Learn About The Latest Five Year Plan Of Adidas

"It's all about Adidas today."

This is the opening words of Adidas's online investor and media conference on March 10. This has also laid the theme of this conference: About Adidas's new five-year plan and 2020's results, but it will not include Reebok, a default merger case.

Nearly six years later, Adidas once again announced a new five-year plan: 2025 development strategy, and this time the slogan is "own the game."

"Our strategic focus is to enhance adidas' brand reputation, enhance the consumer experience and further promote sustainable development." "We will continue to focus on investing in our employees and brands and accelerating the company's digital transformation," Kasper Rosted, Adidas CEO, said at the meeting

From the whole conference, Adidas's goal in the next five years will focus on the improvement of sports brand image and the company's performance growth, and growth is particularly emphasized. The word "growth" appeared 11 times in adidas' official press release, higher than "Sport" which appeared eight times.

Times have changed

From "route 2015" in 2015 strategy to "creating the new" in 2020 strategy and "own the game" this year, Adidas's goal adjustment in the five-year strategy is closely related to the change of the company's environment.

Review Adidas's 2015 "innovation" strategy, which focuses on open cooperation, key cities and production speed. Now, some of the goals set at that time were met, but some attempts failed. Compared with the effective "road to 2015", ADI in the "Lixin" era obviously faces more challenges.

Specifically, the success stories include the doubling of sales in North America and greater China, while the sales of e-commerce business have exceeded 4 billion euro, accounting for nearly 20% of the sales in 2020.

Some of them failed. For example, in the brand portfolio, Reebok still failed to save performance after repositioning the fitness brand; in terms of improving production speed, Adidas once built two fully automated speed factories in 2016 and 2017 to save labor costs in the production process, but they stopped operation in April 2020. Quartz, the US business news website, points out that these speed factories cannot be used to make leather shoes with rubber soles like superstar and Stan Smith.

Some ADI did not disclose the progress. For example, the revenue of Shanghai, Paris and Tokyo in 2020 was originally planned to double that of 2015.

Standing at this node in 2021, we can see that Adidas is in a completely different situation from that in 2015. On the one hand, the performance of sports brands has been affected by the impact of the new champion epidemic. On the other hand, ADI, who has been challenging Nike alone in the past, has not been able to get close to the top of the list. In terms of market value, it has been closely followed up by lululemon, VF Corporation, which has acquired many brands, and Anta Group, which is rapidly rising in China. The same is true for market share.

At the same time, a new round of sports return trend has been set off in recent three years, and many brands have picked up sports function business lines again, which has caught Adidas by surprise: after 2017, adidas has reduced research and development investment in professional fields such as football and basketball Smith and yeezy series have gradually become the representative products of a large part of Adidas, which has become the most criticized point of Adidas by the outside world and old users. Besides products, ADI's latest industry heated discussion was the speech made by Simon peel, its global media director, at an event at the end of 2019: in the past few years, ADI has invested too much in digital & performance channels, thus sacrificing brand building.

In such a context, adidas' new plan of "controlling the whole court" is better understood. Obviously, Adidas is also aware of these problems internally.

Key words: Growth

In this five-year plan, adidas has part of its strategic objectives, including digital transformation, sustainability, strengthening the North American market, investing in women's market, and focusing on core cities. For example, during the planning cycle, Adidas will convert 90% of its products into a sustainable mode of production.

However, in terms of the strategic objectives announced at present, "controlling the whole market" will pay more attention to the reform of sales mode, the improvement of gross profit margin and cash flow compared with "Lixin".

One of the important changes is that Adidas's sales model will shift to a more consumer oriented business model. It is planned that by 2025, direct business will account for about 50% of the company's sales, contributing more than 80% of the sales growth.

Adidas is expected to grow in sales, gross profit margin and operating rate: between 2021 and 2025, excluding exchange rate factors, sales are expected to grow by an average of 8% - 10% per year. It is estimated that by 2025, the gross profit rate of the company will rise to 53% to 55%, and the operating rate will rise to 12% to 14%. At the same time, Adidas will use part of the cash flow during the new plan period for dividend distribution and share repurchase, with an estimated scale of 8-9 billion euros.

This is the first time that Adidas proposed to turn to the sales mode of facing consumers. The official press release described that "with the help of the sales network composed of physical stores and e-commerce platforms, Adidas will transform into a business model with members as the center and direct business as the leader", and put forward clear objectives for this:

The number of members has tripled to about 500 million, and the current number is 165 million;

The sales volume of self owned e-commerce channels is expected to double to 8-9 billion euro, and the current sales volume is more than 4 billion euro;

Adidas's self operated stores will realize digital transformation. The company has invested more than 1 billion euro in digital transformation, covering product R & D, manufacturing and sales with 3D technology.

According to adidas' annual financial report up to the end of December 2020, adidas' direct business now accounts for 41%, and the figure at the end of 2019 is 33%. In 2020, Adidas's direct business will increase significantly, mainly driven by e-commerce business (53% growth in the whole year after the adjustment of exchange rate). Of course, this has something to do with the epidemic situation. However, after the re opening of stores, the e-commerce business also maintained a high level of growth. It also includes the expansion of Adidas's confirmed app in the global market. In August 2020, the confirmed app was launched again in the Chinese market, and entered the European market in March this year. This app focuses on selling trendy products such as Pharrell Williams' NMD Hu co branded model and yeezy series, and has a similar positioning with Nike's snkrs app.

In addition to the digital transformation of its own stores, Adidas plans to work with wholesaler partners to improve the digital level. Starting from around 2019, Adidas began to open new digital stores in key cities such as London, Paris and New York, with hundreds of digital contacts in the stores.

In recent years, the number of Adidas's own stores is actually shrinking. After the number of self operated stores reached 2913 in 2014, the number at the end of December 2020 has dropped to 2456, close to the level of 2012. However, nearly 60% of Adidas's revenue comes from wholesalers, and how to cooperate with wholesalers to carry out digital reform may take quite a long time. In the Chinese market, Adidas opened more than 10000 stores through its cooperative wholesalers in 2018, of which only a few are self operated stores.

Generally speaking, Adidas and Nike are gradually similar in strategy. The core elements of adidas' strategy of facing consumers proposed by Adidas are basically the same as that of Nike's "consumer direct offer" strategy proposed by Nike in 2017. However, adidas' huge store scale may require more time and resources.

Key words: Sports

Compared with the specific to the number of growth requirements, in the brand, Adidas to re shape itself as a "Sports" brand image.

According to the new plan, "control the whole venue" focuses on three key areas: brand credibility, consumer experience and sustainable development. The so-called brand reputation is exactly the part of Adidas that will strengthen its brand image in sports and lifestyle.

The corresponding product plan is that Adidas will focus on four major sports in the sports category: football, running, training and outdoor. By 2025, these four brands, together with life and leisure, are expected to account for more than 95% of the company's revenue growth.

It is worth noting that Adidas tried to break out a market segment in the original sports performance brand and sports classic series origin, and introduced a new sportswear product line with the positioning of sports leisure (usually understood as clothing with sports performance, but also suitable for daily wear).

Adidas's original sports performance series will pay more attention to sports, while sports classic series origins will be expanded to high-end market segments. However, it is uncertain whether the sports classic series origin may have certain conflicts with Adidas by Stella McCartney or Y-3 brand in brand positioning.

Brand reconstruction needs product support. Adidas has to accept more and more sports brand competition in various fields. To a certain extent, as a century old brand, it also needs to reflect on its path dependence and sluggishness in the past few years.

Reebok is ready to sell after Greater China becomes independent again

Adidas announced the fourth quarter of fiscal year 2020 and the full year's results in the same period. Thanks to e-commerce and retail sales, Adidas's sales resumed growth in the fourth quarter of 2020 at a fixed exchange rate, with a year-on-year increase of 1% to 5.55 billion euro, and the operation of * * decreased to 225 million euro from 245 million euro in the same period of last year.

In 2020, the sales volume of Adidas is 19.85 billion euro, which is 14% lower than that of the previous year; the net value of Adidas is 429 million euro, a sharp decrease from 1.92 billion euro of the previous year. Adidas China, the region with the shortest hit time last year, grew 7% in the fourth quarter, but even so, the Chinese market fell 17% for the whole year.

The two reclassifications may be of the greatest concern.

Adidas once again adjusted the market division, split Greater China from the Asia Pacific region and announced its performance separately. It also pushed the former European, Russian and emerging markets into the newly established EMEA market. According to the new five-year plan, we will focus on Greater China, North America and EMEA (Europe, Middle East and Africa). Overall, these three strategic markets are expected to contribute about 90% of sales growth by 2025.

In March 2018, Adidas merged the Greater China region with the Asia Pacific region and established its headquarters in Shanghai. But with Colin Currie, managing director of the Asia Pacific region at the end of last year, he announced that he was about to leave office, and the newly established Asia Pacific region was split into greater China region and Asia Pacific region, which manages Japan, South Korea, Southeast Asia and other regions. Then a new round of internal personnel transfer began.

Another matter has been repeatedly discussed by the outside world recently. In February this year, Adidas officially announced the launch of a 15 year old Reebok brand evaluation, which cost $3.8 billion at that time, but now the Reebok brand is worth only $1 billion. Adidas announced at the meeting the result of the treatment of Reebok: Reebok will be split into separate companies, and Reebok will be included in the financial statements as a discontinued business from fiscal year 2021.