Business World

Saturday 30 August 2014

Adidas' chief football fan on the World Cup battle with Nike

Herbert Hainer speaks to Graham Ruddick on Fifa's controversies and his battle with biggest competitor, Nike

Graham Ruddick

Published 03/07/2014 | 00:00

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Herbert Hainer, chief executive officer of Adidas

For Herbert Hainer, the chief executive of Adidas, there is no doubt which two teams he wants to reach the World Cup final in Rio de Janeiro. Germany and Argentina.

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The 2014 World Cup is the most lucrative event ever for sportswear retailers and the battle between Nike and Adidas is as fierce as anything on the pitches in Brazil.

Adidas is estimated to have spent more than £50m (€63m) on advertising for the tournament, and this has already helped to deliver record-breaking sales.

The German company has sold 14 million official Brazuca footballs, the ball being used in the tournament, as well as eight million shirts from the nine countries it supplies.

This includes more than two million Germany shirts and more than one million each for Argentina, Mexico and Columbia.

The performance of each team and the 300 players that Adidas sponsors - including Lionel Messi, the Argentine striker - is crucial to sales. This is shown by the unsold England merchandise piled up in the stockrooms of supermarkets around the UK.

"Germany and Argentina would be great," Hainer says with a smile at the Adidas headquarters near Nuremberg in Germany.

"Messi so far is doing his job. But this [final] would obviously be ideal for us."

It is more important than ever for Adidas that it has a successful World Cup. The company is under pressure from investors as it loses market share in western Europe - its homeland - to bitter rival Nike.

Although Nike has made football kits for years, it is making a renewed drive to grab a share in football. Last week the US company reported that sales of its football products grew 21pc to $2.3bn in the last year.

According to industry data, Nike had 15pc of the global sportswear market in 2013, while Adidas had 10.8pc. While Nike is expanding in Europe, Adidas is struggling to make inroads in the US.

"As you can see now, a competitor is heavily investing in the World Cup," Hainer explains.

Hainer has worked for adidas since 1987, becoming chief executive in 2011, so he knows all about the rivalry.

His knowledge of football is impressive too. As well as serving on the boards of Lufthansa and Allianz, he is interim chairman of German football club 
Bayern Munich.

Ambitious

Hainer has set an ambitious target that Adidas will sell €2bn of football products on the back of the World Cup. He claims that Adidas will surpass that target and that the early indications are that it 
will come out on top in the fight with Nike.

The scrap between the companies has a further edge this year because Adidas sponsors Fifa - meaning it provides the matchballs and kit for the referees - while Nike produces the kit for the home nation Brazil.

"Of course, Brazil is a very passionate football nation and the Brazil team is a five-times winner [of the World Cup], therefore Nike will sell a lot of shirts I do believe," Hainer says.

"But we will too with all of our teams. Honestly, when I watch television and look at the stadiums I think we are by far the most dominant brand."

Adidas is not only judging its success at the World Cup through sales of Fifa merchandise and official kits. For the first time, Adidas against Nike is also being fought on social media.

Visitors to Adidas's base in the town of Herzogenaurach in Bavaria get no initial sense that the company is part of one of the toughest corporate rivalries in the world.

The complex is more like a university campus, with tennis courts, water features, and even a nursery. The site was once a US army base, with the accommodation now converted into office buildings.

The "World of Sports", as the base is known, houses 2,500 employees.

Adidas has set up a 25-strong team in an office in Rio de Janeiro that is posting tweets and other content on the back of the tournament.

A Twitter account for the Brazuca matchball has more than two million followers. Even if there is a Germany and Argentina final, however, not everything will have gone Adidas's way at the World Cup. As well as defending champions Spain being knocked out early, Luis Suarez, who featured in Adidas adverts in the run-up to the tournament, has been banned for biting an opponent.

However, potentially even more damaging for Adidas is its relationship with Fifa itself. Football's governing body has been dogged by corruption organisations about the awarding of the 2022 World Cup to Qatar.

Hainer believes that the 2022 World Cup should have been awarded to the US, but is standing by Fifa and the company's sponsorship deal.

"We are absolutely happy with our relationship with Fifa. The Fifa World Cup is the biggest sporting event in the world. This is the heart and soul of our company - football - and we can present our brand in the best way during the World Cup."

Hainer, who is 59, insisted that Fifa is treating the corruption allegations seriously, pointing to the investigation being carried out on its behalf by Michael Garcia, a former US attorney.

"I think Garcia is a very straight guy who is investigating with seriousness and professionalism," the Adidas boss said.

Hainer said Garcia's move to ban Franz Beckenbauer, the German football legend, from football activity for 90 days over an alleged lack of co-operation with the investigation showed how serious his probe was. The ban has since been lifted.

"He doesn't stop in front of names," Hainer said. "He definitely wants to get to the core of whether there is something or not."

Whether Hainer continues to stand by Fifa if Garcia finds evidence of corruption remains to be seen, but for the moment more of his attention is focused on Nike.

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