Mr. Riedmüller, after anti-Semitic statements, Adidas parted ways with its long-term cooperation partner Kanye West – the inventor of the “Yeezys” sneaker line. West has been attracting attention for years with bizarre statements and has repeatedly publicly accused Adidas of having stolen its designs. Why did the breakup come only now?
Florian Riedmüller: Adidas had no choice. Before that, despite all the public statements, the disputes were rather enigmatic – and even when Adidas develops new cooperations, such as with Stella McCartney, it doesn’t run smoothly. All sides have different interests. But the moment Kanye West violated Adidas’ canon of values, they had to terminate the contract. It would have been the same with any other star and any other brand. Nike did this with Tiger Woods, for example, although the cooperation was very successful.
And that moment, that was when West made anti-Semitic comments to Fox News host Tucker Carlson and on Twitter?
Yes. Adidas has explicitly stated that anti-Semitic statements are incompatible with its values. It’s even written on the walls of the Adidas buildings.
Adidas made short work of the Russian national soccer team in March and stopped supplying jerseys. Why did Kanye West’s decision take several weeks now?
Adidas probably had to verify the whole thing first. Not only are the statements not fake news, but also speak to Kanye West to see if he really holds those views. And then, of course, the lawyers also want to look at it. That takes a certain amount of time with such an important cooperation.
Has Adidas perhaps also drawn up a cost-benefit calculation and soberly calculated when break-even will be reached – that the loss of image outweighs the advantages?
No, that doesn’t exist when it comes to anti-Semitism or other critical statements. In 2020, for example, HR manager Karen Parkin had to leave because she dismissed racism in the company as “rumours”. As a result, all Adidas employees were trained in diversity and inclusion for six months. From the board of directors to the postman. That shows how sensitive Adidas is there.
Kanye West has been known for his eccentric behavior for years. In a music video, he kidnaps and kills a wax man who looks like ex-wife Kim Kardashian’s new boyfriend. He supports Donald Trump in the election campaign and considers himself God. Some now claim that he is mentally ill. However, the behavior has brought him range. Didn’t Adidas even benefit from its eccentricity?
No, I wouldn’t say that. He did draw attention to Adidas that Adidas itself would not have achieved. But Bad Bunny or Beyoncé can do that without eccentricity.
How could someone who always shoots at their own partner become so important for Adidas? West’s “Yeezys” sneaker collection recently accounted for almost 7.5 percent of total sales…
The lifestyle market that we are talking about here is characterized by short-term trends, but is growing rapidly. That’s why Adidas invests so much energy here. A strategy that all major brands are actually pursuing is to rely on cooperation with stars. Nike does that with Billie Eilish, Puma with Dua Lipa, and Adidas with Kanye West, but also with Ivy Park and Pharell Williams. Such lines are extremely lucrative for manufacturers, and that is why they are so important.
Why?
The development costs for a cooperation are much lower than bringing new technical innovations onto the market. You put a designer at the side of the stars, show them a few textiles and colors – and then a product is made out of it. Of course, that brings much higher margins than a running shoe that is a few grams lighter – but is actually the much bigger innovation. In addition, technical innovations have to be marketed themselves. In the case of cooperation, the stars help with their reach.
And yet Adidas can
There is a surcharge for both products. Even a new soccer shoe quickly costs over 200 euros. This price can hardly be explained with the Yeezys from an innovation point of view. This is ultimately expressed in the margin.
Why are customers willing to spend so much money on it when the products are actually not very innovative?
The products are primarily purchased by the so-called “Gen Z”, i.e. young people between the ages of ten and 25. Hardly any of them put their money into cars, music or art today. What they do instead: They buy a shelf and put shoes in there. It started with the Air Jordans from Nike and the manufacturers then cleverly expanded it. Users now receive notifications via the Adidas “Confirmed” or Nike “Snkrs” apps when new exclusive shoes are out – and for which they can then apply. Some of these shoes are strictly limited and are not worn on the street. These are collector’s items with an extremely high price.
Now Adidas is breaking the most important cooperation with the Yeezys. In the fourth quarter alone, a net profit of EUR 250 million is missing. Can Adidas even recover from this breakup – and if so, how long will it take?
Yes, that will work – but it may take several years. The Yeezys actually had a recognition value in the industry. There are many collaborations where it theoretically doesn’t matter if you print a Puma cat or a Nike Swoosh. That’s not the case with the Yeezys. But when I look into Adidas’ past, there have always been important collaborations that have ended. And then something new came along.
Is there already a cooperation in the portfolio that could succeed it?
The cooperation with Ivy Park, for example, has developed very well in recent years. In the meantime, it has become its own brand, which only very rarely succeeds.
The Adidas works council has long criticized the fact that creativity in the group is suffering – also because of the many cooperations and the pressure to save. Is that seen the same way in the industry?
Yes, but that is partly due to the strategy. Adidas has said they want to grow in the lifestyle space. However, the growth here did not come from the development of new shoes, but from successful cooperation. This is something completely different than developing a new silhouette. A successful silhouette in recent years, for example, was the “Forum”. Adidas could have produced a lot more of such innovations. Therefore: Yes, Adidas actually lacks creativity in parts.
The strategy was supported by CEO Kaspar Rorsted, who will leave the group in the coming year. What issues does the new, still unknown CEO have to tackle?
The best thing would be an internal innovation campaign. If I manage to bring my own new lines and innovations onto the market, it’s easier for me to find partners who share the risk. Adidas has taken a big risk in-house, and that is that they become dependent on cooperation with third parties. The last real innovation was Ultraboost technology, and that was in 2015. For me, promoting more of these generic innovations and finally writing an Adidas story again would be the central task.
But then you would need a completely new type of leadership. Kaspar Rorsted has trimmed the group for profitability in recent years…
Yes, Adidas needs a CEO who focuses on growth again and not just on efficiency. That would be good for the group.
Note: This article first appeared on Capital.de.
