Adidas goes local as it fights to overcome crisis in China

Financial Times

24 Apr, 2023 03:30 AM3 mins to read

A year ago, Adidas shook up its top management team in China, poaching Adrian Siu (pictured) from Cosmo Lady. Photo / Linkedin

Adidas wants to win back “the hearts and minds” of Chinese consumers with patriotic clothing lines to claw back share in its once-biggest growth market.

Adrian Siu, the German sportswear brand’s country manager for the Asian nation, said: “2022 was a difficult year, and probably this year won’t be much easier...But Adidas has been in mainland China for more than 20 years and we have experienced lots of high times and low times.”

Reviving the group’s fortunes in China is a top priority for new chief executive Björn Gulden, who joined the brand from Puma in January to turn round Nike’s biggest rival, which is also reeling from its split with disgraced rapper Kanye West and the loss of its Russia business.

A quick recovery in China would “help tremendously because the margins are higher”, Gulden said in March after warning in 2024 that Adidas might suffer its first annual loss in 31 years.

Adidas has experienced a brutal fall from grace in China since 2019 as protracted lockdowns hit sales, exacerbated by a backlash against western brands over their refusal to buy Xinjiang cotton, which human rights activists say involves forced labour.

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The rise of local sportswear makers such as Anta and Li-Ning has increased competition for western brands. Last year, Adidas’s sales in the region plunged by 36 per cent to €3.2bn and were just half as high as the group had envisaged in 2019.

Part of the turnround strategy involves tailoring more clothes for the local customer. “The Chinese consumer is increasingly confident in traditional Chinese culture...We are marrying traditional Chinese elements with international product design to win the hearts and minds of ... young consumers,” Siu said.

The Adidas executive sported a red Adidas tracksuit top with “China” splashed across it in Chinese characters, part of a new line that he says has been flying off the shelves.

A year ago, Adidas shook up its top management team in China, poaching Siu from Cosmo Lady. A Hong Kong-trained manager, he oversaw Adidas’ operation in the city before joining the Chinese lingerie maker as chief executive in 2019.

Siu is pursuing a three-pronged approach that focuses on locally designed products, more local production and shorter lead times. An 80-person strong design team in Shanghai is creating shoes and apparel for Chinese consumers. The goal is to design at least 30 per cent of all Adidas kit sold in China locally by next year, compared with a figure in the low single digits before the crisis in China.

Adidas also wants to move a higher share of production to the country to shorten lead times so it can respond more quickly to fickle fashion trends. Industry experts note that this strategy could push up overall costs as labour is more expensive in China compared with Vietnam, Indonesia and Cambodia, where it makes the bulk of its apparel and footwear.

Adidas will focus more on sports kit rather than its fashion lines as “the middle class consumer has a higher and higher awareness of health and fitness”, said Siu. The group is expanding its portfolio of athletes, including Wu Yibing, the country’s number-one tennis player, after being shunned by many influencers during the nationalist boycott.

Written by: Olaf Storbeck in Herzogenaurach and Eleanor Olcott in Hong Kong