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SBD Global/July 15, 2014/Marketing and Sponsorship

Manchester United Signs Record 10-Year Shirt Deal With Adidas Worth $1.3B

ManU "signed a record shirt deal" after landing a £750M ($1.3B) tie-up with German sportswear group adidas, according to Robinson & Ross of the FINANCIAL TIMES. The deal guarantees the club at least £75M ($128M) a year for the next 10 years -- more than triple the £23.5M ($40M) Nike "had paid for the team’s current deal." The U.S. company had pulled out of negotiations claiming that the club’s demands "did not represent good value for Nike’s shareholders." The deal is worth more than double the £31M, eight-year deal under which adidas makes and sells Real Madrid’s shirts and comes after ManU endured its "worst season in decades" (FT, 7/14). The BBC's Bill Wilson reported adidas "will provide training and playing kit to all the club's teams and will have the exclusive right to distribute dual-branded merchandising products worldwide." The sum involved is only £40M "less than the Glazer family paid for the club in 2005." Adidas CEO Herbert Hainer said the deal would help the firm "to further strengthen our position in key markets around the world" (BBC, 7/14). In London, Scott & Cue reported new ManU Manager Louis van Gaal, successor to David Moyes, "will be hoping to be able to use the funds to bring in more signings," having already brought in England defender Luke Shaw for £29M ($50M) and Spain and Athletic Bilbao midfielder Ander Herrera for £28.8M ($49M) (LONDON TIMES, 7/14).

BRAND STILL STRONG: REUTERS' Neil Maidment wrote adidas, which also has similar deals with elite European clubs including Chelsea, Bayern Munich and AC Milan, "takes over the contract" from '15-16. Its lucrative value also points to the "continued prominence" of the ManU brand despite a '13-14 campaign -- its first without influential Manager Alex Ferguson, who retired after 26 years in May '13 -- "that saw the club finish seventh in the league and miss out on a Champions League spot for the first time in 19 years." Nike was also recently replaced by ManU rival Arsenal, which "signed a kit supplier deal with Germany's Puma, the third-ranked company in the market," worth a reported £30M a year (REUTERS, 7/14). In London, Jack de Menezes wrote adidas fended off competition from two American sportswear brands in Warrior and Under Armour -- "even though the former already supply fierce rivals Liverpool with their kits." With the club expecting a £50M ($85M) loss due to the failure to qualify for the Champions League under Moyes, "the deal will come as a huge boost to ensure the financial stability of the club remains intact" (INDEPENDENT, 7/14). SKY SPORTS reported sponsorship expert Tim Crow admitted that "it was an investment, not without risk." Crow: "United is a trophy asset worldwide. This is an important deal because adidas are battling Nike and they can use this for better distribution deals. But Nike have taken a calculated risk. They've been there for 12 years and they know the numbers. ... This is a leap of faith for adidas" (SKY SPORTS, 7/14).

BEGINNING OF THE END: In London, Ian Ladyman wrote ManU's relationship with Nike "finally hit rock bottom" when the club "began displaying branding from rivals manufacturers at their Carrington training ground earlier this year." Nike reportedly was "infuriated" at the way the club "went about courting other companies." The club laid out large banners of rival logos on the Carrington training pitches, which "really annoyed" Nike (DAILY MAIL, 7/17)

Biggest kit deals
Club/country Sponsor  Annual value
ManU
adidas
£75M ($128M)
France
Nike
£36M
Real Madrid
adidas
£31M
Arsenal/Chelsea
Puma/adidas
£30M ($51M)
Barcelona
Nike
£26.3M
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