Wen Xiaotong Xin

Every March and April are the days when sports brands focus on making money. Compared with the “gloomy cloud” affected by the epidemic in 2020, the performance of companies has obviously improved in 2021. Anta Group, Li Ning, Tebu group, 361 ° and other domestic sports brands in Hong Kong stocks all showed good data.

However, also in the Chinese market, the life of foreign brands in 2021 seems to be difficult, especially the head companies Nike and Adidas.

From the annual report, Adidas’s global revenue growth reached 15%, but only 3% in Greater China; Nike’s annual report has not been issued, but the revenue growth in Greater China in the first nine months was - 11%.

Anta mentioned in the financial report release that during the period from December 2020 to November 2021, the group’s revenue was 49.33 billion yuan, exceeding Adidas’s revenue in Greater China (34.34 billion) for the first time, and not far from Nike’s level in Greater China (51.02 billion).

The change in market share seems to be more telling. According to the latest analysis of Euromonitor, the market share of Nike + Adidas in China fell to 40% (Nike accounted for 25.2% and Adidas accounted for 14.8%) in 2021, breaking the pattern of 43% maintained from 2018 to 2020; The market share of Anta Group (Anta + FILA, etc.) rose 0.8 percentage points to 16.2%, surpassing adidas for the first time and rising to second place. Fourth place Li Ning also rose 1.5 percentage points to 8.2%.

Changes in domestic market share of sports brands in 2020 and 2021

Company data can also find clues. Quarterly data show that the growth rate of the two brands in Greater China has decreased after 2021, even negative growth, which is significantly lower than the global level of brands.

Due to the just split, adidas has only the data of Greater China in fiscal year 2021, and its performance is also not optimistic.

As a general rule, after the epidemic in 2020, referring to the data of domestic sports brands, Nike and Adidas should perform better in the Chinese market. Why did Nike and Adidas experience “temporary loss” in the Chinese market? What does it mean for these two head brands?

“Special 2021”

Xiao Ying still remembers that when she went to Beijing International Trade mall in April, she felt the “double heaven of sadness and joy” of the store - Nike had few customers in the store due to the influence of public opinion on the origin of cotton products; Not far away from China, Li Ning has just announced the signing of Xiao Zhan. Fans are attracted and need to limit the flow, so there is a long line outside the store.

The event of public opinion is indeed the most direct reason for the sharp turn in consumption will, which is not the first time in China. For example, in 2012, affected by the tense relationship between China and Japan, the sales of Japanese cars experienced great fluctuations, and Toyota fell by nearly 70% in October 2012. It was not until March of the next year that the overall decline of Japanese auto enterprises began to narrow further, but there are still variables.

Although many international brands are involved, Nike and Adidas have obviously become the “leading birds” targeted by all parties. According to the analysis of “Amoy data”, before the origin of cotton fabrics occurred in March, Nike and Adidas ranked first in monthly sales alternately, almost dominating the list all year round, and the best result of domestic brands is the second; After the incident, the monthly sales share of Nike and Adidas was quickly occupied by domestic brands, and Anta rushed to the top of the list the next month. Li Ning, Tebu and Hongxing Erke also rose to the top one after another.

However, relative to public opinion events, productivity shortage may be the biggest constraint on the development of Nike and Adidas.

Most of Nike and Adidas products come from Asian countries, especially Vietnam. According to the financial report data of Nike and Adidas, 50% of Nike’s shoes and 42% of Adidas’s shoes were produced in Vietnam in 2020. The sudden outbreak caused the shutdown of Vietnamese factories, which directly affected the capacity supply of Nike and Adidas.

On September 24, Matt friend, CFO of Nike, said in the earnings call that 80% of Nike’s shoe factories in southern Vietnam and nearly 50% of its clothing factories were closed. In the first quarter of the fiscal year alone (June August 2021), Nike suffered a 10 week production loss.

In the two quarter of the fiscal year (-11 September 2021), the performance of the Greater China region slipped by 20%. Nike’s earnings report said that “a large extent is due to the closure of Vietnam’s factories caused by COVID-19, resulting in a low level of inventory of goods.”

In September 2021, Nike said that the production and delivery delay of shoes would continue until next spring, and several new products were also postponed.

Panjiva, a supply chain research institute, predicts that 160 million pairs of shoes may not be delivered by Nike in 2021 according to the worst-case scenario.

To make matters worse, the increase in sea freight and port congestion have slowed down the entry of raw materials and products, led to a sharp rise in production costs and reduced gross profit in disguised form.

Fortunately, the Vietnamese factory was able to resume production at the end of 2021, alleviating the capacity crisis of Nike and other brands.

In addition to the impact of public opinion and capacity supply, the epidemic is still the third hand to hinder growth. The repeated local epidemic since July 2021 and the impact of floods and other disasters have led to the regional closure of stores in the domestic market, the reduction of passenger flow and the reduction of residents’ consumption willingness.

During the same period, brands such as Li Ning and Anta also slowed down their growth, but Nike and Adidas were relatively more affected. Gong Cheng, an industry analyst, believes that when the economic environment is good, more consumers are willing to pay a high premium for Nike and Adidas products. On the contrary, when the uncertainty of the economic environment increases, some consumers will look for low-cost alternatives, and some consumers will prefer to “delay consumption” - that is, reduce the frequency of buying the brand. This phenomenon is more obvious in high-income groups and young groups.

Growing competitors

In addition to the overall environment, the rise of domestic brands is another major challenge facing Nike and Adidas.

With the continuous progress of the manufacturing industry, domestic sports brands are trying to remove the label of “high quality and low price” and develop in the direction of focusing on quality. The technology R & D and raw material application level of the head brand is keeping up with Nike and Adidas, and the gap between professional products is narrowing.

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