Why Adidas wants to put on the India cricket jersey

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Earlier this week, India won the Border-Gavaskar Trophy 2-1. In other news, water is wet. No, this isn’t a dig at Australia. Just pointing out that the last four Border-Gavaskar Trophy series have all ended 2-1 to India.

But I wish the series that just concluded had been a three-Test affair. Because, my god, what a snoozefest of a fourth Test that was in Ahmedabad. Except, of course, for that glorious first morning when we got to see a unique “lap of honour”.

I’m actually surprised the International Cricket Council (ICC) didn’t give the lifeless Ahmedabad pitch a poor rating. I mean, think about it—the ICC rated the pitch for the third Test in Indore as poor because it “was very dry and did not provide a balance between bat and ball, favouring spinners from the start”.

The Ahmedabad pitch, which was so flat that even Virat Kohli scored a hundred (sorry, Viratians!), also did not provide a balance between bat and ball, and favoured the batters from the start. Why should a pitch be rated poor only if the bowlers are having fun on it? This is discrimination against batters.

Jokes aside, Australia will have a chance to set the record straight—kinda—when the two teams meet again in the final of the World Test Championship (WTC) at The Oval in June. I’m really looking forward to that match.

The WTC final will also probably see India in a new jersey. Well, as new as a white Test jersey can be. Because the contract of the current kit partner, Killer Jeans, would have run out by then. ICYMI, in January, I had written about how and why a jeans brand is making Indian cricket jerseys. Do read that piece if you haven’t already, because it has some important context for what I’m going to talk about today.

So, who is the Board of Control for Cricket in India’s (BCCI’s) new kit partner? Well, it isn’t official yet, but reports suggest German sportswear major Adidas is close to signing a five-year contract worth ₹350 crore ($42 million). The official announcement is expected closer to the expiry date of Killer Jeans’ contract—May 31.

Now, on paper, there’s nothing unusual about Adidas coming on board to sponsor the Indian cricket team. One of the biggest sportswear brands in the world sponsoring the biggest team in world cricket should be par for the course. But considering what happened with the two kit partners before Killer Jeans, I’m actually wondering why Adidas wants to get in.

Especially considering what happened with Nike.

Nike, Adidas, Puma’s different paths to cracking India via cricket

It’s amazing to think that prior to 2006, the Indian cricket team did not have an official kit partner. The only logos on the India jerseys before that were those of the BCCI and the official team sponsor. If you watched Indian cricket through the 1990s and 2000s, you’d remember seeing the logos of brands such as Wills, ITC, and Sahara on the India jersey. But the jerseys were made by local manufacturers.

It all changed in December 2005, when the BCCI announced that American sportswear major Nike had signed a five-year contract to supply kits to the Indian team. This was after a bidding war with rivals Adidas and Reebok. Nike’s winning bid of ₹197 crore ($43 million at the time) topped Adidas’ ₹128 crore ($28 million) and Reebok’s ₹119 crore ($26 million).

So, from January 2006, the Indian cricket team began wearing Nike jerseys. Nike had just entered India in 2004, while Adidas and Reebok had been around since the mid-nineties and had a head-start. To make up ground and elevate the brand’s presence, Nike decided to build an association with the most valuable sports franchise in the country.

“Nike had no connect in India at the time,” says a former senior executive at the company, who requested anonymity. “The biggest category for Nike globally is running, and that wasn’t a big category in India at the time. It was the same with basketball shoes. So, the intent was to get visibility.” Nike, Adidas, and Puma did not respond to my request to participate in this story.

Another key driver was to create a platform for innovation in sports kits. “The gear and apparel that Indian cricketers were wearing hadn’t changed in years, and Nike believed it was ripe for innovation,” says a second former senior executive at the company. “There was also a desire to grow the market and not just gain market share.”

And so, it was only from 2006 that official Indian team jerseys and merchandise began retailing in India. Before that, the only avenue for fans to buy India jerseys was purchasing cheap replicas of whatever the players were wearing from unauthorised sellers, usually outside stadiums on match days. You couldn’t even call them unauthorised because there was no authorised seller before Nike came in. These jerseys were sold for ₹200-₹300 ($4-$6), which also turned out to be a major stumbling block for Nike.

The American company has always prided itself as a premium sports brand that sells technical and performance-oriented apparel, so there was no way it was going to sell jerseys for a few hundred rupees. Nike released two variants for retail: one was a true replica of the India jersey that was almost exactly the same as the one worn by the players. This was sold for around ₹3,000 ($65 at the time). And the second one was a “takedown” version, where certain visual elements aligned with the players’ jersey, but the fabric and other performance elements were downgraded. This jersey cost ₹2,200 ($48), which is still at least 10x the price of the knockoffs that continued to be sold outside stadiums.

“Pitching a jersey at ₹2,200 and above in India was an uphill journey because, at that time, very few people were purchasing apparel at that price point,” says the second former Nike executive. “Consumers in smaller towns weren’t exposed to global products and their price points back then. E-commerce was in its infancy. Did sales meet expectations? Let’s just say there was an aspiration, and there was reality. But the brand knew it would be a pioneering effort, and a healthy market would develop over time. It was an investment aligned to a future growth trajectory.”

Nike continued to invest in Indian cricket over the years, hoping for future returns. In the buildup to the 2011 World Cup, hosted by India, the brand launched a marketing campaign called “Bleed Blue”. To date, it’s one of the most memorable campaigns by a brand in Indian sport. I remember having a Bleed Blue-themed profile picture on Facebook at the time. The fact that India went on to win the 2011 World Cup would have surely helped the brand.

That same year, Nike renewed the BCCI contract for another five years, this time at a cost of ₹270 crore ($60 million at the time). There was no bidding process this time since Nike had the first right of refusal and chose to renew. And five years later, when India hosted the 2016 T20 World Cup, Nike again renewed the contract for four more years, paying ₹370 crore.

Does that mean Nike was beginning to see returns on its investments? Not quite. In 2016, the company reduced its store count in India by 35% to around 200, with reports saying it made a loss of over ₹100 crore ($16 million) in the year ending March 2015. The company also did not renew several bat sponsorship contracts with cricketers, which used to cost anywhere between ₹25 lakh and ₹8 crore annually at the time.

In 2017, Nike laid off 20% of its India employees after its losses widened to ₹170 crore ($26 million) in the year ended March 2016. Its sales slumped to ₹764 crore from ₹803 crore in the previous year. Meanwhile, rivals Adidas and Puma recorded sales ₹899 crore and ₹878 crore, respectively.

Unsurprisingly, Nike did not renew the BCCI contract again after it expired in 2020, especially with a global pandemic in the picture. But Covid-19 was far from being the straw that broke Nike India’s back. The second former Nike executive quoted earlier says the market did not grow as per the company’s expectations. And there were several reasons behind it.

One is that the growth and profitability of retail, not just for Nike but also its retail partners, has been challenging in India. The cost of running both physical stores and e-commerce is much higher than in other emerging markets.

“That’s because of the disproportionately high cost of real estate, the duties and taxes involved in bringing the product into the market and selling it, and various inefficiencies: you don’t have the same degree of retail infrastructure that you have in other markets. Even though you have a lot of malls, it’s still on the lower side for a country the size of India,” says the second former Nike executive.

Two, the consumer propensity to purchase performance-oriented, expensive products wasn’t at the level Nike anticipated. “That’s partly because of the strong paisa vasool aspect of Indian consumers. Globally, consumers purchase a Nike product because it’s the best, even though they may not aspire to push it to its limits. But in India, that relationship is significantly different. If you’re going for a walk in your neighbourhood park, you don’t have to have the most expensive product,” the executive adds.

And three, when it comes to Indian cricket, the business might be amazingly profitable from a media perspective, but that doesn’t translate into sportswear retail because the market is still very small. “In China, Adidas and Nike have $4 billion-$5 billion in wholesale revenue. If you look at the retail equivalent, it will be significantly higher. In India, the market leaders are still in the hundreds of millions of dollars in terms of revenue. It’s a different scale altogether,” the executive says.

Nike India posted a revenue of ₹814.3 crore ($98.5 million) in the year ended March 2022, according to filings with the Ministry of Corporate Affairs (MCA). Even if that doubles next year, it’s barely going to move the needle for the company, whose global revenue for the year ended May 2022 was $46.7 billion. “India’s luxury or premium segment is still limited in terms of reach,” says a senior executive from the sportswear industry, who requested anonymity. “China’s luxury market boomed when its GDP per capita touched $8,000. India is still far from that level.” India’s GDP per capita was $2,300 in March 2022.

That’s why selling an India cricket jersey for ~₹5,000 ($60), which is what the players’ replica cost towards the end of Nike’s contract, was never going to work out. And Nike is clear that it will not downgrade the premiumness of its brand by making cheaper products and compromising on quality. So, it decided it’s better to run a smaller business that grows with the brand story. “They’re looking at profitability, but their main focus is on building the brand rather than the revenue,” adds the executive.

Along with ending the BCCI partnership after 14 years, Nike has also been reshaping its retail presence to go with its new brand focus. While the company has been trimming its store count across India over the last few years, it’s largely been smaller stores. “They’re focusing on flagship stores that make a statement,” says a third former senior Nike executive. “The average store size has increased from 1,200 sqft four years ago to 5,000-6,000 sqft today. It’s a global strategy to have fewer but larger, experiential stores.”

However, Nike isn’t the only brand that does experiential stores. Puma and Adidas have them too. And the two German brands are doing a lot better than Nike in India. Especially Puma.

Forever Faster cheaper

Puma entered India around the same time as Nike, and it has never bought a BCCI kit sponsorship. But it’s still the largest sportswear brand in the country today in terms of sales—and has been for the last few years. That’s because the company is very clear it wants to grow revenue rather than brand stature.

Puma disrupted the Indian market by keeping prices much lower than Nike. It was able to do this by manufacturing sports shoes in India, which neither of its rivals was doing. As a result, it was able to penetrate India a lot more and have higher margins. Puma also positioned itself adroitly in the market as a sports lifestyle brand—equal parts fashion and performance. And it was a first-mover in e-commerce.

“In 2011-12, when [fashion e-commerce company] Myntra launched, Puma was the first sportswear brand that launched on the platform, whereas everyone else was wary of how e-commerce will play out,” says a former senior executive with Puma.

In terms of marketing, too, Puma took up a different strategy to Nike. It didn’t go after the Indian team sponsorship, but rather focused on the Indian Premier League (IPL). From 2009 to 2013, it sponsored two IPL teams but eventually pulled out because the sales were abysmal. “But our sponsorship costs weren’t much. We were paying ₹1 crore-₹1.5 crore per season to the teams,” says the former Puma executive.

Since the team sponsorships weren’t delivering the expected returns, Puma decided to go after the players. It signed cricketers such as Yuvraj Singh, Sourav Ganguly, and then Virat Kohli in 2017 for a record-breaking deal worth ₹110 crore ($16 million at the time) over eight years. He was the India captain at the time, one of the best batters in the world, and a flamboyant personality to boot. And while the value of the deal was unprecedented for an Indian sportsperson, Puma was still paying a fraction of what a BCCI sponsorship would have cost.

“In India, the players are bigger than the game. Puma thought, if we get Virat, we can use him to market everything, not just cricket. Because Virat is such an influencer that he can get people to buy Puma running shoes,” says the former company executive.

Part of this player-focused marketing strategy was making its footwear visible by handing shoes to young and upcoming IPL cricketers for free. These shoes had vibrant colours that stood out while watching on television, like orange, red, and green. It was a low-risk, high-reward strategy. If any of the players made it big, the brand could capitalise on it later.

“They also gave shoes to the umpires. There was a guy whose only job was to go around giving shoes. So, whether you call it guerrilla marketing or low-budget marketing, it just increased visibility. It didn’t sell cricket shoes, but the brand got visibility without spending too much money,” says the former executive.

“Puma would never be interested in a BCCI sponsorship,” adds the senior sportswear industry executive. “The math just doesn’t make sense. You have to spend ₹50 crore-₹70 crore a year on the sponsorship and another ₹20 crore-₹30 crore to market it. You also have to provide the kits to the players and staff for free—new kits after every three matches. You have to customise the sizes according to each player’s demands. If they’re going to a cold country, you have to change the kit and give them all full-sleeved jerseys, sweaters, jackets… it turns out to be as expensive as the actual sponsorship cost. And you also have to manage all the logistics on top of it. You’ll need to hire a separate team for it.”

Which brings us to Adidas, and why it would be interested in getting into such an expensive and complex sponsorship deal.

Impossible is Nothing Team India?

The brand with three stripes has been around in India the longest out of the big three. And while globally, Adidas and Nike are quite similar in terms of how they position themselves, in India, Adidas’ strategy is more aligned with Puma’s.

Like Puma, Adidas also manufactures locally and plays the volume game. You’ll always find an “Outlet” sale section on the Adidas website, offering discounts of 40-60%, similar to Puma. On the retail side, factory outlets offer discounts north of 55%, while the average discount at regular stores is around 30%. Nike, on the other hand, typically operates at an average discount of 8%.

In terms of marketing, Adidas has never sponsored the Indian team but did have cricket legend Sachin Tendulkar as a brand ambassador from when he was at his peak in the late nineties. After Tendulkar retired in 2013, Adidas signed up Rohit Sharma, who eventually became the India captain last year and continues to endorse the brand. Adidas also has actors Ranveer Singh and Deepika Padukone endorsing its premium Originals and fitness-wear lines.

And while Adidas makes just over half of Puma’s revenue in India, it is the most profitable out of the big three (see chart above). That could be why it’s gambling on a BCCI sponsorship, despite how things went for Nike. Another reason could be that Adidas is struggling in China, where sales were down 36% year-on-year in 2022 because of the country’s stringent zero-Covid policy, which was lifted only in December. Adidas also had unsold inventory worth $6 billion after a difficult 2022, in which it terminated its lucrative partnership with controversial rapper Kanye West.

“Considering the China struggles, Adidas may have recognised that they need to create some new sources of growth, and they may be relooking at India,” says the second former Nike executive. “This could be similar to where Nike was in 2006—seeing India as a growth market and wanting to invest.”

The senior sportswear executive concurs, adding that Adidas India’s current general manager Neelendra Singh took over in 2019 right before the pandemic, so he hasn’t got the opportunity to do a big marketing campaign yet. “He would have gone to the senior management and said cricket is the best way to get visibility in India. And since India is among Adidas’ top five priority markets globally, the management would have agreed.” Singh did not respond to my request to participate in this story.

So, what can Adidas do differently compared to Nike? Ultimately, it depends on what the brand’s objectives are.

“If you’re paying ₹70 crore and expecting sales of ₹350 crore, it’s not possible,” says the senior sportswear executive. “You should have budgets set so that the ₹70 crore helps you elevate the other aspects of the brand. How much can I grow my revenue from ₹1,500 crore? Will I get extra sales of ₹100 crore-₹200 crore? And then out of that ₹200 crore, how much is coming from the India merchandise? If your expectations are clear, you’re okay. But what happens is the expectations keep increasing every year because you’re spending ₹70 crore and you don’t see the needle moving as much as you’d want.”

The second former Nike executive says it all also depends on what Adidas’ growth plans for the market are. Since products sold in India are 20%-25% more expensive than most international markets because of all the duties and taxes involved, all of that additional cost structure has to be addressed to meet financial targets. So, Adidas may decide to take a more strategic pricing approach and reduce its margins.

Another important consideration is how Adidas approaches its strategic relationships with retail partners. If it gives them better margins and marketing support, that could help get the brand more shelf space in the market.

And thirdly, does Adidas plan to truly invest in cricket and build a bigger business in the category? “How do you get more accessible products that may be more relevant to the India market? How do you get into the school-level activities where there is a thriving athlete base, but the price points at which they can afford footwear and apparel are very different? It would require a relook at the whole business model,” says the second former Nike executive.

Will Adidas bring down the price of the India jersey from ₹5,000? The industry experts I spoke to were divided on this, but they all acknowledged that the only way the brand would be able to do so is if it manufactured the jersey locally. And that’s easier said than done.

It’s essentially a chicken and egg problem. India is a very strong sourcing base for leather footwear and non-technical apparel, but not so much for athletic footwear and performance apparel. Most performance-oriented products are sourced from other Asian countries such as China, Bangladesh, Thailand, and Vietnam.

Indian factory partners could potentially make performance apparel, but it has to be sustainable for them. The products have to be able to drive the volumes needed to amortise the capital investment required. And that’s tricky because, as mentioned earlier, the scale of the market for such products in India is not high enough.

“Nike has got some of its global factory partners to set up units in India, like [Taiwanese company] Feng Tay. But it’s a similar story to Apple where there is some global manufacturing being done in India but not enough to really supercharge the market,” says the second former Nike executive.

Whether Adidas decides to manufacture the India jersey locally or not, what’s clear is that it’s going to have to spend far more than the reported ₹350 crore over five years to really crack not just India cricket, but India as a whole. The brand is in a decent position right now, with profits growing 229% year-on-year to ₹149.8 crore ($18 million) in the year ended March 2022. Those numbers will take a hit if it does end up getting the India kit sponsorship.

Will it be worth it in the long run? We’ll have to wait and see. I, for one, am really looking forward to seeing if Adidas can match Nike’s Bleed Blue ahead of the 2023 World Cup, hosted by India, later this year.

That’s all for this week. If you enjoyed this edition, please share it with your friends, family, and colleagues, and ask them to subscribe to The Playbook. You can reach out to me at [email protected] with any feedback (good, bad, or ugly), tips, and ideas. I'd love to hear from you!

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