How Adidas Transformed from a Small German Brand into a $25 Billion Global Sportswear Powerhouse

General Info

Founder: Adolf Dassler (younger brother of Rudolf Dassler, founder of Puma)
CEO: Bjorn Gulden (59 yo)
Started in: 1924 in Germany
Employees: Approx. 58,600 employees globally

Financial Info

Revenue/Quarter: Approx. $6.39 billion (in Q2 FY24) (up 9.0% from 2Q 2023)
Net Income/Quarter: Apx. $215.88 million (in Q2 FY24) (up 131% from 2Q 2023)
Profit margin: 3.4% (as of Q2 FY24) (up from 1.6% in 2Q 2023)

 

About Adidas

Adidas stands as a testament to the power of persistence, innovation, and cultural resonance in the sportswear industry. What started in 1949 with Adolf Dassler’s vision has turned into a global phenomenon, pulling in over €21 billion in revenue in 2023. But the numbers only tell part of the story.

Adidas has always been about pushing the boundaries. Remember when Boost technology came out? It changed the game for athletic footwear. Suddenly, shoes weren’t just about style—they were about performance, comfort, and that little bit of extra energy return that makes all the difference. And it’s not just about the shoes. Adidas has been leading the charge in sustainability, with initiatives like Primegreen and Primeblue. These aren’t just buzzwords; they represent a real commitment to making over 60% of their products from recycled materials. In a world that’s becoming more eco-conscious, that’s a big deal.

But what really sets Adidas apart is how it’s woven into the fabric of culture. Whether it’s through collaborations with big names like Kanye West and Pharrell Williams or the enduring popularity of classics like the Stan Smith and Superstar, Adidas has managed to stay relevant across generations. It’s not just about what you wear on the court or the track—it’s about what you wear in your everyday life, and how that makes you feel connected to something bigger.

Adidas isn’t just surviving; it’s thriving by staying true to its roots while constantly evolving. It’s this balance of tradition and innovation that keeps the brand at the forefront, not just of sportswear, but of culture itself. That’s what makes Adidas more than just a company—it’s a legacy in motion.

 

Backstory and What lead to Adidas?

Adidas’ story is a fascinating journey through family ties, rivalry, innovation, and global impact. Founded in 1949 by Adolf “Adi” Dassler, Adidas has grown from humble beginnings into one of the most recognized sportswear brands in the world. The brand’s history is deeply intertwined with family dynamics, fierce competition, and the evolving landscape of global sports and fashion.

The Founding: A Family Affair

The origins of Adidas date back to the 1920s when Adi Dassler began making sports shoes in his mother’s washroom in Herzogenaurach, Germany. He was later joined by his older brother, Rudolf Dassler, and together they founded the “Dassler Brothers Shoe Factory” in 1924. Their products gained international attention during the 1936 Berlin Olympics when American athlete Jesse Owens won four gold medals wearing Dassler shoes.

However, the brothers’ partnership was strained by personal and professional differences, which were exacerbated during World War II. The split between the brothers in 1948 led to the creation of two separate companies: Adi founded Adidas (a portmanteau of his name, Adi Dassler), while Rudolf established Puma, just across town. This rivalry between Adidas and Puma would go on to define the sportswear industry for decades.

Early Success and Global Expansion

Adidas quickly established itself as a leading brand in sports footwear, especially after the 1954 FIFA World Cup. The German national football team won the tournament while wearing Adidas’ innovative screw-in stud boots, a design that allowed players to adjust their footwear according to pitch conditions. This victory not only elevated Adidas’ profile but also solidified its connection with football—a relationship that would continue to grow.

Throughout the 1960s and 1970s, Adidas expanded its product line to include apparel and equipment, becoming a household name in global sports. The brand’s iconic three stripes, initially used as a practical design to stabilize the shoe, became a symbol of quality and performance. By 1978, Adidas was generating around DM 1.3 billion in revenue (approximately €665 million in today’s terms).

The Death of Adi Dassler and the Struggles That Followed

Adi Dassler passed away in 1978, and the company’s leadership was transferred to his son, Horst Dassler. Horst was a visionary who understood the importance of branding and sponsorships in sports. He played a crucial role in establishing Adidas as a dominant force in global sports, particularly through collaborations with organizations like FIFA and the International Olympic Committee.

However, Horst’s untimely death in 1987 marked the beginning of a difficult period for Adidas. The company struggled to maintain its market leadership amid rising competition from new players like Nike, which was gaining ground with its innovative designs and aggressive marketing strategies. By the late 1980s, Adidas was losing market share, and its revenues had begun to decline significantly.

 

The Adidas-Puma Rivalry

The rivalry between Adidas and Puma, driven by the Dassler brothers’ bitter split, extended beyond business into the cultural and sporting fabric of Germany. Herzogenaurach, the small town where both companies were based, became a microcosm of this rivalry. Residents, including local football teams, were divided in their loyalty to either Adidas or Puma.

This rivalry reached a high point in the 1960s and 1970s, but by the 1980s, both companies were feeling the pressure from Nike, which had quickly risen to challenge their dominance. Nike’s entrance into the market with innovative products like the Air Jordan line and their ability to capture the American market shifted the dynamics of the sportswear industry, forcing both Adidas and Puma to rethink their strategies.

A New Era: The Advent of Robert Louis-Dreyfus

By the early 1990s, Adidas was in a precarious position. The company was in debt and had lost its way, struggling to compete with Nike, whose revenues had surged to $3 billion by 1992, compared to Adidas’ $1.5 billion (approximately €1.25 billion). The turning point came in 1993 when French businessman Robert Louis-Dreyfus took over as CEO. His leadership marked the beginning of a new era for Adidas.

Louis-Dreyfus initiated a series of changes, including streamlining operations, focusing on the core brand, and expanding into new markets. Under his guidance, Adidas re-entered the public markets in 1995, and by 1997, Adidas had acquired the Salomon Group, expanding its portfolio into winter sports equipment. This period also saw Adidas securing key sponsorship deals, most notably with FIFA and UEFA, reinforcing its presence in global football.

The Rise of Collaborations and the Return to Glory

The early 2000s saw Adidas embracing the trend of celebrity and designer collaborations. Partnerships with artists like Kanye West (Yeezy) and designers such as Yohji Yamamoto (Y-3) brought a new level of cultural relevance to the brand, allowing it to compete more effectively with Nike’s stronghold on streetwear and youth culture. By 2016, Adidas had overtaken Nike in several key markets, including North America, with its revenue hitting €19.29 billion.

Adidas also made significant strides in sustainability, launching initiatives like Primegreen and Primeblue, which focused on reducing environmental impact through the use of recycled materials. By 2023, over 60% of Adidas products were made with sustainable materials, aligning the brand with the growing consumer demand for eco-friendly products.

 

Adidas Today: A Global Powerhouse

Today, Adidas stands as a global leader in the sportswear industry, with a presence in over 160 countries and revenues exceeding €21 billion in 2023. The brand’s commitment to innovation, sustainability, and cultural relevance has ensured its place at the forefront of the industry, despite the challenges it has faced over the decades.

The rivalry with Puma has softened, and while Nike remains a formidable competitor, Adidas has carved out its niche, particularly in football and lifestyle segments. The company’s ongoing collaboration with FIFA, including as a major sponsor of the World Cup, continues to reinforce its dominance in football.

Adidas’ journey from a small workshop in Herzogenaurach to a global powerhouse is a story of resilience, innovation, and the ability to adapt to changing times. From the legacy of Adi Dassler to the modern-day brand that continues to shape sports and culture, Adidas remains a testament to the enduring power of vision and determination.

Brilliant Pricing Strategies

Adidas is a good company to learn ‘How to use pricing strategies more effectively’. 

1. Premium Pricing

Adidas often uses premium pricing for its high-end product lines, such as the Adidas Ultraboost and Adidas Y-3. This strategy is designed to create an aura of exclusivity and high quality, appealing to consumers who are willing to pay more for premium features.

• Example: The Adidas Ultraboost 22 was launched with a retail price of around $180. This is significantly higher than the average price of other running shoes, positioning it as a premium product.

2. Dynamic Pricing

Adidas employs dynamic pricing to adjust prices based on demand, competition, and other factors. This approach allows the company to maximize revenue by varying prices for different market conditions.

• Example: During peak sales periods like Black Friday or major sports events, Adidas may offer discounts or special promotions. In contrast, prices for new releases or limited-edition items might be set higher.

3. Bundling

Bundling involves offering multiple products together at a discounted rate compared to purchasing them separately. This strategy encourages customers to buy more and increases overall sales.

• Example: Adidas often bundles athletic wear, such as shoes with matching apparel, and offers a discount on the combined purchase. For instance, a promotion might offer 20% off when buying a pair of running shoes along with a matching track suit.

4. Penetration Pricing

Adidas uses penetration pricing to enter new markets or promote new product lines. This involves setting lower prices initially to attract customers and gain market share, before gradually increasing prices.

• Example: When Adidas launched its NMD line, it initially set lower prices to attract attention. Over time, as demand grew and the product gained popularity, the prices were increased.

5. Psychological Pricing

Psychological pricing is very common these days. It involves setting prices in a way that appears more attractive to consumers. This includes using prices that end in .99 or .95, making them seem more affordable.

• Example: Many Adidas products are priced at $99.99 or $79.95, a tactic that makes the prices seem lower than rounded numbers like $100 or $80.

Consumer Response:

A 2022 survey indicated that 60% of Adidas customers consider the brand’s pricing to be fair and reflective of the quality, highlighting the success of its premium and psychological pricing strategies.

 

Marketing and Branding Strategies

This case study delves into the brand’s marketing strategies, spending patterns, and the impact of its campaigns, sponsorships, and celebrity endorsements.

1. Marketing Spend: A Strategic Investment

Adidas has consistently invested heavily in marketing to maintain its competitive edge. In 2023, the company spent $2.52 billion on marketing and point-of-sale (POS) expenses. This significant budget allocation reflects the importance Adidas places on brand visibility, consumer engagement, and market penetration.

a. Growth of Marketing Spend Over the Years

Adidas’ marketing spend has grown substantially over the years, driven by its global expansion and the need to compete with major rivals like Nike. For instance:

• In 2010, Adidas spent approximately $1.75 billion on marketing.
• By 2015, this figure had increased to around $2 billion.
• In 2020, the marketing budget reached $2.37 billion, reflecting an increased focus on digital marketing and influencer partnerships.
• The 2023 spend of $2.52 billion represents not only a continuation of this trend but also a response to the growing importance of maintaining a strong brand presence in an increasingly competitive market.

b. Allocation of Marketing Budget

Adidas’ marketing budget is strategically allocated across several key areas:

• Digital Marketing: A significant portion of the budget is directed toward digital campaigns, social media engagement, and e-commerce promotions. Adidas has embraced digital channels to connect with younger audiences and drive direct-to-consumer sales.
• Sponsorships: A substantial part of the marketing budget is allocated to sponsorship deals with major sports events, teams, and leagues, including FIFA, UEFA, and the NBA.
• Celebrity and Athlete Endorsements: Adidas invests heavily in endorsements by celebrities and athletes, who play a crucial role in shaping the brand’s image and appeal.
• Retail and POS Marketing: A portion of the budget is used for in-store marketing, visual merchandising, and POS materials to enhance the consumer experience and drive sales.

2. Sponsorship Deals: A Cornerstone of Adidas’ Strategy

Sponsorships have been a critical component of Adidas’ marketing strategy, helping to elevate the brand’s visibility and association with top-tier sports.

a. Key Sponsorships

• FIFA and UEFA: Adidas has been a long-standing partner of FIFA and UEFA, providing official match balls for the FIFA World Cup and the UEFA Champions League. These partnerships have not only bolstered Adidas’ credibility in football but have also provided global exposure during high-profile events.

• Olympics: Adidas has been a key sponsor of the Olympic Games, supplying equipment and apparel for various national teams. This association with the world’s largest sporting event has reinforced Adidas’ position as a leader in performance sportswear.
• NBA and MLS: In the United States, Adidas has invested in sponsorships with the NBA and Major League Soccer (MLS), helping to expand its footprint in the North American market.

b. Impact of Sponsorships on Revenue

These sponsorships have had a significant impact on Adidas’ revenue and brand equity. For example, the 2014 FIFA World Cup, where Adidas was the official sponsor, contributed to a 14% increase in sales in the football category, pushing revenues to €2.1 billion. Sponsorship deals provide Adidas with valuable advertising space, enhance brand credibility, and create strong associations with excellence in sports.

3. Celebrity and Athlete Endorsements: Leveraging Star Power

Adidas has long recognized the power of celebrity and athlete endorsements in building brand equity and driving sales. The brand’s strategy involves partnering with high-profile athletes and celebrities who embody Adidas’ values of innovation, performance, and cultural relevance.

a. Athlete Endorsements

• Lionel Messi: As one of the greatest football players of all time, Messi’s long-term partnership with Adidas has been incredibly valuable. His endorsement has helped Adidas strengthen its position in the football market, particularly in regions like Europe and South America.
• James Harden and Damian Lillard: In basketball, Adidas has signed lucrative deals with NBA stars like James Harden and Damian Lillard. These endorsements have been critical in expanding Adidas’ influence in the basketball category, particularly in the U.S. market, which is dominated by Nike.

*Lionel Messi (Left) and Kanye West (Right)

b. Celebrity Endorsements

• Kanye West (Yeezy): Perhaps the most iconic celebrity partnership for Adidas is with Kanye West. The Yeezy line, launched in 2015, became a cultural phenomenon, blending high fashion with streetwear. The Yeezy brand reportedly generated $1.7 billion in revenue in 2020, making it a cornerstone of Adidas’ profitability in the lifestyle category.
• Pharrell Williams: Another key partnership is with Pharrell Williams, who has collaborated on several sneaker and apparel lines that have been well-received by consumers and critics alike.

c. Return on Investment (ROI) from Endorsements

Adidas’ investment in endorsements has paid off handsomely. While the exact figures vary, it is estimated that Adidas spends around 10-15% of its marketing budget on endorsements. This investment has delivered substantial returns, both in terms of direct sales and brand equity. For instance, the Yeezy line alone has been credited with driving significant increases in Adidas’ overall revenue and market share in the U.S. market.

4. Marketing Campaigns: Creative Storytelling with Measurable Impact

Adidas’ marketing campaigns are known for their creativity, cultural relevance, and ability to connect with diverse audiences.

a. Notable Campaigns

• “Impossible Is Nothing”: Launched in 2004, this campaign became one of Adidas’ most iconic. It featured athletes (Muhammad Ali) overcoming obstacles, reinforcing the brand’s message of empowerment and resilience. The campaign resonated globally, contributing to a boost in brand recognition and sales.

*Muhammad Ali famous campaign

• “Here to Create”: This campaign, launched in 2017, focused on creativity and individuality in sports. It featured a diverse group of athletes and influencers, including Karlie Kloss and Paul Pogba. The campaign helped Adidas tap into the growing market of consumers who see sports as a form of self-expression.
• “Creators Never Follow”: Launched in 2015, this campaign targeted young, urban consumers by focusing on non-conformity and the idea of creating your own path. The campaign was successful in attracting a younger audience and solidifying Adidas’ position in the streetwear market.

b. Impact of Campaigns on Profits

Adidas’ marketing campaigns have consistently delivered strong financial results. For example, the “Here to Create” campaign contributed to a 17% increase in revenue in 2017, with particularly strong growth in North America. Whereas ‘Impossible is Nothing’ campaign had 1.3 billion+ campaign video views. The brand’s ability to craft compelling narratives that resonate with consumers has been key to its marketing success.

5. Digital and Social Media Strategy: Engaging the Modern Consumer

In recent years, Adidas has increasingly focused on digital and social media as critical components of its marketing strategy.

a. Digital Transformation

Adidas has invested heavily in digital marketing, recognizing the shift in consumer behavior toward online shopping and social media engagement. The brand’s e-commerce sales have grown significantly, reaching €4.9 billion in 2021, driven by strong digital campaigns and direct-to-consumer initiatives.

b. Social Media Engagement

Adidas’ presence on platforms like Instagram, Twitter, and YouTube has been instrumental in engaging younger consumers. The brand frequently collaborates with influencers and leverages user-generated content to build community and drive brand loyalty.

 

Some Key Insights for Future Entrepreneurs

1. Leverage Cultural Relevance Through Strategic Collaborations

• Insight: Adidas’ success with collaborations like Yeezy and Stella McCartney highlights the importance of partnering with influencers and designers who resonate with your target audience.
• Actionable Tip: Identify and collaborate with cultural icons or influencers whose values and audience align with your brand. This can help your product reach new demographics and build a strong emotional connection with consumers.

2. Innovate Continuously to Stay Ahead of Competitors

• Insight: Adidas’ investment in technologies like Boost and Primeknit allowed it to regain market share and challenge Nike’s dominance.
• Actionable Tip: Regularly invest in R&D to innovate your product offerings. Even if you’re in a saturated market, introducing unique features or technology can differentiate your brand and attract attention.

3. Adapt to Market Shifts Quickly

• Insight: Adidas effectively shifted focus towards digital transformation and direct-to-consumer sales as consumer behavior evolved.

• Actionable Tip: Stay agile and be prepared to pivot your business model in response to market trends. For instance, invest in e-commerce and digital channels as consumers increasingly prefer online shopping.

4. Sustainability as a Brand Differentiator

• Insight: Adidas’ commitment to sustainability, such as its partnership with Parley for the Oceans, helped it connect with environmentally conscious consumers.

• Actionable Tip: Incorporate sustainability into your business model. Consumers are increasingly prioritizing brands that demonstrate environmental responsibility. This can also open up new markets and create long-term brand loyalty.

5. Strategic Pricing Can Broaden Your Market Reach

• Insight: Adidas uses a tiered pricing strategy to cater to different consumer segments, from premium products to more affordable options.

• Actionable Tip: Consider offering multiple pricing tiers for your products or services to attract a wider range of customers without diluting your brand value.

6. Maximize the Impact of Marketing Spend

• Insight: Adidas’ focused marketing investments in areas like digital campaigns and influencer partnerships have driven significant returns.

• Actionable Tip: Instead of spreading your marketing budget thin, focus on channels that provide the highest ROI. For example, influencer marketing and targeted digital ads can offer greater returns than traditional advertising.

7. Understand and Leverage Your Brand’s Unique Identity

• Insight: Adidas differentiates itself by focusing on values like teamwork, diversity, and sustainability, as opposed to Nike’s emphasis on individualism.

• Actionable Tip: Clearly define and consistently communicate your brand’s unique identity. Ensure that every product, marketing campaign, and customer interaction reflects this identity to build a strong, cohesive brand presence.

8. Global Expansion Requires Local Adaptation

• Insight: Adidas’ success in various markets, particularly in Europe and China, is partly due to its ability to adapt its marketing strategies to local cultures and preferences.

• Actionable Tip: When expanding internationally, research and adapt to the local market’s cultural nuances and consumer behavior. Tailored marketing and product offerings can significantly enhance your brand’s acceptance in new regions.

9. Turn Rivalries into Opportunities for Growth

• Insight: Adidas turned its rivalry with Nike and Puma into opportunities to innovate and differentiate itself in the market.

• Actionable Tip: Don’t shy away from competition; use it as a motivation to improve your products and strategies. Analyze competitors’ strengths and weaknesses to identify areas where you can outperform them.

10. Data-Driven Decision Making is Crucial

• Insight: Adidas’ use of data from its digital platforms has enabled it to better understand consumer behavior and tailor its offerings accordingly.

• Actionable Tip: Invest in analytics to gather insights on customer behavior, market trends, and product performance. Use this data to make informed decisions that align with your business goals.

“IMPOSSIBLE IS NOTHING!”