Thursday, April 14, 2011

Adidas CEO opens up about the challenges he faced when his company acquired Reebok five years ago

Curated By ZenithOptimedia, The ROI Agency
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It’s no secret that there was a bit of a culture clash when German competitor Adidas landed at Reebok’s futuristic mother ship Canton six years ago with an offer to buy its U.S. rival for $4 billion. But it’s still interesting to see Adidas CEO Herbert Hainer open up about how tough the ensuing years were for him after the merger was completed in 2006.

In an interview published in the latest edition of Bloomberg Businessweek, Hainer admits to a number of genuine surprises that arose out of the Reebok deal. The brand was, in his words, “over-distributed” – about a third of the revenue came from products that sold for less than $40.

Then there was the jealousy. As Hainer puts it, “When you’ve been competitors for 20 years, it’s hard to suddenly be friends.” Of course, it didn’t help that Adidas swiped the NBA sponsorship away from Reebok.

Hainer says Adidas started to invest in new products, but it took time for those products to be ready for the market. Meanwhile, investors and analysts began to wonder about whether the Reebok purchase was a smart move as Reebok revenues continued their descent. Employees at Reebok pressed Hainer for a “light at the end of the tunnel.” Then the recession and ensuing financial market crisis arrived, obviously complicating his efforts.
Hainer says that if he had to do it all over again, he would have managed expectations about the acquisition differently and replaced key people at a faster pace.

Today, finally, the Reebok purchase is paying off, big time. Reebok is on well on its way to replicating the success it saw in the 1980s with its EasyTone toning shoes (lawsuits notwithstanding) as well as its otherworldly-looking ZigTech shoes. Global sales at Reebok rose 15 percent last year, and sales in the U.S. were up 22 percent.

Hainer learned something that the athletes sponsored by his company already know well: Success doesn’t happen overnight.