Reebok 2008 Annual Report Download - page 122

118 Group Management Report – Our Financial Year Risk and Opportunity Report
Ongoing fusion of sport and lifestyle
The border between pure athletics and lifestyle continues
to blur as sport becomes a more integral part in the lives of
more and more consumers. People want to be fashionable
when engaging in sporting activities without compromising on
quality or the latest technological advances. At the same time,
performance features and styles are fi nding their way into
products meant for more leisure-oriented use. We estimate
the global sports lifestyle market to be at least three times
larger than the performance market. This development opens
up additional opportunities for our Group and our brands –
which already enjoy strong positions in this market. adidas
has an authentic sports lifestyle offering with the adidas Sport
Style division which continuously launches innovative con-
cepts see adidas Strategy, p. 048. In 2008, the adidas segment
launched Style Essentials in Asia and the USA, a new line of
casual sportswear clothing. In 2009, with the launch of the
adidas SLVR Label, adidas will expand its offer of pure fashion,
sports-driven style. The Reebok brand will revive its Classics
business in 2009 with the launch of new products and cam-
paigns such as The Pump™ and “On the Move” see Reebok
Strategy, p. 052. And at TaylorMade-adidas Golf, the acquisi-
tion of Ashworth provides a new platform to expand the seg-
ment’s golf apparel business into the lifestyle market see
TaylorMade-adidas Golf Strategy, p. 056.
Emerging markets as long-term growth drivers
Emerging economies in Asia, Europe and Latin America have
consistently grown at stronger rates than more mature
markets over the last several years. However, due to economic
constraints, sports participation in most of these countries
has historically been lower than in industrialised countries.
Now, rising real incomes and employment rates as well as
positive demographic trends and a growing middle class are
fuelling these economies – and subsequently our industry.
This develop ment is expected to continue in the near future.
European and North American sporting goods brands are often
seen as easily accessible, affordable luxury goods. Our Group
currently generates more than 30% of sales in emerging mar-
kets, which refl ects a higher exposure compared to many of
our competitors. Further, we believe we have opportunities for
further growth, in particular in China and Russia. Our growth
in emerging markets is supported by our strong portfolio of
partnerships: in China, the NBA, Yao Ming and the China Golf
Association, in Russia, the Russian Basketball Federation and
the Russian Football Union, and in India, the Twenty20 Cricket
League. In addition, our various brand controlled space initia-
tives allow us to reach out to more consumers in markets
where retail is still developing.
Growing popularity of “green” products
Today’s consumers are increasingly concerned about the
impact their consumption has on the environment. Therefore,
they demand more and more products that are environmentally
benign. For many consumers, materials used in footwear and
apparel are now expected to be suitable for re-use, while still
looking fashionable and stylish. By positioning ourselves in this
fi eld within the sports lifestyle segment, we can benefi t from
the growing demand for environmentally friendly products. In
2008, we launched the adidas Grün Originals collection within
our adidas Sport Style division. The collection consists of
footwear and apparel made of organic, untreated or recycled
materials such as cork, manila and linen. In 2009, Reebok will
also introduce a collection of eco-friendly NFL licensed apparel
utilising 100% organic cotton and products made of recycled
polyester. Besides this, we recently launched a programme
called “Better Place” that targets adidas performance products
see Sustainability, p. 067. Environmentally friendly products
are of course also used in other categories, albeit to a lesser
extent. For example, our adidas SLVR Label contains “green”
components, even if the main focus of this line is not ecology.
We expect consumer demand for environmentally friendly
products to increase going forward.
Strategic and Operational Opportunities
Strong market positions worldwide
The adidas Group has the highest market share in numerous
countries around the world. This strong competitive position
offers us many advantages in terms of global brand visibility,
market power and the ability to effectively expand our posi-
tion in emerging markets. As a result of our strong partner-
ship portfolio and marketing efforts, consumers around the
globe are highly aware of our brands and are receptive to our
brand messaging. This makes demand for our products more
stable compared to smaller competitors. Hence, many retail-
ers consider our products as core to their offering. The adidas
Group is therefore in a strong bargaining position and can
compete more effectively for shelf space.
Multi-brand approach
We believe there is a natural limit to the audience size a single
brand can appeal to, given the diverse tastes and expectations
of a highly-fragmented consumer market. Our multi-brand
approach provides us with the opportunity to leverage the
power of our brands in a more precise and meaningful way
see Group Strategy, p. 046. We are able to utilise the combined
strengths of each brand to compete for a higher percentage
of the total market – covering a greater number of consumer
needs, price points and demographics.
Personalisation and customisation replacing mass wear
Today’s consumers are looking for choice and variety that
goes beyond choosing from a wide selection of products. We
engage in developing unique and relevant products that fi t
specifi c functional and aesthetic requirements see Group
Strategy, p. 046. adidas, Reebok and TaylorMade-adidas Golf all
offer different personalisation and customisation platforms
refl ecting each brand’s strategy. Key concepts include adidas’
mi adidas, miCoach and mi Originals, Reebok Custom and the
TaylorMade-adidas Golf myTPball online platform. After suc-
cessfully implementing mi adidas in our performance stores in
2007, in 2008 we rolled out mi Originals to our concept stores.
Reebok Custom is a web-based platform over which consum-
ers can customise footwear. Shoes are then shipped within ten
business days. With the myTPball programme, customers can
design and order their own golf balls.