Most American consumers no doubt recognize Nike (NYSE:NKE) as one of the premier names, if not the premiere name, in the athletic retail landscape. However, what may not be so obvious is that Nike still has to compete with German rival Adidas (NASDAQOTH:ADDYY) on the world stage.
The next leg of the battle is set to play out during the 2014 FIFA World Cup in Brazil, which officially begins on June 14. With both companies having invested heavily in player/team endorsements and advertisements as well as having rolled out new product introductions specifically for the tournament, the stage is set for a spectacle-filled showdown in Brazil.
Endorsements and advertisements
Both Nike and Adidas have devoted significant time and money to individual player and club endorsements for the World Cup. Together, the two companies are sponsoring 19 of the 32 teams in the tournament. Nike has 10 teams, including host Brazil and the United States, while Adidas has nine, including 2010 World Cup champion Spain as well as Argentina. German sports company Puma also has nine team sponsorships, including Italy.
When it comes to individual player sponsorships, Nike has more of an edge. According to the sports research group Repucom, Nike sponsors six of the 10 most marketable players in the game, including Portugal's Cristiano Ronaldo, Brazil's Neymar Jr., and England's Wayne Rooney. Meanwhile, Adidas sponsors just three, and Puma only one.
When it comes to promoting their club and player sponsorships, both Nike and Adidas have gone above and beyond. However, Adidas has the edge since it extended its deal with FIFA in November of last year to remain the official sponsor of the World Cup all the way out until 2030. The deal gives Adidas exclusive marketing rights to the FIFA World Cup name.
However, Nike has had some interesting advertisements in recent weeks. The most recent one was a nearly five-minute animated short called The Last Game that featured its biggest sponsored stars like Ronaldo, Neymar Jr., and Wayne Rooney in a battle against a clone army of soccer players.
Of course, all of the fancy endorsements and advertisements would mean very little if there weren't new products to sell to consumers. In this regard, Nike seems to have another lead on Adidas.
While both companies are busy selling their official team kits, Nike has also been aggressively promoting its newest soccer boot called the Magista. Unveiled back in March and touted as a revolutionary new soccer product, the sneaker has been heavily promoted by Nike over the past few months.
With advancements like a Nike Flyknit upper sole, 360-degree rotational traction, and a sock-like fit, the Magista is simply Nike working more of its innovative magic.
For a company as large and successful as Nike is, it may come as a surprise to some people that management remains so dedicated to innovation. However, it is Nike's innovative spirit that allows the company to continually ward off encroaching competitors and remind consumers that the company is still leading the industry.
In a recent earnings call, Nike Chief Executive Officer Mark Parker explained, "While the Nike portfolio is diverse, there is a common theme. It's powered by innovation. We don't innovate just for the sake of change. We do it with a clear purpose and that's to help athletes reach their full potential."
What's at stake?
Besides bragging rights, the most to be gained from a victory at this year's World Cup is sales momentum. Both companies are already capable of generating massive revenues from soccer at the current time. However, a successful World Cup tournament would likely lead to increased revenues for the company with the superior showing.
The two companies are close in terms of soccer revenue generating capabilities but Adidas most likely has a lead at the moment. Adidas chief executive Herbert Hainer recently estimated that his company would generate approximately $2.8 billion from the soccer segment in its current fiscal year. Meanwhile, Nike reported approximately $2 billion for soccer sales last year, a number that should climb with the addition of extensive World Cup exposure in 2014.
Although it has taken Nike decades to catch up to Adidas on the global soccer stage, some indications seem to suggest that 2014 is the year the American company finally pulls ahead of its German rival. Accordingly, investors looking to benefit from the World Cup should consider buying shares of Nike as it remains perfectly positioned to gain massive global exposure in the weeks ahead.