The decision by Adidas to explore dropping its sponsorship of the IAAF comes as the sports brand plans wider divestments within its sporting portfolio and aims to win back lost ground to rival Nike
Earlier this month, the independent World Anti-Doping Agency concluded that doping was “widespread” within athletics and that former IAAF president Lamine Diack had been “responsible for organising and enabling the conspiracy and corruption that took place in the IAAF.”
This wouldn’t have escaped the attention of Adidas, the IAAF’s biggest sponsor.
One source, with inside knowledge of the deal, told Marketing Week that Adidas is already on bad terms with the IAAF due to current president Seb Coe’s links with rival Nike as well as its decision to hold the 2021 World Championship’s in Eugene, Oregon – where Nike is headquartered. “The waters were already muddied,” he explained.
Finding sponsorship deals that boost profits
Adidas is currently under pressure from shareholders because it is trailing Nike and New Balance in the key North America region. It is thought to be re-evaluating its sponsorship portfolio in underperforming areas – such as golf – in order to boost overall profitability.
Therefore its reported decision to cancel the 11-year athletics tie-up, which was due to run until 2019, could not only be down to scandal but also pleasing shareholders.
“Track and field remains a niche sport for a sponsor.”
Tim Crow, CEO of Synergy Sponsorship
“Yes, athletics is still a huge brand due to the Olympic connotations and once-in-a-generation stars such as Usain Bolt but it is still a niche sport commercially.
“Adidas would have already realised you are not going to move goods as quickly off the back of athletics deals as you are on major sports such as football. The doping scandal would have only added to these concerns.”
Rupert Pratt, managing partner at Generate, is keen to point out the relatively small size of the 11-year IAAF deal, which is thought to be worth around $6m a year, when compared to Adidas’ dealings with the likes of Manchester United.
“The athletics sponsorship is relatively small in comparison to some of the Adidas deals in other sports, probably because an athletics sponsorship isn’t a direct merchandising opportunity on the scale of say a football club,” he says.
“For example, despite a poor on pitch performance, its £750m kit sponsorship of Manchester Utd pays for itself on kit sales alone.
“The athletics deal has already incorporated the 2009 World Championships in Berlin which would have been a major attraction for the partnership so maybe the remaining four years are less attractive commercially, especially with the IAAF reputation coming under such scrutiny.”
Scandals rocking sport
Adidas looks to be acting swiftly with the IAAF having been criticised for failing to speak up fast enough when financial scandal recently engulfed FIFA.
However, despite seeing two of its major sports sponsorship deals recently marred in scandal, experts are keen to point out the differences between the two sporting bodies.
“Obviously when you hear about corruption on the money side at FIFA it is disappointing but it doesn’t impact the purity of the on-the-field product,” says Joel Seymour-Hyde, VP of Strategy at Octagon.
“The IAAF scandal is all about cheating and performance, it is a very different place to be in, especially when you hear reports about cancelling all previous medal records due to doping. If you’re a beverage brand tapping into the emotions of athletics it isn’t good but if you’re a performance brand who sells athletics-based products it is a grave concern.”
Crow, meanwhile, says the FIFA scandal would not have impacted the reputational clauses in its Adidas contract “anywhere quite like” the IAAF has done.
A new approach to sponsorship
adidas change the gameAdidas has also been criticised for its sponsorship of FIFA, which is also facing widespread corruption charges
Above all, Generate’s Pratt says the way Adidas is currently handling the IAAF could signal a wider shift where brands hold more power.
“Interestingly, previously sponsors would try to distance themselves from the issues by not commenting and pulling back on marketing activity – a classic crisis communications approach – until the issues had died down or gone away,” he explains.
“Not commenting or not being see to condone activity is becoming increasingly more difficult and of late we have seen more sponsors speak publically or not renew their partnerships as a result of scandals.”
Last year, Adidas, Coca Cola and Visa all called on FIFA to implement “reforms” or risk losing each as sponsors.
“I think we are starting to see a potential change in both crisis communications management and sponsors tolerance of issues,” adds Pratt.
Earlier this month, Adidas announced that Kasper Rorsted, currently chief executive at German cleaning products maker Henkel, would join as Adidas CEO from October.
“Rorsted is the perfect candidate to help us grow our profitability,” said Adidas in a statement.
And with profitability now firmly on the agenda, Adidas has proven it will act quickly if a sponsorship deal is damaged by scandal or does not add to its bottom line.