Reebok and Adidas Merger Looks Good. But Will It Be Good?

Posted by: David Kiley on August 3, 2005

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On paper, the acquisition of Reebok by Adidas looks great, and totally logical. But we know that mergers don’t get executed on paper. They get executed in real life where people can blow executions. Mercedes-Benz and Chrysler? Quaker and Snapple? HP and Compaq?

In terms of closing the gap between Adidas and Nike, this deal helps. It gives the German shoemaker about 22% of the U.S. shoe market, for example, compared with Nike’s 36%. And that’s still a pretty wide gulf.

What looks like a good plan is if the deal allows Adidas to really focus on premium product full of design and innovation—the kind of shoes people with too much money like to buy. Let Reebok fill the middle market and take care of the traditional ladies’ aerobics and jazzercise categories. By the middle market, I mean fashion shoes worn by suburban kids who don’t necessarily play sports. And Reebok has to keep up the successful hip hop strategy. Fiddy Cent’s shoes and stuff are flying off the shelves. But will Adidas’s tie-up with Missy Elliott make sense for the long term now?

But it’s far from a slam dunk that Adidas is going to encorach on 30% share in the U.S., which is what the company execs say is in their plans. Nike, BMW, Apple…these are brands that seldom make a mistake with product or image. They stay aspirational because they create mystique around their brands year after year after year.

Adidas may make some headway, but I’ve seen this movie before. They might not know where the Adidas brand ends and the Reebok brand begins, and so the two will be jockeying for the same customer. The Germans are infamous for this. Witness Volkswagen’s foray into the luxury car market with the Phaeton even though VW owns Audi, which should be taking care of that market for the company.

Like I said, successful mergers are not made on paper.

Reader Comments

K

August 3, 2005 11:56 PM

More confused Germans eh? And with such a powerful merger too... it'll be a truely sad sight if Addidas & Reebok together can't take down Nike. As much as I dislike Nike, here's the truth... they still do a pretty DAMN good job of innovative marketing and product release. Too bad others don't follow suit. Just like mergers, although made on paper easily, when out in the world, people always screw up the essentials.

p.s. - very good entry, definite mush for munch.

Vignesh N

August 18, 2005 5:08 AM

The merger looks really good. But, as author says, to Be good Adidas should never intrude atleast in Reebok fashion shoe/sandal market.

Nick

October 4, 2005 1:42 PM

i'm allall for reebok and adidas but would reebok still be the same reebok? or would it be completely changed? i been wearing reebok since i was a little kid and they're awesome. im hoping it will be reebok with benefits.

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News, opinions, inflammatory meanderings and occasional ravings about the world of advertising, marketing and media. By marketing editor Burt Helm, Innovation Editor Helen Walters, and senior correspondent Michael Arndt.

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