On September 22nd, Adidas held a football match in Shanghai with employees from its distributor, Top Sports. Adidas CEO Bjorn Gulden took to the field as a starting player. Since becoming the CEO of Adidas last year, Bjorn Gulden has visited China three times. Adidas is the world's second-largest sportswear brand in terms of sales scale, operating in an industry filled with sweat, injuries, victories, and setbacks.

For Adidas, the recent years have been tumultuous, both globally and in the Chinese market. After experiencing a decline in revenue and a restructuring of its supply chain, Adidas has regained its footing in the Chinese market. Looking at the latest year's operational data, Adidas has embraced the Chinese market with vigor, regaining consumer trust, but also moving further away from Chinese manufacturing.

The period of business turmoil has come to an end for Adidas. The change in management at Adidas occurred last year. On January 1, 2023, Bjorn Gulden took over as the CEO of Adidas, succeeding Kasper Rorsted who left early.

The past five years have been a test for the management of any multinational company. The pandemic disrupted global supply chains, and a large number of retail stores closed. During this period, Adidas terminated its collaboration with rapper Kanye West, affecting the popular Yeezy business and causing hundreds of millions of euros in impact. In 2022, Adidas' revenue stagnated, and net profit fell by nearly 70%. The fiscal year of 2019 was the peak of Adidas' sales in the past decade, and the fiscal year of 2023 has not yet returned to that scale.

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Adidas' business挫折 in China have been particularly severe. During the pandemic, China's economic vitality was suppressed, and consumer confidence was affected. At the same time, Adidas faced fiercer competition from local enterprises, with Li-Ning and Anta being strong competitors in the Chinese market. The previous CEO of Adidas admitted to making mistakes in the Chinese market.

In early 2022, Adidas changed its Managing Director for Greater China, with Xiao Jiale taking over a market with continuously declining sales. Since then, he has made some adjustments to the Chinese region, focusing not only on the consumption capacity of first- and second-tier cities but also stepping up efforts to tap into the consumption potential of third- and fourth-tier cities.At the end of 2023, Adidas closed its first global flagship store in South China, which was also the highest-level flagship store. The lifespan of this flagship store was less than two years. At the same time, it also added some new stores. After 2023, Adidas opened new landmark stores in Xuzhou, Chongqing and other places, such as the super thousand square meters store in Xuzhou.

"In the past three years, the positioning of commercial circles and the structure of passenger flow in many cities have changed, so Adidas will optimize offline stores based on these changes, combined with its own business strategy, including closing and opening." Adidas said at that time when responding to the first financial feedback.

Adidas's Suzhou automated distribution center also opened in September 2023, which is the largest investment of the company in China in the past five years. After the sharp decline in the Chinese market, Adidas's sales in Greater China increased by 8% on a neutral exchange rate basis in 2023. However, this performance scale has not yet returned to the best period.

Bjorn Gulden believes that every category of Adidas has the potential for growth in China. China's economic growth is maintained at around 5%, while the EU's GDP only increased by 0.5% last year, especially in the fourth quarter, the EU's economy grew zero on a quarter-on-quarter basis.

During his third visit to China after taking office, Bjorn Gulden said to the media that Adidas wants to give more autonomy to the local management, which can better know what kind of products are suitable for the Chinese market.

De-Chinalization in the manufacturing process

From the perspective of the market, Adidas is embracing China; the Chinese market has also lived up to its efforts, and Adidas has achieved growth in Greater China for the past five quarters.

"Some of the reasons are luck, and it depends on timing (socio-economic, political environment, etc.), of course, there is also effort." When talking about Adidas's change in business downturn, Bjorn Gulden said that Adidas has turned the situation on the consumer side, and the situation in some areas has improved faster than expected.

China is currently one of the three creative centers of Adidas, and the other two creative centers are located in the United States and Europe. Currently, about half of the Adidas products sold in China are designed locally in China. "These three centers together form the development engine of Adidas." Bjorn Gulden said, "We will continue to invest in local design, that is, creative talents."

From the perspective of the manufacturing industry, Adidas has been moving away from China in recent years.Despite Bjorn Gulden's statement that approximately 80% of the company's products sold in China are manufactured domestically, this is hardly a source of pride for China's manufacturing industry.

In the past, China was one of Adidas's manufacturing hubs, serving as its global factory. The contract manufacturing enterprises located in China's coastal cities produced sports shoes, apparel, and footballs that were shipped from Chinese factories to every corner of the world.

This is no longer the case.

Footwear is Adidas's leading product category. In 2023, China manufactured about 14% of Adidas sports shoes, down from 16% in 2022. A decade ago, in 2014, China produced around 27% of Adidas sports shoes.

The decline is even more pronounced in the apparel segment. In 2014, 31% of Adidas's apparel was made in China, but by 2023, this figure had dwindled to just 15%. Cambodia is now Adidas's largest apparel production center.

Over the past decade, Adidas has reduced its already limited production capacity in the United States and Europe, shifting its production focus to Asia. Currently, about 97% of Adidas's shoes are produced in Asia, but this capacity has increasingly shifted towards Vietnam and Indonesia, with China's share continuously declining.

At present, the proportion of Adidas's manufacturing in China is roughly equivalent to its sales proportion in the Chinese market. Looking at the first half of 2024, sales revenue from the Greater China region accounts for 15% of Adidas's total revenue. This figure is essentially the same as the 16% proportion of its shoes produced in China.

Post-pandemic, multinational corporations are seeking more diversified production and a resilient supply system. The distancing of Adidas's manufacturing from China, is it a stopping point, or will it continue until it reaches a complete shutdown? Adidas has not yet made a clear statement.

After Xiao Jiale took the helm, Adidas reversed its downward trend in the Chinese market, convincing more Chinese consumers to believe in the Adidas brand. The next step may involve persuading Adidas's global CEO, Bjorn Gulden, to retain more manufacturing processes in China.