German sportswear giant Adidas is currently investigating allegations of embezzlement and kickbacks in China. The investigation comes after Chinese state media reported that local executives had been accused of embezzling 'millions of euros' in an unsigned letter written by whistleblowers. The letter also alleged that a senior executive in Greater China had taken kickbacks from external advertising and celebrity agencies, in addition to workplace bullying and nepotism. Adidas is intensively looking into the matter [ff8dfe1b].
This investigation adds to the recent controversies surrounding Adidas. In 2021, the company faced a boycott in China due to its refusal to use Xinjiang cotton. The boycott had a significant impact on Adidas, as Greater China contributes 15% of its sales. Following the news of the investigation, shares of Adidas fell 3.7% on Monday [ff8dfe1b].
Despite these challenges, Adidas CEO Bjorn Gulden remains focused on pursuing major kit deals. Gulden criticized Nike's financial offer to lure away the German national football team from Adidas after 70 years as 'inexplicable'. The German Football Association (DFB) ended its partnership with Adidas and selected Nike as its kit provider from 2027. Gulden defended Adidas's decision not to enter into a bidding war with Nike and stated that Adidas would continue to pursue major kit deals, including the franchise for France, if the price is right. Adidas had made the jerseys for the German national football team for over 70 years. The breakup with the German football team came at a bad time for Adidas, which had reported its first annual loss in over three decades in 2023. Gulden also outlined Adidas's plan to shift its focus from major disciplines like football to a wider range of sports, including athletics. Adidas raised its revenue and profit outlook for 2024 after a better-than-expected first quarter [ad3a6e2e].
In addition to the controversies surrounding Adidas, Borussia Dortmund, a German soccer team, has faced backlash from fans over a sponsorship deal with Rheinmetall, a major German weapons producer. The partnership, which includes advertising and marketing rights in Dortmund's stadium and club grounds, has sparked a debate about the normalization of the military in German society. While some fans are angry about the deal, others are focused on Dortmund's appearance in the Champions League final against Real Madrid on Saturday. The club's chief executive, Hans-Joachim Watzke, defended the partnership, stating that it reflects the role that a company like Rheinmetall has played in German society since the country supported Ukraine after it was invaded by Russia [7aac4a3d].
Adidas has fired two employees in China following an investigation into compliance violations. The investigation was launched after the company received an anonymous letter alleging corruption and was widely circulated on Chinese social media. The letter accused employees of embezzling millions of euros and receiving kickbacks from suppliers. One of the employees identified in the letter is Judy Li, senior vice president of marketing for Adidas China. The investigation is ongoing, and the company has stated that evidence has been found of one employee violating the company's code of conduct and another failing to meet leadership expectations. Adidas is the third largest market for the company, accounting for 15% of overall sales in 2023. The Greater China region saw growth of 8.2% in 2023, reaching 3.19 billion euros. The company remains confident in the Chinese market and will continue planned marketing activities and events [2018d141].