In bid to step on Nike's toes, Adidas plans to buy Reebok

Adidas takes on archrival

August 04, 2005|By Abigail Tucker and Stacey Hirsh | Abigail Tucker and Stacey Hirsh,SUN STAFF

When Michelle Knox's mother complained of aching feet recently, the solution seemed simple enough: a nice, solid pair of Reebok Classics, with blue, fluffy-looking interiors. Knox is a shoe saleswoman; she thought she knew the styles, what passed muster on the street.

Then her 17-year-old daughter got a look at them.

"Freaky Rees!" she screamed. "What are you doing buying Grandma freaky Rees?"

"And I said, `Freaky Rees?'" recalled Knox, who works at Shoe City on Greenmount Avenue. "`What are you talking about?'"

Once cool, Reeboks are apparently anathema on the streets of Baltimore, the kind of sneaker that gets your grandma laughed at.

But Knox isn't the only one buying them. Yesterday, the company that makes Adidas shoes announced that it will purchase Reebok International Ltd. for $3.8 billion. That's a whole lot of freaky Rees.

The hope is that, united, the two companies - each of which comes with its own stable of celebrity endorsers and its own cultural baggage - will be able to go toe-to-toe with Nike, which has long shod the majority of the market.

After acquiring Reebok, Adidas-Salomon AG will become an athletic footwear and apparel giant, controlling about 20 percent of the $16 billion athletic footwear industry.

News of the acquisition sent Reebok stock skyrocketing yesterday. The shares, traded on the New York Stock Exchange, went up $13.19, or 30.01 percent, to close at $57.14.

"It sure is a blockbuster," said Andy Appleby, president of General Sports and Entertainment, a Michigan sports marketing and management company. "Both have tremendous resources, and I guess they may have felt like they had to team up to fight the Nike machine."

Yesterday's deal creates a company with estimated 2004 sales of $11.1 billion, but Nike, like the kid with the baddest sneakers, rules the court with sales of $12.3 billion. Also, Nike has seemingly unassailable street cred, likely the result of celebrity spokesmen such as LeBron James and, most famously, Michael Jordan. Consult the average Baltimore teenager, and he'll tell you he longs for Nike's Air Force 1's.

Neither Adidas nor Reebok has that kind of universal appeal, but their target markets are complementary. Adidas is a German company that has customers across the world and is well known in soccer-playing circles for its endorsement from star midfielder David Beckham. It's also recognized as a track and field apparel firm that has long struggled to gain a foothold in the American market.

Massachusetts-based Reebok, on the other hand, is an established national name that has sought to build an image around basketball, relying heavily on the endorsement of Philadelphia 76er Allen Iverson. Lately, it has been making forays into the fashion market, producing lines such as G-Unit, which is promoted by rapper 50 Cent.

Both corporations sell more than just high-tops and tennis shoes. The new company will have under its umbrella a range of products from footwear to hockey and golf equipment.

"They'll have a great assortment in terms of brands that a retailer will be able to buy," said Gregg Hartley, vice president of the Sporting Goods Manufacturers Association, a business trade association. "Reebok's market position in the U.S. should help Adidas products, and Adidas should be able to help Reebok in the non-North American markets."

Also, the new company will be connected to major sports marketing engines: Adidas has ties with the Olympics and the World Cup, while Reebok works with the National Football League and the National Basketball Association.

But especially because neither brand is changing its name, the deal - which has yet to be finalized - might have little direct impact on the style-conscious consumers who purchased nearly 493 million pairs of athletic shoes last year. Some of these fashionistas say they wouldn't set foot in either Adidas or Reeboks no matter who owned what. In urban culture particularly, sneakers are a careful statement of personality, of status, of lifestyle.

"Your shoes are the last thing you put on," said Shiloh Witherspoon, 31, who was shopping for some yesterday on Greenmount. "They say how you feel at that moment. You say now my day is started, this is how I'm going out - looking good."

Unless you're wearing Reeboks, some say.

"Nobody wears Reeboks," said 16-year-old Byron Wallace of Northwest Baltimore. "They're old. People who don't have no style wear Reeboks."

The same goes for Adidas, he said: Although they come in more "flavors" - brown and black with spikes on the bottom, gray with a powder-pink stripe - they won't get you a girlfriend.

Comments such as his show what analysts have long suspected: In recent years, neither Adidas nor Reebok has done a good job managing brand identity. Reeboks weren't always freaky, and in the '80s the group Run-DMC rapped an ode to "My Adidas." But in recent years, both labels have lost their footing.

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