The Journal The Authority on Global Business in Japan

ACCJ EVENT | SPORTS

February 2014
A Billion Dollar Brand
Adidas Japan founder explains how the company achieved success here as a wholly owned subsidiary

By Megan Waters

An issue faced by all international companies moving into the Japanese market is whether to form a joint venture or set up an independent business.

Until the early 1990s, a local partner was considered as the only viable route into Japan. However, this changed as brands began to question this accepted wisdom.

“From Zero to a Billion Dollars: The Road to Success for adidas Japan,” a luncheon presentation at the Tokyo American Club on December 12, told a tale about determination. Founder and former vice president and chief operating officer of adidas Japan, Jonathan Hewitt, told ACCJ members and guests about the key decisions and principles that had led to the establishment of a wholly owned subsidiary, and how it had achieved success.

According to Hewitt, although the brand had been active in Japan and run by the global adidas Group since the late 1960s, it wasn’t doing very well.

In 1997, the global group decided to take back control of its distributors all over the world, including in Japan.

“There was a lot of discussion over who owns the brand. We, as the distributor had worked on the brand for 25 years and got it where it was,” explained Hewitt.

“We decided it was our brand and we wanted to take it and build it.”

Thus, in 1998, Hewitt and a small team started putting a company together; starting from nothing and making their first sales in 1999. By 2008, the company had 1,500 staff across the country and sales had exceeded $1 billion. More importantly, profits also exceeded $1 billion.

“When we started the company, we were 25 percent the size of our main competitor. Today, the company is 50–80 percent bigger than Nike here,” he said.

So, what did they do to build the company?

According to Hewitt, the option to form a joint venture stimulated a long discussion.

“The idea of risking it all and going solo was a topic of some debate. A joint venture was considered the safe option and, in those days, brands did not come in to Japan on their own,” he said.

However, Hewitt and his team wanted much tighter control of the brand, which they couldn’t get as a joint venture.

“If we formed a JV there would always be someone second-guessing what we were doing, and there would always be someone with a different opinion.

“Whether they were right or wrong, we wanted our decisions to be our own,” he said.

The company started with a staff of five in a serviced office in Shinjuku, with one telephone.

As foreigners in an unknown start-up in Japan, the company faced many issues that they wouldn’t have had as a joint venture, including a lack of staff, no accounts, no contracts, and no product to sell.

“The only thing we did have coming up was a big meeting in which to sell our products.

“If we didn’t have products for buyers to see, we would have no sales for the next six months until we managed to catch the next cycle,” he said.

Hewitt and his team managed to obtain samples from Germany and successfully displayed their products to the buyers. The brand soon moved to bigger offices, where they set themselves the goal of becoming the best sports brand in Japan.

Soon the company hit gold and managed to get the Japan Football Association (JFA) on board.

“This was part of the total strategy of taking the brand back and becoming successful in Japan,” he said.

The company, wanting their name to be associated with the JFA, and to become the JFA teams’ overall official supplier, including of support staff and, absolutely critically, the ball.

“When watching a game of soccer, the only thing that is in the TV shot the entire match is the ball,” he explained.

The JFA was impressed with the brand and with their strategy to get young children involved in soccer and improve the game for them.

“We knew that doors weren’t going to open for us unless we established a relationship with the JFA. We were seen as a bunch of foreigners taking over a brand that had been successfully run by a Japanese distributor for many years,” he explained.

This relationship helped to accelerate credibility with other accounts across the country.

Becoming the sponsors of the Japan team during the 2002 FIFA World Cup, held in South Korea and Japan, was an important platform for the company.

“The sponsorship deal meant we could be central to absolutely everything.”

The company focused on getting the brand “out there” and making sure it was associated with the world cup. To do this, the brand concentrated on marketing activities, including large—and sometimes controversial—billboards; a vertical soccer field suspended above a building in Shibuya; and their successful “Impossible is Nothing” campaign.

Next on the list was for the company to take control of the product. They started trying to fit into the Japanese market in terms of sizing, colors, and quality.

“Footwear back then was black or white, or both. Further, Germany said we couldn’t put pink on sportswear. However, we knew that the consumer would respond to a much more Japanese approach; the product had to be defined by it.”

Thus, the company set up a design center, which focused solely on the Japanese market.

Hewitt believes that getting control of the product was critical to the early success of adidas Japan.

Next, the company set about developing their wholesale business.

To keep the control that the company had fought so hard to retain, the company limited its number of direct accounts to 100.

Further, it had a more inclusive approach to these accounts and developed strong relationships with them.

“We would really talk to them and get their feedback on what we were doing. We didn’t see them just as someone buying the product, we saw them as someone who could teach us an awful lot.”

Another important reason for the company’s success is that they focused on building the brand. According to Hewitt, they didn’t consider themselves a pure sports brand but, rather, a lifestyle brand.

“When we first started out, adidas was seen as a salaryman’s brand here.

“So we started getting as much exposure as we could; asking celebrities to wear the brand, creating manga with top Japanese artists, and doing a tie-up with a Japanese university.”

Hewitt attributes the success of the company to their diverse team, who were taught what the brand is about and often taken offsite for training workshops.

“Most of the team is local, but we also have local foreign talent, and we worked hard to represent women within the company. We strongly believe in incentive-based bonuses for our team.”

“I believe we would not have been as successful if we had not got everyone in the company aligned,” he said.

“We are a team of people who love what they do; everyone is aligned with the concept of wanting to work in sports and work with athletes.”

Sport02.14DividerJonathan Hewitt is the founder and former vice president and chief operating officer of adidas Japan.

Divider