adidas Spending Big On College Contracts

Earlier this year, adidas made two giant splashes when the sports retailer announced it had signed both Miami and Arizona State away from rival Nike. The additions of the Hurricanes and Sun Devils were immediately seen as huge wins for the German based company, as adidas tries to regain its footprint in the United States. But the additions to the adidas line up were not cheap. Arizona State’s deal, which runs for eight years, will see adidas shell out over $4 million dollars a year. The final numbers on the Miami deal have not been made public, but it is known that UM’s deal with adidas will last for 12 years, making it the longest apparel contract in the NCAA.

Paying big money to big time schools appears to be a strategy that adidas feels gives it the best chance of catching Nike as the nations biggest athletic apparel supplier. According to data gathered by the Portland Business Journal, in 2014 adidas paid five universities over $5 million dollars in apparel and cash. The highest value reported Nike contact on the other hand is only worth $4.4 million in apparel in cash.

2014 Top 10 adidas contracts*

University; 2014-2015 Contract Value
Michigan; $8,200,000
UCLA; $7,500,000
Kansas; $6,375,000
Louisville; $5,680,000
Tennessee**; $5,550,000
Nebraska; $4,050,000
Indiana; $3,795,000
Wisconsin; $3,500,000
North Carolina State; $3,025,000
Cincinnati; $2,625,000
*Not all universities responded to the Portland Business Journal’s information request

**Tennessee is leaving adidas when its contract expires at the end of the 2014-2015 athletic season

Closing The Gap With Nike

Mark King, adidas North American President is hoping that by spending big bucks to outfit the nation’s top athletic programs, adidas will be able to gain traction in the U.S. market. adidas is seen around the world as a top sports brand, but the company has been unable to take away much market share in the U.S. from top outfitter Nike. As of 2013, according to the Wall Street Journal, Nike held a whopping 47.1% of the U.S. athletic footwear wholesale market. adidas on the other hand controls just 9.7% of the same market.

adidas isn’t fairing any better in regards to athletic apparel either. As of 2013, the Wall Street Journal reports that Nike controls 10.3% of the wholesale market. Under Armour, who saw a decline in market share in 2013, still controls 4.9% of the apparel market. while adidas has fallen to third place, with only 4.5% of the market. Executives at adidas are hoping that they will be able to gain more market share, when fans of adidas sponsored universities go out and buy the same gear that their favorite team is wearing.

Is Market Share Something That Can Be Bought ?

Only time will tell the strategy of trying to buy its way to the top pay off for adidas, but if Tennessee’s departure from the apparel maker is any indication, no it will not. Tennessee who has been one of adidas longest partners, dating back to the days of Peyton Manning is leaving and moving to Nike. The reported agreement with Nike will pay Tennessee only $3 million in apparel and cash over eight years. That’s two million less annually than the Volunteers were receiving from adidas. But adidas isn’t just battling Nike in today’s market. In 2014 Under Armour showed adidas just how serious it was about competing in the world of college athletics. The Maryland based apparel innovator signed long time adidas school Notre Dame away for what has been reported to be a $90 million dollar deal.

Trouble doesn’t seem to be over for adidas either. This week the Michigan athletic department sent out a survey to students asking which brand would they most want to wear. Michigan, who receives of $8 million annually from adidas, will have it currently contract expires after the 2017 athletic season. Could a change in providers be in Michigan’s future? adidas would be in big trouble if the Wolverines were to jump ship to either Nike or Under Armour. A quick visit to Michigan’s 247sports page show’s a majority of fans favor a switch back to Nike.

You certainly must commend adidas on trying to take back some U.S. market share with the addition of programs such as Miami and Arizona State. However, right now it seems adidas is fighting an uphill battle.  Coaches and administrators love the apparel deals that adidas because of the large amounts of money that company is willing to commit. But, as the Wall Street Journal put it, King’s biggest challenge is making adidas cool, because right now “adidas isn’t cool in America, and cool is what sells sports gear.”  As long as adidas is willing to pay millions of dollars to colligate athletic programs, teams will take the field wearing the best adidas has to offer. But until adidas becomes “cool”  in America, it appears the company will be stuck looking up to Nike in the U.S. market.

 

Feature photo courtesy of adidas