Chief earns his stripes
By Richard Milne
Published: January 20 2008 19:29 | Last updated: January 20 2008 19:29
As a child, Herbert Hainer supported 1860 Munich, the team his brother played in as a professional for 10 years and bitter rivals of Bayern Munich, Germany’s biggest football club.
But Mr Hainer, chief executive of Adidas, has since switched allegiance to Bayern, the club in which Adidas has a 10 per cent stake and where Mr Hainer is also the deputy chairman. “I support Bayern now because I am so often there and they are so important for Adidas in terms of the brand and marketing,” he says.
Although the 53-year-old, as a young striker, helped his team to win the Lower Bavarian championship, he concedes he also enjoys watching Real Madrid, AC Milan and even Barcelona, sponsored by arch-rival Nike, because “they play such attractive football”.
His enthusiasm for sport verges on the fanatical but he never lets this get in the way of a point-scoring opportunity for his business. A digression about the English football team’s recent dismal performance, for instance, prompts a dig at Nike, which recently brought the English sponsorship deal through the US company’s £285m ($558m, €382m) purchase of Umbro. “It looks an expensive way of gaining the English team,” he adds.
Adidas has “become faster and more aggressive” since he took charge in 2000, claims Mr Hainer in an interview at the company’s headquarters in a converted US army barracks in Herzogenaurach, a tiny Bavarian town of 25,000 people that is also home to Puma, another Adidas rival.
This competitive streak will be put to the test in 2008 in what promises to be a memorable year for sport. The Olympics are to be held in Beijing and the European football championships in Austria and Switzerland. Throw in the African Cup of Nations in football, the Super Bowl and the NBA All Star event – all of which Adidas sponsors through the three stripes or its Reebok brand – and there is no doubting the importance of the next 12 months for the the world’s second biggest sporting goods maker.
“This is a huge year for Adidas and we are aiming for record sales and profits. I do believe all the events are a window to showcase our brands,” he says, underlining Adidas’ stranglehold over big competition sponsorship with its official role at both the Olympics and the European Championships.
Adidas’ sales are finally within spitting distance of Nike. Its estimated €10.5bn revenues for 2007 are close to Nike’s of $16.3bn, or €11.1bn. This is as much down to Mr Hainer’s abilities as to the dollar’s weakness. Yet the Adidas chief, with his salt-and-pepper hair and gappy smile, embodies a number of contradictions.
He is a proud Bavarian and has spent most of his life in the southern German region where he was born. Colleagues describe him as “down to earth”, which is fitting given his humble background. He helped out in his parents’ butcher shop from the age of 10 and then opened a pub in his home town while pursuing his dream of becoming a professional footballer. Eventually he gave up, joining Procter & Gamble, the consumer goods group that he left 20 years ago for Adidas.
Unlike many Adidas and Puma executives who prefer the urban bustle of Nuremberg or Munich, Mr Hainer enjoys living in Herzogenaurach. He is a regular at his local Rotary Club and likes to socialise with the owner and head of Ina-Schaeffler, a multi-billion euro ball-bearings manufacturer that is the town’s third largest company.
But it would be wrong to characterise Mr Hainer as a provincial Bavarian. He is known in Germany for bringing an Anglo-Saxon style to his job. English is Adidas’s official language and it is the only German company to hold all its press conferences in English, even when the audience is dominated by local journalists.
Mr Hainer deflects taunts from rivals that Adidas is a traditional German company run predominantly by Bavarians: “It is bullshit that we are a German company. We have 40 nationalities here and a New Zealander and American in the management board.” He stresses his cosmopolitan credentials by commenting that he is equally at home dealing with England player David Beckham or New Zealand’s All Black rugby team as with Bayern Munich or the German football squad, all sponsored by Adidas.
His management style is also very different from the usual view of Germans as consensus-driven. “I am very direct. I tell people immediately what I think, good or bad. I am aggressive in getting things done. I am impatient. I don’t want bullshitters around,” he says.
However, his reputation has suffered with his $3.8bn takeover of Reebok in 2005. While the deal has brought the company’s revenues close to Nike and turned the sporting goods industry into an effective duopoly (Puma’s revenues are only €3bn), Reebok’s stuttering performance has hurt profitability and consumed a great deal of management time.
Mr Hainer says the situation at Reebok is similar to that which prevailed at Adidas in the early 1990s, when the three stripes was on the verge of bankruptcy. “We no longer innovated on products, we were behind the competition, we were overdistributed and in the wrong retailers. That is where Reebok is now with its $29 shoes.”
His response was to try the same tactics that worked for Adidas – he stopped selling to certain retailers, pushed prices up and sharpened marketing by investing more in the brand.
But that meant Mr Hainer had to take tough decisions. “I had the guts to go out and tell the analysts last year to reduce our earnings guidance from 20 per cent to 15 per cent growth so that we can invest in Reebok. I told them I am here to rebuild the brand, and not just for a quick fix.”
This long-term solution is a source of frustration for some investors – Adidas’s shares are down more than 20 per cent this year on worries about its exposure to a prospective US recession.
Mr Hainer concedes: “Reebok sales will fall again in the US this year, deliberately. But they will bounce back in 2009 and then we will be stronger than ever... I am always asked: is this a disaster like [Daimler’s purchase of] Chrysler? But Reebok is making money. It is not another Chrysler.”
Eye on the ball: how Adidas got up to speed on big events
A bright yellow, red and green football sits in Herbert Hainer’s office. The “Wawa Aba” ball (pictured), designed for the African Cup of Nations, which started yesterday, sums up much of what Mr Hainer has changed at Adidas since he took over as chief executive in 2000.
“I do believe that the company has in the past five to eight years become very professional in preparing for big events,” he says. The company has made a much bigger event out of the ball for each competition by, for instance, launching the World Cup ball at the draw six months before it started. The Teamgeist ball for World Cup 2006 ended up selling 15m, well above the 6m sold four years previously.
“There is a lot of drama around how we bring products to life,” Mr Hainer says.
Another example from the World Cup shows how Adidas has improved its supply chain. “It no longer takes 18 months to bring an entirely new product to market. But also when we have a lot of demand, like with the German shirts where we projected selling 600,000 and ended up doing 1.5m, we can cope with that,” he says.
Changes include stripping out two layers of management and restructuring responsibilities so that fewer executives report to Mr Hainer directly, freeing him up for more time to schmooze with big customers and players.
“Since 2000 we are like a race car where every screw and piece is exactly designed to get us to top speed – and I have to oil the machine every day,” he says.
Copyright The Financial Times Limited 2008
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