How Puma Can Compete With Adidas And Nike

Puma, currently a distant third in the sporting-goods industry behind giants Nike and Adidas, wants to return to its sporting roots, led by its new CEO Bjoern Gulde. The struggling brand's profits crashed 70 percent last year and its sales declined by 2.5 percent in the first 9 months of 2013. The turnaround plan abandons the company's efforts over the past two decades under former CEO Jochen Zeitz to focus on fashion-led consumers.
But taking on the dominance of Nike and Adidas, which have annual sales of €18.5 billion ($25 billion) and €14.8 billion ($20 billion) respectively, against Puma's €3.5 billion (€4.7 billion), will be quite a challenge. Is it possible at all?

A COLORFUL PAST: THE TWO BROTHERS WHO STARTED PUMA AND ADIDAS BECAME BITTER ENEMIES

The two brothers Adolf (nickname Adi) and Rudolf (nickname Rudi) Dassler originally were partners in the Dassler Brothers Sports Shoe Company, in the small German town of Herzogenaurach. They convinced legendary track star Jesse Owens to wear their shoes as he competed and won four gold medals in the 1936 Olympics.

There are various rumours about why eventually it came to a split between the two brothers in 1947, with Rudi forming a new firm called Ruda (from Rudolf Dassler which he later rebranded Puma) and Adi Dassler founding Adidas in 1949. Elderly residents believe the brothers split because Adolf slept with Rudi's wife and their wives loathed each other. Of course, there are more of those entertaining rumors and stories going around in Herzogenaurach.

Fact is, while Rudi had the sales staff and was better at moving product, Adi had the technical know-how and better relationships with athletes who provided excellent brand exposure. As a result the scales tipped in favor of Adidas with Puma permanently playing catch-up. As they were concentrating so vehemently on each other, both companies only woke up far too late to the arrival and surge of Nike.

TODAY'S COMPETITIVE ENVIRONMENT: TWO GOLIATHS AND A MYRIAD OF SMALLER PLAYERS

Nike: The world’s largest sporting-goods maker reported 2013 revenue of €18.7 billion ($25.3 billion, up 8 percent). The company said it would have €22.2 billion (€30 billion) in annual revenue by the end of its fiscal year 2015. Nike’s sales forecast equates to a compound annual sales growth rate of more than 9 percent over the next few years. Its annual sales growth rate was 10 percent in the past three years. Nike, a true growth company, is the clear leader in North America, very well positioned in apparel, basketball, running gear, and women's products. It expects strong growth coming from its Converse subsidiary and new, innovative products such as the Fuelband (an activity tracker that is worn on the wrist).

Adidas: The world’s second-largest maker of sporting goods realized a revenue growth of €14.6 billion this year and is aiming to reach a target of €17 billion euros ($23 billion) in annual revenue in 2015. As such growth will be slightly behind Nike, although significant revenue increase is expected next year, boosted by sales of national team shirts and official balls for the soccer World Cup in Brazil. Adidas cut its 2013 profit forecast last month because of Russian distribution difficulties, a weak golf market and the strength of the euro.

The Little Dangerous Ones: Last, but not least, there is increasing competition from newer brands like Lululemon, Under Armour, and smaller specialist players like Asics, Mizuno, Brooks, and others.

HOW A BELEAGUERED BRAND SHOULD BEHAVE – OR TEN ACTIONS TO BRING PUMA'S CAT BACK INTO SHAPE

• Focus on the brand's DNA and heritage: In Puma's case this is performance and its sporting roots in soccer and athletics – fashion must come after sports. Finally the company has realized and developed a new mission statement some weeks ago: “Forever Faster“. The statement and a new tag line will be launched to consumers in 2014. (Remember its old one: “Puma has the long-term mission of becoming the most desirable and sustainable sports lifestyle company.“)

• Build on the brand's biggest and most promising category and strive for category leadership: For Puma this is footwear. Precisely the running sub-category. With Usain Bolt as brand ambassador this should be a clear objective and a non-negotiable one.

• Heavily invest in innovation and in parallel cut Opex: Technological-driven innovations in its core categories (running and athletics) must drive growth and margins. Sports should serve the fashion-side of the business, not vice versa.

• Focus on a few selected marketing campaigns and make them as big and as exciting as possible: Fiercely promote existing brand ambassadors and at the same time get new top ambassadors (the new Arsenal London deal will not be sufficient) to build brand recognition.

• Maintain transparent and trustworthy relationships with main stakeholders: Re-build trust with key retail partners, with employees and with French parent company Kering (which owns 84 percent of Puma).

• Strengthen the distribution network: Gain back lost share of space and share of mind at key retailers. Establish a holistic multi-channel distribution strategy with a key emphasis on e-commerce (both on its own site and on key e-retailers′ platforms).

• Manage expectations: Bringing Puma back on track will require a comprehensive turnaround and change management program. Something which can take anything between 12 to 24 months until the first significant benefits might appear. Senior management would be well advised to pro-actively explain that to all stakeholders.

• Do your financial homework and clean up the balance sheet: Quickly execute one-off charges and write-offs which are typical in crisis situations. Future financial results will look more encouraging and will help to stress that the company is on the right path. It is expected that Puma will book approximately €130 million once-off charges in the fourth quarter of 2013, mainly for the closure of a development center in Vietnam and for relocating staff from London to Germany.

• Appreciate the past and set the team's focus on conquering the future: The leadership teams needs to re-inject self-confidence into staff. They need to show appreciation and at the same time constantly raise the bar. A mindset of innovation and Execution in Excellence should be established and lived by everyone. Existing talents and high performers need to be rapidly developed and empowered whilst new external talent should be recruited to bring in some fresh ideas and drive.

• The leader is key: A beleaguered brand needs strong leadership. Someone who is very close to the business, who is in the relevant details himself and able to develop together with key stakeholders a lasting vision and compelling strategy. He needs to be a convincing communicator and motivator, being able to inspire the team in an honest way and in parallel to deliver quick wins. He should display a positive Can-Do-Attitude, a very high level of resilience and energy and manage his teams based on Tough Empathy (giving the teams what they need and not necessarily what they want).

IN THE END IT'S ALL ABOUT A COMPANY'S ABILITY TO INNOVATE AND TO FOCUS

At the heart of any successful business lies its ability to compete. The ability to compete is dependent on its ability to differentiate from competitors. And its ability to differentiate, in turn, is stemming from its ability to innovate and to communicate with consumers. Question: Have you perceived Puma as an innovative company for the past 2-5 years?

Instead Puma tried to be everything by pursuing a so-called multi-category strategy when it aimed at being a sports and a fashion company at the same time. Sadly it ended up being nothing. Why? Because it did not take as much pride in what it didn't do as what it did. In other words: It missed a clear positioning and it lacked focus. Two marketing and branding mistakes you should't commit. Puma lost its shine when it morphed into a copycat of Nike and Adidas.

Can the cat successfully return and attack again? Or is it already too late for a comeback?

What do you think? I look forward to receiving your feedback. Join the discussion!

Photo: Puma

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Andreas von der Heydt is the Country Manager of Amazon BuyVIP in Germany. Before that he hold senior management positions at L'Oréal. He′s a leadership expert, management coach and NLP master. He also founded Consumer Goods Club. Andreas worked and lived in Europe, the U.S. and Asia.

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