It was a moment most business executives would pause to savor: late last year, German sporting goods pioneer Adidas learned that after years of declining market share, the company had sprinted past U. S. Reebok International to take the second place behind Nike in the race for worldwide sales. But Robert Louis-Dreyfus, the rumpled Frenchman who now runs Adidas, and didn't even stop for one of his trademark Havana cigars in celebration, worried that the company would grow complacent. Instead, he and a group of friends bought French soccer club Olympic de Marseille "Now that's something I have dreamed about since I was a kid. " Louis-Dreyfus says with an adolescent grin.
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With sales in the first three quarters of 1996 at 2.5 billion, up a blithering 30.7% over 1995, it's hard to recall the dismal shape Adidas was in when Louis-Dreyfus took ever as chairman in April 1993. Founded in 1920 by Adi Dassler, the inventor of the first shoes designed especially for sports, the company enjoyed a near monopoly in athletic shoes until an upstart called Nike appeared in the 1970s and rode the running fad to riches. By the early 1990s Adidas had come under the control of French businessman Bernard Tapie, who was later jailed for bribing three French soccer player. Although the company tried to spruce up its staid image with a team of American designers, Adidas lost more than 100 million in 1992, prompting the French banks that had acquired control of the company from Tapie to begin a desperate search for a new owner.
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The tinker-loving Louis-Dreyfus knew he had been dealt a winning hand. Following the lead set by Nike in the 1970s, he moved production to low-wage factories in China, Indonesia and Thailand and sold Adidas' European factories "for a token one Deutsche mark a piece. He hired Peter Moore, a former product designer at Nike, as creative director, and set up studios in Germany for the European market and in Portland, Qregon, for the U. S. He then risked everything by doubling his advertising budget. "We went from a manufacturing company to a marketing company," says Louis-Dreyfus. "It didn't take a genius—you just had to look at what Nike and Reebok were doing. It was easier for someone coming from the outside, with no baggage, to do it, than for somebody from inside the company. "
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"The marketing at Adidas is very, very good right now," says Eugenio Di Maria, editor of Sporting Good Intelligence, an industry newsletter perceiving Adidas as a very young brand. "The company is particularly strong in apparel, much stronger than Nike and Reebok. "
Although 90% of Adidas products for wear on street instead of sports fields, Louis-Dreyfus felt the previous management had lost sight of Adidas' roots as a sporting products company. After all, Adi Dassler invented the screw-in stud for the soccer shoe and shod American champion Jesse Owens in the 1936 Olympics. So he sold off or folded other non-core brands that Adidas had developed, including Le Coq Sportif, Arena and Pony. Europe is still the company's largest market because Adidas dominates the apparel industry and thanks to soccer's massive popularity there, Louis-Dreyfus is quick to share credit for the turnaround with a small group of friends who bought the company with him in 1993. One of those fellow investors is a former IMS colleague, Christian Tourres, now sales director at Adidas. "we're pretty complementary because Fm a bit of a dreamer, so it's good to have somebody knocking on your head to remind you there's a budget," says Louis-Dreyfus.
Commuting to the firm's headquarters in the Bavarian town of Herzogenaurach from his lakeside house outside Zurich, Louis-Dreyfus also transformed Adidas from a stodgy German company into a business with a global outlook. Appalled on his first day at work that the chief executive had to sign a salesman's travel voucher for 300, he slashed the company's bureaucracy, adopted American accounting rules and brought in international management talent. The company's chief financial officer is Australian and the international marketing manager is a Swede. English is the official language of the head office and no Germans remain on the managing beard of the company, now whittled down to just himself and a few trusted aides. "It was clear we needed decentralization and financial controls," recalls Louis-Dreyfus. "With German accounting rules, I never knew if I was making money or losing. "
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" He gives you a lot of freedom, "says Michael Michalsky, a 29-year-old German who heads the company's apparel design team." He has never interfered with a decision and never complained. He's incredibly easy to work for. "
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The challenge for Louis-Dreyfus is to keep sales growing in a notoriously trend-driven business. In contrast to the boom at Adidas, for example, Reebok reported a 3% line in sales in the third quarter. Last fall Adidas rolled out a new line of shoes called" Feet You Wear" which are supposed to fit more comfortably than conventional sneakers by matching the natural contour of the foot. The first 500,000 sold out. Adidas is an official sponsor of the World Cup, to be held next June in France, which the company hopes to turn to a marketing bonanza that will build on the strength of soccer worldwide. But Reebok also has introduced a new line called DMX Series 2000 and competition is expected to be fierce coming spring.
A. Just as the transition was taking place, Adidas had a run of good luck, The fickle fashion trendsetters decided in early 1993 that they wanted the" retro look", and the three-stripes Adidas logo, which had been overtaken by Nike swoop, was suddenly hot again. Models such as Cindy Crawford and Claudia Schiffer and a score of rock idol sported Adidas gear on television, in films and music videos, giving the company a free publicity bonanza. Demand for Adidas products soared.
B. Louis-Dreyfus, scion of a prominent French trading dynasty with an M. B. A. form Harvard, earned a reputation as a doctor to sick companies after turning around London-based market research firm IMS-a feat that brought him more than 10 million when the company was eventually sold. He later served as chairman of Saatchi &Saatchi then the world's largest ad agency, which called him in when rapid growth sent profits into a tailspin. With no other company or entrepreneur willing to gamble on Adidas, Louis-Dreyfus got an incredible bargain from the banks: he and a group of friends from his days at IMS contributed just $ 10,000 each in cash and signed up for $ 100 million in loans for 15% of the company with an option to buy the remainder at a fixed price 18 months later.
C. In another break with the traditional German workplace, Louis-Dreyfus made corporate life almost gratingly informal: employees ostentatiously called him" Rowbear" as he strides down the corridors, and bankers are still amazed when counterparts from Adidas show up for negotiations wearing sweatshirts and sneakers.
D. The company's payroll, which had reached a high of 14,600 in 1986, was pared back to just 4,600 in 1994. (It has since grown to over 6,000.)
E. A sports fun who claims he hasn't missed attending a soccer World Cup final since the 1970s or the Olympic Games since 1968, the 50-year-old Louis-Dreyfus now is eminently well placed to live out many of his boyhood fantasies. Not only has he turned Adidas into a global company with market capitalization of $ 4 billion (he owns stock worth $ 250 million), but he also has endorsement contracts with a host. of sports heroes from tennis great Steffi Graf to track's Donovan Bailey, and considers it part of the job to watch his star athletes perform on the field. "There are very few chances in life to have such fun. " he says.
F. After reducing losses in 1993, Adidas turned to a profit in 1994 and has continued to surge: net income for the first three quarters in 1996 was a record $ 214 million, up 29% from the previous year. Louis-Dreyfus and his friends made" great personal fortunes when the company went public in 1995. The original investors still own 26% of the stock, which sold for $ 46 a share when trading has doubled to $ 90.