2024-03-22 15:14:00
analyse
Instead of three stripes, the German national team will now wear the “Swoosh” of the US manufacturer Nike on their chest. In the short term this will probably have little impact on Adidas – in the long term it might harm the company.
The change of supplier at the German Football Association (DFB) marks the end of a partnership with Adidas that has lasted more than 70 years. From 2027, competitor Nike will equip all German national teams. The collaboration with the US sporting goods manufacturer is initially scheduled to run until 2034. What does the end of the cooperation mean for Adidas?
DFB cites financial reasons
Supplier changes are commonplace in the sports world – especially when they switch to the industry leader Nike. But the alliance between Adidas and the DFB is something special. Adidas was the supplier for all four World Cup titles and the three European Championship titles for men. The women wore three stripes in their two World Cup titles and eight European Championship trophies.
The DFB emphasized yesterday that financial reasons were the deciding factor in the departure. The long-standing partner, which will continue to equip all national teams until the end of 2026, is expected to transfer around 50 million euros annually to the DFB for sponsorship. According to the “Handelsblatt”, Nike will be putting more than 100 million euros on the table per year in the future – that would be twice as much as Adidas.
The cash-strapped DFB simply spoke of “by far the best economic offer”. Because of the national team’s weak sporting results, the association only received a total of 27 million euros in bonuses from the last major tournaments – that is less than half of the income from the three major World Cup and European Championship tournaments between 2010 and 2014.
The timing is provocative
Adidas says it was taken by surprise by the decision and was only informed when the deal had already been signed. The fact that Nike is now pulling off such a coup – shortly before the start of the European Football Championship in Germany – is causing anger in Herzogenaurach.
It was only on March 12th that Adidas CEO Björn Gulden proudly showed the German footballers’ new tournament jerseys, which had previously been kept secret, and the next day they were officially presented. Just a few days later, Nike boss John Donahoe finally traveled to Germany to sign the deal that had apparently been negotiated long ago.
This raises questions regarding timing and style online. And there is also great indignation in politics and on the financial markets – at least some of it.
Nike has recently been less active in football
Capital market strategist and ex-football professional Jürgen Molnar says he grew up with Adidas and, on the one hand, heard the news with a tear in his eye. On the other hand, the DFB also needs to make money, he emphasizes to the ARD financial editorial team. “Nike has left Puma and Adidas miles behind. They are twice as big in terms of sales and can afford it.”
Nike makes the equivalent of 47 billion euros in sales annually, twice as much as Adidas. Puma follows in third place with 8.5 billion euros. However, Adidas is the world market leader in the football business. The Franconians equip the Mexican national team, which is important for the huge North American market, and all 30 teams in the rapidly growing Major League Soccer (MLS), including Inter Miami with Lionel Messi.
Nike follows behind. The group had recently behaved more defensively on the football market – Borussia Dortmund, like Manchester City, switched to Puma, FC Barcelona also left the American flag, as did RB Leipzig.
Adidas benefits from upcoming tournaments
The change initially has little economic significance for Adidas. The German market is not of outstanding importance for the company in terms of revenue. According to Adidas, well over 90 percent of sales are generated abroad. And the DFB jerseys with the three stripes – currently a bestseller at a price of over 100 euros each – will be produced and sold until the end of 2026.
During the European Championships, the Olympic Games in which the DFB women are taking part, and the next World Cup in the USA, Mexico and Canada, the group can still rely on its income. “Adidas expects sales of around 400 million through competitions such as the European Football Championship,” says stock analyst Christian Salis, who, among other things, monitors Adidas’ development at Hauck Aufhäuser Investment Banking.
There is no direct refinancing of sponsorship funds anyway. The sale of jerseys only recoups part of the annual expenditure of 50 million euros – which is, by the way, the most expensive equipment contract for a sports association in the world to date.
Is the brand suffering?
In the longer term, the news of losing an important figurehead with its own national team is a blow to the German company Adidas. Because a large sponsorship pays off in several ways, says Salis.
In addition to the income from jersey sales, it has a signaling effect for brand building and visibility. “Also for other products in the lifestyle sector, such as sneakers. The question is how Adidas wants to replace that in the future,” said the expert.
Nike wants to turn footballers into “global heroes”.
There were initially no strong movements on the stock market following the news. Analyst Salis explains it like this: “There are two main reasons for this: Firstly, it’s still a while away. Adidas will still be the supplier until 2027.” Secondly, investors are generally very positive regarding Adidas and its shares. “Which is because many people have a lot of trust in CEO Gulden.”
After the announced separation from the DFB, Gulden will now have an additional difficult time getting the group out of the crisis. The company, which he took over a year ago, has run into difficulties due to weak business in China and, above all, experiments in the lifestyle sector. In 2023, the bottom line was even a small loss for the first time in over 30 years. After his experiences with rapper Kanye West’s products, Gulden wants to do more sport once more at Adidas – and especially football.
Nike also recently had to cope with severe losses on the stock market – and might only present a mixed forecast for the current year. CEO Donahoe, who is under economic pressure, now allegedly wants to turn German footballers into “global heroes” – and thereby convince investors once more.
With information from Bianca von der Au, ARD financial editorial team.
Bianca von der Au, HR, tagesschau, March 22, 2024 3:00 p.m
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