Long live the King… the King’s dead
How Nike is losing out to newer, nimble rivals
Good evening!
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The Premier League is back after its 2-week long winter break. During that break, Manchester United pulled a massive coup by signing Omar Berrada as its next CEO, from cross-town rivals Manchester City. Jurgen Klopp dropped a bombshell and announced that this will be his last season, paving the way for Premier League’s very own version of The Last Dance. Oh, and there’s even a documentary in the works. The break also gave me time to take stock of The Playbook’s fantasy league. Nightwatchman is on top with 1334 points. Yours truly is languishing at the 47th position but just like Manchester United, there's a turnaround looming. 🤞🏻
Some time ago, I had written about the shoe wars. Adidas had a new launch called the Adizero Adios Pro Evo 1, which took the athletics world by storm. Tigst Assefa broke the world record in the women's marathon by wearing them. But Assefa’s phenomenal record was reduced to a footnote in a corporate battle for shoe supremacy.
Almost a week after I wrote that, Kelvin Kiptum broke the men’s marathon record wearing Nike’s Alphafly 3. Same story, different character. However, instead of lamenting about this new reality in sport (athletics in particular), I’ve decided to look at things objectively. See them for what they are and not how they should be. Turns out, the disruptor is getting disrupted.
Nike had burst onto the scene with groundbreaking innovations in product design and great marketing. It established a solid presence in running and soon transformed into a fashion icon with a notable presence in other sports. Now, newer companies are beating Nike at its own game, with the likes of Hoka and ON gnawing away at the OG’s market share.
Let’s start with Hoka. The company was founded by three French athletes-cum-product developers, Nico Mermoud, Jean-Luc Diard, and Christophe Aubonnet in 2009. Their goal was to design comfortable shoes for people going down steep hills while skiing. This birthed their initial product, a slip-on that goes over the shoe with an oversized sole. From there, the idea morphed into a shoe with its now-characteristic oversized sole. It reached US shores the following year and carved a unique niche: the shoes were for both runners and senior citizens. The next decade saw steady growth for the company, with sales jumping from $3 million to $100 million. It was acquired by the Deckers Group in 2012.
However, things really turned around during the pandemic, which started two parallel trends—comfort wear and running. Hoka’s shoes were a natural fit for both. Additionally, Hoka also got the love of healthcare providers who had long working hours during the pandemic. This created an ideal environment for Hoka’s cushy shoes; the company saw sales of $109 million in the first quarter of 2020 alone. Unlike many pandemic era companies (looking at you Zoom), Hoka’s fortunes remained intact thanks to the post-pandemic trend of ‘ugly shoes’. People flocked to buy shoes that were comfortable, looks not withstanding. The trend got so popular that even Barbie joined the bandwagon.
Soon, Hoka expanded into hip streetwear, and the company leaned heavily into it by collaborating with designers such as Nicole McLaughlin and Seoul-based fashion brand Thisisneverthat (TINT). These collabs didn’t come at the cost of its sporting heritage; they sponsored the 2023 Men’s VinFast Ironman Championship, held in Nice, France. Former winner Sam Laidlow, competed in Hoka shoes. Alongside these campaigns, Hoka has also tapped into the ‘less is more’ dictum. It has just produced 440 individual unique shoes for men and women in different colours and widths as opposed to Nike’s 10,000 shoes. It follows the same strategy in retail as well. The company is more present in and around areas where its fans are located. That includes multi-brand store outlets like Footlocker and Dick’s Sporting Goods. Hoka is available in less than 20% of the Dick’s locations and is still selling like hot cakes.
ON, a shoe company based out of Zurich, follows a similar strategy. The only difference between Hoka and ON is the target audience.The latter is primarily targeted at runners and tennis players. Even Roger Federer became an investor in the company. ON has signed Poland's Iga Świątek, one of the best women tennis players today, and Ben Shelton, a rising American star. It also signed Hellen Obiri, a two-time Olympic medal winner and a former Nike-sponsored runner. Even within these sports, ON primarily sees itself as a premium brand. Its co-CEO Marc Maurer himself said so in an interview, “ON aspires to be the most important premium global sportswear brand, rooted in innovation, design, and sustainability.”
These two companies are hitting right at the core of Nike’s business, and it’s showing. An analysis by the Financial Times revealed that Nike-sponsored athletes are winning less by the day. Off the tracks, other industries are taking note as well. Several market analysts have downgraded Nike’s stock, and Footlocker is trimming its Nike inventory. Nike CEO John Donahoe is working to address some of these issues. In December 2023, the company started company-wide cost-cutting measures to save up to $2 billion over the next three years. This is expected to placate some shareholders. On the retail front, Donahoe has said that it’s part of a conscious decision to engage more in D2C sales.
Aside from this, the company has other problems as well. Its golfing high is officially over, now that Tiger Woods has decided to part ways. In basketball, the Air Jordan-maker has lost key players like Nikola Jokić to Chinese rival 361 Degrees. In such a market, Nike can’t seem to catch a break. It’s moving from one crisis to the other and now has to contend with rivals of all sizes. I guess that’s the price you pay for being the market leader.
What are your thoughts on this? Share it with me in the comments section below, and I’ll meet you there.
⚡️Quick Singles
🏁🔴🏎: Seven-time Formula One champion Lewis Hamilton is changing lanes in 2025. He will end his long-time association with Mercedes and surprise, surprise, switch to Ferrari. The 39-year-old Briton has signed a multi-year contract with Scuderia, a team he came close to joining in the past. Hamilton joined Mercedes in 2013 and won six championship titles with the team, including four straight wins from 2017 to 2020. He signed a two-year contract extension with Mercedes last year, lasting through the 2025 season with some ambassadorial duties thereafter. Following the Hamilton announcement, Ferrari’s US stock rose more than 12.5%.
⚽️🇪🇸💰: Spanish footballing giant Real Madrid has signed storied American technology company HP as the club’s first-ever sleeve sponsor. The long-term deal is rumoured to be worth $75.7 million per season, according to the Spanish media. However, the club is yet to release numbers around the deal. The other company in contention, according to reports, was Apple. Real Madrid’s other long-term sponsors include Emirates (since 2011, front of shirt) and Adidas (1998, kit), with both deals renewed until 2026 and 2028 respectively.
💰🎾🏏: The Sachin Tendulkar-backed Indian Street Premier League has raked in ₹1,165 crores ($140.5 million) from co-owners who bid for six city-based franchises. Sanjay Gupta and Rohan Gupta shelled out ₹251 crore for the Akshay Kumar co-owned Srinagar franchise, while KVN Enterprises successfully bid ₹225 crore for the Bengaluru franchise, also co-owned by Hrithik Roshan. Other successful bids included ₹205.6 crore for Team Mumbai, ₹200 crore for Team Hyderabad, ₹163.6 crore for Team Chennai, and ₹120 crore for Team Kolkata. The inaugural edition of the T10 tournament will take place in March in Mumbai.
🏏💰❌: A newly-formed legends cricket league found itself in a legal soup. Asian Legends League (ALL), organised by a World Sports Group Private Limited (WSG), received a legal notice from the Legends League Cricket (LLC), Mint reported. ALL, founded by Chandigarh-based RD Singh, also features former Indian cricketer and chairman of selectors Chetan Sharma as its commissioner. The league, Mint added, will rope in Viacom18 and JioCinema as its broadcast partners, with five teams — Indian Royals, Sri Lankan Lions, Pakistan Stars, Afghanistan Pathans, and Bangladesh Tigers — participating in the tournament. The three-season-old LLC, which counts former India coach Ravi Shastri as its commissioner, alleged that ALL was a “frivolous copy” of its brand identity.
🏌️💰🎯: Strategic Sports Group (SSG), a consortium of high-profile sports investors, has picked up a stake in the PGA Tour, reportedly worth as high as $3 billion. SSG is led by Boston Red Sox and Liverpool owner John Henry’s Fenway Group also includes New York Mets owner Steve Cohen and Marc Lasry, among others. The group will initially infuse $1.5 billion into a new entity, valuing it at $12 billion. The infusion comes at a time when the PGA Tour is locked in discussions with Saudi Arabia’s Public Investment Fund (and LIV Tour backer) for a potential investment, with no apparent solution in sight even as the two rival factions proposed joining forces in June 2023.
📖 Weekend Reading
How Lewis Hamilton transcended Formula One stardom [The Athletic]
The Sports Illustrated Cover, a Faded Canvas That Once Defined Sports [New York Times]
That’s all for this week. If you enjoyed reading The Playbook, please share it with your friends, family, and colleagues. Please also subscribe to it (for free) if you haven’t already.
You can reach out to me at adarsh@thesignal.co with any feedback (good, bad, or ugly), tips, and ideas. I'd love to hear from you!
Thanks for reading, and see you again next Friday!
Hey Adarsh, another great read! Keep up the good work.
Ps , I've been landing aces in my draft league and I do no brain work. So you might turn a corner soon 😜