Do Major Sporting Event Sponsorships Pay Off for Adidas, Nike, and Under Armour?

It's an easy bet that sporting good manufacturers will introduce fancy new products at the biggest events, whether players like it or not.

Mar 13, 2014 at 1:35PM

Watching sporting good manufacturers compete for market share in 2014 has been like watching young men go after the hot girl at the bar. The aggressiveness and the tactics are occasionally cringeworthy, but you can't help but be impressed by the effort.

The Winter Olympic Games in Sochi and the upcoming 2014 FIFA World Cup in Brazil have offered massive stages for the major players to compete. With supremacy of a multi-billion dollar industry at stake, their strategies for boosting visibility and sales are undoubtedly bold, with the introduction of innovative/bizarre new products that may come with backlash from fans and athletes. But just about everyone involved will probably walk away a winner.

For Adidas (NASDAQOTH:ADDYY), 2014 is about maintaining dominance in the soccer segment and chipping away at Nike's lead in overall market share.

For Nike (NYSE:NKE), it's about staying on top and cutting into Adidas' stronghold in soccer and in the European market.

For Under Armour (NYSE:UA), it's about leveraging its visibility at the Winter Olympics, making new inroads, and continuing on an aggressive growth path.

Bang for the buck in Brazil

At the World Cup, Adidas is the official partner of FIFA, and will supply the brand-new ball and get most of the "official" exposure. Nike, meanwhile, will outfit 10 national teams and sponsors many of the top players.

Adidas will introduce a new soccer ball for the tournament, as it does every four years. If history is a guide, the ball will be met with derision from players, who will complain about the challenge of getting used to a new piece of equipment while playing on the biggest stage. (Read this CNN article that includes complaints about new balls dating back to 2002.)

Though it will say otherwise, Adidas couldn't care less about what the players think. It wants to sell these slick new items to the soccer-loving public, and is selling its new "Brazuca" ball for about $150 (yikes!) at most sports retailers. If the balls sell, it could translate into a big chunk of change. Adidas reportedly sold 13 million of its 2010 World Cup balls despite player complaints. 

Adidas is projecting $2.8 billion in soccer-related sales in 2014, according to a Reuters report.

Of course, Nike can't afford to sit and watch Adidas score all the soccer-related business, so it's created a stir by introducing a wacky new soccer shoe that looks like a sock. Rest assured, Nike-sponsored players who will hit the pitch in Brazil will be expected to wear the bizarre new shoe, regardless of how they feel about it.

This is not just a battle over soccer. It's a battle over market share of the entire sporting goods industry.

"These are the moments when we share the stage with the greatest athletes and showcase our most innovative products – the products that will go on to transcend these individual events and catalyze new momentum in the marketplace around the world," Nike CEO Mark Parker said in announcing the company's quarterly earnings in December.

Adidas is likely to come out ahead following the World Cup, simply because of its official FIFA tie-in and its long-held status as the market leader in soccer.

But Nike's done an impressive job of topping Adidas in the competition for sponsorships of individual players and teams. Relatedly, the company grabbed some headlines this week with the revelation that it signed a 10-year, $1 billion deal with Manchester United of the Barclays Premier League. 

Under Armour looms large

Where does Under Armour fit into all of this? Well, the Baltimore-based upstart may not have a big presence at the World Cup, but it's been making inroads into South America, including a partnership with a top Chilean soccer league that could pay dividends in the future.

In the meantime, UA's struck deals involving Notre Dame and the U.S. Naval Academy, and has seen across-the-board double-digit increases in sales. Revenue for the company hit $683 million in the recent quarter, up 35% from the year before.

At the 2014 Winter Olympic Games in Sochi, Under Armour may have proved the theory that bold attempts at exposure can pay off, even if the athletic results are less than ideal.

Ask the U.S. Speedskating team if they were thrilled with the new uniforms supplied to them in time for the 2014 Winter Olympic Games. Under Armour boasted a fast new design featuring input from Lockheed Martin engineers, and excitement was high.

But the skaters tried them for the first time in competition in Sochi and came home with just a single silver medal.

Unfazed by the bad publicity, Under Armour responded by extending its sponsorship of the team for eight years, suggesting that the goodwill generated by supporting Olympic athletes offsets any performance-related problems.

Feeding the daily beast

It's important to remember that while major events can help drive sales for folks like Nike, Adidas, and Under Armour, it's the day-to-day servicing of major sports leagues that remains the bread and butter.

Selling new products tied to an event that happens every four years can be easy, as the buzz is usually built in. But how do you consistently breathe fresh air into an existing league that plays every night?

Sometimes you have to get a little bit crazy.

The NBA recently began experimenting with a short-sleeved jersey from Adidas, and they were a topic of conversation during games on Christmas Day and the All-Star game in February. Players hate the sleeves, reportedly because they are too tight and interfere with their shooting stroke.

But one can bet that the new shirts aren't going away, regardless of what players think.

Cynics will insist that the sleeved shirts are the first step toward the league accepting on-uniform advertising. (Hey the WNBA does it, why not the guys, too?)  It's a distrustful view, but probably a correct one.

The NBA and Adidas are also looking at the potential for jersey sales, and acknowledged as much in an article in the Wall Street Journal.

"We know fans want to wear the authentic product that the players are wearing," Chris Grancio, the chief basketball marketer for Adidas, told the newspaper. "In the NBA, it's just harder for fans to do that because a tank top is just a little bit more difficult to wear."

Regardless of the fit of the shirt or the feel of the ball, all three companies have been awake and aggressive during one of the most high-profile sports years in recent memory. Let the games continue.

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Tim Lemke has no position in any stocks mentioned. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Lockheed Martin, Nike, and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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