FOOTWEAR: BIG MAN, BIG MOVE, BIG IMPACT

Am I the only one that was taken aback by Kevin Garnett switching his endorsement from Adidas to Chinese local brand Anta?  This is getting lost in the noise around earnings reports, but mark my words…it is big (bigger than the 6’ 11” man himself). Let's take this past the sensationalistic headline stage and really look at the facts and the underlying implications for the industry, and for Nike.

 

FOOTWEAR: BIG MAN, BIG MOVE, BIG IMPACT - Kevin Garnett

 

First off, let’s get the facts right… The press is pitching this as Garnett ditching Adidas. I guess that’s partially true. But if Adidas really wanted to keep him, then it would have kept him. Mind you, this is the big man’s 4th endorsement in his career. Most athletes have one. Two max. Similar trajectory as Shaq. Wanna guess why?  Big dudes don’t sell product. They tend to be viewed by the target consumer as inaccessible. True or not, the consumer generally has a mindset that one of the reasons they are good is because of freak genetics. That compares to players like Michael Jordan, Allen Iverson, Kobe Bryant, and KG’s teammate Rondo – who are gifted, fast, and hard working athletes in the shell of a semi-normal sized guy.  The bottom line is that Adidas hardly fought to keep Garnett, and I don’t blame them.

 

Second, and more importantly, this is a newfound offense on the part of Anta. Who?  Anta, the second largest local sneaker brand in China behind Li Ning.  Anta will debut KG’s shoe and an accompanying line of sportswear for the ’10-’11 season. They have already planned major basketball events in Beijing, Xiamen and Shanghai throughout the month of August.

 

Why does this matter? I could care less about the events they are hosting in China to highlight Garnett. There’s more than enough to go around as China’s middle class emerges. But I’m concerned about the US. Back in 2006 Li Ning debuted basketball shoes in the US for the NBA. And while they have yet to catch on, they just opened an office in ‘sneaker alley’ in Oregon (yes, to poach Nike employees). Now they’re making a heavier push with Baron Davis. I have no idea whether it works or not, but they’ll keep trying.

 

FOOTWEAR: BIG MAN, BIG MOVE, BIG IMPACT - bd

 

Now Anta is in the game too? Ugh.

 

If there’s anything that gives me comfort it is that I had a meeting with Nike’s Charlie Denson earlier this year when we started to highlight this as a risk. Everyone was concerned about China from a sourcing perspective. While valid, we started to sense a greater risk from China as it relates to content being exported back into the US from Chinese brands.  When I asked Charlie about this, he gave me one of those stone cold looks in the eye with a little smirk and said “we’re keenly aware of that.” 

 

Knowing how Nike works, this tells me that they’re a step or two ahead of the game. They will not get beat in their own category on their own soil. This is also one reason why I think the company reorged like it did a year ago and radically changed its go-to market.  

 

But also keep in mind that Nike is sitting on $5bn in cash. Yes, they’ll start repo’ing licenses. But what better way to get better exposure in China at lower price points, gain more local talent and connections, and have a burgeoning US lower-price brand with an Asian flair than to buy one of these competitors?

 

What does Anta get? For one, it gets US distribution. That’s big. Nike’s distribution is near impossible to replicate without a few billion dollars to get it there.  Also, keep in mind that Anta, Li Ning, and other Chinese locals are fine from an FX standpoint as long as they stay in China. But as they grow outside of China (and into the US and Europe) they become net short the Yuan – which is the currency with the long-term tailwind. Like it or not, they NEED a US partner more than they care to admit.

 

Can someone explain to me why this does NOT make sense?


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