Reebok is finally getting a way to escape adidas control, and now has a second chance to revive its branding position following the acquisition by ABFRL.
Aditya Birla Group’s acquisition of Reebok in India will finally give it a second chance to grow in a burgeoning market, emerging from the shadows of its biggest competitor and former owner Adidas, for the first time in 15 years. Earlier this week, Aditya Birla Fashion and Retail Ltd (ABFRL) said it has secured exclusive rights to distribute and sell Reebok merchandise through wholesale outlets, e-commerce and exclusive brands across India and other ASEAN countries. “For struggling Reebok, this is a perfect escape route,” said Harish Bigor, who specializes in branding and business strategy.
Reebok struggled to grow under the control of Adidas
German sportswear brand Adidas acquired Reebok’s operations in 2006, in order to strengthen its position and corporate strategy. However, 15 years later, the deal has not benefited either Adidas or Reebok. Adidas was forced to close several Reebok stores in a consolidation move. While Adidas made efforts to relaunch the appeal of the Reebok brand, Reebok’s performance failed to match that of Adidas. Reebok India recently announced that its net profit for the 2020-21 financial year fell 93% YoY to Rs 4.9 crore for the year ended March 31, 2021, due to lower sales.
“At the time of the acquisition by Adidas for US$3.8 billion, it was a great move from a market acquisition point of view, but Reebok could not maintain its position due to dilution of the brand along with adidas,” said Manas Gulati, Co-Founder and CEO. Marketing and Communications Consulting Firm, ARM Worldwide. “Reebok has always been at risk of cannibalism by Adidas,” said Rohit Kumar MS, co-founder and partner at Zensciences.
Reebok gets Aditya Birla’s growth stepping stone
Harish Begur said the Reebok brand has spent many years building shares in the Indian market, and will continue to maintain its presence in India through the operational strength of ABFRL. “Although Reebok has gone through a lot in India, it still offers great fun. ABFRL will bring the science of long-term retail play at its best and Reebok will offer competition to other sportswear brands in the market,” said Bigor. “This move could actually give them a fresh cash boost and then the ability to try out their brand strategy,” said Rohit Kumar MS of Zensciences.
ABFRL will partner with Reebok Design Group (RDG), the newly created Boston-based global brand hub, across all product design, development, innovation and creative direction to drive a unified brand voice and vision, the company emphasized. This gives Reebok a great opportunity to reignite its lost glory and status with other earned brands. “Also, adidas shareholders are anticipating a huge deal between the two Al Fahal brands,” said Manas Gulati, co-founder and CEO of marketing and communications consultancy, ARM Worldwide.
What Reebok brings to the table of Aditya Birla
For ABFRL, Reebok is a good addition to their sports and leisure lineup. Even as the sportswear brand’s retail sales fell last year, experts believe this is a good buy for ABFRL, and will add to its portfolio of fashion and lifestyle brands. ICICI Securities has confirmed that the fashion house will be able to offer a lower double-digit EBITDA margin (pre-IndAS116) for Reebok India’s postal equity expenses, and therefore, this transaction will likely add 4-5% to the consolidated EBITDA (pre-IndAS116) of FY23E .
ABG acquired Reebok from Adidas in August of this year, and the transfer of the Reebok brand is expected to expire in the first quarter of 2022. The deal marked ABFRL’s entry into India’s growing sports and business segment. The sector is experiencing steady growth and is expected to reach 997.8 billion rupees by 2024, expanding at a compound annual growth rate (CAGR) of 13.59 per cent, according to a report by Research and Markets.
“In partnership with ABG, we plan to accelerate Reebok’s business in India, combining its global appeal and prominence among Indian youth,” said Ashish Dikshit, Managing Director of ABFRL. The deal marks a significant milestone in the journey of ABFRL, which has grown its portfolio into a force of brands across all major fashion and lifestyle sectors over the past several years. The addition of Reebok will fill an important gap in the ABFRL portfolio.
Best known for its brands such as Allen Solly, Louis Philippe, Peter England, Pantaloons and Van Heusen, it has been in the news recently with its 51 per cent acquisition of bridal fashion brand Sabyasachi in January of this year, and 33 per cent of menswear brand Tarun Tahiliani in February, and Finesse clothing brand Shantanu & Nikhil in 2019. The range of international brands includes – The Collective, Simon Carter and select single brands such as Forever 21, American Eagle, Ralph Lauren, Hackett London, Ted Baker and Fred Perry.
ABFRL has a definite ambition to maintain its position in the fashion retail sector and this strategy, as assessed by experts, is aligned with the vision.
Financial Express is now available on Telegram. Click here to join our channel And stay up-to-date with the latest Biz news and updates.