Adidas recently announced the sale of its subsidiary brand, Reebok, to Authentic Brands Group for $2.5 billion. The decision to sell the iconic American sportswear brand came after Adidas struggled to revive Reebok’s declining sales and market share in recent years.
The move is seen as a strategic decision for Adidas, allowing them to focus on their core brand and invest in further growth opportunities. But what factors led to the decline of Reebok, and why did Adidas ultimately decide to let go of the brand? Let’s dive deeper into the reasons behind this significant business move.
Adidas sold Reebok to focus on its own brand and improve profitability. Reebok had been struggling financially, and Adidas decided to let it go after 15 years of ownership. The sale also allowed Adidas to redirect its resources towards its core business strategy and invest in new growth opportunities.
Why Did Adidas Sell Reebok?
Adidas, one of the world’s leading sports brands, recently decided to sell Reebok, a company it acquired in 2006. The German sportswear giant announced that it had initiated a formal process to divest the Reebok brand, which has a rich history in the sports world. In this article, we will explore the reasons why Adidas decided to sell Reebok and what it means for the future of both companies.
1. Strategic Misalignment
Adidas’s acquisition of Reebok was intended to help the company compete against its biggest rival, Nike. However, over the years, it became clear that the two brands had different strategic goals. Adidas wanted to focus on performance and innovation, while Reebok’s focus was on lifestyle and fashion. This misalignment led to a lack of synergy between the brands, resulting in poor financial performance for Reebok.
Moreover, Adidas has been focusing on its core brands such as Adidas Originals and Yeezy, which have been performing exceptionally well in recent years. Therefore, selling Reebok was a strategic move to focus on the brands that are driving growth and success for Adidas.
2. Poor Financial Performance
Reebok has been struggling financially for several years. In 2019, the brand’s revenue declined by 3%, and it continued to perform poorly in 2020 due to the pandemic. This poor financial performance was a significant factor in Adidas’s decision to sell Reebok. The brand was not delivering the expected returns, and it was weighing down Adidas’s overall financial performance.
3. Increased Competition
The sports industry has become increasingly competitive, with new players entering the market and established brands expanding their offerings. Reebok struggled to keep up with the competition, and its lack of innovation and focus on lifestyle rather than performance made it difficult to stand out in a crowded market. Selling Reebok was a strategic move for Adidas to focus on its core brands, which are better equipped to compete in the current market.
4. Reebok was not a Priority
Adidas has many brands under its umbrella, including Runtastic, TaylorMade, and Five Ten. Reebok was not a priority for Adidas, and the company was not investing enough resources in the brand to make it successful. Selling Reebok was a way for Adidas to focus on its core brands and allocate resources more efficiently.
5. Pressure from Shareholders
Adidas’s decision to sell Reebok was influenced by pressure from shareholders. The company’s stock price has been underperforming, and shareholders were calling for a change in strategy. Selling Reebok was seen as a way to unlock value for shareholders and improve Adidas’s financial performance.
6. Potential Buyers
There is interest from several potential buyers for Reebok, including VF Corp, the owner of The North Face and Timberland, and Anta, a Chinese sportswear company. Reebok’s heritage, strong brand recognition, and global reach make it an attractive acquisition target for companies looking to expand their offerings in the sports industry.
7. What it Means for Adidas
Selling Reebok will allow Adidas to focus on its core brands and invest more resources in driving growth and innovation. The company has been performing well in recent years, and this move will enable it to continue on this trajectory. Adidas will also be able to streamline its operations and improve its financial performance by divesting a brand that was weighing it down.
8. What it Means for Reebok
The sale of Reebok could be a positive move for the brand. Under new ownership, Reebok could receive the resources and investment it needs to thrive in a competitive market. This could lead to a renewed focus on performance and innovation, which could help the brand regain its position as a leading player in the sports industry.
9. Benefits of Selling Reebok
Selling Reebok will allow Adidas to focus on its core brands, which have been driving growth and success for the company. It will also enable Adidas to streamline its operations and improve its financial performance. The sale of Reebok could be beneficial for the brand as well, as it will receive the resources and investment it needs to thrive under new ownership.
10. Adidas Vs Nike
Adidas’s decision to sell Reebok will enable it to focus on its core brands and compete more effectively against its biggest rival, Nike. Nike has been dominating the sports industry for years, but Adidas has been gaining ground in recent years. By focusing on its core brands, Adidas can continue to build its momentum and become a more formidable competitor to Nike in the sports industry.
Frequently Asked Questions
Here are some frequently asked questions about why Adidas sold Reebok:
1. Why did Adidas sell Reebok?
Adidas sold Reebok to focus more on its core brand and improve its profitability. Reebok had been struggling to compete with other sports brands such as Nike and Under Armour, and was not contributing significantly to Adidas’ bottom line. By selling Reebok, Adidas can redirect its resources and investments towards strengthening its own brand and expanding its market share.
Moreover, Adidas’ strategic priorities shifted towards sustainability and digitalization, which did not align with Reebok’s business model. Adidas hoped that selling Reebok would help it become a more agile and sustainable company, able to adapt to the rapidly changing market environment.
2. When did Adidas acquire Reebok?
Adidas acquired Reebok in 2006 for $3.8 billion. At the time, the acquisition was seen as a way for Adidas to challenge Nike’s dominance in the US market, where Reebok had a strong presence. Adidas hoped to leverage Reebok’s expertise in fitness and lifestyle products to expand its product portfolio and reach new consumer segments.
However, the acquisition did not meet the expectations, as Reebok failed to live up to its potential and faced various challenges, including declining sales, brand image issues, and lack of innovation. Adidas struggled to integrate Reebok into its operations and culture, and the two brands remained largely separate entities.
3. Who bought Reebok from Adidas?
Authentic Brands Group (ABG), a New York-based brand management company, bought Reebok from Adidas for $2.5 billion in 2021. ABG specializes in acquiring and revitalizing distressed brands, and has a portfolio that includes over 30 consumer brands, such as Forever 21, Juicy Couture, and Barneys New York.
ABG plans to reposition Reebok as a “digital-first” brand that focuses on fitness, wellness, and sustainability. It aims to leverage Reebok’s heritage and legacy to create innovative products and experiences that resonate with younger and more diverse consumers. ABG also plans to expand Reebok’s global footprint and explore new partnerships and collaborations.
4. What is the future of Reebok under ABG?
Under ABG’s ownership, Reebok is expected to undergo a significant transformation, both in terms of its product offerings and its market positioning. ABG plans to invest heavily in Reebok’s digital capabilities, including e-commerce, social media, and augmented reality. It also plans to introduce new sustainable materials and production methods to reduce Reebok’s environmental footprint.
ABG aims to make Reebok a more inclusive and socially responsible brand, with a focus on diversity, equity, and inclusion. It plans to collaborate with athletes, influencers, and cultural icons to create authentic and relevant campaigns that connect with consumers on a deeper level. Overall, ABG sees Reebok as a brand with a lot of potential and is committed to unlocking its value.
5. What does the sale of Reebok mean for Adidas?
The sale of Reebok marks a strategic shift for Adidas, as it seeks to streamline its operations and sharpen its focus on its core brand. By divesting Reebok, Adidas can allocate more resources and attention to its core business, including product innovation, marketing, and digitalization. This could help Adidas stay competitive in a crowded and rapidly changing market.
However, the sale also means that Adidas will lose a significant portion of its revenue and market share, as Reebok generated around $1.4 billion in sales in 2020. Adidas will need to find ways to compensate for this loss and maintain its growth trajectory. It remains to be seen how Adidas will adapt to the changing market landscape and capitalize on new opportunities.
Adidas is Selling Reebok to WHO?
In conclusion, Adidas’ decision to sell Reebok was a strategic move aimed at streamlining its business operations and focusing on its core brand. Adidas acquired Reebok in 2006 in a bid to challenge Nike’s dominance in the US market. However, Reebok struggled to keep up with changing consumer trends, and its sales declined in recent years.
By selling Reebok, Adidas can now focus on its core brand and invest more resources in marketing, product development, and innovation. This move will help Adidas strengthen its position in the competitive sportswear market and expand its customer base globally.
Furthermore, Adidas’ decision to sell Reebok will also benefit Reebok as an independent brand. The new ownership may bring fresh ideas and investment, helping Reebok to reposition itself in the market and regain its lost market share.
Overall, Adidas’ decision to sell Reebok marks a new chapter for both companies. While Adidas can focus on its core brand, Reebok has a chance to reinvent itself and emerge as a strong player in the sportswear market.
