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Adidas and Manchester United: Top of the merchandise league
As explored in the MarketLine case study adidas AG: Bumpy road on Route 2015, adidas invested significant funds to become Manchester United’s official outfitter and merchandiser and so far, it looks a shrewd investment as sales of this season’s kits have broken all records.
In July 2014, adidas announced that that it had signed a deal to become the official outfitter and merchandiser to English football club Manchester United, believed to be the best supported in the world. The deal, worth £750m ($1,235m) over 10 years, more than doubled the amount Nike was previously paying the club. On announcing the deal, CEO Herbert Hainer said that it will “further strengthen our position in key markets around the world,” and that “We expect total sales to reach £1.5bn ($2.5bn) during the duration of our partnership.” If the early signs are anything to go by, that target revenue figure should be exceeded by some distance.
The deal became effective August 1, 2015 and neither adidas nor Manchester United has yet published financial results that include the period for which sales of the latter’s merchandise were ongoing. However, Adidas has confirmed that the kit launch was the most successful in both its and the club’s history.
Hainer was taken aback by the success, despite having high expectations: “The initial response has really blown us away as it has exceeded all expectations in both the club’s and our own brand channels. The Old Trafford Megastore saw a record demand for a non-match day, almost 50% up on the previous record.” Hainer also stated that the club’s e-commerce platform, United Direct, saw equally high demand, four times higher than the previous record kit launch.
Hainer’s comments were made before the club’s away and third kits went on sale and early indications are that they too are selling well. Manchester United will also be delighted to welcome this commercial income, but it is adidas that has most to gain.
Recent years have seen the German sportswear company suffer, mainly as a result of its TaylorMade-adidas golf business performing poorly, and many saw the Manchester United deal (which is a record by some £10.5m/$17.3m a year) as a huge risk and an example of them paying over the odds.
The early indications are very promising with some estimates claiming that the first five days’ sales reached a number adidas had predicted for the first month. adidas’s gamble is looking as if it is going to deliver great returns and if demand for new kits remains so high for the next nine years, Manchester United and adidas may very well find themselves atop of their respective tables in unison.