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SPORTSWEAR
Integrating consumerevident technology
innovation in all key
products to enhance
performance credentials
ADIDAS
Adidas is on the move and always has been: It has had an
adventurous history since it first grew out of a family
business in Herzogenaurach, Germany in the 1920s. With
the hostile separation of two brothers’ interests in the
1940s, nearly going bust in the 1980s and then executing
two rescue operations, first by sending production
offshore to Asia and then by reinventing itself into a design
and marketing company, Adidas has riden the waves of
change in the sports goods sector both up and down.
Alongside its own brands, it owned the Saloman ski and
sportswear brand for nearly a decade and now includes
the Reebok, Taylormade Golf and Rockport brands in
its stable.
Things are now definitely on track and, if the current
marketing slogan, “Impossible is Nothing", is anything to
go by, the company is brimming with confidence. This is
not surprising when you consider that Adidas now
consistently out-performs the rest of the sector and has
enjoyed eight years of consecutive double digit net
income growth. It is now the world's number two sports
apparel manufacturer with total sales for 2007 of €10.3bn
and profit growth of 9%.
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Innovation Scorecard
Innovation Culture
Page 19
Adidas-Salomon Key Data 2007
8
Strategic Focus
New Products
22:56
9
8
Managed Growth
9
Total Sales
¤10.3bn
Gross Profit
¤14.8bn
Profit Growth
9%
Gross Margin
47.4%
Product Margin
8
Net Income
¤551m
Investment in Innovation
8
R&D Spend
¤84m
Brand Value
$4.7bn
Sales / Employee
¤329k
Innovation Brand Impact
Innovation Peer Review
9
8
Walk along any high street and it is clear that wearing sports clothing is
the company has been refining its distribution proposition, concentrating
definitely a fashion statement, and possibly an indication of athletic
on expanding its own outlets or ‘controlled’ space and improving retail
prowess. Adidas recognised this trend early on and has developed high-
relationships. There are now over 1000 Adidas stores around the world
performance sports lines in collaboration with the likes of Stella
and, in the run up to the Beijing Olympics the company opened an
McCartney, Yohji Yamamoto, Porsche Design and Rolland Berry. That
average of two stores a month in China. By 2010, the aim is to generate
said, the company does not sacrifice its commitment to improving
at least 30% of the group’s revenues through controlled space.
sporting performance and aims to launch at least one major new
technology or technological evolution per year. Even more than its
peers, Adidas has put performance at the heart of its product portfolio
and invests specifically to support this. R&D projects involve
collaborations with professional and amateur athletes including Zinedine
Zidane, Michael Ballack and Allyson Felix. In addition, Adidas works with
clubs such as AC Milan and Bayern Munich to test and optimise
products. Over recent years this has led to development of technologies
such as ForMotion, which supports the core adistar and Supernova
families, as well as the next generation of the Response and BOUNCE
running shoes.
To keep its brand in the public focus Adidas has also sponsored
sportsmen and women for many years. In 2008, 295 footballers, 64
rugby players, 71 tennis players, 24 basketball players and 8 golfers all
benefited from its three stripe logo. One of the first prominent
endorsers of Adidas equipment was American running legend Jesse
Owens, the gold medalist at the 1936 Summer Olympics. As well as
sponsoring the Beijing Olympics Adidas is also supporting the 2012
Olympic Games in London in a deal worth around $200 million: in this
sector such brand awareness is critical. Going forward, Adidas is also
embracing a number of niche sports and lifestyle activities fuelled by the
current trends in individualism, health and wellbeing with, for example,
Alongside providing performance products, Adidas recognises that
a new woman's Yoga range. As it aims to take over world number 1
consumers make purchase decisions based not only on brand but also
position in the sector from Nike, Adidas will be innovating incessantly
on availability, convenience and breadth of product offering. As a result
both within existing sports and outside the core.
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SECTOR OVERVIEW
Sportswear is very big business: In Europe alone, almost 90% of
range of activities that we participate in is also growing as action
people under 35, and 76% of the population as a whole, buy at least
sports, such as snowboarding, extreme biking and in-line skating,
one item of sportswear a year. Consumers benefit from a huge
catch up with traditional games such as soccer and basketball. This
range of choice so brand awareness and credibility is pretty much
is not solely a Western phenomenon. Thanks to greater promotion,
everything. Small wonder that marketing budgets are enormous and
the massive fan-bases that support the top teams and the worldwide
performance enhancing technology considered the holy grail of any
desire for a healthier lifestyle there is significant and growing
sports manufacturer. In addition, trends in health and well-being are
markets in Asia. Overall, annual growth in sportswear
acting as catalysts for change as governments and sports associations
manufacturing is expected to continue at an average of 5% over the
recognise the cost benefits of securing fitter, healthier nations. The
next decade.
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SPORTSWEAR
INNOVATION DRIVERS
One of the hottest races at the Beijing Olympics is not among the
As aditional technology is embedded within products from Speedo’s
athletes, but the companies that outfit them. The gold medal is, of
Fastskin swimsuits to the Nike + iPod cobination, new developments
course, domination of the Chinese market. Sports in China were once
are currently blurring the lines between fashion and well-being. Look
seen as a luxury but, as the middle class has grown and the culture has
out for more clothing that can ‘think’ for itself by using IT connectivity to
changed, interest has exploded. The likes of Nike and Adidas, which have
PCs and gym equipment, and yet more smarter fabrics which are able
had a low key presence in the market for decades, compete for brand
to respond to changes in the environment by adjusting their pore size
preference and are using the 2008 Olympics as their battlefield.
or thickness at a given moment to facilitate moisture transmission.
Sponsorship is a major weapon for both companies. Nike, for example,
sponsors 22 of the 28 competing Chinese federations and one of China's
most promising athletes, Liu Xiang, wears the trademark swoosh.
Lastly, like other sectors, sportswear is also going green. Alongside a
major recent reorganisation of the supply chain for this sector to make
it more sustainable, there are also a number of product changes in play:
But brand awareness is only part of the strategy – performance, and the
Look out for Adidas’ Grun, a collection of organic lifestyle apparel. With
perception of it, is also of major importance in this market. To keep
three guiding elements of ‘Made From’, ‘Recycled’ and ‘Reground’,
ahead, the major players in the sportswear industry need to
Grun offers a range of products, including classic silhouettes like the
demonstrate innovation across the portfolio - in technology, product
Forum basketball sneaker and the ZX 500 runner, all made from
design, functionality, graphics and presentation. The psychological effect
recycled and natural materials. If it can work for Nike with its
of dynamic, cushioned track shoes or drag-reducing textiles on running
Considered line then this could also be big news for Adidas.
and swimming suits cannot be overlooked. Moreover, as a casual glance
at MTV demonstrates, nor can the influence of fashion.
ONES WE ARE WATCHING
Nike
Puma
Nike, the world’s largest sportswear company, is in growth mode.
The outcome of the brothers’ split at Adidas and so also based in
2007/8 revenues of $13.5bn were up 13% on the year before while
Herzogenaurach, Puma was, for a long time, a relatively small player in
gross margin increased by 16%. As it seeks to incorporate yet higher
the sportswear sector. However, it gained significant growth and rising
performance credentials into its products, this mass-market player is
profitability in the early part of the decade when its products were
pushing harder into the swimwear and soccer areas. The rise of Adidas
increasingly worn by celebrities such as Madonna. Now, with a string of
seems to have acted as a catalyst for Nike which has started linking social
new golf, running and soccer products hitting the market, Puma is a
networking to its stores and won a series of prizes for new products
strong player from both the fashion and performance perspectives. It
including the Revolutionary Support Sports Bra, the Considered 2K5
has double digit revenue growth and has had particular recent success
shoe and the Nike+ Air Zoom Moire. Nike is aiming at $23bn
at the Rugby World Cup and at the African Cup of Nations where it
revenues by 2011.
equipped over half the teams.