Adidas is exploring a sale of its Reebok brand, Bloomberg reported Thursday. But while a potential sale would change the dynamic of the footwear industry, it brings one pressing question to light: Could Adidas be gearing up to acquire that Bay Area bastion of sustainable footwear—Allbirds?
The German athleticwear and footwear brand hasn’t been shy about building out a more sustainable offering in recent years. Adidas has been serious about sustainability since 2015, when the company entered a long-term partnership with Parley by the Oceans in an effort to integrate materials made of ocean plastic waste into its product offerings. This gave birth to various iterations of sustainable footwear like the Adidas by Stella McCartney Parley Ultraboost X and the Terrex Parley shoe, among others.
Allbirds, which has essentially built is entire brand on sustainability, neatly fits in with Adidas’ eco-friendly push, so much that the two companies partnered up in May with the goal to create a performance shoe with the lowest carbon emissions on the market. Adidas noted that a single running shoe made with synthetic materials has a carbon footprint of between 11.3-16.7 kilograms of carbon dioxide, and both companies are aiming to take that number to zero.
As part of the partnership, the two brands said they would explore innovations that would impact the entire footwear supply chain—whether through materials, manufacturing or transportation methods—in an effort to reduce their carbon footprint. To ensure double the accountability, the analysis that goes into creating the shoe will use both brands’ life cycle assessment tools.
Since their pairing, Allbirds has reeled in $100 million in new funding and expanded its own product line beyond footwear to now include sustainably made underwear, a T-shirt, a puffer jacket, a sweater and a cardigan.
And interestingly of note, in late September, Adidas successfully placed its first sustainability bond, a 500 million euro ($591 million) bond with a term of eight years. The bond placement will help fund the company’s growing ESG (environment, social, governance) initiatives.
“Following the first-time bond placements as an investment-grade-rated issuer earlier this month, today’s successful sustainability bond offering marks another milestone for our company,” Adidas chief financial officer Harm Ohlmeyer said on Sept. 29. “The proceeds will help fund environmental as well as social initiatives at Adidas as we are committed to keep building on our industry leadership in the area of sustainability.”
Proceeds from the offering will be used in accordance with Adidas’ newly created sustainability bond framework. Adidas says the framework has been validated by a second-party opinion from Sustainalytics, an independent provider of sustainability ratings, which confirmed that the framework is “credible, impactful and aligned with established sustainability principles.”
Eligible sustainable projects cover investments into more sustainable materials and process, including purchases of recycled materials for sustainably sourced products, investments into renewal energy production and energy-efficient buildings as well as initiatives designed to create lasting change for underrepresented communities.
With that in mind, Adidas is certainly putting its money where its mouth is to deliver on its sustainability goals, transforming operations and R&D for meaningful circularity rather than simply chasing greenwashing goals. They would just have to open the checkbook even more for Allbirds, whose recent funding round brings its total valuation to a reported $1.7 billion.
A person familiar with the potential Reebok sale told Bloomberg that Adidas will decide “in the coming months” whether to proceed with a sale process, with the internal review still in the early stages.
German business magazine Manager Magazin, which broke its own report on the rumor earlier Thursday, said that Adidas CEO Kasper Rorsted hoped for approximately 2 billion euros ($2.4 billion) from a sale but would now accept less. This total could clear the resources necessary for Adidas to potentially scoop up Allbirds at its current valuation.
An Adidas spokesperson told Sourcing Journal, “As a matter of company policy, we do not comment on market rumors.”
Reebok’s results fail to hold up since 2006 buyout
Adidas bought Reebok in 2006 for approximately 3.1 billion euros ($3.8 billion) in a bid to stay competitive with Nike. But Reebok hasn’t held up its end of the bargain since the sale.
In 2007, a quarter of Adidas’ total retail sales—more than $2 billion—came from Reebok. Compare that to the second quarter of 2020, when Reebok made up just 6.4 percent of Adidas’ total sales.
While net sales at Adidas fell 35 percent in the second quarter to 3.58 billion euros ($4.21 billion) compared to last year, Reebok’s dropped by an even steeper 43.8 percent to just 228 million euros ($268 million).
Reebok bounced back to profitability in early 2019 prior well before the pandemic, with Adidas CEO Kasper Rorsted showing optimism that he could generate sales growth with new footwear lines like the CrossFit Nano and the FloatRide Run. But the success was short lived once footwear sales across the board began to crumble at the start of the crisis.
Manager Magazin, which reported that a sale could come as early as March, said parties interested in acquiring Reebok include VF Corp., which owns the Timberland and North Face brands, as well as China’s Anta International Group Holdings.