsoft and Expedia, all headquartered in the state of Washington, are lending their support to a legal challenge to the travel ban mounted by the state's attorney general Bob Ferguson. However, brands opposing Trump can also expect repercussions from his supporters. Starbucks and Uber both suffered boycott calls on Twitter as a result of their stance, and similar anti-protest protests are inevitable.
Kevin Hart adds to his endorsement portfolio with this new campaign for Nike, from Wieden & Kennedy of course, for the...Posted by Adbrands.net on Wednesday, 4 January 2017
Brands & Activities
Nike remains the clear leader in the global sportswear market, and has if anything strengthened its position in recent years, especially in the global football (soccer) market, where it had traditionally lagged behind rival Adidas. With general approval of the sportswear market in general and Nike in particular at an all-time high there seems little evidence of any likely future downgrade in performance. The only significant clouds on the horizon could be rising costs of manufacturing or raw materials, and any extraordinary surge in performance by merging competitors.
Nike is the world's #1 manufacturer and marketer of athletic footwear and apparel. The group operates a broad collection of separate divisions, and produces footwear and sportswear for just about every conceivable sport within its main range. Combined sales for the Nike brand were $32.2bn in the year to May 2017, up 6%.
The business is now structured as now key segments of running, Nike basketball, Jordan (including basketball), football (soccer), men's training (including American football and baseball), women's training, action sports, general sportswear and golf. It is the clear market leader in running, training and basketball (the latter mostly under the Jordan brand), all of which reflect its powerbase in the US, where it now has around 60% share of the branded athletic footwear market, up from just 36% in 2005. The group reports an annual breakdown by category of wholesale sales (not including its own sales direct to consumer). Out of total wholesale sales for the Nike brand of $28.7bn, running accounted for 18%, the Jordan brand for 11%, men's training for 9%, football (soccer) for 7%, Nike basketball for almost 5% and women's training for 4%. General sportswear is still the brand's biggest category, at 30% of wholesale sales. Men's footwear and apparel accounted for 56% of sales, women's for 23%. Some categories are doing significantly better with others, with the best growth, even at currency-neutral rates, coming from US-centric lines like running and Jordan. Sales of soccer, action sports and golf have fallen sharply since 2015.
Traditionally Nike was less all-conquering in less American-focused sports, but has caught up very quickly indeed with its traditional European rival. In soccer, for example, Nike had traditionally held 2nd place to Adidas, but the Air Zoom Total 90 soccer boot launched in 2003 was extremely successful in Europe's main football markets, giving Nike the edge over its rival in soccer footwear for the first time. It continues to hold onto the leading position in football footwear in Europe, although Adidas has the edge in overall apparel and equipment. Soccer alone contributed revenues of around $1.7bn to Nike in fiscal 2010, compared to just $40m in 1994. In 2008, Nike agreed a stunning deal to replace Adidas as official sponsor of the French national team from 2011 to 2018, offering a total fee of around E320m. (The shine came off that deal somewhat because of France's disastrous performance in the 2010 World Cup).
In 2007, Nike attempted unsuccessfully to wrest the contract to sponsor the kit for German national football team from Adidas (it will try again in 2017), and subsequently announced a $291m takeover of UK-based sportswear manufacturer Umbro, best known as the official manufacturer of the England football team's kit. Umbro retained standalone status within the group as an affiliate brand, generating sales of $262m in 2012. However the group put that business up for sale during the year, and a deal was eventually agreed with Iconix Brand Group, who acquired the business for $225m. Nike retains the England football team contract (now until 2030). Football remains one of the brand's key segments, although it was also the only one to record a decline at constant exchange rates between 2014 and 2015, falling by 2% from highs encouraged by the build-up to the 2014 World Cup.
German firm PR Marketing estimated that Nike had an overall 36% share of the total football market in 2012, just behind Adidas at 38%. Globally Nike has around 33% share of the athletic footwear market. In the US it is more like 48%.
In running and training, Nike has strengthened its position with a range of innovative add-ons, most notably, Nike+, a partnership with Apple to integrate its iPod technology with footwear and apparel. As a result, Nike+ running shoes are able to transmit performance data wirelessly to the Nano, including distance run, pace and calories burned. The accompanying apparel has a special pocket to house the iPod. Along similar lines, the group introduced the Nike+ Fuelband in 2012, a digital bracelet that tracks daily activity and calories burned.
Key to the marketing of its main brand is the group's huge portfolio of endorsement agreements with leading sportsmen and women. Combined payments are well in excess of $1bn per year. The most celebrated such arrangements have been the original precedent-setting deal with Michael Jordan in 1985 (then worth a little more than $4m), and a later gamble on golfer Tiger Woods which turned into an ongoing $105m endorsement contract, currently still the reigning record for a solo sportsman. In 2005, Nike dipped deep into its wallet again to sign up teenage golfing phenomenon Michelle Wie to a contract estimated to be worth at least $5m a year. In the US, Nike was able in 2010 to poach the prestigious contract to become official uniform supplier to the NFL from Reebok from 2012.
In soccer, the group has a deal with the Brazilian national football squad worth $695m over 10 years to 2018. It also supplies the French, US and Chinese teams. Other football endorsements in Europe include kit sponsorship deals with Barcelona, Paris St Germain, Internazionale and 24 other top European clubs, though it lost Manchester United to Adidas in 2015, and Juventus from 2016. Tottenham Hotspur joined the portfolio in 2017 (from Under Armour). Individual players include England striker Wayne Rooney and Brazil's Ronaldinho. French soccer star Thierry Henry (now retired) controversially quit Nike in 2006 to sign with rival Reebok. At the beginning of 2013, the group signed what was then thought to be its richest deal to-date, securing a 10-year partnership with golfer Rory McIlroy for a rumoured $250m. That deal proved something of a disappointment as McIlroy's performance slumped dramatically during the course of the first year, though it has since improved significantly. The group now pays out at least $1bn a year to its various endorsement partners, and even without new deals or renewals, Nike's outstanding financial commitments under existing endorsement contracts at the end of May 2017 totalled $1.3bn for 2018 alone, and total future commitments of $9.85bn.
Nike's vast range of clothing and footwear is manufactured by independent suppliers in more than 450 factories around the world (mostly in Asia), and sold in nearly 160 countries. Most Nike-branded merchandise is designed and developed by Nike, but several lines including swimwear, sports bras and maternity exercise clothing, children's clothing and timepieces are licensed to other manufacturers. There are also several specialist lines including the Jordan Jumpman 23 sportswear brand; Nike All Conditions Gear (ACG), producing footwear and apparel "infused with the flavor and attitude of the outdoor athlete"; and Nike Team Sports, which manufactures custom-designed uniforms for amateur and college sports teams. Nike NSW is a newer line of premium sportswear introduced in 2010.
The group also produces a range of golf apparel and equipment under Nike Golf brand. That unit is perhaps best-known for its endorsement partnership with Tiger Woods, and it was Woods' most vocal supporter during his recent marital troubles. The relationship with Woods has been maintained, but the veteran golfer was more or less retired in 2016 in favour of better-performing Rory McIlroy. However, sales of Nike's golf clubs and other equipment suffered from the global downturn in interest in that sport, and the group said it will stop producing hardware, though it will continue to market apparel. In fiscal 2017 alone, Nike's wholesale revenues from golf-related apparel plunged by 18% to $579m. In 2002 the group acquired Hurley, producing premium clothing and footwear for surfing, skate and snowboarding. It is now the main operating unit within the Nike Action Sports segment. Nike Golf, Hurley and Jordan are all included under the umbrella of the Nike brand.
In the 1990s and 2000s the group also diversified, adding subsidiary brand divisions, which were grouped under the general umbrella title of Nike Affiliate Brands. The most significant of these is rival US sportswear brand Converse, maker of the All Star basketball sneaker, acquired in 2003 for about $305m. Converse continues to operate as a standalone business, under its existing management team. Established by Marquis Converse in 1908, Converse is in fact America's oldest sporting brand. All Star was the first sports performance shoe when introduced in 1917, and was later endorsed by legendary basketball player Chuck Taylor in the 1920s. Converse has had a mercurial corporate history, bought and sold by one owner after another for most of the 20th century. Its owner from 1986 onwards, furniture and clothing company Interco, collapsed in 1991 in what was then one of the biggest ever US corporate bankruptcies. Established as a separate public business in 1994, Converse struggled through that decade before itself declaring Chapter 11 in 2001. It was acquired by private investors who agreed the sale to Nike in July 2003. For ye 2017, Converse contributed sales of $2.04bn, up 4% on the year before.
Other brands in Nike's affiliate portfolio have not lasted the distance. The group acquired ice hockey equipment manufacturer Bauer in 1995 for $430m, but despite its best attempts was unable to develop the business beyond its core sport. It agreed to sell Bauer in 2008 for just $200m to a private investment group. The group also owned Cole Haan for several years. That company markets casual non-sports footwear under the Cole Haan and Bragano brands through its own chain of more than 160 stores. It generated revenues of $535m in 2012. The business was put up sale during the year, and was eventually acquired by investment company Apax for $561m.
In 2004 the group established a new division, Exeter Brands Group, to develop footwear and apparel for "value" retail channels. Previously it had barred its branded products from sale through mass-market discount outlets. The new division allowed Nike to exploit this enormously valuable retail sector without compromising the values of its lead brand. Exeter was originally built around Starter, a minor brand acquired in 2004 which supplied sports shoes to mass-discounters under the Shaq brand (under license from basketball star Shaquille O'Neal). Nike continued to produce Starter as an exclusive brand for sale through Wal-Mart, where Nike was not otherwise available, and Tailwind was launched in early 2007 for sale though PayLess ShoeSource. The shoes are priced well below other Nike-made brands, but at a premium to other discount trainer brands. Other brands introduced under the Exeter umbrella include Asphalt and Dunkman. Nevertheless there were signs of a change of heart at Nike over this strategy by the end of 2007. Starter was sold to smaller apparel manufacturer Iconix in November, and the rest of the Exeter group was eventually shut down. In 2005, the group quietly reintroduced the Blue Ribbon Sports brand - actually Nike Inc's original name - for a range of upscale urban clothing, including jeans, pullovers and shirts. Despite its "sports" branding the range was quite far removed from traditional sportswear and puts Nike into much closer competition to casual retailers such as Gap. The experiment failed to take off, and was just as quietly discontinued in 2006.
The group sells through a variety of third-party retailers, as well as its own network of over 1,140 outlets by May 2017. Three-quarters of these are factory outlets selling discontinued lines, but the most prestigious outlets are the NikeTown superstores (mostly in the US, but also other major markets such as Germany and the UK), extravagant giant outlets designed to celebrate all aspects of the brand. The group also has its own fast-expanding e-commerce business. Direct-to-consumer sales from its own retail network and online jumped by 16% in fiscal 2017, topping $9bn for the first time. The group's single biggest retail customer is global chain Foot Locker, which accounted for 8% of Nike's sales in 2010 or around $1.5bn. Nike in return provides more than half of Foot Locker's sales. In 2007, Nike launched a small network of specialist outlets in a partnership with Foot Locker to concentrate exclusively on the basketball market. Trading as House of Hoops by Foot Locker, the chain sells only Nike footwear, as well as basketball clothing and equipment. Traditionally, the group has always avoided direct sales of its products via Amazon, but it backtracked on that strategy for the first time in 2017, signing a deal to open its own channel on the ecommerce giant.
Nike's group revenues topped $30bn for the first time in the year to May 2015, and have continued to climb since then. The company has set itself a revenue target of $50bn by the end of fiscal 2020. Revenues for the year ending 2017 rose 6% to a new high of $34.35bn. Net income rose by 13% to $4.24bn, also a record result, and the first time profits have exceeded $4bn. The US alone accounted for 46% of total revenues. China is now Nike's #2 market by revenues, with sales up 17% at constant exchange rates in ye 2017 to $4.24bn. Japan was the #3 territory at $1.0bn.
Footwear remains the core line within the group, generating 65% of Nike brand revenues, or $21.08bn. Nike branded apparel contributed $9.65bn, and equipment $1.43bn.
Nike chairman and co-founder Phil Knight has long developed a reputation as one of the most enigmatic and idiosyncratic figures in big business, rarely to be seen in person without his trademark pair of sunglasses, even within Nike HQ. He generally maintains a low profile outside Nike. His best-known sideline is as the chairman and owner of Laika, a specialist CG and stop-motion animation production company run by his son Travis Knight, who joined Nike's board in 2015. Laika produced its first animated feature film, Coraline, in 2009 released theatrically by Universal's Focus Features division. A follow-up, the similarly dark ParaNorman, was released in 2012, and there have been others since. In 2015, Knight announced plans to step down as chairman in 2016, and transferred his 18% voting stake in the company to a newly created investment entity, Swoosh LLC. This entity is run jointly by him in association with current Nike CEO Mark Parker and two other trusted Nike directors.
Mark Parker is president & CEO of Nike, and succeeded Phil Knight as chairman in 2016. Other members of the executive committee include Trevor Edwards (president, Nike brand), Eric Sprunk (group COO), Hilary Krane (chief administrative officer) and Andy Campion (EVP & CFO). Marketing is now led by John Slusher (EVP, global sports marketing).
There is a large team of other vice presidents heading up each of the group's core areas. These include Greg Hoffman (VP, global brand creative & experience), Nigel Powell (VP, global communications), Davide Grasso (VP, global brand marketing), Enrico Balleri (VP, global brand communication), David Schriber (VP, North America brand marketing), Jesse Stollak (VP, global digital brand & innovation), Steve Lesnard (VP, brand management, Western Europe), Howard White (VP, Jordan brand), Brian O'Connor (VP, global Jordan brand), Sarah Mensah (VP, North America Jordan brand), Lynn Merritt (VP, global basketball sports marketing), Riccardo Colombini (VP, global football & Western Europe sports marketing), Amy Sheridan (North America media director), Dave Genel (VP, global digital brand marketing) and Stefan Olander (VP, digital sport).
The Nike brand is divided into several product groups overseen by Jayme Martin (VP & general manager, global categories) and Reenie Benziger (VP & GM, global apparel). Individual groups are headed by Dirk-Jan van Hameren (VP & general manager, global sportswear), Heidi O'Neill (VP, global women's training), Amy Melczer Montague (VP & GM, North America women's), Dermot Cleary (VP, Nike global football), Patrick Seehafer (VP, Nike global running), Craig Zanon (VP, global men's training), Michael Jackson (VP, global basketball), Carl Grebert (VP, young athletes) and Maggie Gauger (VP & GM, global tennis), Amy White is VP, global category operations; Keith Houlemard is VP & GM Olympics.
Global operations are now overseen by Elliott Hill (president of geographies & sales) and Christiana Shi (president, direct to consumer). In Nike's domestic market, business heads include Joaquin Hidalgo (VP & GM, North America), Jamie Jefferies (VP, North America Nike NSW), Ken Dice (VP, North America running), Dan Jones (VP, North America Basketball) and Mark Riley (VP, North America athletic training). Other brand businesses are led by Larry Miller (president, Jordan brand), Michael Spillane (CEO, Converse), and Dave McTague (CEO, Cole Haan). Julien Cahn is chief marketing officer for the Converse brand.
Operations for the Nike brand were divided into regional groups in early 2009, now reporting to Hans van Alebeek (EVP, global operations & technology). Divisional heads are Elliott Hill (VP, North America), Craig Cheek (VP, Greater China), Bert Hoyt (VP, Western Europe), Marc van Pappelendam (VP, C&E Europe), Roland Wolfram (VP, emerging markets), Jim Reynolds (VP, Japan) and Michaela Stitz (VP, C&E Europe). Tom Peddie is VP, global sales, also reporting to DeStefano.
In the 1960s, just about the only international sportswear brand was Germany's Adidas. In 1962 American athlete Phil Knight and sports coach Bill Bowerman set up Blue Ribbon Sports to steal a little of Adidas's US market by importing lower-cost but higher-tech running shoes from Japan. The pair had met five years earlier at the University of Oregon, where Bowerman taught and Knight was a student. To begin with, the company distributed shoes manufactured by Japanese company Onitsuka Tiger (now Asics). These Tiger shoes were a modest success, and the company opened its first retail outlet in 1966. Slowly, the business grew, not least after Bowerman's 1966 book Jogging launched a running craze which swept America and later the world.
As demand for running shoes began to increase, Tiger attempted to take back control of its shoes in the US. As a result, Bowerman and Knight decided to set out on their own and start designing and making their own trainers. In 1971, Knight paid art student Carolyn Davidson just $35 to design a new logo, and the famous swoosh was born. The first shoe, named Nike after the Greek goddess of victory, was launched at the 1972 US Olympic trials, and got a big boost when it was endorsed by two of the fastest runners. The company promptly changed its name to Nike. Two years later, the Waffle Trainer - with an undersole moulded after Bowerman's preferred breakfast food - became America's best-selling sports shoe.
With sales now approaching $5m, Nike set up a dedicated factory in the US, as well as an Australian sales office. Sales rocketed over the next five years, as the company expanded rapidly around the globe, supported by endorsements from several sports stars including tennis player John McEnroe. By 1980, the year the company went public, Nike had stolen more than 50% of the US market from Adidas and Reebok, and sales had powered from $5m in 1974 to over $269m. Yet Nike also had strong rivals to overcome. The sudden popularity of aerobics in the early 1980s appeared to take Nike by surprise, and it was overtaken in 1983 as the leading manufacturer of athletics shoes by Reebok, which developed a close association with that exercise routine. It took Nike another six years to regain its lead, once the popularity of aerobics had begun to fade, and by the end of the 1980s, company revenues had leapt to over $2bn.
At the heart of the company's success was its revolutionary Nike-Air cushioning system, developed by former NASA engineer Frank Rudy. Pressurised gas pockets in the sole gave the shoe extra spring and resiliency during running. In 1985, the company took a gamble by signing an endorsement deal with basketball player Michael Jordan, a college star who had just turned professional for the Chicago Bulls. Famed for his spectacular slam-dunk leaps, Jordan was the perfect partner for the new cushioning, highlighted by the new range of "Air Jordan" shoes. It was to become a hugely lucrative partnership. Over the next 15 years, as a result of Nike's marketing, Jordan was established as one of the world's best-known sports figures, despite the fact that the sport in which he excelled had only marginal appeal outside the US. And the marketing was truly a force to be reckoned with it. The 'Just Do It' campaign first launched in 1987, and was a huge success. Not only did it turn Nike into a global brand, but it established agency Wieden & Kennedy as one of America's most creative shops. Also one of the hardest-working - delivering up to 60 different creative executions a year by 1996.
At the same time, the company began to diversify, acquiring Cole Haan leisure wear in 1988. In 1990, the first Niketown superstore, selling a full range of clothing and shoes, was opened in Portland, Oregon. Nike also spent widely and wisely to sign up a glittering portfolio of the world's top sports figures, particularly in athletics, where each Olympics seemed to broaden the brand's strength. The rest of the world began to catch the Nike fever. International sales soared to over $1bn by 1992, making up a third of the company's total revenues.
In 1993, Nike took a bite out of a new sport, when Michael Jordan retired from basketball to become a professional baseball player. The following year, the group acquired Canada's leading sportswear company Canstar, owners of Bauer hockey and skating gear. Meanwhile the group was conquering every other international sport, from athletics to soccer to golf, signing up leading stars for endorsement deals. In 1995, Nike took a gamble on recreating their success with Michael Jordan, by signing another rookie, golfing sensation Tiger Woods. In 1995, 20 year-old Woods inked a $40 million endorsement contract and went on to win the PGA Masters tournament in 1997. In 1996, the Brazilian national soccer team and CBF, the country's football association, were signed to a $200m, 10-year deal, centring on star player Ronaldo and Nike's Mercurial football boot brand. Sales continued to climb by $1bn or more every year, reaching a peak of $9.2bn in 1997.
Then suddenly, Nike hit a brick wall. The market changed. In the US, Nike's fashion-led teenage target market moved from basketball shoes to hiking boots, almost overnight. As a result, the long-running sports-oriented marketing campaign finally ran out of steam. The US media was suddenly swamped with stories accusing Nike of operating sweatshop conditions in its Far Eastern factories, where workers were paid minimal wages to make $150 shoes. Key managers whose personal stock options in Nike had soared as a result of the company's growth retired early or left for other challenges. The group was even hit by a sudden and wholly unforeseen drop in US sales of golfing wear by up to 20%. Total US sales, accounting for 57% of revenues, dropped. Meanwhile in Asia, economic problems led to a sudden halt in growth - after more or less doubling every year since 1995, sales in the Asia Pacific market rose by just 1% in 1998. The company was caught completely off-guard. Restructuring costs from a reduction in factory operations led to a write-off of over $129m. The company was forced to let 1,600 people or 7% of the workforce go. Only Latin America and Europe saw continued growth, but there was a symbolic disaster in the Paris World Cup that summer, when Nike's Brazil, the favourites to win, were roundly defeated in the final by France, sponsored by arch rival Adidas.
Thanks to growth outside the US and Asia, group sales for 1998 inched up to $9.6bn. But redundancy costs, restructuring, improvements in Asian factory conditions and more left a big dent in profits - net income effectively halved from $796m in 1997 to $400m in 1998. Operating profits dropped 37%. As chairman & CEO Phil Knight put it in his 1998 shareholders' letter "So, what knocked us down in 1998? Asia ... brown shoes ... labour practices ... resignations ... layoffs ... boring ads. Also, we have been criticised for our headquarters expansion. But understand this: we need a much bigger place to house all our troubles." But as Knight's typically informal comment suggests, Nike was able to look at its problems objectively and showed every sign of bouncing back.
Michael Jordan's retirement from sports, announced in 1999, was followed by the launch of a new range of Jordan Brand "Jumpman" shoes, sportswear and accessories. Also new in 1999 was the launch of the Nike Alpha Project brand, featuring top-of-the range clothing, shoes and accessories, including the ACG - All Conditions Gear - line of outdoor wear. Meanwhile, Nike renewed its sponsorship contract with golfer Tiger Woods, making him the world's second best-paid sportsman after racing driver Michael Schumacher. The new five-year deal was worth $100m to Woods, more than twice the previous figure. In an end to one era in Nike's history, Bill Bowerman retired from the Nike board in 1999, and died later that same year.
In 2000 Nike agreed a deal with the UK's Manchester United soccer team to have exclusive rights for replica sports kit for the club over a 13-year period from 2002. Other endorsement partnerships include tennis players Andre Agassi, Monica Seles, Pete Sampras and John McEnroe, as well as athletes Michael Johnson, Carl Lewis and Joan Benoit-Samuelson. There were signs that the group was regaining its stride. Sales in 2001 rose to $9.5bn, mostly on growth outside the US, and net income rose to $589m, the company's best performance since 1997's record $795m.
As competition between manufacturers increased so did the size of endorsement deals, and 2003 marked a new high in Nike's spending. That year the company signed 18-year-old basketball rookie LeBron James to a $90m contract before he even played his first professional game. Shortly afterwards Los Angeles Lakers player Kobe Bryant was tied to a $40m deal. Nike got a little more than they had anticipated from this deal in particular when sexual assault charges were filed against Bryant only a few months later. (Suspended from Nike's family for a while, he returned to the fold in 2005). In early 2004 tennis star Serena Williams agreed a $40m deal which will make her one of the faces of Nike's female tennis line until 2010. (Her sister Venus signed with Reebok for the same amount in 2003). Since then, however the size of deals has reduced, as has their structure. Rather than pay champion cyclist Lance Armstrong direct, Nike agreed instead in 2004 to support a fund-raising exercise for his cancer charity. Sales of the little yellow rubber LiveStrong bracelet were forecast at 5m units. Instead, a staggering 50m bracelets were sold, sparking off a series of copycat bracelets. Nike continued to support Armstrong both as an endorsement partner and for his Livestrong Foundation for the next eight years, despite growing allegations that he had cheated repeatedly through blood-doping. The company eventually terminated its support of Armstrong personally in October 2012.
Also in 2003, Nike finally settled a long-running law suit over its description of labour practises. In 1998, Californian consumer activist Marc Kasky sued the sportswear company, alleging it had lied in a PR campaign which attempted to defuse accusations of poor working conditions in its Asian factories. Nike denied that it had lied and claimed that its campaign constituted free speech under the US constitution. A court eventually ruled that the campaign was not free speech, but marketing, designed to sell more products. After losing an appeal, Nike agreed to pay around $2m towards independent worker education and training programs.
Phil Knight gave up the role of president & CEO of Nike in 2004, initially appointing newcomer William Perez, recruited from SC Johnson, as his successor. That was always likely to be a difficult handover, and so it proved when Perez resigned a little more than a year later as a result of "strategic differences". Instead, Nike brand co-president Mark Parker was promoted to group president & CEO.
In 2006, Nike teamed up with Apple to launch an integrated system which links a computer chip inside certain running shoes with a specialised version of the iPod, which monitors details of distance travelled and calories used on its screen.
Last full revision 1st October 2017
All rights reserved © Mind Advertising Ltd 1998-2017