WHERE NIKE AND REEBOK HAVE PLENTY OF RUNNING ROOM
In a vast hypermarket in the south German town of Neutraubling, Horst Rumpel, 13, is checking out sneakers. Dressed in a plum-colored Adidas sweatsuit and Adidas running shoes, Rumpel checks out a pair of Nike tennis shoes, lingers over some Reebok Pumps, and finally settles for Bank Shot Hi basketball shoes, Adidas' newest product.
A decade ago, Rumpel wouldn't have had so much choice. Back then, most models were made by Adidas or its somewhat smaller rival, Puma. For years, the two German companies controlled about 75% of Europe's athletic shoe and apparel market, and they were also strong in the U. S. But no more. Today, two U. S. companies, Oregon-based Nike Inc. and Massachusetts-based Reebok International Ltd., command over 50% of the U. S. market. And now Reebok and Nike are making spectacular inroads in Europe.
Exact share figures are hard to come by, but the consensus among consultants and industry executives is that Adidas is still on top in Europe, with about $1.6 billion in revenues, $870 million of it coming from footwear. But it's estimated that Nike and Reebok now rank second and third for Europe in running and cross-training shoes. Puma has slid to fourth in many categories.
Far from slowing down, Nike and Reebok see their European sales accelerating (chart). "Europe has an incredible potential for us," says David Kottkamp, general manager of Nike Europe. Nike's European sales for 1990 were roughly $500 million, and orders for Nike in Europe are currently up 100% from last year. As for Reebok, its European revenues rose sharply to an estimated $380 million--a figure that would be $200 million higher if one included the value of Reebok wares sold under license by independent distributors.
Nike and Reebok consider Europe crucial to their growth. Nike had fallen behind Reebok several years ago. Recently, it has been enjoying U. S. revenue gains of 30% or more, passing Reebok over the past two years with its Visible Air series of sports shoes. For the 12 months ended Nov. 30, Nike's U. S. revenues hit $2 billion. "The kind of meteoric growth we've had in the U. S. can stay at that level for only so long," says Tim O'Kennedy, Nike's international marketing director. And Reebok, with $1.6 billion in U. S. revenues, saw its 1990 domestic sales growth flatten to 2%.
In Europe, the $5 billion retail sneaker market is also maturing, but Nike and Reebok figure that as newcomers they have ample room for growth. Nike estimates that European consumers spend only $3 per capita on Nike products, as opposed to $10 per capita in the U. S.
SLAM DUNK. Reebok and Nike have a strong appeal to Europeans fascinated with things American. Reebok and Nike basketball shoes, for example, sell briskly both to Europeans drawn by U. S. street fashion and to amateur athletes who have caught basketball fever. "We've capitalized on offering a new product that's all the rage in America," explains Reebok Deutschland Chairman Richard Litzel of the Pump, which accounts for 5% of Reebok sales in Germany. As for Nike, it promoted its Air basketball shoes in Europe last fall with a touring slam-dunk exhibition featuring the Chicago Bulls' Michael Jordan. Jordan was mobbed in every city he visited.
Nike is also signing up European celebrities as sponsors--a tough task, since Adidas has promotion contracts with most athletes in Western Europe. When Eastern Europe's sports machines crumbled, though, Nike leaped into action. Last year, it signed up a well-known East German athletic club in Neubrandenburg that boasts several Olympic medalists and track star Katrin Krabbe, a media darling in Germany. To crack Adidas' market in soccer and rugby shoes, Nike has lined up one major German soccer team, the Dortmund club, and it has signed on top soccer player Andreas Moller.
Both Nike and Reebok have profited from long-term problems at Adidas and Puma. In the past half decade, both German companies reported steady streams of losses because of unfocused marketing, high costs, and a glut of products. At Adidas, the confusion was especially acute: In footwear alone, it had 1,200 different variations and styles. "We had everything," says Michel Perraudin, Adidas' manager for logistics, "even shoes for left-handed bowlers." Adidas' poorly coordinated marketing angered many distributors, who started to desert to Reebok and Nike. And in the U. S., where Adidas was once No. 1 in athletic shoes, chronic delivery problems and a failure to spot the trend to more comfortable shoes led to huge losses and a dramatic drop in market share to 7%.
Nike and Reebok, however, now have to confront the possibility that Adidas and Puma can fight back. The Aritmos Group, a Swedish concern that has just taken full control of Puma, plans to pump cash into the strapped company. At Adidas, a new owner, French entrepreneur Bernard Tapie, has slashed its product range in shoes and apparel to several hundred from several thousand, retired hundreds of employees, and started a network of more efficient purchasing and production facilities in Asia.
NO FRILLS. Adidas is launching a new line, Equipment, featuring no-frills shoes for such sports as soccer, tennis, and track. There's also a new and acclaimed Adidas series of hiking and outdoors shoes. The improved management, aided by a booming British market and a rush of new orders from Eastern Europe and east Germany, boosted 1990 European footwear sales 24%, to $870 million, reversing a drop in 1989. And in America, a new management team assembled by Peter V. Ueberroth, who has invested in Adidas USA, shuttered unneeded operations and managed to eke out a small operating profit for 1990.
After years of losses, and with plenty of debt, Adidas and Puma lack the deep pockets of Reebok and Nike. "There's no way in the world Adidas can spend as much on advertising in Europe as Nike," says Robert Carr, editor of Inside Sporting Goods. Nike has boosted its 1991 European ad budget 44%, to $39 million. It already has penned an agreement to advertise on EuroSport, a pan-European cable channel.
Reebok, which has staged European sports promotions but used little consumer advertising, has hired the London office of Chiat/Day/Mojo Inc. to launch a Continent-wide campaign this year. As Nike and Reebok put on speed, Adidas and Puma will have to respond with aggressive marketing to protect their home turf. In this now-global business, the marathon never stops.Igor Reichlin in Munich, with Dori Jones Yang in Seattle, Keith H. Hammonds in Boston, and bureau reports