Yesterday's New York Times discussed (sub req) the recent bidding war over a five-year deal to outfit the 16-person Indian national cricket team. Nike's (ticker: NKE) $44 million bid beat out separate bids from Adidas (OTCQX:ADDYY) and its almost-partner Reebok (ticker: RBK). Why is this important?
The sneaker wars, once fought on the basketball courts and football fields of the United States, are increasingly being waged on the track fields of China, the volleyball courts of Brazil and the soccer fields of Mexico, long overlooked markets filled with the fan base that footwear companies thrive on... more and more companies are moving their marketing machines to fertile developing countries to generate the growth they can no longer rely on in the United States and Europe. Nike remains the No. 1 seller of footwear and athletic apparel in the world, but the acquisition of Reebok by Adidas-Salomon, approved this week by Reebok shareholders and the European Union and expected to close next week, could throw up a considerable roadblock to the swoosh across Latin America and Asia.
Nike remains number one in sales of footwear and athletic apparel worldwide. It has built an outdoor sports center in China (Nike Beijing Park), sponsored 21 Chinese sports federations and has endorsement deals with a number of top Chinese athletes. But Adidas and Reebok (numbers two and three, respectively) have staked out a place in the competition. From the Times article:
Adidas recently spent $80 million to sponsor the 2008 Olympics in Beijing while Reebok has closed a $70 million endorsement deal with the best basketball player to emerge from China, Yao Ming. Adidas has just eclipsed Nike in sales in Japan, an athletic apparel market second in size only to that of the U.S.
Who will win?
...Nike firmly dominates the athletic footwear business and is unlikely to lose its grip anytime soon. In the United States, where the sneaker market has remained flat for the last decade, it controls 36.3 percent of the market, compared with 21.1 percent for Adidas and Reebok combined, according to Sporting Goods Intelligence, a trade publication. But the gap is far narrower in the faster-growing international market, where Nike controls 30.9 percent of sales, compared with 28 percent for Adidas and Reebok combined. "In every single region in the world, it is now a two-horse race between Nike and Adidas," said Jan Runau, a spokesman for Adidas. Analysts and executives agree that the biggest battle will unfold in China, the world's most populous country, where Nike, Reebok and Adidas are scrambling to nail down sponsorships, endorsements and store locations before the Olympics.