The Big Poach – Adidas vs Puma

The Big Poach – Adidas vs Puma

What is common between Manchester City, Neymar and Christian Pulisic from the footballing world, F1 racer Lewis Hamilton, chess grandmaster Magnus Carlsen and Olympic athletes Karsten Warholm and Armand Duplantis? Once-Puma-now-Adidas CEO, Bjørn Gulden, of course. Read on to know more:

Outside of Adidas signing off from Kanye West’s Yeezy business worth about $1.5 billion and likely to cost the firm about $250 million of their net 2022 income, Bjørn Gulden, poached from Puma to become Adidas’ new CEO, have hit headlines worldwide, making it one of the other most controversial things to happen in sports business this year. But first, some context:

Adidas and Puma – Agang feud!

That Adidas and Puma share a history may just be a bit of an understatement.

In 1919, Rudolf and Adolf Dassler opened the Gebrüder Dassler Schuhfabrik (Geda, for short) – a running shoe manufacturer located in a small town in Germany. Geda enjoyed much success through the 1920s and the ‘30s, but disruptions from WWII and an ensuing falling out between the two brothers led to a division of assets and the company to suddenly close down in 1948.

The brothers then decided to set up rival shoe brands on opposite ends of the town, separated by the river, Aurach and intense burning hatred for the other. Of this, sport business and media firm Athletic Interest writes, “Rudolf’s Puma and Adolf’s Adidas began a rivalry that is more akin to a gang feud than business competitors.” In fact, the workers working in Adidas and Puma – mostly inhabitants of the small town – were forced to live in different districts and go to separate bakers, pubs and butchers.

Figure 1: Stock Prices, Puma and Adidas; Source: Refinitiv Eikon

With both brothers now dead and buried on opposite ends of the same cemetery, the rivalry between Adidas and Puma has since cooled down. The two brands even played a friendly back in 2009, where even the mayor of their small town participated. (The mayor did, however, ensure to wear Adidas on his left foot and Puma on his right.)

Yet, in spite of the almost tribal-like nature of the rivalry now over, both brands are still as competitive as ever – fighting it out in the global market.

Stealing Puma’s greatest asset

When ex-football and handball player Bjørn Gulden took over the reins of Puma back in 2013, their net sales were under 3000 million euros annually – a number he has since more than doubled. It managed to comfortably edge out competitors New Balance and Under Armour to cement its place as the sports’ apparel market’s third-largest player. Since then, it has gone only from strength to strength. The same cannot be said for Adidas, though.

Figure 2: Net Sales – consistentlyup, Puma; Source: Statista

Compared to the same period, and given its wider reach, Adidas too managed to expand rapidly, but now face the prospect of a grim slowdown amidst COVID-19 disruptions, supply chain issues, market recession worries and the Yeezy controversy hurting sales. So much so, the gap between Puma and Adidas today is the lowest it has been in a rather long time.

Figure 3: Net Sales – bump, Adidas; Source: Statista

Athletic Interest writes, in this regard:

“With profits down, future projections falling, and its CEO quitting, Adidas has taken a peek across the river and – ina move that Adolf (Dassler, not the other one!) would be proud of – decidedto steal Puma’s greatest asset.”

The Gulden era

When the Norwegian executive took over Puma back in 2013, he realised almost instantly that the firm had ‘lost focus’. In an attempt to be both a sports brand and a fashion brand with completely different strategies, it was failing to do well on either. He decided to unify the company’s core message with the idea of a performance, and introduce the strategy known as ‘Forever Faster’.

The lifestyle and sportswear divisions of the firm were merged, and the company decided to place firm interest in the fastest athletes in the fastest sports (and, Magnus Carlsen). The acquisitions reaffirmed Puma’s sporting pedigree and sales have only boomed from there. Gulden was a charismatic figure, expert at establishing high-end relationships that would pay dividends. His contacts and leadership were instrumental in Puma’s uber-successful campaign.

There is perhaps none better than Gulden to guide Adidas through these turbulent times and back to expanding the gap to its direct rival. It will be interesting to see what strategy he adopts to get Adidas back to its high growth trajectory of the mid-2010s.

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