Adidas has certainly gone all in. The athletic apparel giant has finalized a 10-year, $1.3 billion sponsorship agreement with Manchester United — the most expensive uniform deal ever. Adidas will replace Nike, which will allow its contract with the soccer club to expire after this upcoming season, and will share the expensive real estate on the Red Devils’ jersey with Chevrolet.
Nike spends one in every 10 dollars it collects on “demand creation,” a term coined by the company to describe its numerous lucrative deals with premier athletes and sports clubs to wear and promote its brand. It is somewhat surprising then, that a company that spends so much on sponsorships would step aside and allow one of its main competitors to replace the iconic swoosh on the jerseys of one of the most powerful teams in the sports world.
Nike defended its decision in a statement, saying, “Any partnership with a club or federation has to be mutually beneficial and the terms that were on offer for a renewed contract did not represent good value for Nike’s shareholders.”
While Nike did not recognize the mutual benefit in the deal, Adidas expects sales to reach $2.5 billion during the course of the partnership.
With the unpredictability of sponsorship investments, time will tell whether Nike or Adidas has made the more profitable decision. However, one thing is certain – Manchester United will emerge from the deal a winner. Coming off of the club’s worst performance in recent history, the deal will prevent the team’s financial numbers from doing the same. The Red Devils are expecting to lose nearly $70 million as a result of failing to qualify for the Champion’s League, the annual tournament for the best teams in Europe. Adidas will certainly do its part in erasing that deficit.