Adidas'S Acquisition Of Reebok Has Become An Embarrassing "Stepson"

"Acquiring Reebok is one of the most expensive mistakes in the company's history," said Casper Rosted, Adidas CEO.

The ups and downs of Reebok is a classic story in the business world. Today, this story has made new progress.

The brand was founded in 1895 and began its international journey in the late 1970s, and has since soared. In the 1980s, relying on a pair of small white shoes, Reebok climbed to the top of the world's No. 1 position in just seven years. After a brief resplendence, the company turned into a downhill one after another, and began to fall back and make ends meet.

In August 2005, Reebok was acquired by Adidas at a price of 3.8 billion US dollars. As the second and third largest in the market, the prospect of strong and powerful alliance surpassing Nike has not yet appeared. Since 2014, news of Adidas selling Reebok has been endless. In 2016, Casper Rosted, the newly appointed Adidas CEO, stopped the rumors with the fitness transformation of Reebok, and made the idea of Reebok fully profitable before 2020.

He said he treated Adidas and Reebok like two children and treated them equally. In 2019, Reebok will turn losses into profits. But on October 25, 2020, Adidas suddenly decided to dump the bad assets. Casper Rosted also redefined Reebok: "this is one of the most expensive mistakes in the company's history.".

1、 The world's first birth

Reebok's success was one of the most sensational news events in the 1980s. It took just seven years to become one of the top sneaker manufacturers.

In 1895, Joseph foster, founder of Reebok, created the world's first pair of spiked shoes to meet his running needs. This caused a huge sensation at that time. Until the end of the 19th century and the beginning of the 20th century, runners in many countries wore the "foster running shoes" to compete. In 1896, he created the first pair of inflatable sports shoes, and established Reebok's predecessor "foster" in England to customize shoes for athletes.

In the early 1980s, Reebok began to pay attention to women's demand for sports shoes, invested $1 million in research and development, and designed white sports shoes with a selling price of more than $80. Through eye-catching design, this shoe has become a necessary equipment for women's aerobic sports. Women's movement in the world has begun.

In 1983, the sales of the shoes reached 12.8 million US dollars, a world record in the history of sports shoes sales. In 1986, Reebok's shoes were so popular that they were out of stock in London. In a short period of seven years, in 1987, Reebok won the first place in the world and led the market for three years with the continuous introduction of new products. Reebok, which has rich wings, has begun to accelerate the development of overseas markets.

In the late 1980s, the management authority began to advocate the professional manager model, and the way entrepreneurs manage their own companies began to be criticized. In order to show Reebok to keep pace with the times, CEO Farman retreated to the second line. But since the professional manager took office, Reebok has gone down the road.

Reebok has changed 5 presidents in the past 10 years. Huge management costs, discord among senior leaders, and strategic mistakes have led to Reebok's repeated mistakes. In 1992, the new professional managers were not willing to Reebok's dominant position in women's shoes market, and began to build a more perfect business blueprint. He ventured to expand his core business from entertainment and fitness shoes to men's competitive shoes, squeezing into a bloody battle with Nike, Adidas and NewBaron.

With the existing advantages of the brand, Reebok goes "smoothly". Not only did he sign in a large number of outstanding stars such as O'Neill, but also let 3000 athletes wear Reebok shoes in the 1996 Summer Olympic Games. But crises have been detonated one after another on the way to perfection. From 1991 to 1995, the company's administrative expenses increased from 24.4% to 32.7%. Women who used to be keen on Reebok suddenly feel alienated.

To make matters worse, Reebok gave up high priced sneakers from $100 to $130 and bet the company's future on the sneaker market below $90. In the 1990s, with the popularity of sports, sports shoes became the symbol of identity and "cool". The main consumer group changed from users over 25 years old to 12-24 years old who were more willing to spend money on sports shoes. High priced sports shoes suddenly became popular. But at that time, Reebok did not take the hand of the product, can only see Nike with visual air bag sports shoes to earn a bowl of overflow, its own gradually out of favor.

In 1995, half of Reebok's designers, sales and development managers left the company, and Reebok went from bad to worse. Once signed sports stars, but no POP products to support, so that the star effect can not be converted into performance growth. Even O'Neill accused Reebok of not helping him improve his performance by customizing his shoes. This also foreshadowed the failure of Reebok's competition with Nike in 2003 to sign NBA * * James. In 1995, Nike's market share reached 37%, but Reebok dropped to 20%.

In December 1999, Farman could no longer see Reebok's lost way, and began to return to the fashion ranks. He developed the multi buffered air channel's DMX technology and traxtar sports shoes that can detect children's running speed and jumping height. However, the potential energy of the past is no longer, the rising stars are surging, and Reebok is hard to make waves again.

2、 Hand in hand: the dream of strong union

Founded in 1948, adidas has dominated the world sporting goods market for decades. However, in the 1970s, Adidas was complacent in its "professional" identity, but did not realize that the trend of leisure fashion had arrived. As a result, in the late 1970s, adidas' No. 1 position was taken away by Nike, which was less than a decade old. Germany's "rigorous and professional" is inferior to the "flexible development" of the Americans. Since then, adidas has been unable to catch up with Nike.

In 2005, the market share of Nike was 36.6%, and that of Adidas was 22.2%. Adidas even ranked fourth in the United States. The huge gap ignited Adidas's fighting spirit. In order to save the market position of Adidas and Nike in 2005, it announced that Adidas would keep its position in the world market from 3.8 billion dollars. After all, Reebok has surpassed Nike and won the first place in the world for three years.

At that time, acquisition was not good news on Wall Street. Although M & A can make enterprises larger, the difficulty of integration after acquisition often makes the success probability very low. HP and Compaq also hope to successfully block their common enemy, Dell, the new rising giant in the PC industry, through M & A, but no one can deny that the acquisition is a failure. Adidas has just ended a failed integration and sold Salomon, a French ski and golf equipment manufacturer, for $625 million, which it acquired in 1997 for $1.4 billion.

Although the success rate is very low, every M & A operator thinks that he will be an exception. They firmly believe that the synergy effect brought by his M & A will make 1 + 1 far greater than 2. What's more, Reebok's M & A is a perfect decision. After the alliance with Reebok, Adidas once again has the possibility of hitting the first place in the world. Adidas, which has a mediocre performance in the North American market, can use Reebok to insert into Nike's hinterland to avenge Nike's proximity to its base camp. The advertising effect brought about by the $3.8 billion purchase price also makes Nike jealous. However, due to the anti-monopoly regulations in the US market, Nike has no right to join the race against Reebok.

More importantly, both Nike, Adidas and Reebok are aware of the strategic significance of the Chinese market. However, no matter what the market share of Europe and the United States has increased, the market share of China has increased.

Nike made a lot of money by relying on Jordan's personal influence. Since then, many high-quality stars have been robbed in advance. By exploring the layout of tomorrow's stars, Nike successfully signed the 110m hurdles champion Liu Xiang and won a good card in the Chinese market. Adidas has not made a profit in the Chinese market, but Reebok has a sharp market tool in China that even Nike can marvel at - Yao Ming. The two sides signed a lifetime sponsorship contract in 2003. In China, no athlete has ever had the commercial potential of Yao Ming.

After the acquisition of Reebok, Adidas can obtain the "escort" of NBA, NFL and NHL, and take the super NBA * signed by Adidas such as Yao Ming and Iverson as his own, which is of great significance to Adidas. After experiencing a short period of pain in the merger, Adidas began a strong rebound in the market, with a substantial increase in annual earnings. In 2008, Adidas won the naming right of the Beijing Olympic Games. Adidas, which is proud of itself, has more than 1% of Nike's market share in China, leaping to the top position.

In 2008, the adidas global retail store, the adidas Brand Center store in Sanlitun, Beijing, was completed, which facilitated the merger of the adidas Global CEO Herbert Heiner to China. He was supposed to be the adidas platform, but he was trying to sell for Reebok. From behind him is the huge Reebok logo, photos of Yao Ming and basketball shoes specially designed for him, showing his determination to support Reebok in the Chinese market.

Behind the support of going through fire and water, there is also a sense of helplessness. Since the merger and acquisition between Adidas and Reebok, Herbert Heiner has to face questions from analysts and the market every quarter - when can he see the benefits of the merger? Every time, he firmly replied: we are moving in the right direction and hope to reap profits in the next quarter or next year.

But the fact is that Reebok insists on dragging down the whole adidas group with negative growth.

3、 Reebok: under the fence

In addition to the $5.8 billion in debt to acquire Adidas, it has to pay more than $3.8 billion for the merger. The investment of more than 4 billion US dollars has greatly hindered the possibility of Adidas in the market. Although adidas has made redundancies on Reebok, the number of orders continuously reduced and the company losing money continuously is a big mess for Adidas.

In the 15 years since the merger, it has proved that things have not progressed as expected, and Reebok has not brought ideal benefits to the company. However, as a "stepson", it is difficult for Adidas to regard Reebok as his own, and even Adidas may not want to raise him as a son at all. Adidas almost at the end of the acquisition, it squeezed out Reebok, which monopolized the NBA market, and signed an 11 year $400 million contract with the league.

After being acquired by Adidas, Reebok blurred its personality and gradually declined its brand. Despite Yao Ming's excellent performance in the Chinese market, Reebok has been mediocre. Apart from the brief appearance of Reebok and Yao Ming in the 2008 Olympic Games, it is rare to see more marketing activities for Yao Ming after the Olympic Games. Yao's shoes are not designed by users.

Reebok mainly uses the existing channel system of Adidas in China market, and there are few signs that it has made achievements in channel expansion. "Can't buy Yao Ming shoes" has been the status quo for many years. It's even hard for consumers to remember where to buy Reebok products, and it's even harder to see new and refreshing products. In the Chinese market, Reebok has become a niche brand, lack of distinct product differentiation and brand personality. China's local sporting goods manufacturers have not even included Reebok in the list of competitors at all.

Since 2010, the global sports shoe market has been growing at a rate of 5% to 9% every year, but Reebok's revenue has declined year by year in the same period. In 2010, as the market share shrank and the trend declined, Reebok failed to keep the NFL contract and was later cut off by Nike. With the separation from the three major leagues, the sponsored stars gradually retired, and Reebok was completely abandoned outside the arena.

Reebok's failure is not only in China, but also its share in the North American market has shrunk significantly, and even the news that Reebok will be sold -- in 2014, the Wall Street Journal said that a consortium of investors from Hong Kong and Abu Dhabi proposed to buy Reebok for adidas Group, with an offer of $2.2 billion. In 2014, Adidas redesigned its brand strategy for Reebok: focus on the fitness market, in order to regain consumers and stop fighting with other brands in the group.

In 2016, the new CEO of Adidas, Casper Rosted, took office. He set a goal to restore Reebok's profits by 2020, and said he treated Adidas and Reebok as if he were two children. Reebok launched a new logo, positioning itself in the ranks of fitness, and finally Reebok regained profits in early 2019, with slow growth in performance. But before Reebok regained its momentum, the story again ushered in a turning point.

On October 25, 2020, according to German media reports, Adidas is considering selling Reebok in the next few months, which is expected to be completed by March 2021. Both Anta sports and American Weaver holding timderland and north face are potential buyers. Rosted hopes to get 2 billion euros from the sale of Reebok, but now, even if the deal is less than that, he will accept it. US $3.8 billion (about RMB 25.5 billion) was purchased, 2 billion euro (about RMB 15.8 billion) was sold, and Adi was forced to sell 9.7 billion yuan of meat.

In the past two years, Nike has launched such popular products as Jordan and air force No.1 series, while Adidas only has the coconut shoe yeezy to hold up the scene for a short time, which is obviously unable to meet its technical development and iteration. Coupled with the impact of the epidemic, Adidas's net profit fell by 96% in the first quarter of 2020, and more than 70% of stores in the world were forced to close. As a result, it also brought greater pressure on inventory, which increased by 32% to $5.116 billion. Adidas' net sales fell 35% to $4.225 billion in the second quarter, with a net loss of $348 million, compared with a profit of $627 million in the same period of the previous year.

In the howling of the market, China has become the lifesaver of international brands. However, as the main market of Reebok still stays in the United States and its international business is relatively weak, Reebok has been more seriously affected than Adidas. The official value of $50.9 billion for Adidas in 2018 is based on the market value of 95.9 billion in 2018. Under the epidemic situation, Reebok's sales fell by 44% in the second quarter of 2020, and Adidas will bear more depreciation and loss.

In order to save physical strength, cutting off the burden of Reebok may be the choice of Adidas. After the news was released, Adidas shares rose 3.5%, which shows that the market has given up the attitude of Reebok. "It's one of the most expensive mistakes in the company's history," said Casper Rosted, Adidas's CEO.

4、 epilogue

A British management master, Liles Rubin, said this: people in the pursuit of perfect decision-making process, often put the most reasonable decision-making aside.

It is an important measure for Reebok to "perfect" from the rotation of professional managers to the expansion of recreational fitness shoes to men's competitive shoes. However, these two actions of building on the ground are both from the deliberate grafting under the idealistic appeal, rather than from the natural growth of business development, thus losing the foundation of its rationality. Let Reebok fall from the world's No. 1 throne, and even make ends meet.

In 2005, the original intention of the $3.8 billion acquisition was to challenge Nike's "perfect dream". Reebok should have used Yao Ming, a readily available resource, to enter the Chinese market. However, Reebok has become an embarrassing stepson after the acquisition. In the "dream" of dominating the world with Adidas, there is no original light. Adidas's acquisition and integration of Reebok's huge capital and opportunity cost have also deprived the company of a rich soil for its vigorous growth. This can be seen from its market performance that it is unable to meet its expectations.

The journey of climbing the peak is step by step. From the business changes of Tencent, Alibaba and meituan, it is not difficult to find that those great innovations and businesses are often grown within the enterprise, rather than from the guidance of a perfect dream. Perfect decision-making is just a distant dream, and it will even bring down the enterprise. The development of the enterprise can not tolerate a trace of rash progress, those who grow out of the business of the most reasonable decision, is really worth putting into action. But the dream of blood, but always in the process of history, burning out one after another amazing mistakes.