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Adidas in 2008 signed an 11-year sponsorship deal with the IAAF for upwards of $33 million. This represented the largest sponsorship the International Association of Athletics Federation had ever received.
In the wake of the biggest doping scandal to hit the IAAF, however, Adidas is now looking for a way out. Executives reportedly wrote a letter to the IAAF expressing the company’s desire to put an early end to its contract. Adidas also harbors concerns about corruption spreading through FIFA. This presents a major problem for the sportswear company, which is the oldest sponsor of soccer’s worldwide governing body. While the company stays mum about the scandals, it clearly wants to disassociate itself from the corruption, which may infect and cause damage to its brand.
What will these withdrawals do for Adidas? Is it too late, or will the company’s recent assertion help protect its image? Was this a moral decision? Or did Adidas set up this publicity stunt deliberately, to improve bottom line?
The Effect on the Adidas brand
When Lance Armstrong finally admitted to doping, the world believed this was the true peak of doping scandals in athletics. After seeing an entire country banned for state-sponsored doping, any major brand supporting the related organizational bodies would be concerned. Why? The causes, events and organizations a brand supports reflect on the sponsor.
Just last year, Nike gained its fair share of bad publicity after making the decision to sponsor Justin Gatlin. Evidence proves Gatlin cheated not only once, but twice in his athletic career. Nike’s association with such a dishonest character caused many to question Nike’s ethical values.
Adidas’ attempt to untangle itself from the IAAF scandal reflects well on the brand. Even if the company is unable to break the contract, it will retain a good public image because it stated its position and made an attempt to disassociate. The company’s present manner also serves it well, as it has not issued any statement to the IAAF’s discredit.
A statement released by the company said only: “As you know Adidas has a clear anti-doping policy in place. Therefore, we are in close contact with the IAAF to learn more about their reform process.”
The effect on the IAFF
When the IAAF banned Russia from competing, it took a similar route to the one Adidas is now pursuing. However, as much of the corruption was entrenched in the IAFF itself, this alone cannot save its image and rebuild trust within the athletic community. To make it through this crisis, the IAAF actually needs to remain associated with companies like Adidas, who act on ethical issues at the organizational level.
For Adidas to break its contract with the body sends a clear message to everyone that the IAAF is the ‘bad guy’ and the company does not wish to be guilty by association. This further hurts the IAAF’s image and makes it more difficult to recover. Ironically, the media speculates the next person the IAAF would turn to if this happens is Nike, who clearly has no qualms about rubbing shoulders with the “bad guys.”
In fact, Geoff Gardner, a colleague of IAAF’s President Lord Coe, tried to play off the blow Adidas’ departure would cause to the IAFF when he stated, “If they choose, for whatever reason, to not continue the arrangement with the IAAF, I would think that it won’t be too long before others do come out of the woodwork wanting to have their emblems emblazoned upon the chest of Olympic and world champion athletes around the world.”
If Adidas withdraws its support, however, it will cost the IAAF millions. (Current estimates place this amount at up to $30 million.) Even so, experts insist that the IAAF will recover from the blow. BBC athletics correspondent Mike Costello stated Adidas’ departure would cause a huge financial setback, but not one the IAAF can’t recover from. He also added that in contrast, the damage to the IAAF’s image “is a hammer blow.”
Morality or money
While many commend Adidas for the brave move, just as many wonder if there is a less altruistic reason for the decision. Speculations run high that Adidas’ decision to pull back support came in answer to the bottom line, and not a moral conscience.
This worsens as the media points out the German sportswear company remains a FIFA sponsor in spite of its scandal. Corporate giants like McDonald’s and Coke reproached the leaders behind FIFA for the scandal, but Adidas remains silent about the issue. Its only comment on the matter was an admission of concern about the scandal.
One Guardian writer proposed the notion that as Adidas focused more on its core soccer market, it looked to shed any other expensive deals, and the scandal offered the perfect excuse. He believes the company simply wants to refocus its resources so it can dedicate itself to record-breaking deals like its billion dollar sponsorship to Manchester United.
Another proposed theory is Adidas intends to use this as a marketing ploy. Breaking ties with IAAF when competitor Nike makes deals with athletes known for doping sets it apart and puts it one level above others in terms of ethical behavior. And as more organizations get drawn into scandals, this is one distinction from which Adidas can benefit long term.
Much of this speculation surfaces in light of Adidas’ refusal to trash partners with whom it maintains a working relationship. This has now become even more evident in an instance where it plans to end work relationships with an organization. This in itself is a form of ethical behavior and shows Adidas values its partners and network, even when things go badly.
The company must respect its contractual obligations. In the FIFA instance, the company had no written guidelines it could use to end its sponsorship contract. However, in the case of the IAAF, it had strong anti-doping policies it could use, which the company could provide a solid reason for breaking the contract. No one wants to do business with a reputed contract-breaker and Adidas knows this.
At the end of the day, media rarely know what happens behind closed doors, or the conference room discussions that lead to life-changing decisions. Neither will we know what truly motivates CEOs to act. What we know for a certain today is Adidas’ decision to withdraw support benefits both its bottom line and moral conscience, and the company can expect mostly good publicity for its decision.
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Ronn Torossian is the CEO & Founder of 5W Public Relations. 5WPR is headquartered in NYC with offices in Los Angeles and Denver.
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