More trouble for Adidas

Former company MD likely to file a legal notice against his former employers

Former Adidas India managing director, Subhinder Singh Prem, who had expanded the Reebok brand aggressively in the country, is likely to file a legal notice against his former employers.

The move comes after the global sportswear major yesterday spoke of “commercial irregularities” at the Indian unit of Reebok, its leading sportswear brand in the country.

Just a month ago Prem and Chief Operating Officer Vishnu Bhagat, besides six other employers, stepped down from their positions after a long stint in the company.

Adidas had said the situation in India could result in a pre-tax impact of up to euro 125 million (or Rs 871 crore) — during the period when Prem was at the helm of affairs. Besides, further restructuring in the country could cost up to euro 70 million (Rs 488 crore) in 2012, the company stated.

Prem did not respond to a query. An Adidas spokesperson said the company had no information to share on the matter.

On whether they could elaborate on the specific nature of “commercial irregularity”, the spokesperson said, “No comments at this stage.”

Those close to the earlier management say differences arose when Adidas wanted the management under Prem to push the Adidas brand and re-focus on it rather than on Reebok. The Adidas spokesperson, however, said, “Adidas group has a clear multi-brand strategy. While the Adidas brand is the multi-sport specialist, Reebok focuses on fitness and training. Our intention is clear and that is to grow the business of both the brands, as part of our Route 2015 strategic business plan.”

The spokesperson also said they were not in a position to respond to any further queries due to the ongoing investigation.

“The situation in India, though unfortunate, will now allow us to accelerate our plans to improve a specific underperforming part of our business,” chief executive Herbert Hainer said in a statement yesterday .

Adidas had replaced Prem with expatriate Claus Heckerott. The COO position was abolished and another expatriate, Frederic Serrant, was appointed sales director for the group.

Those in the know say the German company wanted to shift its franchisee model from a minimum guarantee model to a wholesale model that would entail a one-time cost which had to be paid to the franchisees. However, this plan was discussed in detail and conveyed to all the franchises and provisions made by the company.

Adidas has three brands in India, including the flagship brand that shares the same name as that of the group, Reebok and TaylorMade. The last one targets the golfwear market, while Reebok and Adidas are known for sportswear products.

Prem, who was earlier Reebok India MD and took over as Adidas India MD only last year, has been credited with turning around the fortunes of Reebok in the country. Globally, Reebok comes fourth after Adidas, Nike and Puma. However, in India, the pecking order is lead by Reebok, which is at number one. It leads with a share of 53 per cent in a market estimated to be Rs 3,500 crore in size.

With over 1,000 stores in 325 towns and cities, Prem had expanded the operations aggressively in the country with affordable and premium-priced products.