Adidas sees Games as venue to China market

updated 9:37 a.m. ET Feb. 26, 2006

SHANGHAI, China - When Adidas brought NBA star Tracy McGrady to China last August for a well-funded publicity tour, all 800 pairs of a special edition basketball shoe sold out at stores in a single day. The sportswear maker hopes the enthusiasm that the young Chinese showed for those $170 shoes will spill over to the 2008 Beijing Olympics.

The company will drape the Adidas name and three-stripe logo on Chinese athletes at the Winter Olympics next month, splash it on souvenir jerseys for the 2008 Games and clothe tens of thousands of officials and volunteers at the Beijing competition.

"The Beijing Olympics will be an Adidas event," Adidas-Salomon AG's chief executive, Herbert Hainer, said in a presentation to investors in October.

Trying to vault to the top of China's booming market ahead of archrival Nike Inc., the German-based Adidas is gambling it can use its pricey Olympics sponsorship to root its brand in the minds of Chinese consumers.

The Olympics and China are key components in a strategy to revitalize the 78-year-old company that pioneered the sports-shoe industry but then grew listless.

Since its acquisition by French financier Robert Louis-Dreyfus in 1993, Adidas has expanded its product line and absorbed other sports-gear makers. It plans to close a $3.8 billion acquisition of competitor Reebok International Ltd. Tuesday, with plans to maintain the Reebok line and promote it globally.

Slide show   Taking gold Check out the best images from the 2006 Winter Olympics.

Adidas paid an unusually hefty $80 million to $100 million in cash and in services such as uniforms to win the Beijing Olympics sponsorship, industry executives estimate. The company declines to reveal the cost, but the price tag underscores the allure of China's growing market.

Sponsorships give companies limited rights to use the Games logo on products and in advertising. Bidding wars have pushed up the price of such deals, bringing the Beijing Olympic organizers an estimated $1 billion so far and allowing them to project a profit.

Among multinationals that shelled out handsomely, Volkswagen AG sees its sponsorship as crucial to shoring up a rapidly eroding position in a nation where it used to be the leading car maker. Johnson & Johnson wants to raise the profile of its medical and health-care products.

Adidas is looking for an edge in its battle with Nike over China's consumers. "It's definitely a two-dog race," said Terry Rhoads, general manager for Zou Marketing Inc., a Shanghai-based sports consultant.

Both companies have successfully appealed to a cohort of single urban children — the "little emperors" of China's one-child family planning policy — who are wired to the Internet and captivated by professional sports, especially NBA basketball, and whose families have money to spend.

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