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Nike has been eating into its German rival’s market share and some branding experts and investors don’t believe throwing more cash into marketing will necessarily fix the problem.

Instead, Adidas needs to spot and set more trends and create a buzz among fashion and sports mad youngsters.

“At the moment, Nike is cool, very cool. If you ask a 20 year old, they are not going to pick Adidas right now,” said Tammy Smulders, head of marketing consultancy SCB Partners.

“It is not as easy as just writing a cheque. They need to be doing more of the viral, underground activities which brings out the cool factor of the brand.”

After recently issuing its third profit warning in a year, Adidas said on Thursday it would boost spending on marketing to about 13 percent of sales in 2014 and to between 13 and 14 percent of sales in 2015.

The company also said it would give marketing experts more responsibility and bring them closer to sales and product development staff.

Adidas spent 12.4 percent of its 2013 revenue of 14.5 billion euros ($19.4 billion) on sales and marketing, up from 12.1 percent in 2012 and already well above Nike, which spent 10.8 percent of sales of $27.8 billion in the year to May 31.

Adidas chief Herbert Hainer admitted the company, known for its three stripes logo, was being taken on even on its home turf. But he said second quarter results including double digit growth in Germany, Britain, Spain and Italy and a 41 percent jump in soccer sales showed Adidas was fighting back.

While Nike can focus on its “swoosh” logo and the “Just do it” slogan it has used since 1988, Adidas has to spread its ad budget across a range of brands such as Reebok, TaylorMade golf and Rockport shoes, as well as its Originals and NEO sports inspired fashion labels.

“They are fighting fires everywhere. Pouring money into marketing might put out some fires, but they will continue to burn elsewhere,” said Ingo Speich, a fund manager at Union Investment which has a 1.2 percent stake in Adidas and has repeatedly criticised management in recent months.

While Nike has encroached on Adidas’s home territory, the German firm has failed to make serious inroads in North America. firm extended its lead to take a 15 percent global market share in 2013 compared with 10.8 percent for Adidas, according to Euromonitor.

Nike has focused on exploiting social media to target young consumers, while Adidas has relied more on official partnerships with the likes of the FIFA World Cup and the National Basketball Association (NBA).

Nike’s animated film “The Last Game”, featuring soccer stars Cristiano Ronaldo and Neymar on a quest to save football from the hands of a villainous mastermind, has become one of Facebook’s most shared posts ever.

“Nike is the cheeky challenger doing guerrilla ambush marketing,
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whereas Adidas follows the more orthodox line,” said Andrew Walsh at sports marketing research group Repucom.

The value of the Nike brand rose 13 percent in 2013 to $17 billion, making it the world’s 24th most valuable brand, according to consultancy Interbrand, more than double the value of Adidas on $7.5 billion.

Even though Adidas was thought to have forked out about $100 million to FIFA to sponsor the World Cup, two Nike World Cup ads are among the top 10 most shared ad videos so far this year, according to marketing technology company Unruly. No Adidas videos feature in that ranking, though it says its videos published during the tournament made it the most viewed sports brand on YouTube.

“Quite a lot of people thought Nike was the official sponsor. They manage to get the benefits without as large an upfront investment,” said Leah Donlan, marketing lecturer at Manchester Business School.

Adidas has started to replicate Nike’s tactics, setting up a “news room” in Rio during the World Cup to generate a stream of social media chatter on its sponsored teams and players. Investment in social media will be a big part of its increased marketing spending and it plans to open similar news rooms in key cities around the world to continue its engagement with fans.

But Nike is also investing, launching an interactive Football app. It is kitting out more of Europe’s top clubs, such as Barcelona and Paris St Germain, for the 2014/15 season, even though Adidas is ousting Nike at Manchester United and Italian champions Juventus from next year.

Adidas CEO Hainer said the record $1.3 billion shirt deal struck with Manchester United last month almost three times per year what Nike has been paying the former English champions and the signing of four of the top six National Basketball Association (NBA) draft players showed he meant business.

“We have three out of the four biggest symbols in the football club world with Real (Madrid), Bayern (Munich) and ManU. This gives us huge reach,” he said, predicting the ManU deal will generate sales of 1.5 billion pounds ($2.5 billion).

But not everybody is convinced.

“The ManU deal is too expensive. It might bring management top line growth and exposure in emerging markets, but means that the expected margin improvement will be delayed,” said Stefan Guenter Bauknecht, fund manager at Deutsche Asset Wealth Management, which holds a 1.4 percent stake in Adidas.

“The strategy has changed from profitable growth towards building up the top line and the brand image against Nike.”

Adidas acknowledges it has cut its 2014 target for its operating margin operating income as a proportion of sales to between 6.5 and 7.0 percent for 2014, from 8.5 to 9.0 percent, partly due to higher marketing spend.

Nike recorded an operating margin of 13 percent in the fiscal year to May 31.

“We know driving higher levels of profitability is absolutely critical to our long term success, and we will get there. But we will not get there if we are not constantly winning in the marketplace,” Hainer said.
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