By Shruti Thakur
1. The Hainer Era
In 2014, retailers were giving prime shelf space to Nike, the reigning champion of sportswear, while Adidas grappled with the challenge of boosting its earnings. The journey began back in 2005 during the early Herbert Hainer era, where the game-changer was none other than the acquisition of Reebok for a hefty 3.8 billion dollars. Adidas held the throne in the realm of soccer, with European football as its stronghold. In 2005, Adidas extended its sponsorships to include football teams such as Argentina and Spain, alongside clubs like Real Madrid and Liverpool. As the dominant player in Europe, Latin America, and Africa, the German brand sought to conquer the vast American and Asian markets. The acquisition of Reebok was the pivotal move that Herbert Hainer believed would transform Adidas into a global powerhouse.Reebok held the promise of tapping into the lucrative U.S. and Chinese markets, long coveted by Adidas. Hainer was willing to pay a 34% premium for this American brand, and investors were eager to navigate this strategic shift. Hainer’s vision entailed a 5-year multi-brand strategy, with Adidas charting its own course and Reebok swimming in its own. The merger had the potential to establish a company with global dominance. Reebok caught Hainer’s attention due to its strong presence in American sports. The company was the official uniform supplier for the NFL, NBA, and other sports, making it the brand for American football. However, the pivotal moment came in 2006 when Reebok ended its contract with the NBA to sign a new 11-year deal worth 400 million dollars with Adidas.The 2006 World Cup in hand, enhanced the visibility of Adidas, Hainer aimed to establish Adidas as the premier running brand, achieved through sponsorships of marathons in London, Berlin, and Boston, focusing on direct sales to customers to boost margins. In 2006, Adidas crossed the 10 billion Euro revenue mark, partly due to Reebok’s contribution. However, in 2007, it saw only a 2% increase in net sales, and struggles were evident as it heavily relied on discounts, failing to sell branded merchandise to hockey and football, leaving a significant amount on the table. Reebok had lost its vision and touch with its customer base. Hainer clarified that Reebok had veered off course long before the acquisition and needed time to stand up. His explanation had an unresolved aspect: if Reebok was a brand in dilemma, why did he acquire it at a premium price in the first place?
In 2008, the German brand was on track but was hit by the 2009 recession, leading to lost momentum. The same year, the company went through a complete shake-up, merging both brands under a unified operating model. Hainer spearheaded this by crafting a new company structure. His school of thought behind the strategy was that a single operating model ensured efficiency and reduced miscommunication, but he overlooked its impact on autonomy and speed. Also, it’s essential to recognize that what suits one brand may not be ideal for another. Hainer prioritized retail over e-commerce, creating a dedicated retail department. He believed that more retail presence would be the game-changer, neglecting the emerging significance of e-commerce. Leaving e-commerce on the table for Nike cost Hainer dearly.
2.Create the New
Hainer’s route in 2015 aspired to achieve 17 billion Euros in annual sales by envisioning Adidas as a fitness brand. He divided Adidas into a lifestyle fashion brand and a performance brand, with Reebok bridging the gap. Adidas focused on America, China, and Russia, while Reebok secured a deal with CrossFit, giving up on NFL and MLB, which turned out to be a billion-dollar move for Nike. e-commerce wasn’t on the radar of Route 2015. The first year of Route 2015 was a success, driven by the fitness positioning. 2012 was a strong year for Adidas, but Reebok faced irregularities in its India business. Adidas was still dealing with the cost of Reebok’s mismanagement, 7 years after the acquisition. In 2013, another company reorganization aimed to merge retail, wholesale, and e-commerce, focusing on an integrated omni-channel approach.In 2014, the Russian financial crisis caused a significant loss of 500 million euros in Adidas’s net sales. The same year, the entire Reebok team was reshuffled, with Mark King tasked with rejuvenating the American brand. Entrusting Mark King to revive Reebok was a bad call, and investors were furious. The board renewed Hainer’s contract for two more years. In response, he devised a new five-year strategy, “Create the New,” in a final attempt to keep his job.Hainer admitted that his 2009 move to integrate Reebok and Adidas under a single operating model had its drawbacks. “Create the New” shifted the focus from countries to 6 cities: New York, Los Angeles, London, Paris, Shanghai, and Tokyo. Hainer believed that winning consumers in these six cities would be a game-changer. To execute this, he decentralized the company into groups with artistic autonomy. E-commerce gained recognition, but competing with the industry giant, Nike, was challenging. To reduce production time, design and manufacturing underwent a revolution. Outdated design was a challenge, but Kanye West and Stella McCartney came to the rescue, injecting a breath of fresh air.In all this Adidas had lost its pioneering edge.
3. The Comeback
In 2015 marked the zenith of success for Adidas. At the end of Hainer’s tenure, he catapulted Adidas into a transformative era. Adidas’s emphasis on running proved to be a prudent strategy. Finally, Adidas unveiled its all-time finest product, the Ultra Boost, which epitomized the seamless fusion of style and high-performance running. NMD, the new lifestyle sneaker, was an addition to the long-awaited success. Kanye West saved the day with the release of Yeezy Boost 350s and 750s. Fueled by this, Adidas swiftly ascended to the pinnacle in 2015, all thanks to the musician whose creative autonomy crafted distinctiveness. Hainer handed over Adidas to Kasper Rorsted in 2016. The new CEO had a ruthless focus on monitoring costs and had proved himself in his previous role at Henkel. The Rorsted era saw a groundbreaking revenue of 19.3 billion euros. Adidas, in its winning period, cut loose its dead weight, shedding wasteful businesses. Rorsted understood the market and addressed the trend of price drops as models aged, the company expanded its creator network and introduced limited collections. A significant pipeline of in-season products became imperative for Adidas, through rapid replenishment manufacturing ,enhanced desirability, luxury positioning and strategic scarcity greater pricing leverage was achieved . From 2018 to 2019, 9% growth and double-digit margins were registered. Yeezy was the star of the show in the e-commerce landscape. Ultraboost 4.0 and the Game of Thrones collection gave Adidas the long-awaited scent of success. Adidas also ventured into the high-end outdoor market. Despite persistent challenges, Adidas eventually decided to sell Reebok to an authentic fashion brand conglomerate. Rorsted had a resolute vision to streamline the company, concentrating solely on the Adidas brand while placing a strong emphasis on e-commerce and global expansion. As Adidas strides into a promising future, the million-dollar question lingers: will Adidas be the sole inventor of the next shoe sensation?
Business Matters 
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