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Can Adidas Kickstart Itself?

Can Adidas Kickstart Itself?

Author | exchange4media News Service | Saturday, Jul 17,2004 9:58 AM

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Can Adidas Kickstart Itself?

Andreas Gellner, the new MD of Adidas India, has been given a clear mandate: to create an organisation that is able to proactively capitalise on the dynamics of the Indian market. For the parent company, India is so far one of the smaller entities in terms of turnover—in fact, 11th among 13 countries in the Asia Pacific region.

But Gellner has big plans of bringing it up on the company’s internal charts.‘‘If the external scenario remains favourable in terms of political stability and reforms, India could well be the number 3 market for Adidas, after China and Japan,’’ he says.

That India is high up on Adidas AG’s agenda is evident with the separating of Adidas India from Area Southeast Asia. As Christophe Bezu, Senior Vice President of Adidas Asia Pacific, had said at the time of Gellner’s appointment in June,‘‘In view of the geographic and business differences, we will separate Adidas India from Area South-east Asia and this will help us to fully maximize the growth potential of the Indian market.’’ Gellner goes with this view. ‘‘There is nothing similar between India and countries like Thailand, Malaysia and others in the region, neither culturally, nor in taste, styles or the nature of the market,’’ he says. Carving out a separate entity will help get more direct attention and priority from the regional headquarters in Hong Kong.

Gellner is optimistic that expansion in the Indian market can catch up with China, where Adidas opened 1000 stores last year and will add 500 more this year. Expansion may not be quite as dramatic, but the plans are to open 30-60 new stores this year. Adidas currently has 75 exclusive stores and 20 shop-in-shops.

Correcting Weaknesses

Ask him where the company has gone wrong and why traditional rival Reebok has managed to edge its way past in India, and he dismisses that with ‘‘ahead in what? In terms of sales or brand image? We have an image and a goal that is universal across our units. For us, future potential is determined by the strength of the brand and measurement in brand equity.’’

However, he does admit that Adidas India has so far been less aggressive. There has been a general reluctance to ‘localise’ products to meet local tastes. Reebok, on the other hand, has customised its range to Indian needs and tastes.

One can then, expect an aggression that has been lacking in the Indian subsidiary so far. Adidas now plans to amend its strategy in India by customising its range and offering products at lower price points too. “But price alone will not be the criteria. Range building will still be in line with international ranges , though at the same time reflect local content and taste to a greater degree than before. We will now be open to acknowledging a certain amount of localisation,’’ says Mr Gellner.

The Indian subsidiary began the year on a dismal note with the exit of three top personel, including MD Tarun Kunzru. Dismissing allegations of irregularities, Gellner is not willing to comment on the reasons for the exit of the three, either. However, he does admit that the Indian set-up appeared to have ‘‘slight weaknesses, with everybody not appearing to be aligned to the goals of the company.’’ He says, ‘‘The important areas for me are to build a reliable and efficient organisation, with a clear strategy and formula.’’

The new MD also strongly feels that the Indian subsidiary has not ‘exploited’ its association with sports icons, even after 6 years.

Tapping New Strengths

There will also be an attempt to make better use of these ‘resources’ (read brand ambassadors). Thus, Sachin may well appear on Adidas’ global advertising. Big hikes in advertising spends are also on the cards. Advertising spends may be doubled or even trebled. It will also, on the lines of the parent company’s strategy of building up the Beckham brand, build up Sachin Tendulkar as a brand.

Adidas will also focus more on apparel, an area with huge potential and greater margins. India may also become the hub for supplying apparel to the US and European markets. Currently apparel accounts for 40 per cent of total turnover in value terms. With 99 per cent local manufacturing and aggressive pricing, this is an area it plans to strengthen its presence in.

The Indian operations have broken even operationally, he says, but it will take at least 3-4 years to wipe off accumulated losses.

Gellner, 35, brings close to 10 years of Adidas experience to his new role. In October 2000, he became one of the youngest ever Managing Directors of Adidas when he was promoted to head Adidas Malaysia. Under his leadership, Adidas Malaysia has consistently been one of the top countries in Region Asia Pacific over the past few years. Whether he can rework that magic in India is the question.

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