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« on: May 23, 2006, 08:00:14 AM »
Article from today's Wall Street Journal for those interested in the battle for gear
Pitched Battle
At World Cup,
Nike and Adidas
Fight for Top Spot
German Firm, Long No. 1, Gets
At this summer's World Cup soccer tournament, 32 countries will vie for bragging rights in the world's most popular sport. But another World Cup showdown is already entering its championship round: the battle between sporting-goods giants Adidas AG and Nike Inc.
The corporate fight is every bit as intense as the on-field action, which starts June 9 in Munich. As a global event drawing more television viewers than the Olympics, the tournament could be a tipping point in the increasingly high-stakes competition between the companies. Nike and Adidas have come to see the month-long event as a referendum on who is No. 1 not just in soccer, but the entire global sports market.
During the 64-game tournament, more than a billion viewers will see Adidas's three-stripe logo on match balls, referee uniforms, outfits worn by volunteers and billboards in and around the country's stadiums. Adidas has also locked up exclusive rights to advertisements during broadcasts of games in the U.S. by ABC and ESPN -- effectively blocking Nike ads from view.
Nike, meanwhile, is using the star-driven, buzz-building formula that has given it supremacy in other sports. Just as its sponsorship of Michael Jordan propelled Nike into the biggest basketball brand in the world, the company hopes pricey endorsement deals with superstars like Brazil's Ronaldinho and the Brazilian team -- the reigning World Cup champions and this year's tournament favorite -- will make it the leader in soccer. Giving its swoosh even greater visibility, Nike for the first time is sponsoring more World Cup teams than Adidas. Nike is sponsoring eight, including the U.S., Mexico and Portugal. Adidas has just six, since several teams it signed failed to qualify for the tournament.
The rivals have both opened their wallets wider than ever for traditional advertising, online content, amateur soccer events and individual and team sponsorships.
Nike's usual guerrilla-marketing tactics -- blanketing Olympic cities with billboards when the company lacked official sponsorships, for instance -- may be tougher to employ in Germany. FIFA has turned to local courts to protect exclusive marketing rights and asked cities to give preferential treatment to official sponsors when selling billboard space outside stadiums.
"We are where everybody else would want to be," says Günter Weigl, Adidas's director of global soccer.
But Nike's grip on the popular Brazilians is proving to be a tactical advantage. Replica Brazilian jerseys, which Nike sells for $70, are among the most coveted around the world. And Nike is making even bigger global celebrities out of Ronaldinho, Ronaldo and other top Brazilian players. So important is Brazil to the Nike plan that its global marketing campaign features a Portuguese phrase -- "joga bonito," which the company translates as "play beautiful." Celebrating the playful, ball-finessing Brazilian style, the tagline is an attempt to create "Air Jordan"-like appeal for the soccer pitch.
Nike says it is approaching $1.5 billion in soccer-related sales, more than double what it generated in 2002 and a huge jump from the $40 million in soccer goods it rang up in 1994, when the U.S. played host to the World Cup for the first time. Adidas, the longtime leader, is expecting a better than 30% sales jump this year to more than $1.5 billion.
Two Claims to the Throne
Adidas says it is still No. 1 in soccer and points to data from NPD Group, a market research firm in Port Washington, N.Y., that showed it ahead of Nike last year in Europe and continuing its dominance in the U.S. Adidas says it expects to gain additional market share this year. But there is no global data available from NPD or another independent group, and Nike says it has overtaken Adidas. "I don't have to forecast being No. 1. We are No. 1," says Charles Denson, president of the Nike brand.
Earlier this year, Adidas pulled closer to Nike in their battle for supremacy in the global sporting-goods market by acquiring Reebok International Ltd. for $3.8 billion. In April, the $12 billion company from the small German town of Herzogenaurach signed an 11-year merchandising pact with the National Basketball Association after transferring the rights from Reebok. Besides soccer and basketball, Adidas also is a major player in running, tennis and golf.
Meanwhile, Beaverton, Ore.-based Nike, with $13.7 billion in annual sales, is making a redoubled push into soccer after years of start-and-stop efforts. The current drive began in earnest with the 1994 tournament in the U.S., a time when Nike was looking to expand internationally, says Mr. Denson. "If we were going to be the world's biggest and best sports brand then we had to be No. 1" in soccer, he says.
Wholesale soccer-shoe sales in the U.S. were about $125 million in 2005, far below the $2.1 billion spent on basketball sneakers, according to the Sporting Goods Manufacturers Association. One big reason: Soccer cleats are made for grass, not sidewalks. Despite a growing number of sneaker-like models, soccer shoes are still more for the game than the street.
So both companies are increasingly pushing their soccer businesses beyond shoes and balls. Hispanic consumers in the U.S., whose passion for the game rivals that of Europeans, already are making a big impact. Nike says the top-selling jersey in the U.S. thus far is that of Mexico's national team, which it sponsors.
Adidas also has high hopes for the U.S. It signed a 10-year, $150 million sponsorship agreement with Major League Soccer in 2004 and is strengthening ties with youth leagues.
Different Histories
The two companies bring vastly different histories to this World Cup. Herbert Hainer, Adidas's chief executive and a former semiprofessional player, says soccer is in the company's DNA. Founder Adi Dassler cobbled his first pair of soccer shoes more than 80 years ago, and Adidas has supplied the balls for each World Cup since 1970.
After Adidas signed a $350 million deal last year to extend its Cup partnership through 2014, FIFA President Joseph Sepp Blatter proclaimed that "Football and Adidas have become one."
Adidas's relationship with FIFA gives it a big platform to blast its marketing message -- including prominent placement on FIFA's World Cup Web site, which organizers estimate will attract four billion visits during the tournament. An Adidas soccer advertising campaign called "+10" -- referring to an individual player plus his 10 teammates -- celebrates traditional elements of the World Cup like teamwork and nationalism.
One series of ads in the campaign features two Spanish boys on an urban sandlot picking their dream team for a pickup game from among such Adidas-sponsored stars as England's David Beckham and Argentina's Juan Roman Riquelme. The freewheeling match ends prematurely during a disputed call when one boy's mother yells down from a balcony that it's time to come home.
Pressing its home-field advantage, Adidas is building a temporary stadium in front of the Reichstag in Berlin, where more than 10,000 spectators can watch World Cup games on a giant video screen. Argentina's national team, meanwhile, will train on Adidas's spacious corporate campus.
With a deep history of technical expertise in soccer, Adidas says it expects brisk sales of official World Cup game products, including its "+Teamgeist" or "+Team Spirit" soccer ball. The company spent more than three years developing the ball and has trotted out scientific studies demonstrating that its 14-panel configuration -- compared with 32 panels in previous models -- makes it the roundest soccer ball ever. In all, Adidas expects to sell 15 million soccer balls this year, ranging from $190 replica match balls to $10 miniballs.
The company is also touting customizable soccer cleats. The "+F50 Tunit," introduced earlier this year, comes with various footwear pieces that allow players to create a specialized shoe for multiple surfaces or conditions. Fashion options include uppers in bright blue and red. Adidas expects to sell more than 750,000 pairs this year. The basic "starter package" -- because you can always buy extra components to mix and match -- retails for about $230.
Nike, which started out making running shoes in 1964, became a global giant by persuading consumers to wear its running, basketball and training shoes off the field. But the company has long been a laggard in soccer, which has fallen in and out of favor over the years at the company. For years, Nike produced soccer goods that weren't considered technically innovative.
Nike co-founder Philip H. Knight made the first big strike in soccer in 1996 by signing the Brazilian Football Confederation, the governing body of the Brazilian national team, to a 10-year, $100 million sponsorship deal, which was recently extended until 2018 for an estimated $144 million. Since then, Nike has snapped up deals with top-tier squads such as England's Arsenal, Barcelona of Spain and Juventus from Turin, Italy.
Having signed many of the best players in the world, Nike challenged its R&D forces to come up with products worthy of the company's new stars but also fashionable enough to attract nonplayers. After years of making basic flat black cleats, in the late 1990s Nike decided to make a bottom that was contoured around the curves of a foot. But the design tweak meant Nike had to overhaul its manufacturing process.
The result is three lines of high-end soccer cleats worn by its biggest endorsers -- Ronaldo, Ronaldinho and English star Wayne Rooney.
Nike teamed with Google Inc. to create a MySpace-like online community for soccer fans called joga.com. There, fans can create their own dream teams, post messages for a pickup game in their neighborhood or view soccer videos. Nike expects to sign up about a million users by the end of the tournament.
Where the Swoosh Will Be
Nike says it's not concerned with Adidas's official sponsorship opportunities. "The swoosh will be where it matters most -- on the pitch," says Trevor Edwards, Nike's chief marketing officer.
But placing bets on individual teams and athletes can be risky. Several weeks ago, Mr. Rooney, who plays for Manchester United, broke his right foot wearing Nike's Air Zoom Total 90 Supremacy soccer cleats, threatening his World Cup participation. The injury has also raised questions about the design of the shoe even though Nike and Mr. Rooney insist the company wasn't to blame and high-profile players have suffered similar injuries in Adidas cleats in recent years. Similarly, if Brazil or other Nike teams unexpectedly are eliminated early, "joga bonito" could fizzle.
That's why Nike also sees big opportunities in expanding beyond performance products into what the company calls "sport culture" products. That means everything from white tracksuits with gold trim to a soft T-shirt with the numbers "5862709402" -- the last two digits of the years Brazil has taken the Cup.
"If you don't even love football, you love the look, the style, the approach to it," Mr. Edwards says. Tapping into awe-inspiring athleticism has "worked for us every time," he says.
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