Kieran Maguire is a Lecturer in Economics, Finance and Accounting in the University’s School of Management:
“News broke late on Sunday, that Adidas, the German based sportswear company, had broken their sponsorship deal with the International Amateur Athletic Federation (IAAF).
The timing, just six months before the start of the Olympic Games in Rio, seems strange, but the recent allegations of corruption and doping in athletics were the stated reason for Adidas’s action.
Adidas are the biggest sponsor of the IAAF, and the deal, worth an estimated $33 million (£23 million) signed in 2008 and not due to expire until 2019, contributed about 5% of IAAF’s total income in non-Olympic years.
Whilst the IAAF can probably survive the loss of one sponsor, their fear must be that the organisation’s other global sponsors, such as Canon, TDK, Toyota and Seiko, may follow suit.
However, whilst Adidas may be trying to claim the moral high ground with their actions, there may be more to their decision than meets the eye.
Who’s the Daddy of athletics?
Ask someone in the street to name a world famous athlete, and the most common response is likely to be Usain Bolt. Bolt, the six time Olympic gold medal sprinter, and holder of the 100 and 200 metre world records, is recognisable, personable and dominant personality in athletics.
Bolt has a sponsorship deal with Puma, the German sportswear company set up by the brother of the founder of Adidas. His appeal transcends the sport, and he helps Puma sell their sportswear. Despite Adidas having the likes of Jessica Ennis-Hill and Tyson Gay as sponsored athletes, they have struggled to have the same appeal.
First isn’t best
Adidas were the first company to sell running shoes, but in recent years they have struggled in the athletics sportswear market. Their share of the very lucrative running shoe market is estimated to be less than 5%, despite introducing new technologies into their products recently.
The dominant company in sports footwear is another rival, Nike, who have over half of all sales, in an industry worth about $84 billion ($60 billion) by 2018. There is no love lost between the two companies, and any opportunity to discredit the opponents is seized upon gleefully by both parties.
Nike have had Sebastian Coe, the recently elected head of the IAAF, as one of their sports ambassadors for a number of years. Coe has had his integrity questioned in relation to the awarding of the 2021 world athletics championship in Eugene, Oregon, which happens to be were Nike are based. Coe had to resign his position in November 2015 to stave off the criticism that came his way in relation to his role in the world championship decision.
By cancelling the IAAF contract Adidas can be seen to be making things even more uncomfortable for Nike.
Insignificance
Whilst the contract with the IAAF is sizeable for that organisation, it is relatively small change for Adidas. The company recently signed a $1 billion (£750 million) ten year deal with Manchester United to be their kit manufacturer, and spent over $100 million (£71 million) at the London Olympics in 2012.
Adidas have a sponsorship deal with FIFA, the scandal ridden governing body of football, that lasts until 2030. Adidas were notably silent in calling for the resignation of FIFA president Sepp Blatter as recently as October 2015.
Their reluctance to take the moral high ground here contrasts with their approach to the IAAF. A cynic might say that this is due to Adidas being a far bigger player in football than they are in athletics, and so having far more to lose.”