The story which I found to be one of the biggest sports business stories of the decade is about the world’s second and third biggest sporting goods companies, Reebok and Adidas, respectively, lacing up to run with the #1 big dog, Nike, in an attempt to become “king of the hill in the world of sports shoes and apparel!” (Howard, T. 2005)
In August 2005, the CEO of Adidas, Herbert Hainer, announced the deal to merge the two companies in a cash transaction buyout of Reebok’s stock, which included the 17% stake held by founder, Paul Fireman. Hainer believed this would help Adidas to take on Nike, the number one sporting-goods brand, while giving Adidas a stronger presence in North America, and Reebok, who had a strong presence in the United Kingdom, a stronger presence on the global stage.
As reported in the CNBC video, 10 Years in the Making, under the “hit or miss” category, the decision of Adidas to acquire Reebok for an estimated $3.8 billion is considered one of the big misses. The goal was to become a big challenger to Nike; however, it actually made both brands weaker. When Adidas bought Reebok, Adidas had a 10% share of the market and Reebok had an 8% share, now it is reported that Adidas has a 6% share and Reebok has a 2% share.
Although it was previously believed that Reebok was “on the rebound” with the “toning shoes”, which Reebok claimed “wear a pair of shoes to burn more calories and tone muscles better”, unfortunately, it was the focus of an investigation and class action lawsuit. The Federal Trade Commission (FTC) is cracking down on the company for alleged false claims. As of September 29, 2011, the FTC has announced it was settling a class action lawsuit for $25 million with Reebok and creating a fund to refund customers.
What Adidas has discovered is that although Reebok had NBA and NFL marketing deals, they had no proprietary assets. Consequently, this decline is in large part due to the NFL announcement in October 2010 that Nike would be the official uniform provider of the NFL beginning in April 2012. According to CNBC’s Sports Business Reporter, Darren Rovell, “As CNBC reported Monday, Nike will produce all on-field apparel including game uniforms and base layer, as well as sideline personnel apparel and fan gear.” The Reebok $300 million deal with the NFL will expire before the 2012 season.
Is Adidas+Reebok able to rebound? Stay tuned! The game is not over yet!!
Reebok still has a 10-year agreement that went into full effect with the 2004-05 season with the National Basketball Association (NBA), which also applies to all Women's National Basketball Association (WNBA) teams, teams in NBA's development league, and includes, with limited exceptions, exclusive rights for Reebok to design, manufacture, sell and market licensed merchandise headwear, T-shirts, fleece and other apparel. Additionally, beginning with the 2006-07 season, Adidas was able to get its name on NBA apparel, including team warm-ups, by signing an 11-year global merchandising marketing deal. Now that’s a slam dunk!!
Nike (Greek Goddess Victory) remains #1 and “king of the hill in the world of sports shoes and apparel!” I would suggest that maybe Adidas+Reebok should change it’s name to Adonis (Deity of Greek Mythology) ~ handsome god of desire and manly good looks who died, but was reborn. That indeed would be interesting to see the two Greek deities battle it out ~ or merge to be known as the world’s greatest love affair. Hmmm…..now that’s a thought!!
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