Finally, after about 30 months, the Indian cricket team has an official kit partner with performance-oriented apparel and training gear as part of its core business, and the proprietary technology to manufacture it. On May 23, the BCCI announced that Adidas had signed a five-year deal to become the official kit sponsor of the Indian cricket team.
As part of this agreement, Adidas will be the sole supplier of all the “match, training and travel gear” for both the men’s & women’s teams across the international sides, India A and B units, the U-19 squads, and all coaches and staff.
Whilst the deal’s financial terms weren’t confirmed, unofficial sources speculated that it was worth USD 45M (INR 370 Crore), about an 18% drop in dollar terms since Nike last renewed its five-year kit contract in 2016.
As context, Nike’s first winning bid in 2006 was worth USD 43M, which shot up to USD 60M upon renewal in 2011, after the Indian men’s team had won the 50-over World Cup. But the price point for the coveted upper right corner of the jersey has slid back 25% since then.
In the interim, between 2016 and 2023, the BCCI awarded the apparel-and-kit contract to brands such as MPL and Killer Jeans, neither of which were associated with the sports-apparel category. Nor did they have the manufacturing capabilities. Understandably, both deals seemed stop-gap measures. MPL terminated its three-year deal after 31 months, and got Killer Jeans to cover for the remaining five months till May 31.
This begs a few critical questions about the BCCI’s apparel-and-kit contracts:
- Why has the value of the contracts not scaled up despite the growth of Indian cricket, in terms of performances, stature, and revenues?
- Why have we struggled to get premium sports-apparel manufacturers to sponsor the team kits and apparel for the last seven years?
- Why did Adidas do the deal, despite Nike backing out and a Puma not putting in a bid?
- What must it do to surmount the ‘Impossible’ and make this deal return-on-investment (ROI) positive?
A quick analysis of Nike’s 15-year journey as the pioneer official-kit sponsor will shed us some light and lend some perspective.
Growing up in the 1980s and ’90s, one never saw the Indian cricket team enjoy the benefits of accessing their sports apparel and gear from any sports manufacturer. Their jerseys were manufactured locally, and team sponsors like Wills, ITC, and Sahara had their logos stamped on them.
Things changed for the better in January 2006, about a couple of years after Nike entered the Indian market when they signed a five-year contract with the BCCI to supply kits to the Indian team. They outbid Adidas and Reebok to invest USD 43M and win the deal.
Along with the seven-year contract they signed with Indian football, this was Nike’s chance to launch itself and emotionally connect with the massive Indian fanbase.
Indeed, over the subsequent years, it did manage to create some national appeal and build its brand affinity with never-seen-before, high-quality apparel, experience stores, and emotionally charged activation campaigns like the #BleedBlue campaign as a build-up to the 2011 World Cup, which Dhoni and team manage to win.
The success of the brand sponsorship and activation efforts led Nike to retain the official kit contracts in 2011 and 2016 for USD 60M and USD 55M, respectively. Unfortunately, that emotional affinity with the brand did not translate to the desired monetary success. And Adidas has some lessons to learn here if it wants to do the ‘Impossible’ and make its USD 45M deal ROI-positive.
Beyond the fact that Nike had to pay a good amount in taxes and duties to import its foreign-manufactured apparel and kits into India, and that rents and salaries are significantly high in India to run a successful hybrid, omnichannel business, two fundamental issues spoilt Nike’s commercial party in the country. This forced it to downscale its retail operations, lay off people, and not renew certain player contracts between 2016-17.
For a nation with a per capita GDP income of around USD 2,500 (China has surpassed USD 13,000), the premium luxury sportswear market is rather aspirational and inaccessible. I recall Nike’s official cricket jerseys being priced anywhere between USD 48 and 65, which were 8-10X the price of knockoffs that one could buy outside stadiums.
India may have over 1.4B people today and its luxury market is worth over USD 57B, but the majority of that spending comes only from Tier-1 cities in the bling categories of luxury cars, real estate, destination weddings, gourmet food, and fancy watches. The middle and upper-middle class in India, which forms the bulk of the market, isn’t keen or discerning enough yet to invest in original, high-performance sporting goods.
Secondly, beyond USD 8-9M of annual sponsorship, brands spend another USD 4-5M to activate and market the sponsorship. Hence, the total cost of sponsorship is typically 50% higher than the base sponsorship price, making it further challenging for the sponsor brand to recoup its investment.
While Nike took the team-sponsorship route, Puma, the leading sports brand in the country, took the athlete-sponsorship path that has paid rich dividends to date. It struck an eight-year contract with Virat Kohli worth USD 16M, and his growing global-brand stature and 300 Million+ followers across Instagram and Twitter ensure that Puma enjoys significant brand love and amplification at a fraction of what a BCCI contract would have cost.
In fact, having Kohli in Puma’s roster potentially prevented Adidas from featuring him in the customized three-striped logo that was launched yesterday, featuring legends like Kapil Dev, Sachin Tendulkar, Dhoni, Jhulan Goswami, Harmanpreet Kaur and their very own ambassador, Rohit Sharma.
The athlete-driven strategy is clearly working for Puma in India, as it posted revenues worth USD 360M in FY22, 27% growth from the previous year. In comparison, Adidas’s revenue stands at about USD 186M in FY22, which grew at 65% from FY21. Nike reported revenues of USD 98M last year, marking a topline growth of 44%.
So, will Adidas be able to do the ‘Impossible’ and catch the fast-racing Puma in the Indian market?
With over USD 23M of accumulated profits over the last two years and profitability growing by over 229% in FY22, it has the resources and muscle to market and activate the sponsorship. Unlike Nike, a lot of its manufacturing happens locally and just like Apple, it needs to double down on this approach to reduce import taxes and duties to shore up profits or pass on the benefits to its retail partners or consumers.
Similar to Puma, Adidas is a lot more realistic and sensitive about pricing for the Indian consumer. There is an opportunity for it to expand its merchandising by playing the volume game for middle and upper-middle-class consumers across Tier 1-4 cities in the country.
The ascendancy of the Indian women’s cricket presents another unique opportunity for Adidas to build stronger and more inclusive ties with the sport, and open new wallets by catering to the entire household as opposed to typically just targeting men.
Compared to the previous sponsorship cycle, thanks to India’s digital stack, consumers are a lot savvier when it comes to eCommerce and digital payments, and the last-mile delivery of eCommerce is scaling up every year. This could present a unique opportunity for the brand to expose itself further to the hinterlands of our nation, especially as cricket now regularly unearths raw and rock-solid talent from smaller towns.
They should take a leaf from Puma’s playbook and add a few more marquee and upcoming athletes to the sponsorship roster beyond a Rohit, who may potentially not play beyond next year’s T20 World Cup. Is there an opportunity to unseat CEAT as Shubman Gill’s bat sponsor, and take a rookie bet on an emerging Yashasvi Jaiswal, who is hungry to make his presence felt across multiple formats in Indian cricket?
Adidas has been around for 27 years in India, and here is a golden opportunity for it to make its presence felt, both within the nation and overseas, as cricket’s televised reach scales greater heights globally.
It has signaled its intent through this winning bid, but it will have its work cut out to leverage this opportunity not just to build an emotional bond with young and upwardly mobile Indian households but to recalibrate its business model to convert that emotional affinity to generate sustainable profits in the coming decade.
For now, it’s time for Adidas to take guard at The Oval on the June 7, when it makes its debut on the Indian cricket jersey at the World Test Championship (WTC) finals.
A billion fans will hope and pray that with its brand ethos of ‘Impossible is Nothing’, Adidas’ five-year sponsorship cycle will see the Indian team win its first-ever World Test Championship and Women’s World Cup, and the men’s side will end its decade-long drought without an ICC trophy!