Stripes, swoosh: Soccer war flares
Nike has clomped onto Adidas turf, and they aren't playing footsie. They're in a showdown at the World Cup.
By Christopher K. Hepp
INQUIRER STAFF WRITER
As the World Cup opened with a festive parade, giant robotic figures symbolizing the continents strode through the streets of Paris. On their feet, they wore shoes with tri-striped insignia -- just like those of an official Cup sponsor, Adidas.
But on the field of play, the Nike swoosh was much in evidence -- on the uniforms of Brazilian players as they flipped and cavorted after Cafu scored the pinball goal that beat Scotland in the Cup opener.
It was the sort of moment Nike chairman Phil Knight dreamed of when he splashed out $200 million to sponsor defending champion Brazil while making soccer -- the world's most popular sport -- the centerpiece of his company's diversification and global growth.
As the World Cup unfolds in France before a TV audience that is projected to reach 37 billion for all matches over the 33 days of competition, Nike has positioned itself to take on its competitors, especially Adidas, which has long towered over the soccer scene.
In the last four years, Nike, based in Beaverton, Ore., has spent more than a half-billion dollars, or more than double its current annual revenue of $200 million from soccer, signing up some of the sport's most exciting players and top teams -- six at the World Cup vs. eight for Adidas.
In Ronaldo, Brazil's phenomenal young striker, Nike clearly hopes it has the pitchman with the worldwide appeal to succeed an aging Michael Jordan, who may or may not retire after winning a sixth NBA crown.
On Monday, as the United States took on Germany in Paris, the field was also a corporate battleground -- the upstart Americans wearing uniforms with the swoosh; Germany sponsored by Adidas, a company with deep German roots. In this match, the Nike team was stomped.
Broadening the beachhead that Nike has established in soccer by opening its pocketbook won't be easy, nor is it likely to return dividends as swiftly. Adidas still outsells Nike in soccer at home 2-1, and enjoys an even larger advantage overseas.
"Nike has really spent very heavily on the endorsement side, more than their sales have justified," said John Horan, editor of Sporting Goods Intelligence.
While Nike's investment in soccer may be risky, it is also a logical step.
Waxing philosophical in a recent letter to shareholders, Knight called sports "the fastest growing culture, growing so fast that it is becoming the one, true international language." But until recently, Nike didn't speak soccer. The sport accounts for only about 2 percent of Nike's $9 billion in annual sales.
Now, by outfitting such famous teams as Brazil, Nike has gained instant credibility despite its nouveau riche status in a tradition-laden sport. It even tried to snatch Bayern Munich -- the marquee German club team -- away from Adidas, but failed.
Nike is taking no sides in the World Cup, sponsoring teams from five continents -- the Italians, the Dutch, the Nigerians and the South Koreans also wear the swoosh. But Knight would not be sorry if Ronaldo scores the Cup-winning goal and sambas about displaying Nike's insignia before a TV audience expected to be even greater than the 1.2 billion who watched the 1994 final.
"You may be a bull . . . you may be an act of God," is the unmistakable message linking Ronaldo to Jordan in a recent Nike magazine ad touting a new line of sporting apparel. Ronaldo, a two-time world player of the year, even resembles Jordan with his shaved head and serious look, but he is 21, not 35. As a player, his skill is so extraordinary that he is known variously as "the extraterrestrial," or O Dono do Mundo, "King of the World."
While Nike views soccer as a vehicle to ride into the 21st century, for years it even overlooked the growth of the sport in its own country. With 18 million players at all levels, soccer has become America's most popular participant sport.
"I think, quite honestly, as an American company, we did not understand the heritage of the sport and passion behind the sport," said Alexander Bodecker, vice president and general manager of Nike's soccer division.
But Nike is now committed to soccer, for cold-blooded reasons of commerce. The company remains a giant in running and basketball shoes, and dominates the overall sports-shoe market in America with a 47 percent share, but sales in its traditional market sectors have been slumping because of sticker shock -- some Nike basketball shoes have retailed for as much as $180 -- and the maturing of the market. Americans already spend more than $20 per capita on Nike products, according to a company calculation.
Nike was also slow to adjust to the "brown shoe phenomenon." Skateboarders, the hip-hop crowd and the Gen-Xers have been buying off-color and brown recreational shoes designed for places other than the basketball court. Those shoes aren't necessarily Nikes.
The company also has been buffeted by allegations of poor pay and working conditions at its Asian manufacturing plants, which it has denied.
But Nike is nowhere near as notorious overseas, where consumers care less about allegations about sweatshops that might deter them from buying soccer sweats and shoes with a swoosh.
In America, the soccer boom provides a major growth opportunity. And the huge sums Nike is spreading around are stabilizing the sport, helping to ensure the survival of fledgling Major League Soccer, and funding the U.S. Soccer Federation's talent-development program, Project 40, which turns teenagers, such as Matt Napoleon, a former Neshaminy High goalkeeper, into pros.
As recently as 1990, the U.S. national team made do with an endorsement deal from Adidas of just $50,000 in cash plus equipment. But within the last year, Nike signed a 10-year, $120 million sponsorship deal with the national team and, in partnership with International Sports Marketing, agreed to pay the U.S. Soccer Federation $380 million for marketing rights.
The arrangements mean that Nike will outfit all of the U.S. national teams, including the reigning Olympic champion women's team; receive prominent field-level signs at U.S. matches; and have the right to buy television advertising time during U.S. games.
"This will ensure that soccer, at a high level, will be here for a long time," said Paul Kennedy, managing editor of Soccer America magazine. "That is something that was never certain in the past."
Alan Rothenberg, president of the U.S. Soccer Federation, predicted that Nike sponsorship would lead to the United States' winning the World Cup by 2010.
The amount Nike is spending on soccer beggars the amount it spent to finance its much-publicized foray into golf by signing a $40 million deal with Tiger Woods.
But Adidas is formidable competition. In addition to Germany, it outfits France, the host team, and Brazil's principal South American rival, Argentina, as well as being the Cup's official shoe and apparel sponsor, for which it paid an estimated $20 million to $25 million. (Nike has countered by building a soccer-oriented theme park in Paris to cater to World Cup fans.)
And while Nike's original soccer shoes were, well, clunky, Adidas has come out with several innovative shoes that are already big sellers. Its marketing gurus have even managed to cloak Adidas in the American flag in a clever World Cup-oriented campaign featuring American defender Eddie Pope.
In the stark black-and-white spot, Pope stands alone against a threatening horde of foreign players. Pope says, "The world thinks American soccer is second-rate," as the horde advances on him. "We'll see about that," Pope says defiantly, stepping forward like a latter-day John Wayne.
Pope is a key figure in the American team's starting lineup, while Nike's American endorsers -- the red-bearded Alexi Lalas and Marcelo Balboa -- have been relegated to the bench by coach Steve Sampson and may see little playing time in France.
Moreover, Nike stubbed its toe when it tried to go European with ads aired in France during the World Cup, and ended up being accused by the French paper Liberation of promoting a "totalitarian ideology." The campaign used a retired bad boy of French soccer, Eric Cantona, in a poster that resembled the political banners of the 1930s. A sample slogan: "Young people! Soccer calls you. Join us."
Nike shamefacedly pulled the spots.
Despite the formidable competition it faces overseas from Adidas -- and from traditional soccer brands such as Umbro, Diadora, Lanzera, Lotto and Puma -- Nike had little choice but to plunge into soccer if it wanted to keep growing. Nike controls 35 percent of the world athletic shoe market. While its foreign shoe sales increased by 22.3 percent last year, its increase in domestic sales slowed to 16.4 percent. International sales now represent 38 percent of the company's total revenues.
Foreign consumers spend only about $6 or $7 per capita on the swoosh, far less than Americans. And in affluent markets such as Germany, where Adidas and Puma are traditional brands, the figure is only $2 or $3, according to Nike.
Nike has since solved its soccer shoe-quality problem, buying an Italian factory where it produces a new shoe, the Mercurial, which is endorsed by Ronaldo, who plays in Italy for his club team, Inter Milan. But Adidas is already ahead of the game with its Predator model, which promises to give shots more oomph, and its Traxion model, which has a new cleat pattern that promises, as the name implies, more traction on slippery fields. The shoe, endorsed by Pope, is selling so well that there are waiting lists at some U.S. retailers.
Domestically, Nike's growth in soccer, from virtually nothing four years ago to 25 percent of the U.S. market today, has come largely at the expense of third-tier competitors, not Adidas. One company that has felt the onslaught is Umbro, an English firm with the motto, "Only soccer since 1924."
"There are a lot of smaller companies that are being eaten at by both Nike and Adidas," said Travis Gonzolez, public relations coordinator for Adidas America. "It is a highly competitive market right now."
At the beginning of the decade, every soccer-playing child in the country wore Umbro shorts. Today, Umbro has shuttered its manufacturing plants here, and sells through licensees.
Responding to Nike's challenge, Adidas has upped its investment in U.S. soccer as well. In February, it signed an eight-year agreement with the U.S. Youth Soccer Association worth more than $100 million in direct and indirect sponsorship.
"I'm not going to knock Nike," said Virgil Lewis, the association's chairman. "I think their participation is great. . . . With Nike in the game, the price of poker, or should I say soccer, just went up."
Certainly, Charlotte Moran of Northampton Township, Bucks County, is not complaining.
Moran is executive director of the Eastern Pennsylvania Youth Soccer Association. Her experience has taught her that when the shoe companies pour money into the sport, she eventually sees some of it.
"You've heard of the trickle down theory?" she said. "Well, it does trickle down. I've got a garage full of Adidas equipment to prove it. It is a great contract."
Another beneficiary of Adidas' aggressive response to Nike: the New York Yankees. Yes, a baseball team.
With Nike invading soccer, Adidas is becoming part of the national pastime. After Nike tried to lure Bayern Munich, Adidas struck back by calling up George Steinbrenner and signing baseball's signature team to a 10-year, $95 million pact.
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