Tuesday, April 15, 2008

Story behind Adidas and Puma (so good I had to clip a copy)

Newsweek

The family fight that created Adidas and Puma.

Jennifer Barrett
NEWSWEEK WEB EXCLUSIVE
Updated: 6:26 PM ET Apr 14, 2008

Adidas and Puma may be among the most recognized brands in the world, but neither might exist if not for a bitter rivalry between two brothers from a little-known village in Germany. In the 1920s, Adolf (Adi) Dassler, a soft-spoken sports fanatic who spent hours working on shoe designs in his workshop, and Rudolf Dassler, a gregarious salesman, started a small shoemaking business in the Bavarian enclave of Herzogenaurach, focusing primarily on hand-sewn athletic footwear. But as their business took off, the two brothers grew increasingly frustrated with each other. They disagreed on everything from politics, the future of the company and one another's choice in wives.

Finally, in the mid-1940s Rudolf left in a huff and set up a rival shop across the river, while Adi remained in the initial plant. His company was renamed Adidas, and in 1948 Rudolf registered his new company, Puma. NEWSWEEK's Jennifer Barrett spoke with Barbara Smit, author of the new book "Sneaker Wars" (Ecco; $26.95), about how a family feud spawned two of the biggest brands in global sports. 


Excerpts:

NEWSWEEK: Most people wearing Pumas or Adidas today likely have no idea that two estranged German brothers founded the companies. How did you become interested in their story?
Barbara Smit:
 I didn't know it either, actually. I'd been wearing Adidas all my life and had no idea. But I was sent to Herzogenaurach, Germany [where both companies are based] by a French magazine to write a feature ahead of the 2000 Olympics in Sydney. I began to find out more about this story of the two brothers, [and it had] all the elements of what makes a good story: family drama, the intimate rivalry between the two brothers in a very closed setting, two international brands, and all of it set in the world of sports.

What was the extent of the brothers' involvement in the Nazi Party, and how much of a role do you think that had to do with their split?
It was very difficult for any German company during those times to continue to operate without having some kind of links with the party, especially if it involved sports, which was very much at the heart of the Nazi propaganda machine. The Dasslers had ties with the sports hierarchy … It certainly helped in gaining access to the Olympic grounds in 1936 when they had this superb linkup with Jesse Owens.

That was a real coup for their shoe business, but it must have been a controversial decision at the time to pursue an African-American who was competing against the Germans for the gold.
Adi just had this obsession with sports at the complete exclusion of anything else. He just picked Jesse Owens out because he was a fabulous athlete. But in the end the entire environment of the war and politics really tore the brothers apart, and the involvement of their wives [who did not get along] brought it to a boiling point.

When each decided to form his own company, the original names were created by using the first two letters of the first names: Addas and Ruda. How did they become Adidas and Puma? 
There was actually a children's shoe brand with the name Addas, so Adi added an i. In Rudolf's case, his marketing flair and his assistants probably told him that Ruda wasn't very inspiring. So he changed it.

Adidas quickly became a much larger company than its rival. Where did Puma go wrong? 
One of the critical failures for Puma was that Rudolf had an argument with the coach of the German soccer team, and that allowed Adidas an opening before the 1954 World Cup, where, completely against all odds, West Germany won against Hungary … Adi Dassler was in all the [newspaper] pictures; he was everywhere. And the Adidas black boots with the stripes were on all the players. From that moment on they received letters from around the world from people wanting to sell Adidas in other countries. As good as the Puma boots were, it would take many years to build up its international business.

In many ways the rise of Adidas as an international company is the story of the rise of sports as an international business. How big a role do you think Adidas played in the growth of the sports industry? 
Undeniably, when Adidas came along, sport wasn't a daily pastime. It was seen as frivolous and Europeans concentrated on just a couple of sports—particularly gymnastics and soccer. Today sports participation is huge and part of the global lifestyle, not to mention that we're wearing sneakers to go buy groceries. The whole practice of sports has been woven into weekly if not daily routines. The other aspect I find perhaps even more fascinating is how Horst [Adi's son] sold sports events as an advertising platform. He sold sports, not just sports apparel. He made contracts with sports federations and the Olympic committees and was involved in selling the World Cup [to sponsors].

I know Horst died prematurely. Now only one family member remains involved in either company, right? 
Frank Dassler, the grandson of Rudolf Dassler, is the only one. At one point he was head of Puma USA, and he's now been appointed head of legal affairs at Adidas.

He crossed the river! 
Yes. It caused a bit of a storm. But it really symbolizes that things are a bit more rational these days.

Do any remaining family members regret that they're not more involved now? 
The comments I heard were that they wanted to put it behind them. It was such a struggle. They were constantly fighting. There was so much unpleasantness in the family between the brothers and between Horst and his parents and sisters. It was such a tense family environment that they were eager to just let it rest. There's bitterness among [Adi's children] that they sold in a rush, because they believed that Adidas in the late 1980s was really threatened.

Adidas is now the second-largest sports apparel company in the world, and owns Reebok, but at one time it lagged way behind Reebok. How did it turn around? 
Adidas made the terrible mistake of saying it was not interested in jogging, and then aerobics became huge and Adidas and Nike both made the mistake of saying they were not interested in aerobics. They completely missed out on these trends, but Reebok didn't. Within about three years Reebok went from revenues of a couple hundred million to several billion. It continued on that way for years. But then Reebok lost its way. And Adidas, for all its mistakes, never lost its way as badly as that … Through it all, Adidas has remained in the consciousness as a solid sports brand. Reebok doesn't have that, either as a sports or lifestyle brand.

How are Puma's prospects now? 
The French conglomerate PPR, which owns Gucci, has now acquired it. A few years ago it was being sold in bazaars and people had declared it dead, and it is now being named in the same breath as Gucci … That repositioning will probably be taught to MBA students for several years.

As a business case, what are the most important lessons we can draw from the history of Puma and Adidas? What has made them such enduring brands? 
At the beginning of the story, there's always a great product. Puma has survived its worst years because it had a great soccer boot. It's the same story for Adidas; it just makes great products. Another interesting lesson is that you need great enemies. I don't think either company would be where it is today if it hadn't been stimulated by the rivalry with the other.