Nike takes on the Middle East (page 1 of 2)

It was a very good year for Nike, the Oregon-based athletic footwear and apparel maker that reported revenues of $10.7 billion in 2003. Germany's Adidas-Salomon, too, had a strong 12 months, recording group sales of over $7.5 billion.

During the same period, Puma, another German brand, reported sales in excess of $1.5 billion. It was also a good year for Reebok International, based in Canton, Massachusetts, which saw revenues rise to $843 million and its stock climb by more than 23 percent.

According to the Sporting Goods Manufacturers Association (SGMA), global sneaker sales are estimated to be worth over $15 billion annually. The five dominant categories are running shoes, basketball, cross-training, walking and casual/retro.

"Sports shoes are the single most important product category for the profitability of athletic shoe and apparel brands," says John O'Neil, who is in charge of New Balance distributor markets.

Most major brands have larger shoe than apparel businesses, mostly because margins are better and inventory lower. Robert J. Corliss, president and CEO of The Athlete's Foot Group, says footwear typically drives the rest of any sports brand. Ball games.

Worldwide, Nike is far and away the leader. In 2002, the last year for which figures are available, Nike held a 34.1 percent share of the international market, more than double second-place Adidas, at 16.5 percent.

In the Middle East, however, the situation is essentially reversed, mostly for a very simply reason: Nike is primarily associated with basketball and the NBA, while Adidas's focus is football and stars like France's Zinedine Zidane. In the Middle East, of course, hardly anyone follows the NBA, while almost everyone's a fan of the beautiful game.

Ellen van Meerendonk, at Adidas-Salomon in Dubai, insists that while the German brand is the clear market leader in the region, "the competition in the Middle East does not differ from the competition we face on a global level. We consider Nike and Reebok to be our main competitors in the region."

It's worth noting that the Adidas's emerging markets headquarters - covering a vast region stretching from Russia to Namibia - is in Dubai. By comparison, global leader Nike does not have a corporate presence in any Arab country. And unlike Nike and the rest of the competition, Adidas is working hard to cement its presence in the region.

In May, the company opened a large factory outlet/concept store in Abu Dhabi, adding to its two Adidas brand stores in the UAE, at Dubai's Deira City Center and Burjuman Shopping Center, as well as its factory outlet on Dubai's Airport Road. The Adidas network now includes more then 50 exclusive brand stores in the Middle East, including a Doha shop that opened in March.

"I like Adidas because they are comfortable and because I see them everywhere. Nike is more American, and I don't like New Balance because they're not sporty enough" says Fahad, a Dubai teen. "But Adidas look very good, they're very young. I bought my last pair in the Adidas shop in the City Center mall.

"I also like that Adidas has these huge billboards here in Dubai with Muhammad Ali," Fahad says. "He's a good symbol here - because he's a Muslim, and he represents a Muslim who succeeded in life, rather than just being somebody who's good at sports."

There are no reliable figures on the total value of the Middle East sneaker market, but there's no doubt that sales in the region represent a very thin slice of the global pie.