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Bayern vs Dortmund Proxy for Puma-Adidas at Wembley

May 23, 2013

Bayern vs Dortmund Proxy for Puma vs Adidas at Wembley:

Dortmund Jakub Blaszczykowski of Borussia Dortmund, left, in action against David Alaba of Bayern Munich on May 4, 2013. Photographer: Patrik Stollarz/AFP via Getty Images

Bayern Munich versus Borussia Dortmund isn’t the only all-German contest on the hallowed turf of London’s Wembley Stadium this weekend.

While the teams battle in the 58th UEFA Champions League soccer final, the crosstown rivals that supply their uniforms will face off in the latest chapter of a fight that’s even older than Europe’s most prestigious club tournament.

Outfitting favorite Munich is Adidas AG (ADS), the world’s largest maker of soccer gear, whose three-stripe logo has appeared in five of the last 10 finals. Dortmund’s supplier, Puma SE (PUM), will see its first final since 2004.

That’s a rare bit of good news for Puma as it struggles to catch Adidas and Nike Inc. (NKE:US) in the 9.5 billion-euro ($12 billion) global market for soccer clothing, shoes, and equipment.

Backing the winner of the first all-German final “is much more important for Puma than Adidas,” said Sebastian Frericks, an analyst at Bankhaus Metzler in Frankfurt. “Puma is not able to invest the same amount of money into sponsorship as Adidas and Nike, so they have to pick their teams very carefully.”

In working with Dortmund, the smaller company has chosen well, providing some relief at a time of falling profit forecasts. The team was Puma’s only representative among the final 16 in the tournament. Nike, which supplied 10 of the 16 including Spanish champion Barcelona and English Premier League winner Manchester United, isn’t represented in the showpiece game for a second year running. Adidas provided jerseys to four of the final 16 teams and supplied both finalists last year.

‘Still Struggling’

The game provides exposure for the two brands to millions of fans watching on television, and the victor will likely get a “small” boost from sales of replica jerseys, according to research by investment bank Bryan Garnier & Co.

“If you have the right products, winning the Champions League final will underscore the credibility of your brand,” said Joerg Philipp Frey, an analyst at M.M. Warburg in Hamburg.

Still, success for Dortmund on Saturday would do little to change Puma’s image as more of a purveyor of casual gear, rather than equipment and shoes that give athletes an edge, said Andreas Riemann, an analyst at Commerzbank AG in Frankfurt.

“Puma is still struggling,” Riemann said. “In soccer, they probably won’t catch up with Adidas.”

While shares of Nike and Adidas rose to records this month, Puma’s stock slid after the company cut its 2013 sales and profit estimates amid weaker consumer demand in Europe. Puma, controlled by French luxury-goods maker PPR SA, is little changed for the year, versus a 28 percent gain for Adidas and a 23 percent advance for Nike.

Adidas shares dropped 1.7 percent to 86.15 euros while Puma fell 1.4 percent to 226 euros as of 3:50 p.m. in Frankfurt. Nike declined 1.4 percent to $63.55 at 9:50 a.m. in New York.

World Leader

Adidas, which like Puma is based in the southern German town of Herzogenaurach, has grown to become the global leader in soccer, with sales from the sport of more than 1.7 billion euros last year. Puma gets only about 10 percent of its 3.3 billion euros of annual revenue from soccer, Bankhaus Metzler estimates. Nike’s sales in the category rose to $2 billion in 2012 from $1.8 billion in 2011. Adidas and Nike control about 80 percent of the global soccer market, according to retailer Intersport.

Puma’s focus “has shifted outside of football,” said Jon Tipple, chief strategy officer at consultant FutureBrand in London. “It used to be an absolute heartland football brand in the 1970s,” when its footwear was used by players such as Brazilian legendPele and Dutch maestro Johann Cruijff.

Pele’s Laces

Puma, whose shoes grabbed attention at the 1970 World Cup when cameras zoomed in on Pele tieing his laces before a game, now gets about 35 percent of sales from gear designed to enhance an athlete’s performance -- think cleats or jerseys -- rather than everyday clothing. Adidas gets 72 percent of sales from performance-related products, according to Berenberg Bank.

The Puma “brand is more about fashion and style and isn’t as innovative as Adidas,” Tipple said.

To make up ground, Puma signed a five-year deal worth 30 million pounds ($45 million) annually to replace Nike as supplier of uniforms to English Premier League team Arsenal, U.K. newspapers reported this month. Puma declined to comment on what it described as speculation.

“Puma has invested less than Nike and Adidas in football in the last few years,” said Renaud Vaschalde, a sport industry analyst at NPD Group Inc. in Paris. “But the recent deals with Borussia Dortmund and Arsenal show that Puma management is going on the offensive to change that.”

Both German companies trace their roots to the 1920s, when brothers Adolf andRudolf Dassler founded a shoe company in Bavaria. After a feud, Rudolf started Puma in 1948 and Adolf created Adidas in 1949. Seven years later, Real Madrid beat France’s Stade de Reims 4-3 in the first final of the European Cup, the tournament known today as the Champions League.

Puma PowerCat

Adidas keeps customers hooked to the brand by regularly releasing new products, especially shoes -- which players are typically free to choose regardless of the sponsorship deals their teams have for uniforms.

The most recent Adidas shoe is the Nitrocharge, which went on sale on May 21 and will be worn by Munich player Javi Martinez in the final. Dortmund star Marco Reus will wear Puma’s latest soccer cleat, the PowerCat 1 FG.

“In recent years, Adidas’s presence on the biggest stage in the club game has certainly been more prominent,” said Glenn Lovett, president of global strategy at consultant Repucom.

According to a ranking from Intersport, Adidas shoes have outscored Puma 93 goals to 18 in this season’s Champions League. Still, by that measure Nike is the champ: Players wearing its footwear scored 99 goals.

Nike stands a reasonable chance of improving on its lead Saturday. Of the 22 players who started for Munich and Dortmund in their second semifinal matches, nine wore Nike shoes, 10 chose Adidas, and three wore Puma.

Copa Mundial

Just as bookmakers favor Munich to win Saturday, analysts rate Adidas a better bet than Puma. Ladbrokes offers odds of 2-5 on Bayern, meaning a 5-pound bet would return 7 pounds. The consensus recommendation for Adidas is 4.1, versus 3.1 for Puma, according to data compiled by Bloomberg, with each recommendation being ranked on a scale of 1 to 5.

Puma’s new chief executive officer Bjoern Gulden won’t find it easy to convert Adidas fans like Marius Foersch, a 29-year-old who plays in a local soccer club in the Bavarian village of Neubrunn. He got his first pair of cleats from his father 23 years ago and now wears Copa Mundial shoes, an Adidas model worn by Bayern Munich captain Philipp Lahm.

“If you think of football you think of Adidas,” Foersch said. “They sponsor the biggest clubs.”

To contact the reporter on this story: Julie Cruz in Frankfurt at jcruz6@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net


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