THIS IS A PRETTY INTERESTING REPORT INTO THE BIG MONEY, RUTHLESS WHEELING & DEALING IN THE SPORTS-SHOE MARKETPLACE. well worth reading. KK 
Sports sneaker wars are going international
By Michael Barbaro The New York Times
MONDAY, JANUARY 30, 2006
A few weeks ago, in an effort to raise money and its profile, the Indian national cricket team invited athletic footwear companies to bid on a five-year deal to outfit its 16 players. The announcement garnered little attention outside India - this was not, after all, a competition to dress LeBron James or Kobe Bryant - but the eight-figure sponsorship bids certainly did.
Reebok offered $26 million, only to be topped by a $28 million bid from its soon-to-be-sibling Adidas. In turn, Adidas was bested in dramatic fashion by a $44 million check from Nike. An Indian cricket official, Lalit Modi, said the Nike bid made the team the “world’s most valued brand in team sponsorship.”
The sneaker wars, once fought on the basketball courts and football fields of the United States, are increasingly being waged on the track ovals of China, the volleyball courts of Brazil and the soccer fields of Mexico, long overlooked markets filled with the devoted fan base that footwear companies thrive on. From automobiles to airplanes to pharmaceuticals, more and more companies are moving their marketing machines to fertile developing countries to generate the growth they can no longer rely on in the United States and Europe.
Nike remains the No. 1 seller of footwear and athletic apparel in the world, but the acquisition of Reebok by Adidas-Salomon, approved last week by Reebok shareholders and the European Union, could throw up a considerable roadblock to the swoosh across Latin America and Asia.
Nike’s founder, Philip Knight, might have had that on his mind last week as he abruptly dismissed his successor, William Perez, as chief executive.
While the famously competitive Knight made no mention of his rivals, John Shanley of the Susquehanna Financial Group said, “There is no way they can overlook a threat this serious.”
Adidas, the No. 2 footwear company, and Reebok, the No. 3 company, have proved to be nimble competitors. In China, for example, Adidas spent an estimated $80 million to secure the sponsorship of the 2008 Olympics in Beijing, while Reebok has sewn up an endorsement, valued at $70 million, from Yao Ming, the Chinese basketball sensation.
In Japan, the second-biggest market for sporting goods after the United States, Adidas has just overtaken Nike in sales, a coup that would have been unthinkable a few years ago.
To be sure, Nike firmly dominates the athletic footwear business and is unlikely to lose its grip anytime soon. In the United States, where the sneaker market has remained flat for the past decade, it controls 36.3 percent of the market, compared with 21.1 percent for Adidas and Reebok combined, according to Sporting Goods Intelligence, a trade publication. But the gap is far narrower in the faster-growing international market, where Nike controls 30.9 percent of sales, compared with 28 percent for Adidas and Reebok combined.
“In every single region in the world, it is now a two-horse race between Nike and Adidas,” said Jan Runau, a spokesman for Adidas.
Analysts and executives agree that the biggest battle will unfold in China, the world’s most populous country, where Nike, Reebok and Adidas are scrambling to nail down sponsorships, endorsements and store locations before the Olympics.
Nike, based in Beaverton, Oregon, has sponsored 21 Chinese sports federations and has endorsements from top Chinese athletes, including two Olympic gold medalists, Lui Xiang and Xing Huina. It has built a sprawling outdoor sports facility, called Nike Beijing Park, which boasts soccer fields and basketball courts used by 5,000 children a day.
The company does not break out sales by country, but says it has been helped by the growth of a middle class that is willing to pay for $250 Limited Edition Zoom LeBron III sneakers, which sold out across China in just two hours when introduced this year.
But Adidas, based in Germany, has also made strong inroads in China. Besides sponsoring the 2008 Olympics, the company has sponsored the country’s women’s World Cup soccer team, its soccer federation and its volleyball team.
During a recent conference call with investors, the chief executive of Adidas, Herbert Hainer, said: “I am absolutely convinced that Asia and especially China will be the growing force in the next few years” for both Adidas and Reebok, which is based in Massachusetts.
Nike has had less luck in Japan, a market that apparel and footwear companies covet because trend-setting Japanese consumers are highly influential across Asia. That has opened the door for Adidas, which despite entering Japan only seven years ago now controls its footwear market. While Nike has struggled to excite finicky Japanese consumers, Adidas created a hit this year with the adiZero, a lightweight, thin-soled sneaker designed for Asian consumers.
Adidas credits much of its success to the sponsorship of the Japanese national soccer team during the 2002 World Cup competition, which resulted in a 30 percent sales increase. “Adidas has really stuck it to them” in Japan, said John Horan, publisher of Sporting Goods Intelligence.
Nike has also experienced sluggish growth in France and England, where high unemployment and a weak economy are crimping consumer spending.
Nike’s challenges in established markets explain, in part, why it is so eager to break into an emerging market like India, where the population tops one billion. Denson called the company’s business in India “the least developed of the big emerging markets,” which include Russia, Brazil and China.
Nike’s $44 million bid for the sponsorship of the Indian cricket team - $16 million higher than the next biggest offer - “shows that we obviously felt very strongly about India,” Denson said. Cricket, he added, “is the sport of choice in India and inspires a passion that exceeds everything else by tenfold.”
And so far, it is Reebok, not Nike, that dominates the footwear market in India. A top seller, as it happens, is shoes for cricket. The Nike cricket team endorsement put a swoosh on every player’s sleeve for the high-profile test series being played in Karachi, but under an existing endorsement deal, six players slapped Reebok stickers on their bats, pads or gloves. No one company owns the rights to the shoes.
The big question is whether Reebok and Adidas can do more than just challenge and even beat Nike in a handful of countries, but perhaps overtake it in global sales.
“The reality is that even together, they lack the clout of Nike,” said Stephen Greyser, a professor who teaches sports marketing at the Harvard Business School.
Nike executives privately argue, with some hope, that the merger could prove a tough fit, distracting employees at Adidas and Reebok at a time when they are trying to establish themselves in crucial developing markets. Unlike Nike’s purchase of Converse, for example - a relatively small retro fashion label - the combination of Reebok and Adidas brings together two enormous worldwide brands that compete for the same athletic audience.
In an interview, Perez, the outgoing Nike chief executive, said Reebok and Adidas represented two very different cultures at corporations based in two different continents.
“This is going to be a tough acquisition for Adidas to pull off,” he said. “A lot of people may be underestimating the challenges associated with the merger.”
A few weeks ago, in an effort to raise money and its profile, the Indian national cricket team invited athletic footwear companies to bid on a five-year deal to outfit its 16 players. The announcement garnered little attention outside India - this was not, after all, a competition to dress LeBron James or Kobe Bryant - but the eight-figure sponsorship bids certainly did.
Reebok offered $26 million, only to be topped by a $28 million bid from its soon-to-be-sibling Adidas. In turn, Adidas was bested in dramatic fashion by a $44 million check from Nike. An Indian cricket official, Lalit Modi, said the Nike bid made the team the “world’s most valued brand in team sponsorship.”
The sneaker wars, once fought on the basketball courts and football fields of the United States, are increasingly being waged on the track ovals of China, the volleyball courts of Brazil and the soccer fields of Mexico, long overlooked markets filled with the devoted fan base that footwear companies thrive on. From automobiles to airplanes to pharmaceuticals, more and more companies are moving their marketing machines to fertile developing countries to generate the growth they can no longer rely on in the United States and Europe.
Nike remains the No. 1 seller of footwear and athletic apparel in the world, but the acquisition of Reebok by Adidas-Salomon, approved last week by Reebok shareholders and the European Union, could throw up a considerable roadblock to the swoosh across Latin America and Asia.
Nike’s founder, Philip Knight, might have had that on his mind last week as he abruptly dismissed his successor, William Perez, as chief executive.
While the famously competitive Knight made no mention of his rivals, John Shanley of the Susquehanna Financial Group said, “There is no way they can overlook a threat this serious.”
Adidas, the No. 2 footwear company, and Reebok, the No. 3 company, have proved to be nimble competitors. In China, for example, Adidas spent an estimated $80 million to secure the sponsorship of the 2008 Olympics in Beijing, while Reebok has sewn up an endorsement, valued at $70 million, from Yao Ming, the Chinese basketball sensation.
In Japan, the second-biggest market for sporting goods after the United States, Adidas has just overtaken Nike in sales, a coup that would have been unthinkable a few years ago.
To be sure, Nike firmly dominates the athletic footwear business and is unlikely to lose its grip anytime soon. In the United States, where the sneaker market has remained flat for the past decade, it controls 36.3 percent of the market, compared with 21.1 percent for Adidas and Reebok combined, according to Sporting Goods Intelligence, a trade publication. But the gap is far narrower in the faster-growing international market, where Nike controls 30.9 percent of sales, compared with 28 percent for Adidas and Reebok combined.
“In every single region in the world, it is now a two-horse race between Nike and Adidas,” said Jan Runau, a spokesman for Adidas.
Analysts and executives agree that the biggest battle will unfold in China, the world’s most populous country, where Nike, Reebok and Adidas are scrambling to nail down sponsorships, endorsements and store locations before the Olympics.
Nike, based in Beaverton, Oregon, has sponsored 21 Chinese sports federations and has endorsements from top Chinese athletes, including two Olympic gold medalists, Lui Xiang and Xing Huina. It has built a sprawling outdoor sports facility, called Nike Beijing Park, which boasts soccer fields and basketball courts used by 5,000 children a day.
The company does not break out sales by country, but says it has been helped by the growth of a middle class that is willing to pay for $250 Limited Edition Zoom LeBron III sneakers, which sold out across China in just two hours when introduced this year.
But Adidas, based in Germany, has also made strong inroads in China. Besides sponsoring the 2008 Olympics, the company has sponsored the country’s women’s World Cup soccer team, its soccer federation and its volleyball team.
During a recent conference call with investors, the chief executive of Adidas, Herbert Hainer, said: “I am absolutely convinced that Asia and especially China will be the growing force in the next few years” for both Adidas and Reebok, which is based in Massachusetts.
Nike has had less luck in Japan, a market that apparel and footwear companies covet because trend-setting Japanese consumers are highly influential across Asia. That has opened the door for Adidas, which despite entering Japan only seven years ago now controls its footwear market. While Nike has struggled to excite finicky Japanese consumers, Adidas created a hit this year with the adiZero, a lightweight, thin-soled sneaker designed for Asian consumers.
Adidas credits much of its success to the sponsorship of the Japanese national soccer team during the 2002 World Cup competition, which resulted in a 30 percent sales increase. “Adidas has really stuck it to them” in Japan, said John Horan, publisher of Sporting Goods Intelligence.
Nike has also experienced sluggish growth in France and England, where high unemployment and a weak economy are crimping consumer spending.
Nike’s challenges in established markets explain, in part, why it is so eager to break into an emerging market like India, where the population tops one billion. Denson called the company’s business in India “the least developed of the big emerging markets,” which include Russia, Brazil and China.
Nike’s $44 million bid for the sponsorship of the Indian cricket team - $16 million higher than the next biggest offer - “shows that we obviously felt very strongly about India,” Denson said. Cricket, he added, “is the sport of choice in India and inspires a passion that exceeds everything else by tenfold.”
And so far, it is Reebok, not Nike, that dominates the footwear market in India. A top seller, as it happens, is shoes for cricket. The Nike cricket team endorsement put a swoosh on every player’s sleeve for the high-profile test series being played in Karachi, but under an existing endorsement deal, six players slapped Reebok stickers on their bats, pads or gloves. No one company owns the rights to the shoes.
The big question is whether Reebok and Adidas can do more than just challenge and even beat Nike in a handful of countries, but perhaps overtake it in global sales.
“The reality is that even together, they lack the clout of Nike,” said Stephen Greyser, a professor who teaches sports marketing at the Harvard Business School.
Nike executives privately argue, with some hope, that the merger could prove a tough fit, distracting employees at Adidas and Reebok at a time when they are trying to establish themselves in crucial developing markets. Unlike Nike’s purchase of Converse, for example - a relatively small retro fashion label - the combination of Reebok and Adidas brings together two enormous worldwide brands that compete for the same athletic audience.
In an interview, Perez, the outgoing Nike chief executive, said Reebok and Adidas represented two very different cultures at corporations based in two different continents.
“This is going to be a tough acquisition for Adidas to pull off,” he said. “A lot of people may be underestimating the challenges associated with the merger.”
A few weeks ago, in an effort to raise money and its profile, the Indian national cricket team invited athletic footwear companies to bid on a five-year deal to outfit its 16 players. The announcement garnered little attention outside India - this was not, after all, a competition to dress LeBron James or Kobe Bryant - but the eight-figure sponsorship bids certainly did.
Reebok offered $26 million, only to be topped by a $28 million bid from its soon-to-be-sibling Adidas. In turn, Adidas was bested in dramatic fashion by a $44 million check from Nike. An Indian cricket official, Lalit Modi, said the Nike bid made the team the “world’s most valued brand in team sponsorship.”
The sneaker wars, once fought on the basketball courts and football fields of the United States, are increasingly being waged on the track ovals of China, the volleyball courts of Brazil and the soccer fields of Mexico, long overlooked markets filled with the devoted fan base that footwear companies thrive on. From automobiles to airplanes to pharmaceuticals, more and more companies are moving their marketing machines to fertile developing countries to generate the growth they can no longer rely on in the United States and Europe.
Nike remains the No. 1 seller of footwear and athletic apparel in the world, but the acquisition of Reebok by Adidas-Salomon, approved last week by Reebok shareholders and the European Union, could throw up a considerable roadblock to the swoosh across Latin America and Asia.
Nike’s founder, Philip Knight, might have had that on his mind last week as he abruptly dismissed his successor, William Perez, as chief executive.
While the famously competitive Knight made no mention of his rivals, John Shanley of the Susquehanna Financial Group said, “There is no way they can overlook a threat this serious.”
Adidas, the No. 2 footwear company, and Reebok, the No. 3 company, have proved to be nimble competitors. In China, for example, Adidas spent an estimated $80 million to secure the sponsorship of the 2008 Olympics in Beijing, while Reebok has sewn up an endorsement, valued at $70 million, from Yao Ming, the Chinese basketball sensation.
In Japan, the second-biggest market for sporting goods after the United States, Adidas has just overtaken Nike in sales, a coup that would have been unthinkable a few years ago.
To be sure, Nike firmly dominates the athletic footwear business and is unlikely to lose its grip anytime soon. In the United States, where the sneaker market has remained flat for the past decade, it controls 36.3 percent of the market, compared with 21.1 percent for Adidas and Reebok combined, according to Sporting Goods Intelligence, a trade publication. But the gap is far narrower in the faster-growing international market, where Nike controls 30.9 percent of sales, compared with 28 percent for Adidas and Reebok combined.
“In every single region in the world, it is now a two-horse race between Nike and Adidas,” said Jan Runau, a spokesman for Adidas.
Analysts and executives agree that the biggest battle will unfold in China, the world’s most populous country, where Nike, Reebok and Adidas are scrambling to nail down sponsorships, endorsements and store locations before the Olympics.
Nike, based in Beaverton, Oregon, has sponsored 21 Chinese sports federations and has endorsements from top Chinese athletes, including two Olympic gold medalists, Lui Xiang and Xing Huina. It has built a sprawling outdoor sports facility, called Nike Beijing Park, which boasts soccer fields and basketball courts used by 5,000 children a day.
The company does not break out sales by country, but says it has been helped by the growth of a middle class that is willing to pay for $250 Limited Edition Zoom LeBron III sneakers, which sold out across China in just two hours when introduced this year.
But Adidas, based in Germany, has also made strong inroads in China. Besides sponsoring the 2008 Olympics, the company has sponsored the country’s women’s World Cup soccer team, its soccer federation and its volleyball team.
During a recent conference call with investors, the chief executive of Adidas, Herbert Hainer, said: “I am absolutely convinced that Asia and especially China will be the growing force in the next few years” for both Adidas and Reebok, which is based in Massachusetts.
Nike has had less luck in Japan, a market that apparel and footwear companies covet because trend-setting Japanese consumers are highly influential across Asia. That has opened the door for Adidas, which despite entering Japan only seven years ago now controls its footwear market. While Nike has struggled to excite finicky Japanese consumers, Adidas created a hit this year with the adiZero, a lightweight, thin-soled sneaker designed for Asian consumers.
Adidas credits much of its success to the sponsorship of the Japanese national soccer team during the 2002 World Cup competition, which resulted in a 30 percent sales increase. “Adidas has really stuck it to them” in Japan, said John Horan, publisher of Sporting Goods Intelligence.
Nike has also experienced sluggish growth in France and England, where high unemployment and a weak economy are crimping consumer spending.
Nike’s challenges in established markets explain, in part, why it is so eager to break into an emerging market like India, where the population tops one billion. Denson called the company’s business in India “the least developed of the big emerging markets,” which include Russia, Brazil and China.
Nike’s $44 million bid for the sponsorship of the Indian cricket team - $16 million higher than the next biggest offer - “shows that we obviously felt very strongly about India,” Denson said. Cricket, he added, “is the sport of choice in India and inspires a passion that exceeds everything else by tenfold.”
And so far, it is Reebok, not Nike, that dominates the footwear market in India. A top seller, as it happens, is shoes for cricket. The Nike cricket team endorsement put a swoosh on every player’s sleeve for the high-profile test series being played in Karachi, but under an existing endorsement deal, six players slapped Reebok stickers on their bats, pads or gloves. No one company owns the rights to the shoes.
The big question is whether Reebok and Adidas can do more than just challenge and even beat Nike in a handful of countries, but perhaps overtake it in global sales.
“The reality is that even together, they lack the clout of Nike,” said Stephen Greyser, a professor who teaches sports marketing at the Harvard Business School.
Nike executives privately argue, with some hope, that the merger could prove a tough fit, distracting employees at Adidas and Reebok at a time when they are trying to establish themselves in crucial developing markets. Unlike Nike’s purchase of Converse, for example - a relatively small retro fashion label - the combination of Reebok and Adidas brings together two enormous worldwide brands that compete for the same athletic audience.
In an interview, Perez, the outgoing Nike chief executive, said Reebok and Adidas represented two very different cultures at corporations based in two different continents.
“This is going to be a tough acquisition for Adidas to pull off,” he said. “A lot of people may be underestimating the challenges associated with the merger.”
A few weeks ago, in an effort to raise money and its profile, the Indian national cricket team invited athletic footwear companies to bid on a five-year deal to outfit its 16 players. The announcement garnered little attention outside India - this was not, after all, a competition to dress LeBron James or Kobe Bryant - but the eight-figure sponsorship bids certainly did.
Reebok offered $26 million, only to be topped by a $28 million bid from its soon-to-be-sibling Adidas. In turn, Adidas was bested in dramatic fashion by a $44 million check from Nike. An Indian cricket official, Lalit Modi, said the Nike bid made the team the “world’s most valued brand in team sponsorship.”
The sneaker wars, once fought on the basketball courts and football fields of the United States, are increasingly being waged on the track ovals of China, the volleyball courts of Brazil and the soccer fields of Mexico, long overlooked markets filled with the devoted fan base that footwear companies thrive on. From automobiles to airplanes to pharmaceuticals, more and more companies are moving their marketing machines to fertile developing countries to generate the growth they can no longer rely on in the United States and Europe.
Nike remains the No. 1 seller of footwear and athletic apparel in the world, but the acquisition of Reebok by Adidas-Salomon, approved last week by Reebok shareholders and the European Union, could throw up a considerable roadblock to the swoosh across Latin America and Asia.
Nike’s founder, Philip Knight, might have had that on his mind last week as he abruptly dismissed his successor, William Perez, as chief executive.
While the famously competitive Knight made no mention of his rivals, John Shanley of the Susquehanna Financial Group said, “There is no way they can overlook a threat this serious.”
Adidas, the No. 2 footwear company, and Reebok, the No. 3 company, have proved to be nimble competitors. In China, for example, Adidas spent an estimated $80 million to secure the sponsorship of the 2008 Olympics in Beijing, while Reebok has sewn up an endorsement, valued at $70 million, from Yao Ming, the Chinese basketball sensation.
In Japan, the second-biggest market for sporting goods after the United States, Adidas has just overtaken Nike in sales, a coup that would have been unthinkable a few years ago.
To be sure, Nike firmly dominates the athletic footwear business and is unlikely to lose its grip anytime soon. In the United States, where the sneaker market has remained flat for the past decade, it controls 36.3 percent of the market, compared with 21.1 percent for Adidas and Reebok combined, according to Sporting Goods Intelligence, a trade publication. But the gap is far narrower in the faster-growing international market, where Nike controls 30.9 percent of sales, compared with 28 percent for Adidas and Reebok combined.
“In every single region in the world, it is now a two-horse race between Nike and Adidas,” said Jan Runau, a spokesman for Adidas.
Analysts and executives agree that the biggest battle will unfold in China, the world’s most populous country, where Nike, Reebok and Adidas are scrambling to nail down sponsorships, endorsements and store locations before the Olympics.
Nike, based in Beaverton, Oregon, has sponsored 21 Chinese sports federations and has endorsements from top Chinese athletes, including two Olympic gold medalists, Lui Xiang and Xing Huina. It has built a sprawling outdoor sports facility, called Nike Beijing Park, which boasts soccer fields and basketball courts used by 5,000 children a day.
The company does not break out sales by country, but says it has been helped by the growth of a middle class that is willing to pay for $250 Limited Edition Zoom LeBron III sneakers, which sold out across China in just two hours when introduced this year.
But Adidas, based in Germany, has also made strong inroads in China. Besides sponsoring the 2008 Olympics, the company has sponsored the country’s women’s World Cup soccer team, its soccer federation and its volleyball team.
During a recent conference call with investors, the chief executive of Adidas, Herbert Hainer, said: “I am absolutely convinced that Asia and especially China will be the growing force in the next few years” for both Adidas and Reebok, which is based in Massachusetts.
Nike has had less luck in Japan, a market that apparel and footwear companies covet because trend-setting Japanese consumers are highly influential across Asia. That has opened the door for Adidas, which despite entering Japan only seven years ago now controls its footwear market. While Nike has struggled to excite finicky Japanese consumers, Adidas created a hit this year with the adiZero, a lightweight, thin-soled sneaker designed for Asian consumers.
Adidas credits much of its success to the sponsorship of the Japanese national soccer team during the 2002 World Cup competition, which resulted in a 30 percent sales increase. “Adidas has really stuck it to them” in Japan, said John Horan, publisher of Sporting Goods Intelligence.
Nike has also experienced sluggish growth in France and England, where high unemployment and a weak economy are crimping consumer spending.
Nike’s challenges in established markets explain, in part, why it is so eager to break into an emerging market like India, where the population tops one billion. Denson called the company’s business in India “the least developed of the big emerging markets,” which include Russia, Brazil and China.
Nike’s $44 million bid for the sponsorship of the Indian cricket team - $16 million higher than the next biggest offer - “shows that we obviously felt very strongly about India,” Denson said. Cricket, he added, “is the sport of choice in India and inspires a passion that exceeds everything else by tenfold.”
And so far, it is Reebok, not Nike, that dominates the footwear market in India. A top seller, as it happens, is shoes for cricket. The Nike cricket team endorsement put a swoosh on every player’s sleeve for the high-profile test series being played in Karachi, but under an existing endorsement deal, six players slapped Reebok stickers on their bats, pads or gloves. No one company owns the rights to the shoes.
The big question is whether Reebok and Adidas can do more than just challenge and even beat Nike in a handful of countries, but perhaps overtake it in global sales.
“The reality is that even together, they lack the clout of Nike,” said Stephen Greyser, a professor who teaches sports marketing at the Harvard Business School.
Nike executives privately argue, with some hope, that the merger could prove a tough fit, distracting employees at Adidas and Reebok at a time when they are trying to establish themselves in crucial developing markets. Unlike Nike’s purchase of Converse, for example - a relatively small retro fashion label - the combination of Reebok and Adidas brings together two enormous worldwide brands that compete for the same athletic audience.
In an interview, Perez, the outgoing Nike chief executive, said Reebok and Adidas represented two very different cultures at corporations based in two different continents.
“This is going to be a tough acquisition for Adidas to pull off,” he said. “A lot of people may be underestimating the challenges associated with the merger.”