Adidas CEO Kasper Rorsted on How Kanye West’s Politics Have Affected the Brand
There’s no question Adidas has found a winning game plan in the U.S. market, but now the athletic giant is facing a new challenge: to maintain momentum.
Much of the success has come under the watch of CEO Kasper Rorsted, who has rallied the team to produce more hot product, pump up tech and capitalize on relationships with celebrities and influencers.
Since assuming the role in 2016, the exec (who secured the No. 2 spot on FN’s 2018 Power List) has overseen significant sales growth in the North American region, including this year’s Q1 and Q2 bumps of 21 and 16 percent, respectively.
In that time, Adidas’ market share has also experienced tremendous growth.
According to data provided by The NPD Group Inc.’s retail tracking service, the brand owned 6 percent of the footwear market in the 12-month period through September 2016, trailing Nike and Jordan Brand. But it has jumped over the Jumpman, earning the No. 2 spot, trailing only the Swoosh with 11 percent of the market, according to recent data from NPD.
The achievement was powered by successful shoe franchises (most notably, the Ultra Boost and NMD), winning over sneaker diehards with styles from famed brand partners including Kanye West and Pharrell Williams, and a renewed love for longtime favorites such as the Stan Smith.
As the business continued its upswing, U.S. president Mark King left the company in July and was succeeded by 20-year Adidas vet Zion Armstrong, who most recently served as the area’s GM. While there’s a new leader in charge, how Adidas approaches the U.S. consumer — which includes deepening its roots in sport — hasn’t changed. “The plan is exactly the same. We built it together in conjunction with our partners in Germany, and we will continue to bring that plan to life,” Armstrong told FN. “It hasn’t been perfect every step of the way, but the progress we’ve made has been heavy, so there’s zero change in strategy.”
But not every move to win consumers over has been fruitful.
“They’ve had some product missteps over the last 18 months or so; they began to make introductions that weren’t quite so successful — EQT, Prophere,” explained Matt Powell, senior sports industry adviser with NPD.
Also, the insider said Adidas is hurting from the lackluster performance of the iconic Superstar silhouette, which had been one of its top-performing styles at retail.
“Superstar is in major decline. At one point, it was 20 percent of Adidas sales in the U.S.,” Powell said. “That’s a dangerous position to be in, living on a blockbuster item.”
According to NPD, the brand has had just one sneaker appear on a quarterly best-seller list this year: the NMD_R1 in Q3.
But Powell doesn’t see this as a negative. Instead, he believes it’s an indication of the market seeking variety. “The consumer is looking for unique products; they don’t want to look like everybody else. And that requires a broad range, as opposed to a very narrow portfolio,” the expert explained.
And Rorsted sees that as an opportunity. “What’s important is, the sum outpaces the market,” he said. “Of course we’d like to be in the top 10, and we’ll be there in some quarters, but from a stability standpoint, it’s more important that we have a set of franchises that are outgrowing the market.”
Here, Rorsted and Armstrong discuss Adidas’ continued North American growth, the future of its relationship with West and his Yeezy line, and how politics play into decisions regarding with whom to align.
What are you doing to fuel success in the U.S. market that your competitors aren’t?
Kasper Rorsted: “We were the first to combine pop culture and sports [with West]. Second, [we have] a relentless focus on driving innovation into our product. And third is integrating sustainability into our business model like no one has ever done before, through Parley [for the Oceans, to prevent plastic pollution]. We’ve done all three of these things earlier than our competitors.”
Zion Armstrong: “Our growth is coming off a small base because we weren’t a competitive player in the market [in 2014]. We’ve seen tremendous growth because we were so weak early on. We’re seeing the results right now from the investment from [Germany] into truly winning in North America.”
West once had the hottest shoe around, but there’s a lot more competition now. How do you keep the momentum going?
KR: “With certain products, [we will focus] on brand activation, shortness on the volume, and other shoes will be more commercialized like we did with the [‘Triple White’ Yeezy Boost] 350 V2.”
Do you think mass production of a specific style could hamper buzz and demand for the style?
KR: “No, I think the brand can carry much broader products than it has so far, and we’re just getting to phase 2 in what we’re doing with Kanye. If we didn’t continue to renew the products he’s bringing out, eventually you could get some fatigue. But I don’t think there’s risk for fatigue with what we’re doing. Actually, it’s on the contrary.”
ZA: “The Kiths and the Packers — they’re not seeing challenges with this. And what we’ve seen with the most recent scarcity drops — Desert Rats and 700s — is that sell-through has been instantaneous. We’re making sure the pipeline is full of newness and, at the appropriate time, commercializing what’s been in the market for two years.”
Have West’s controversial political views caused disruption for Adidas?
KR: “Kanye brings different points of view out. We want creators to have freedom and sometimes have a different point of view, something people could react to in a positive or a negative sense. That is what Kanye brings to the table. If he brought a common position for everybody, I think people would not react the way they do. And in many ways, we’re very supportive of what he does, but it doesn’t mean we’re supportive of every statement. We’re not signing up to his statements; we’re signing up to what he brings to the brand and the products he’s bringing out.”
Does Adidas consider athletes’ or celebrities’ social and political views before aligning with them?
KR: “It is a factor, but we sign athletes on how they perform first and foremost. What’s important to us is that the athletes with whom we engage are in accordance with our company. I cannot foresee us signing somebody who is, for example, a deliberate racist, because that is a contradiction of what we stand for. If people were inappropriate, we would cancel contracts. We’ve done that with athletes or associations. For instance, we didn’t believe the International Association of Athletics Federation values aligned with us anymore, so we canceled the contract.”
ZA: “At the same time, we’ve enhanced our sports marketing contracts to ensure that we’re inclusive, so if someone comes out through the LGBTQ community and a team drops them, we won’t support that team. That’s groundbreaking.”
What do you make of Nike using polarizing former pro quarterback Colin Kaepernick in advertising?
KR: “They’re making a point of view, and we’re trying to make the same point of view, and that is that sport unites; we don’t believe it should separate. It was a good stance to take; I’ve been very transparent about that internally at Adidas, also.”
What did you think when President Donald Trump went after Nike on Twitter?
KR: “I have not seen every tweet he’s made [about Nike]. I can only look upon us and speak about us. We have created thousands of jobs in the U.S., and I assume that our competitor Nike has created even more jobs than we have. We look at it as if we can create jobs and get people to exercise, we think it’s good for society.”
Are you afraid that if you did something Trump didn’t agree with, he would come after Adidas publicly?
KR: “There has to be a business reason for ruffling anyone’s feathers. We operate in 75 countries; we have a lot of different politicians in the countries. My job as CEO is not to have a political opinion about every single country in the world. It’s to make sure we have the right leadership teams in the different countries and become a good citizen in the countries where we build a sustainable business. That does not mean we don’t have a political position about the EU, but we very seldom have a position on any given individual that represents a country.”
Are you worried about Brexit in regard to business with the U.K.?
KR: “It’s unrealistic to believe that the European and English economy will not be negatively impacted by Brexit. Anyone who would state something different will simply be against facts. It will impact any industry, including ours.”
How is Adidas preparing?
KR: “You can’t prepare for the fundamental economic setup of the EU. What you can prepare for is a different distribution methodology, so right now, we’re building warehouse capabilities in the U.K.. Any global company dealing with the U.K. will have that issue, and every U.K. company that deals with the rest of Europe will have that issue. It’s one of the most of unwise political decisions in the last 30 years.”
Issues surrounding women in the workplace have been in the spotlight this year. How are you focusing on this issue?
KR: “Women’s empowerment is not new in our company. More than 32 percent of the leaders in our company are female. And we’re [focusing on] equal pay and promoting in appropriate ways.
“The first 18 months as the CEO, I was mentoring three female leaders — one from Europe, one from the U.S. and one from Asia — to set the tone from the top. I believe it’s important that if you want it to be taken seriously, if I don’t spend my time on it, why would I expect anyone else to spend their time on it?”
ZA: “With some upcoming announcements, my frontline, my direct [senior leader] reports are 50-50 male-female — maybe even slightly higher. We’re exceptionally proud of that. We also have a women’s enterprise resource group in Portland [Ore.], and they always give me the feedback on how we can improve. We’re happy with the progress, but we still have a long way to go.”
What is your take on newcomers such as Allbirds, which has captured a lot of consumer attention this year?
KR: “It’s good for the industry that you have companies pushing the borders and coming up with new innovation. The reason why it’s good is because smaller and aggressive companies keep larger companies on their toes. But the vast majority of these companies will not have a long life cycle, speaking statistically. If you look so far, there are few niche companies that have made inroads.”
Would you acquire one of these companies if they got hot enough?
KR: “I don’t think we should buy the brand; I think we should buy the technology or business model. If you look at our investment in Carbon [digital light synthesis technology], that’s an example. For us as a company, [that’s a priority]. It could be companies that supply materials or with a specialized competence in digital design.”
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