Tuesday 27 June 2017

As Adidas and Chelsea part ways, branding is now all about the individual, not the team

Manchester United is one of a handful of giant clubs with ties to the German sportswear firm. Photo: ADIDAS/PA Wire
Manchester United is one of a handful of giant clubs with ties to the German sportswear firm. Photo: ADIDAS/PA Wire

Andrea Felsted

It's done it with musician Kanye West, and now Adidas is pinning its hopes on a gang of football galacticos, from Lionel Messi to Gareth Bale.

It's done it with musician Kanye West, and now Adidas is pinning its hopes on a gang of football galacticos, from Lionel Messi to Gareth Bale.

Call it the Kardashian effect in sport if you like. Brands want more of a bang for their marketing buck by sponsoring individual sporting celebrities - grandly titled as ambassadors - as some cut back on their team partnerships. West has re-energised the Adidas fashion brand with his Yeezy range. Such associations work for sportswear too.

Adidas said last week that it's ending a sponsorship deal with Chelsea Football Club six years early, and would receive a €50m payout. While the "mutual decision" was determined in part by the London club's desire for an even more generous benefactor, it comes as Adidas is slashing the number of sports teams it sponsors. The German company is forking out ever-huger amounts on so-called "marketing investments" (which include sponsorship deals), reflecting the hyper-inflation in the sports rights market.

At the same time, it's under pressure to boost an operating margin that's well below those of rivals. So it needs to be selective about who it wants representing the brand. While some big-name teams are out, big-name individuals are in. Ending the Chelsea deal, which John Guy, an analyst at Mainfirst, estimates would have cost Adidas €390m over 10 years, gives it more firepower to invest in superstars like Messi, Bale, Luis Suarez and Paul Pogba.

Nike, another big presence in football, has long been associated with individuals too. Upstart Under Armour is going down the same route, with American sports star Jordan Spieth, Andy Murray and Stephen Curry.

That's not to say all teams are off-bounds. Adidas still has Real Madrid, Bayern Munich, Juventus and Manchester United on its books. There's a chance that Nike (Barcelona's kit supplier) or Under Armour might snap up Chelsea.

But with sponsorship costs ballooning, it makes sense for companies to allocate spending to a few big clubs and names rather than more thinly across the board. There were $50bn (€44bn) of sports sponsorship deals last year, according to Nicolas Sultan at Capgemini Consulting.

It's not just sportswear companies re-allocating spending in a fevered market. Carlsberg has ended its partnership with the English Premier League, although it still has a tie to Liverpool Football Club. It said in recent days that sponsoring this summer's European football championships should boost market share - but at considerable cost. The brewer is planning further reviews.

Yet despite the Adidas shift, football clubs needn't worry that the gold rush is coming to an end any time soon. Capgemini estimates that a bit more than a third of the revenues at football clubs and international tournaments comes from sponsorship.

The Adidas portfolio pruning does suggest even more money will go to an already entrenched elite of clubs and players.

Yet with the high-spending Chinese increasingly bedazzled by the football circus, there's sure to be plenty more bread to go around.

Bloomberg

Promoted articles

Also in Business