At a time when Environmental, Social and Governance (ESG) policies have become the watchword for corporate leaders worldwide, Adidas just demonstrated how not to deal with a PR crisis of mammoth proportions. After months of egregious behavior, culminating in the most offensive publicly repeated statements of hate, intolerance and overt anti-Semitism, Adidas finally cut ties with the artist formerly known as Kanye West.
Jewish groups welcomed the decision but stated (the obvious) that it was overdue. “I would have liked a clear stance earlier from a German company that also was entangled with the Nazi regime,” Josef Schuster, president of the Central Council of Jews in Germany, the main Jewish group in the country where Adidas is headquartered.
“Adidas has done a lot to distance itself from its past and, like many sports brands, is one of those companies that conduct big campaigns against antisemitism and racism. That’s why an earlier separation from Kanye West would have been appropriate,” Schuster said in a statement.
As recently as August, Adidas CEO Kasper Rorsted told CNBC “Kanye is our most important partner worldwide. We have a very, very good relationship with him. We communicate with him on a very ongoing basis. And we’re very proud of that relationship.”
That statement, along with Adidas’s weakening sales, inventory glut and general mismanagement led to Rorsted’s ouster on August 22. Adidas announced that “Kasper Rorsted will hand over CEO position during the course of 2023, and that (they are in) a search for a successor.”
West is known to suffer from bi-polar disorder was particularly outspoken in September and October, criticizing both Adidas and Gap
on Instagram, accusing his fashion partners of stealing his designs and breaking promises to expand his ventures. Gap decided to end its relationship with Mr. West in mid-September.
Things escalated in early October, with a well-publicized stunt at Paris Fashion Week, where Ye’s models walked the runway wearing “White Lives Matter” shirts, a term used by white supremacist groups, according to the Anti-Defamation League.
Adidas said on October 7th that it would review its troubled partnership, noting however “we will continue to comanage the current product during this period.” A week later Ye doubled down on a hip-hop community podcast “I can say anti-Semitic things, and Adidas can’t drop me.” Still no comment from Adidas.
ADL Takes a Stand
On October 20, the Anti-Defamation League sent Adidas an open letter saying the fact that Adidas continues to sell Yeezy products is surprising and concerning. The letter addressed to Kasper Rorsted, Chief Executive Officer, and Thomas Rabe Chairman-Supervisory Board noted “At a time of rising antisemitism, when incidents in the U.S. reached an all-time high in 2021, such statements are more than damning – they are dangerous.” The letter further highlighted “the impact that the anti-Semitic ideas have when his noxious ideas are espoused to his 31 million twitter follower’s world-over, given his outsized media presents and celebrity status.”
After the group urged the company to issue a statement that it has no tolerance for anti-Semitism, Adidas’s toneless response was “it has tried to solve the issues privately several times and reiterated the partnership is under review.”
That level of inaction could only be interpreted as indecision or indifference, or both. Regardless of whatever was going on behind the scenes Adidas’s refusal to stand against the hateful speech will likely tarnish their brand for years to come.
Not surprisingly, today’s news of Adidas’s “coming to terms” with its nightmare was captured in headlines that noted the fact that the “Ye-less” Adidas will result in a $246 million hit to the bottom line. This speaks to the shortsightedness of what a brand like Adidas represents.
Taking a Brand Stand
Research studies on the purchasing behavior of Gen Y and Gen Z consumers generally conclude that they are as interested, if not more interested in what brands stands for, than what they sell. And a brand whose lifeblood has been inseparable from professional, collegiate and team sports as Adidas, should be hyper focused on core brand values, sustainability, and moral leadership.
According to KPMG, in 2021 Adidas spent $1.4 billion promoting football, US college sports, futsal, ice hockey, beach soccer, and basketball. That is just shy of Nike’s $1.67 billion in sponsorship investments.
Last October The National Basketball association announced a multiyear extension of its global partnership with Adidas. The renewal sees Adidas continue to serve as the global marketing partner of the NBA, Women’s National Basketball Association (WNBA), and NBA G League, with footwear category rights.
Then there are the high-profile NBA and WNBA stars whose associations with Adidas could create some bad karma. These include the Philadelphia 76ers’ James Harden, the Portland Trailblazers’ Damian Lillard, and Candace Parker of the Chicago Sky.
Jeopardy to any number of these high-profile ongoing sports relationships due to Adidas’s lack of command over their brand, could make the $246 million Ye-hit look like chump change.
When Pop Culture Goes Pop
It is undeniable that many of today’s brands are more closely tied to popular culture than at any time in history. Social media has only magnified that effect exponentially. This entire incident demonstrates the double-edged nature of such relationships.
Adidas owes its very existence to the world of sports and sports marketing, as well as the selling channels that both promote their products as well as share in both the profits and losses. As such, Adidas should have been able to manage its moorings better and done the right thing sooner and more convincingly. Time will only tell what the actual costs to their brand will be.