Why can’t Reebok get fit?

Posted: March 8, 2015 at 5:48 am

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Aerobics made Reebok the top sneaker in the 1980s. Now the brand is back to banking on workouts with friends

Reebok has endured an unrelenting joginto oblivion from the pumped-updays of 1989. That was the year Tom Petty released Full Moon Fever, the Detroit Pistons swept the Los Angeles Lakers in the NBA Finals, and Reebok introduced itsfirstinflatable shoe. The 80s endedwith Reebok just barely sustaining athree-year streak as Americas best- selling sneaker brand, notching$1.8 billion in sales, but Nike took over the footwear crown to start the new decade and never looked back. Reebok proceeded to stumble its way to a 2006 acquisition by Adidas for$3.8 billion.

Anew earnings report released on Thursday from its parent company shows sales remain stagnant. Last year, not including itshockey business or Rockport dress shoes, which Adidassold in January for $280 million, Reebok sales fell from just above to just below $2.1 billion. Heres how the brand has performed under Adidas:

Bloomberg Click to expand.

Adidas, of course, was hoping for a better weapon in its own losing race in the U.S. against Nike. Instead, the German company presided over a 14 percent decline in sales from 2007 to 2009, triggeringa drastic change in strategy: Reebok would become a fitness brand again, abandoning team sports and celebrity athletes.The first step, in 2010, was to sign a 10- year partnership with a little-known training program called CrossFit.

The move, recalls Reebok President Matt OToole, was not always an easy sell within the companys headquarters in Canton, Mass. Reebok, then the official supplier of NFL uniforms, was about to throw its weight behind a fledgling group of workout fanatics who trained together in warehouse-like gyms they liked tocall boxes. OToole, who waschief marketing officer at the time, had to persuadethe companyto turn its back on about $550 million worth of existing business with premiere sports. We had to start to say, OK, were probably not going to be the right guys to outfit the NFL anymore. We probably shouldnt make cleats and gear for European soccer.

CrossFit was only the beginning. Deals with the obstacle- course organizer Spartan Race and studio fitness programmer Les Mills followed in 2013. LastDecember, continuing the shiftinto unconventional sports, Reebok signed on with mixedmartial arts promoter UFC. In all of these deals, Reebok supplies money, shoes, and apparel, and in return attaches the brandname to races, fights, and gyms. The first stage of the 2015 Reebok CrossFit Games kicked off last week. The unifying theme is social fitness, with an emphasis on intensity.

Our consumers are really rejecting the Globo-Gym, says OToole, where you get on a treadmill and put your headphones on and nobody knows whether you were there or not. Reebok is after twentysomethings who go to group workouts for camaraderie and a bit of peer pressure. Its a growing tribe. Weve seen a real shift in the fitness world away from using heavy equipment like treadmills and stair climbers and toward much more social, class-based fitnessZumba, Pilates, yoga, CrossFit, says Matt Powell, a sports industry analyst atNPD Group. These activities are really ramping up. So for a brand to stake out the fitness activity as their cornerstone makes a lot of sense right now.

Thelogic may be sound and the timing good, yet the financial results have been slow in coming. OToole compares the company to a duck on a pond, with feet paddling furiously under the surface. This transformation thats occurring below the water is pretty significant, he says, even though the waterline looks pretty flat.

Its unclear whether Adidas will wait for the duck to take off:Id like to see those feet moving, Mark King, president of Adidas Group North America, joked during an interview earlier this yearwhen told of theduck analogy. He went on to describe the brands strategy as spot on.

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Why can't Reebok get fit?

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Written by simmons |

March 8th, 2015 at 5:48 am

Posted in Aerobics