Article from Bloomberg.com
By Julie Cruz – May 29, 2013 8:29 AM ET
The red delta sign will be added to items from Reebok’s fitness collection starting July 1, Adidas spokesman Lars Mangels said today.
Using the delta logo marks a recognition by Adidas of the need to rejuvenate a brand that has weighed on growth since it was acquired for $3.8 billion in 2006. In choosing the CrossFit delta,the company is acknowledging the potential gains to be had from exploiting a top-selling Reebok product. Revenue at the CrossFit range rose 13 percent in the first quarter of 2013.
“The new logo will allow them to give their entire fitness category a new boost,” said Gauthier Boche, associate strategy director at the London-based brand consultant Lothar Bohm Associates Ltd. “It’s the right time to do so because they are surfing on CrossFit’s wave of success.”
Reebok initially forged a partnership with CrossFit Inc. gyms in 2010. The tie-up included sponsoring CrossFit Games, opening CrossFit studios and introducing the first co-branded footwear and apparel collection in fall 2011.
CrossFit, which promises a complete fitness routine in less than 30 minutes, has seen its popularity swell in the U.S. and Europe in recent years as people get hooked up on both its speed and being pitted against others.
CrossFit fanatics “shop like crazy,” Katja Erbe, brand director for Reebok in Germany, Switzerland and Austria, said in an interview at Adidas’s headquarters in Herzogenaurach, Germany. “It’s about having the latest gear. Reebok is the only brand that is offering CrossFit-specific products,” including wider shoes and specific textile for apparel, she said.
Adidas Chief Executive Officer Herbert Hainer has vowed to start an immediate revival at Reebok, whose sales declined in each of the three years after the acquisition and again last year. He introduced the “House of Fitness” project last year that aims to bill Reebok as a performance sports brand. The fitness brand will return to growth this year, he said.
“Our communication focus is almost exclusively on the performance angle,” Erbe said.
Adidas’s task in turning around Reebok won’t be easy as combining products designed for high performance with casual sports products “appears particularly difficult,” said Andreas Riemann, an analyst at Commerzbank AG in Frankfurt.
Without Reebok, Adidas could achieve an operating margin close to 11 percent of sales in 2013, Riemann estimated in an April report, compared with the company’s forecast of “a level approaching 9 percent.” Riemann estimates that Reebok is still unprofitable before interest and tax and says Adidas’s free cash flow would be as much as 150 million euros ($193 million) higher without the brand.
Selling Reebok isn’t part of Adidas’s plans, according to Hainer. The CEO said in March that he remains committed to the brand, adding he doesn’t see why it can’t be successful.
To promote recovery, Reebok, which is using the motto “Live with Fire” this year, will continue to add new products. These include CrossFit apparel using so-called baremove+ technology that makes the wearer feel like they are naked when exercising, Erbe said.
Being edgy and provocative when it comes to style remains part of the brand’s strategy, Erbe said, adding that Reebok’s next dance-apparel collections will include prints such as camouflage or zebra.
“We need to be seen because the brand is currently not always at the top of people’s minds like the two other big brands in the market,” Erbe said, referring to Adidas and Nike Inc. “The collections and the campaign ‘Live with Fire’ have brought us visibility.”
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