Will Nike And Adidas Get A World Cup Boost? - Analyst Blog

The FIFA Soccer World Cup 2014, which is set to kick-start on June 12 in Brazil, has more to it than just the game. With 32 teams contesting for the prestigious Cup this summer, there are sponsors behind the scene vying to become the leading soccer brand. The big players among these definitely include Nike Inc. NKE and Adidas AG (ADDYY) that are competing on all platforms to get a hold of their stakes in the game and make the most of this tournament to boost revenues.

While the Germany-based Adidas is in the game almost since the inception of the World Cup event, the Oregon-based Nike stepped in only 20 years back. Today, the companies together make for nearly 90% stake in the global soccer shoe market.

Adidas has been the official sponsor for most of the FIFA World Cup events along with multinationals such as Anheuser-Busch InBev SA/NV (Budweiser) BUD, The Coca-Cola Company KO and Visa Inc. V. Keeping up its legacy of supplying the official match ball for the game, the company recently extended its sponsorship contract with FIFA up to 2030. Moreover, the company is bucking up to reach the #1 spot this soccer season with plans to spend more on advertisement.

Additionally, the company has collaborated with ESPN, one of the official media partners for the World Cup, to promote its brand. Furthermore, the company will sponsor teams like the reigning champions Spain, as well as Germany, Argentina and Colombia this year.

While Adidas is advantageously positioned given its long association with the FIFA game, Nike scores higher on the number of teams it will sponsor during this year's World Cup event. Nike, which has been aggressive in its approach to gain a larger share of the FIFA game, will be sponsoring the kits for 10 out of the 32 qualifying teams in the tournament for the first time this year, including the host team and this year's favorite, Brazil.

The company's increasing popularity is glaring as many players have switched to Nike shoes for the game. Nike has signed 6 of the 10 most renowned footballers in the world, compared with just three for Adidas.

Making most of this, the company is using the popularity of soccer stars like Portugal's Cristiano Ronaldo to do the business trick. Last year, the popularity of Ronaldo helped Nike sell over 1 million t-shirts with his name on the back.

Again this year, the company has launched a 4-minute advertisement featuring Ronaldo and other stars, where a playground game suddenly changes into a match with these stars. This ad won a huge acclaim when Ronaldo released it on Twitter reaching out to his 26.5 million followers.

On the other hand, Adidas countered this act of Nike with the launch of a new ad featuring Lionel Messi of Argentina and his rivals such as Bastian Schweinsteiger of Germany, Luis Suarez of Uruguay and Dani Alves of Brazil.

With all these efforts going into marketing to boost the sales of soccer cleats, uniforms, balls, and leisure wear during the World Cup and ahead, Adidas targets about 2 billion Euros ($2.7 billion) revenue from its soccer division in 2014. This is ahead of Nike's revenue of over $2 billion from soccer sales in 2013.

Based on its revenue size, Nike is the largest sports gear company across the world with about $25.3 billion revenue for 2013 while Adidas ranks only second with $16.3 billion annual revenue.

Despite all these factors, the question remains if these marketing efforts put in for the World Cup will help fetch expanded sales for these market players?

Well, commenting precisely on this is difficult. However, we see these marketing tactics and money spent for the event as a long term investment for the brands. Even if it does not pay off with immediate rise in sales the results will show up in the long term as the brands continue to grow in popularity among the masses.

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