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Adidas sees Games as venue to China market

Trying to vault to the top of China's booming market ahead of archrival Nike Inc., the German-based Adidas is gambling it can use its pricey Beijing Olympics sponsorship to root its brand in the minds of Chinese consumers.
/ Source: The Associated Press

When Adidas brought NBA star Tracy McGrady to China last August for a well-funded publicity tour, all 800 pairs of a special edition basketball shoe sold out at stores in a single day. The sportswear maker hopes the enthusiasm that the young Chinese showed for those $170 shoes will spill over to the 2008 Beijing Olympics.

The company will drape the Adidas name and three-stripe logo on Chinese athletes at the Winter Olympics next month, splash it on souvenir jerseys for the 2008 Games and clothe tens of thousands of officials and volunteers at the Beijing competition.

"The Beijing Olympics will be an Adidas event," Adidas-Salomon AG's chief executive, Herbert Hainer, said in a presentation to investors in October.

Trying to vault to the top of China's booming market ahead of archrival Nike Inc., the German-based Adidas is gambling it can use its pricey Olympics sponsorship to root its brand in the minds of Chinese consumers.

The Olympics and China are key components in a strategy to revitalize the 78-year-old company that pioneered the sports-shoe industry but then grew listless.

Since its acquisition by French financier Robert Louis-Dreyfus in 1993, Adidas has expanded its product line and absorbed other sports-gear makers. It plans to close a $3.8 billion acquisition of competitor Reebok International Ltd. Tuesday, with plans to maintain the Reebok line and promote it globally.

Adidas paid an unusually hefty $80 million to $100 million in cash and in services such as uniforms to win the Beijing Olympics sponsorship, industry executives estimate. The company declines to reveal the cost, but the price tag underscores the allure of China's growing market.

Sponsorships give companies limited rights to use the Games logo on products and in advertising. Bidding wars have pushed up the price of such deals, bringing the Beijing Olympic organizers an estimated $1 billion so far and allowing them to project a profit.

Among multinationals that shelled out handsomely, Volkswagen AG sees its sponsorship as crucial to shoring up a rapidly eroding position in a nation where it used to be the leading car maker. Johnson & Johnson wants to raise the profile of its medical and health-care products.

Adidas is looking for an edge in its battle with Nike over China's consumers. "It's definitely a two-dog race," said Terry Rhoads, general manager for Zou Marketing Inc., a Shanghai-based sports consultant.

Both companies have successfully appealed to a cohort of single urban children — the "little emperors" of China's one-child family planning policy — who are wired to the Internet and captivated by professional sports, especially NBA basketball, and whose families have money to spend.

The rivals are opening stores across China at the rate of 10 or more a week, often just yards apart in the same shopping malls. They sponsor local sports heroes — the Olympic gold medal-hurdler Liu Xiang for Nike, the gold medalist women's volleyball team for Adidas — and fund competitions aimed at hooking teenagers on sports and the related gear.

Sales of premium sportswear in China have rocketed from almost zero a little more than a decade ago to $350 million for Nike and $300 million for Adidas last year, Rhoads estimates. He says that sector was worth $3 billion in total last year and is expected to grow 20 percent this year.

"Everything in China is always, like, out of proportion," Sandrine Zerbib, head of Adidas' China operations for 12 years, said at her new Shanghai office atop an upscale shopping center, a company award for running the most profitable subsidiary sitting on a shelf.

The Beijing Games are "going to be bigger, faster, stronger," she said. "The number of volunteers will be larger. The stadiums will be filled. The number of medals for China is going to be huge. The audience and attention from people in China will be huge."

Under its deal, Adidas will outfit China's Olympic teams at next month's Winter Games in Turin, Italy, and at the Beijing Games. That means when Chinese athletes win medals, they will receive their awards wearing Adidas, even if they compete in garb from Nike or other sponsors.

But Adidas isn't waiting for photos of Chinese athletes at medals ceremonies in Beijing.

"The Games are all about the time before the Games. The Games are just 16 days. It's the sugar on the cream," said Marcus John, the China managing director for the sports marketing firm IMG.

Adidas is investing an undisclosed sum on advertising and other campaigns. At the Shanghai offices, a new Asian design center is focused on getting new products into the Chinese market faster to meet changing tastes in the run-up to 2008, Zerbib said.

A worldwide Adidas marketing campaign — "Impossible Is Nothing" — was refashioned for China last year as "No Impossible Gold," to play to Chinese hopes that their athletes will top the medals table in 2008.

One offbeat initiative, beginning this week, features short video clips that will be e-mailed to several thousand young Chinese in hopes they will pass them on to friends and create buzz about Adidas.

The clips mimic MTV's popular Jackass series and show two Chinese youths dressed in hip-hop fashion performing dangerous stunts, like hurtling off a trampoline into a chain-link fence. The footage then cuts to a diving volleyball player. The goal is to make the Adidas-sponsored Chinese women's volleyball team as cool as NBA basketball.

"We believe that (2008) is going to be the biggest Olympics ever," said Zerbib, who recently bought an apartment in Beijing to be closer to the action. "It's likely to be the most commercial Games."