The adidas brazuca, the Official Match Ball for the 2014 FIFA World Cup Brazil, fifa.com
BERLIN - 31 May 2018: Adidas (ADSGn.DE) can declare itself the winner over arch rival Nike (NKE.N) in the upcoming soccer World Cup even before the first match kicks off as it is kitting out the most teams.
However, the German sportswear brand, which is also the official sponsor of the tournament, expects only a limited financial impact, partly because this year’s World Cup takes place in Russia, where the economy is in the doldrums.
“The World Cup in Russia does carry lower financial opportunities than the similar event four years ago in Brazil,” Adidas Chief Executive Kasper Rorsted said earlier this month.
“At the same time, we’re looking forward to it. It’s going to be a fantastic way of bringing our brand to life globally,” Rorsted added.
Since the last tournament in 2014, Adidas has grown sales rapidly in areas other than soccer, capitalising on booming demand for its retro basketball sneakers and springy Boost running shoes to outpace Nike, particularly in the U.S. market.
Nevertheless, soccer remains important for the image of the German brand, which has supplied the World Cup match ball since 1970 and has a deal to sponsor the event until 2030.
It also announced last week it will extend its partnership with the UEFA Champions League until 2021.
After Nike kitted out more teams for the first time in Brazil in 2014, Adidas has fought back, this year sponsoring 12 of the 32 participating teams, including strong contenders like Germany and Spain, along with hosts Russia.
Nike, which only got heavily involved in soccer when the World Cup was played in the United States in 1994, is supplying shirts for 10 countries, including Brazil, France and England.
“The World Cup is such a powerful moment in sport, and we look forward to amplifying its energy,” Nike Chief Executive Mark Parker said in March.
NO IRANIANS WEAR NIKE
While team deals are important for sales of soccer jerseys, more critical for sales of boots is the sponsorship of top players, particularly the likes of Portugal’s Cristiano Ronaldo, who wears Nike, and Argentina’s Lionel Messi, in Adidas.
Nike expects 60 percent of all the players heading to Russia will be wearing its boots, including almost half the German and Spanish team and three-quarters of the Russians, even though they will be wearing Adidas shirts.
An exception is Iran, which faces new sanctions after U.S. President Donald Trump pulled out of an international nuclear deal. Nike says none of the country’s players are wearing its shoes, while Adidas is providing the team’s jerseys.
German brand Puma (PUMG.DE) is a distant third, sponsoring just four relatively lowly teams in the competition, compared with the eight it kitted out in 2014, dented by the failure of its top team Italy to qualify.
Still, Puma Chief Executive Bjorn Gulden says the World Cup has helped its order book for the second and third quarters.
Adidas reported soccer-related sales of 2.1 billion euros ($2.4 billion) in 2014, when it sold 14 million official match balls and 8 million jerseys, including 3 million for the winning German team.
Sales rose to 2.5 billion euros by 2016, but slipped as a proportion of total Adidas revenue to 13.5 percent from 14.5 percent in 2014. It has not disclosed figures since then.
Nike saw soccer sales fall a currency-adjusted 4 percent to $2 billion for its fiscal year ended May 31, 2017, accounting for less than 6 percent of group revenue.
The World Cup could add about 3 to 4 percentage points to Adidas group revenue growth in 2018, lower than previous tournaments due to the fact it is happening in Russia, according to Piral Dadhania, an analyst at RBC Capital Markets.
However, Dadhania noted much of the benefit occurs before the event as the jerseys have already been sold to retailers.
“Any incremental boost during or after the event relating to jersey sales depends on the extent to which specific teams progress through the competition,” Dadhania said.
Leave a Comment