FIFA World Cup reigning champions, Real Madrid, is deliberating to determine who their next kit sponsor will be. Adidas is a lucrative sportswear manufacturing company worldwide, but especially within the football circuit. As stated on Real Madrid’s website, Adidas has been a sponsor of Real Madrid since 1998 with an extension of their contract in 2011. Real Madrid’s current Adidas contract runs through 2020. It is said that there is a strong possibly that Under Armour will be the next sponsor of Real Madrid. Under Amour is looking to be recognized in the European market of sportswear. If this becomes reality there are not only business implications such as brand alignment, but also sociocultural implications that will effect this massive decision.
As confirmed on forbes.com, the potential contract between Under Armour and Real Madrid is worth at least $160 million, and if signed, could be one of biggest sponsorship deals in the history of football. Any sportswear company would be lucky to sponsor Real Madrid as they are the most valued football franchise for the past 11 years. According to Forbes, as of the 2016 valuations, Real Madrid is worth over three billion dollars.
Adidas headquarters and manufacturing plants are primarily based in Germany. Adidas is one of the largest manufacturing companies in Europe. On the other hand, Under Armour is an American based company that manufactures sportswear as well. Affirmed by fortune.com, “Losing the No. 2 spot (in Sport Brand Position) was especially bruising for Adidas, as it generates more than $18 billion in global sales annually vs. just about $4 billion for Under Armour last year”. According to fortune.com, losing the number two sport was discouraging to Adidas because they are more entrenched in the American sportswear culture from a historical perspective.
Also, Adidas has been around since 1949 and Under Amour has only existed since 1996. However, in 2016 Adidas regained the number two spot of sport brand position behind Nike.
This possible sponsor switch has sociocultural implications. As a result of Under Armour being an American brand could causes fans and followers to be less accepting of a European brand and vice versa.
Another aspect of this deal to consider is if Real Madrid brand aligns with Under Armour. Real Madrid positions themselves as a global brand by being a winning and well-known franchise. Current prominent sponsors of Real Madrid are Audi, Hugo Boss, and Microsoft. Real Madrid’s corporate sponsors are upscale, and well-known global brands. A likely strategy behind Under Armour’s interest in being the official kit sponsor for Real Madrid could be the strategic association of being top of the market as many of Real Madrid’s sponsors are in the top of their respective industry categories. The question at hand is if Real Madrid’s sponsors align with Under Armour and their brand recognition strategy. Under Armour has a good reputation, but it is not Adidas. As reported by investopedia.com, Adidas is entrenched in market segments domestically and abroad where it has significant brand loyalty relative to its competition. Whereas, Under Armour has not broken into the European markets and is primarily based in the United States.
However, as mentioned by Forbes, in 2012 Under Armour owned by billionaire Kevin Plank hired former Adidas executive Karl-Heinz Maurath to run its International Business department. As affirmed by Bloomberg, before joining Under Armour Maurath served for 22 years in various leadership positions with Adidas, including Senior Vice President. This could be used to Under Armour’s advantage because Maurath is familiar with Adidas’s international business model and can challenge it because of his inside knowledge and experience. Found on Forbes, stated by Plank himself, “We believe the future success of our brand depends on developing our business outside of North America”. If Under Armour secures this deal it will be another step in the right direction in breaking into the international market.
Tottenham made it public that they will not renew with Under Armour. According to Forbes, Under Armour began a five-year deal in 2012 as the uniform sponsor of Tottenham Hotspur. However, Tottenham switched their kit sponsor for the 2017-2018 season. Tottenham will be sporting Nike during this season. It was stated via espnfc.com that the reason behind the switch was that Nike offered three times the amount supplied by Under Armour in hope that Nike could have a say in a naming-rights deal for the club’s new stadium, scheduled to be ready for the start of the 2018-19 season.
On the other hand Southampton F.C. has entered into a seven year contract with Under Armour. FC St Pauli also entered in to a partnership agreement with Under Armour in 2016, but have not released the duration of the contract.
If Under Armour signs the contract with Real Madrid, Tottenham leaving Under Armour will be on the back burners of everyone minds because Real Madrid has such a substantial global reputation, recognition, and experience with sponsoring other football clubs.
In addition, another speculation is that this could be a money grab for Real Madrid as they do not have to do anything additional in order to make Adidas more popular in European markets. Real Madrid will continue to win titles and matches and have well known players, which in itself will help make a dent into the European markets as the official sponsor.
However, Under Armour is a prominent brand in the sportswear market, but not fully in the international market let alone the European market as of yet. Under Armour does have many player endorsements which aids to their popularity in the United States, but does not help their international challenge. Under Armour being a United States brand also could interfere socioculturally by having Europeans not fully backing the switch.
With all of that said, the right decision for Real Madrid would be to stay with Adidas as there is history there. Under Armour is not experienced in the European market of sportswear, which could be challenging for a positive result financially if Real Madrid follows through with Under Armour.
(Featured picture found via: http://www.footyheadlines.com/2017/02/under-armour-real-madrid-17-18-concept-kit.html )