Adidas-Reebok merger provokes branding debate

Mergers are often complicated endeavors, bringing together the cultures and business operations of two companies that may or may not already have those things in common.

Mergers are often complicated endeavors, bringing together the cultures and business operations of two companies that may or may not already have those things in common.

Often a merger or acquisition is a way for combined companies to take on a major competitor.

In that spirit, Adidas and Reebok have merged forces to challenge sports behemoth Nike. Realized synergies, product lines, and competitive heft made this an obvious fit. But the debate on the minds of brand experts and shoe enthusiasts is whether the two companies ? who attract consumers from different sub-sets of the urban market - stand to reap windfalls or generate chaos by merging the brands.

The debate is not new to the sneaker industry. Many people had similar reservations about Nike's acquisition of Converse, according to Lucian James, founder and president of brand strategy company Agenda Inc. "Newspapers ran stories about whether fans would feel like Converse had sold out, and although some did, the transition was actually very smooth," James writes via e-mail.

But Adidas has been pleased by the media and analysts coverage, according to Doug Donsky, an Edelman SVP who has worked directly with Adidas-Salomon chairman and CEO Herbert Haineron on US corporate and financial communications.

The media and analysts "have largely acknowledged the companies are a perfect fit and, combined, would create a formidable and compelling #2 in the U.S. market," Donsky says.

Adidas has given all indication that brands will remain separate, assuaging any concerns that aficionados of both brands might need to find a new favorite pair of shoes.

In an August 8th BusinessWeek article, Hainer said Adidas "will definitely be the sports-performance brand rooted in more European sports like football. Reebok is much more linked with American sports such as baseball, American football."

A quick glance at Adidas' website finds it sells nearly as many soccer products ? online at least ? than basketball, football, and baseball items. Its footwear focus is on training shoes and soccer cleats. Reebok, on the other hand, sells nearly four times the amount of basketball shoes as it does soccer trainers online.

Donsky echoes that sentiment, but pointed out, "The two brands are complementary, and each will continue to build upon their strong identities."

As such, he says there are no plans to change marketing and PR strategy.

Hainer points out in BusinessWeek that the complementary branding has less to do with the sports than it does with audience. But there are nuances separating Adidas' and Reebok's targeted constituents, something brand and marketing analysts say the combined company must realize.

Old school versus new school

Both brands compete in the huge, nearly indefinable landscape of urban fashion, which these days invariably involves youth and hip-hop culture. "The brands share some common ground over hip-hop, which is a difficult area to negotiate since it's so fast-moving," James says. "The solution is to keep the brands as separate as possible."

But Reebok sells shoes endorsed by hip-hop artists in the "new school," while Adidas is a product lauded by "old-school" hip-hop. "The new school versus old school split between Reebok and Adidas is an obvious distinction," James says. "The spokespeople should certainly be picked to mark out the differentiators between the brands."

Donsky agrees, saying that while the company will realize synergies on the R&D side, both brands will "cater to distinct audiences with strong brand identities."

The difference between the two hip-hop ideologies are not easily definable, but old school conveys an respect for the history of hip-hop, for taking pride in the quality of their music, and for focusing on substance more than style. New school hip-hop generally focuses on depictions of violence or the amount of individual rapper's wealth and the artist's popularity, rather than one's ability to craft great music. Missy Elliott, an Adidas enthusiast, resides in the old-school tradition, whereas Jay-Z and 50 Cent represent the new school of wealth and "gangsta" lifestyle.

Many sneaker successes have been built upon the backs of individuals: Michael Jordan almost single-handedly built up the Nike franchise, while Tiger Woods helped the brand quickly become competitive in golfing apparel. Converse rose to prominence through Julius Erving, a basketball player from the late 70s and 80s.

James says that there are various ways to contrast the brands: old school versus contemporary, fashion versus performance, high-end versus low-end. Techniques may include using limited editions and exploring different distribution channels. The limited editions have worked well for Reebok through its S. Carter (Shawn Carter is Jay-Z's real name) and G-Unit lines, but Joseph Anthony, CEO of Vital Marketing, warns that Reebok has done more to elevate the brands of its partners than itself.

Some are skeptical that celebrities make a difference. "I wonder how much traction they're getting with these brands," Anthony says. "Reebok is starting to loose its cache as a performance brand and quickly becoming more as a lifestyle brand. Being anchored to these celebrities, it will constantly have to find the next hot person."

Adidas has arguably maintained street credibility longer than any other shoe manufacturer, receiving an unsolicited endorsement from pioneering rap group Run DMC, when it bowed the hit song My Adidas in 1986. Run DMC is the quintessential old-school rap group.

Some artists may straddle the two worlds. Despite her old-school affiliation, Missy Elliott is also beloved by those that also enjoy new-school rap, which makes Reebok customers potential Adidas customers. In response to a question about sponsorships, James jokes, "Let the battle over Missy Elliott commence!"

But James cautions: "If there is a competition over celebrity spokespeople, then it suggests that the brands are not sufficiently distinguished."

Donsky says it's too premature to speculate on future sponsorships, but fully expects the combined entity to challenge or surpass Nike in its roster of celebrity endorsers.

"The company will need only to find creative ways to leverage their existing assets," Donsky says.

Finding the right tone

It's not just the spokespeople who need to differ, brand analysts assert, it's also the marketing tone.

Kaash Sethi, account handler at UK PR agency Freewheelin, which handles Converse's UK marketing and communications, says that the acquisition will not decrease Adidas' fashion and old-school appeal, as long as the combined company is careful in its marketing. He says Adidas can't rely on controversy like Reebok has done with its 50 Cent advertising campaign. Critics decried the advertisement, under the "I am what I am" campaign, as glorifying the rapper's violent past.

"50 Cent used controversial words and hard, thuggish, and violent imagery talking about when he was shot nine times, which reflected his music and persona," Sethi writes via e-mail, cautioning Adidas against adopting that kind of promotional tactic.

James agrees, saying, "Reebok has already had some problems over their 50 Cent campaign being seen to glamorize violence."

Despite Hainer's and Donsky's claims that the brands will stay as they are, others speculate about how a joint product would fare.

"If they are going to start a footwear line where they merge the footwear designs of Adidas and Reebok, it needs to be something where the design is new," Sethi says. "If they see something that is different and fresh about a joint Adidas-Reebok sneaker, people will go and get it."

Regardless of the path the company takes, Sethi says that they will always have a potential audience.

"Every day, everyone has to put on some clothes and shoes," Sethi says.

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