Aditya Birla group’s acquisition of Reebok in India will finally give it a second chance to grow in a burgeoning market, emerging from under the shadows of its larger competitor and former owner Adidas, for the first time in 15 years. Earlier this week, Aditya Birla Fashion and Retail Ltd (ABFRL) said that it has acquired exclusive rights for distribution and selling of Reebok merchandise through wholesale, e-commerce and exclusive brand outlets across India and other ASEAN countries. “For a struggling Reebok, this is an ideal escape route,” brand and business strategy specialist Harish Bijoor said.
Reebok struggled to grow under Adidas’ control
German sportswear brand Adidas had acquired Reebok’s operations in 2006, in order to strengthen its position and corporate strategy. However, 15 years on, the deal did not turn out to be beneficial for either Adidas or Reebok. Adidas had to shut down several Reebok brand stores in a consolidation move. While Adidas made efforts to relaunch Reebok’s brand attractiveness, Reebok’s performance failed to match that of Adidas. Reebok India recently reported its net profit for the financial year 2020-21 fell 93% on-year to Rs 4.9 crore for the year ended 31 March 2021, on account of lower sales.
“At the time of acquisition by Adidas for US $3.8 billion, it was a great move from a market capture point of view but Reebok could not hold its stead due to brand dilution alongside adidas,” said Manas Gulati, Co-founder & CEO, of marketing & communication consulting company, ARM Worldwide. “Reebok always had a risk of cannibalization by Adidas,” said Rohit Kumar M S, Co-founder & Partner, Zensciences.
Reebok gets Aditya Birla springboard of growth
Reebok brand has spent substantial years building equity in the Indian market, and will still retain its presence in India through the operational muscle of ABFRL, Harish Bijoor said. “Though Reebok has been through a lot in India, it still does pack pizzazz. ABFRL will bring with it the science of long term retail play at its best and Reebok will give competition to other sportswear brands in the market,” Bijoor said. “This move could actually give it a fresh cash infusion and then the ability to try a turnaround brand strategy,” said Rohit Kumar M S of Zensciences.
ABFRL will partner with Reebok Design Group (RDG), the newly-established global brand hub based in Boston, on all product design, development, innovation and creative direction to drive a unified brand voice and vision, the company maintained. This gives a great opportunity for Reebok to re-ignite its lost glory and its case with other acquired Authentic Brands. Also, the shareholders at adidas stand to gain a huge deal between the two stallion brands,” said Manas Gulati, Co-founder & CEO, of marketing & communication consulting company, ARM Worldwide.
What Reebok brings to the table for Aditya Birla
For ABFRL, Reebok is a good addition to their sports and leisure collection. Even as the sportswear brand has had a dwindling retail sales the past year, experts believe that this is a good buy for ABFRL, and will add to its slew of fashion and lifestyle brand portfolio. ICICI Securities maintained that the fashion house will be able to deliver low double-digit (pre-IndAS116) EBITDA margin for Reebok India post royalty expenses, and hence, this transaction is likely to add 4-5% to consolidated EBITDA (pre-IndAS116) from FY23E.
ABG bought Reebok from Adidas in August this year, and the transfer of ownership of the Reebok brand is expected to close in the first quarter of 2022. The deal marked ABFRL’s foray into India’s Growing sports and activewear segment. The segment is witnessing steady growth and is estimated to reach Rs 997.8 billion by 2024, expanding at a compound annual growth rate (CAGR) of 13.59 percent, 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 salience amongst Indian youth,” said Ashish Dikshit, Managing Director, ABFRL. The transaction marks a significant milestone in the journey of ABFRL, which has evolved its portfolio into a powerhouse of brands across all major fashion and lifestyle segments over the last several years. The addition of Reebok will fill an important gap in ABFRL’s portfolio.
Known for its brands like Allen Solly, Louis Philippe, Peter England, Pantaloons and Van Heusen, has been in news recently for its 51 per cent acquisition of bridal couture brand Sabyasachi in January this year, and 33 per cent holding in men’s ethnicwear label Tarun Tahiliani this February, and Shantanu & Nikhil’s apparel brand Finesse in 2019. The International brands portfolio includes – The Collective, Simon Carter and select mono-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 segment and this strategy, as evaluated by experts, is in sync with the vision.
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