Exclusive: Interview with Adidas CEO Herbert Hainer
CNBC Sports Business Reporter
I recently sat down with Adidas CEO Herbert Hainerto talk to him about the re-energizing of the Reebokbrand, the licensing business and the state of the sports and shoe apparel business.
Darren:You’ve spent a good deal of money on the NBA license. Reebok bought the NFL license before you bought them. What do you think about the licensing business in general.
Hainer:I think you have to, as a brand owner, have different ways to communicate to consumers to advertise. You advertise digitally, at retail, you use brand ambassadors who are individual players and you have licensing agreements with teams and leagues. Our NBA license is good because it connects our passion for basketball with fans of teams and the league. We just extended our deal with the MLS because we do believe that soccer in the country is gaining. Twenty five million people watched the World Cup final. Reebok hasn’t done as much as it could have done with the NFL before we came along.
Darren:The NFL license is up at the end of next year, but we’re supposed to find out before the end of this year who the apparel partner will be. Are you bidding as Adidas or Reebok?
Hainer:I can’t say which brand, but I can say that we have participated in the NFL’s open bidding process. We decided how much we were willing to pay. We think it’s reasonable and our intention is to try to keep the NFL as a property. But if somebody bids higher than us then we’ll accept that. We expect to hear by the end of October. We have very strong league relationships. So if we lose the NFL, it won’t make or break our company.
Darren:According to some market share numbers, Li-Ning has passed you as the number two company in China behind Nike. What happened?
Hainer:I saw numbers three weeks ago that reflected that our market share is still number two. We did have our issues in China. We had too much inventory and there were select retailers that we trusted that weren’t the best to be with. We have cleaned everything up, we’ll do more than $1 billion in sales and we continue to believe that China will be a growth engine for Adidas.”
Darren:You recently said that you believe that you will grow in the next year. Is that possible in a non-World Cup/Olympics year?
Hainer:Yes it is possible and we’ll do it first and foremost by continuing to bring product concepts to life. Our business is sold six months in advance, so I know how we’re doing and it’s quite encouraging. If you look back in our history, 2003, 2005, 2007 — the in-between years when there isn’t a World Cup or Olympics — we’ve focused on product concepts and technologies more in those years and it has driven market share. So I have no doubt that 2011 is a growth year.
Darren:How good was the World Cup for you?
Hainer: We felt like we obviously were the most visible brand out there with our Jubilani ball and the fact that we had more teams, 12, than anyone. Nike’scampaign was “Write the Future,” but most of their players disappeared and our team (Spain) won. And we were proud of our F50 boot since most goals were scored by players wearing them. Our football (soccer) business is now a $2 billion business.”
Darren:You are a big player in the toning market, which has hit $1 billion this year. What’s the future of this market?
Hainer:I do believe that the toning market is a category that will continue. What the right size is, is it $1 billion, $800 million, $2 billion, I don’t know. But we’ve sold huge quantities of these shoes. The summer has been a little bit slower and there has been some pricing activities, but all our market research suggests that the sell through is good and this is a stable business that will continue. Some of our competitors that went into this market are now gone and it’s now us and Skechers in this space. We’ll be rolling out more EasyTone shoes and also a whole new line of toning apparel is coming, so we think this category will last.
Darren:A lot of people thought that the EasyTones would be a one-hit wonder for Reebok and then you followed it up with the ZigTech shoes, which have also been a success. What’s the next in that line?
"THE NEXT GENERATION"
Hainer:Retailers and consumers have been very positive about the Zig. We have the next generation coming, which is Nanozig, which has the same pattern, but is smaller. We’re excited about our ZigTech basketball shoe and we love having John Wall as our ambassador for that.
Darren:You obviously have the Reebok and TaylorMade brands. Are there any smaller companies that you have your eyes on acquiring?
Hainer:Not at the moment. We think Reebok has huge potential and adidas is obviously all over the world, so we think our best strategy right now is to focus on our existing brands.
Darren:Many people have suggested that with what has happened with Tiger Woods and LeBron James that brands are going to steer away from using athletes as much as they have in the past, do you believe that?
Hainer:We have always believed that we need to have a healthy mix of communication tools. There is traditional sports marketing on television and in magazines, digital and PR. As far as using players, people like heroes. At the same time, it’s hard for a whole team to get caught with steroids. I went to Gillette Stadium to see a Patriots game and the stadium doesn’t inspire emotions like a celebrity like George Clooney does. So what Tiger or Michael Vick has done hasn’t necessarily changed how we feel about athletes. It’s part of the mix, which includes sponsoring the event, sponsoring the athletes and sponsoring the teams.
Darren:It’s been a relatively rough go for the golf business with the economic crisis, at least here in the US. What’s your read on TaylorMade?
Hainer:Iam very proud of TaylorMade and us becoming the biggest golf company in the world. In the US, rounds are still pretty much flat. But I give a lot of credit to (TaylorMade CEO) Mark King on continuing to push innovation with our new drivers, the movable weight system we have, the Penta ball. We’ve provided people with measurable reasons why they should buy our product.
Darren:In the mid-90’s, the sports and apparel companies spent a lot of money doing licensing deals with college teams. You have teams like Notre Dame, Nebraska, Tennessee and you recently did deals with Michigan and Wisconsin. For the most part though, it seems like you’re not in the business of acquiring more and more teams.
Hainer:We determined that adding colleges just to add them does not work for our business. The schools we have, we are obviously very happy with. But what we found to be a more effective spend is on the high school kid. It’s the perfect age that a consumer gets attached to our brand so we’ve chosen to spend money in that space from a grassroots standpoint and activate in tennis, football and soccer.
Darren:How do you feel about the shoe and apparel industry right now?
Hainer:I feel very fortunate to be in this industry. Companies like adidas and Nike have a big advantage over companies in other industries. The bottom line is people want to stay fit and look sporty. People are retiring at an earlier age and have 15 years or more after they retire to live. So this gives them a longer time to pursue active leisure activities. And we’ve been very creative as an industry to keep our categories growing.
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