Reebok may be getting a new owner, as its German sportswear parent company Adidas looks to offload the household name brand. Once a cultural icon of epic proportions, Reebok has struggled in recent years to gain a foothold with today’s trendsetters and tastemakers. This could be changing as new buyers including a business dream team of hip-hop business mogul, Percy “Master P” Miller and former NBA All-Star Baron Davis are looking to acquire the company, which could garner an asking price of around $2.4 billion. Is it time for the culture to take ownership of some of the products it helped to cultivate?
The Breakdown You Need To Know:
Back in 2005, Adidas bought Reebok aiming to take on U.S. arch rival Nike
NKE
on its home turf, but failed to understand the culture it wanted to impact, according to CultureBanx. Then in late October, reports surfaced that Adidas was reportedly looking to shed Reebok, 14 years after acquiring the brand that was founded in 1958 for $3.8 billion. Last year, however, Adidas wrote down Reebok’s book value by nearly half compared with 2018, to 842 million euros ($995 million).
This is why having culturally astute business minds like Miller and Davis who aptly intersect music, sports and culture can be a major win for Reebok’s turnaround strategy. The company actually pioneered the idea of signing rappers to shoe deals in the same way athletes were. Sean “Jay-Z” Carter signed with Reebok back in 2003 and dropped the S. Carter shoes. In 2004, Reebok’s U.S. footwear sales grew by 17%, due in large part to its continued investment in hip-hop. So it’s plausible that Miller and Davis could even change the wealth paradigm through investing in a major sportswear brand, and providing opportunities that didn’t exist before in the Black community.
Remember that sneakers by rappers like Kanye West, Drake and Pharrell with companies including Nike and Adidas have created a consumer frenzy, as these influencers dictate business and trends. Cultural endorsers have basically usurped athletes as the go-to tastemakers in the sneaker industry. Hip hop artists have gone from subtle co-signers who helped start grassroots movements, to indirect ad men, to power brokers. Reebok’s latest cultural influencers to head up its roster include rap sensations Cardi B and Kendrick Lamar.
Cultural Commodities:
The market for resale sneakers and streetwear in North America is projected to reach $6 billion by 2025, according to Cowen. Sneakers have become coveted consumer goods and tradable commodities with “sneakerheads” around the world regarding them as investment assets. It’s imperative that Reebok is able to claim a bigger piece of this market.
The potential sale comes after four years of attempted-Reebok revitalization. Even though the brand was finally profitable in 2019. Investors had already been calling for Adidas CEO to sell the company.
“I think Reebok is being undervalued. I left Nike as a 22 year old kid representing myself and made the jump to Reebok, which took a chance on me as a creative and as an athlete. I want the people I know athletes, influencers, designers, celebs to sit at the table with me,” said Davis.
Davis and Miller are both serial entrepreneurs with investments spanning sectors including media, technology, sports, music, fashion and even Miller’s latest endeavor with Uncle P food products. They have plans to not only turn around the beleaguered brand, but to give other smaller shoe companies opportunities for distribution. While creating a new cool identity for Reebok, they want to change the narrative by offering African Americans a piece of the athletic footwear and apparel pie.
“As we focus on turning Reebok into a lifestyle brand not just a basketball brand, our most important initiative will be to put money back into the community that built this company,” said Miller.
The future opportunities are endless for Reebok under the right business and cultural leaders. Not just for the brand, but also for the people who helped to make it a household name. “We want this to be a community effort, that sets up the next generation of leaders for success,” said Vy Le, COO of Baron Davis Enterprises.
Rebuilding Reebok:
It won’t be easy for Reebok to take on the incumbents in the space. For example, Reebok sales dropped 44% in the second quarter of 2020, while only accounting for 8% of Adidas’ total sales in the first half of the year, leading to its parent taking impairment charges in the period. In fact, German news outlet Manager Magazin calls the purchase of Reebok the brand’s “most expensive mistake.” Not to mention that several companies could be interested in Reebok, including Timberland
TSBK
and North Face owner VF Corp
VFC
and China’s Anta.
Adidas has focused Reebok on fitness in recent years, and currently has official footwear and apparel sponsorship deals with UFC and Spartan Race. It also has a deal with CrossFit that is set to expire this year. Shares in Adidas jumped as much as 3.5% on reports of selling Reebok, following repeated calls to dispose of the brand from investors who criticized a lack of progress in turning around the business.
What’s Next:
Manager Magazin stated that Adidas plans to have Reebok sold by March of 2021, without citing where it obtained the information. However, a report from Bloomberg contradicts this, saying “the company will decide in the coming months” if they will proceed with the sale. Adidas declined to comment directly.
