Nike challenges Adidas on its own turf

Nike is looking to take over Adidas' traditional, and lucrative, role as the official sponsor of the German national soccer team.
Nike is looking to take over Adidas' traditional, and lucrative, role as the official sponsor of the German national soccer team.Andy Eckardt / NBC News

Since 1954, Germany's national soccer team has been wearing shoes from what is considered to be the nation's top brand: Adidas.

But now, American sneaker manufacturer Nike has stepped in to challenge the German company in its own backyard in a bid to become the main sponsor for Germany's national soccer team starting in 2011.

German media has called it "the battle of the jersey giants" — a fight for money, image and traditions.

Negotiations between Germany's Soccer Federation and Adidas stalled after Nike offered nearly $63 million annually versus Adidas’ existing contract that amounts to $14 million annually. Adidas has yet to offer a counter bid, but the field seems to be set for a shoot-out between the battling sportswear giants.

Adidas knows possibly better than any other leading sports utility firm that it means big business to be part of the team in the number one national sport.

Lucrative deal
The 2006 Soccer World Championship in Germany is a prime example of what soccer can do for a country — and a company’s — bottom line.

The overwhelming euphoria around last summer’s tournament had a major impact on the country — from its low birthrate to its stagnating economy. Nine months after hosting the international event, the German birth rate has been boosted by an estimated 10 to 15 percent and the country’s gross domestic product grew by 2.7 percent in 2006. Shares of German sportswear company Adidas are on the rise as well.

In the first half of 2006, Adidas’ revenue rose by 53 percent in comparison to 2005. Experts believe that the June tournament, in which Germany took third place, but was celebrated by Germans as "world champion of the hearts," contributed significantly to the company’s success.

Of course, grabbing that kind of momentum and turning it into profit is part of Nike's strategy as well.

This month, Nike presented a new global strategy to expand its retail presence worldwide by opening 100 new company stores in the next three years. Nike wants to meet consumers on their home turf and not shy away from challenging traditional markets.

"Our goal is to dominate the [soccer] brand by 2010,” Nike marketing vice-president Trevor Edwards told Business Week.

But Germany and Austria are the only two countries left with soccer federations that still require players to wear footwear of the official sponsor.

Last year, several players — under pressure from their own sponsors like Nike — threatened a strike after Adidas demanded that they play international games in Adidas shoes.

Foul play 
The breakup of old traditions and the enormous offer from the American brand, led Adidas to call foul play. The company has insisted that the existing contract with the national team be extended until the year 2014, but the issue is still unresolved.

"We are now waiting for Adidas to make a move and the issue will be discussed at a council meeting on March 9," said Danni Strich, the German Soccer Federation’s new head of marketing.

During his own career as a professional soccer player, Strich at times went to great lengths to ensure that he played in Adidas shoes. At one of his former clubs where the team played in Puma shoes, another German brand, Strich had the team's equipment manager remove the Adidas' three-stripe-logo from his own footwear and sow on the Puma emblem so he could keep wearing the Adidas kicks.

The German Soccer Association has not yet entered official talks with Nike, but is keeping its options open, hoping that Adidas will come up with a stronger offer.

More money from Adidas could put the German company in the lead of the game again, as officials have repeatedly signaled that they would like to continue their traditional and successful business relationship with Adidas.

The question now is whether American dollars can “just do it” to oust the traditional German company, which was founded in 1949 by local German shoe maker Adi Dassler in the quaint Bavarian town of Herzogenaurach.

But, oddly enough, German soccer fans don't seem to care much about the old stories and old ties. According to a survey released by the German Soccer Federation, 77 percent of the nation’s soccer fans support a change to Nike, if the money is spent to support young players and to build more soccer fields throughout the country.

"It's about business, not only about traditions,” Theo Zwanziger, the president of Germany's Soccer Federation, recently said in an interview with Der Tagesspiegel daily.