Adidas Looks at the World Cup "The Jedi Counterattack"

Adidas Group Chairman Herbert Hainer kicked off the new year with a strategic visit to China, accompanied by newly appointed Greater China Managing Director Christophe Bezu. During the trip, Hainer emphasized Adidas’ commitment to remaining one of the top players in the Chinese sporting goods market. His key asset? The upcoming FIFA World Cup in South Africa, which is expected to be a major driver for sales and brand visibility. In the first half of 2009, Adidas reported global revenue of €5.034 billion, with China contributing between 7% and 8%, translating to roughly €352 million to €403 million, or about ¥3.45 billion to ¥3.95 billion. Meanwhile, Li Ning’s revenue reached ¥4.05 billion during the same period, surpassing Adidas’ Chinese sales. This has led some analysts to speculate that Li Ning could overtake Adidas as the leading sports brand in China this year. Despite these challenges, Hainer remains confident. He acknowledged the strength of local Chinese brands but pointed out that there is still a gap between Adidas and Nike compared to domestic competitors. “Chinese companies are still catching up,” he said. “We will continue to be among the top manufacturers in the market.” However, Adidas faces significant hurdles. After the Beijing Olympics, the company overestimated demand, resulting in high inventory levels. By the end of 2008, Adidas’ inventory value had risen by 22.5% to €1.995 billion, forcing dealers to focus on clearing stock through heavy discounts. This led to reduced profits for many distributors, with several closing hundreds of stores. Some executives even left the company, including Zheng Jie, who moved from Reebok China to Anta Sports. To address these issues, Hainer and Bezu are re-evaluating their strategy in China. Bezu, with his experience in the Asia-Pacific region, is tasked with revitalizing the market. One of his main goals is to restructure the distribution network. Currently, Adidas relies heavily on third-party retailers like Pou Sheng International, with around 5,000 retail outlets in China, mostly operated by independent dealers. Bezu stated that Adidas won’t abandon its reliance on distributors, but it will focus on improving collaboration and support. Additionally, the company plans to expand online marketing and selectively open more self-operated stores. Inventory management is also a priority, with Hainer reporting an 8% reduction in inventory in Q3 2009, bringing it down to €1.652 billion. Looking ahead, Hainer is optimistic about the 2010 FIFA World Cup in South Africa. As an official sponsor, Adidas will have a strong presence, providing equipment, balls, and apparel for teams and officials. The company launched the iconic Jabulani ball in Cape Town and plans to release new products such as Falcon and F50 football shoes, as well as jerseys throughout the tournament. In 2006, Adidas saw a 52% increase in sales during the World Cup, reaching €10.084 billion globally. With similar momentum expected this year, the event could mark a turning point for Adidas in China.

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