Of all the information in Nike’s statement confirming it had agreed to buy Umbro last week, it was a single sentence – and in particular one word in brackets – that offered the most fascinating insight into the reasons behind the deal.
The US sportswear giant described Umbro as a “UK-based global football (soccer) brand with more than 70 years’ experience in the world’s No.1 sport and the world’s biggest football market”. Nike has made no secret of its intention to become the world’s “No.1 football (soccer) brand” but many believe it lacks credibility, particularly in Europe, because of its American heritage.
Nike has certainly given it a commendable shot in the decade since it entered the sport. Brazil, Manchester United and a host of other leading club and national teams sport the Nike swoosh.
Since the early 1990s, Nike has increased its football revenues from about $40m (£20m) to $1.5bn (£750m) – about 10% of its business. Umbro’s 2006 annual revenues were £149.5m. If its licensed sales were translated to direct sales based on wholesale cost, total equivalent sales last year would have been about £409m.
Three for one
Now Nike can boast official association with the England team, the Football Association and Wembley Stadium; three of the biggest and most emotive properties in the sport. And all for £285m – pocket change for the US giant. Indeed, in 2000 it spent £303m on wresting the Manchester United contract from Umbro for 13 seasons from 2002.
Even the England team’s recent troubles should not worry Nike, believe experts. They say the brand is big enough to weather any storm should the team fail to qualify for the finals of the 2008 European Championship. Umbro, meanwhile, would have been battered by a dearth of sales without the deal. It already struggles in the alternate years when the World Cup or Euro Championship finals do not take place.
As a result, many think Nike could be Prince Charming to Umbro’s Cinderella and save it from turning to rags from a lack of investment. Umbro chief executive Steve Makin admits his company needs an injection of capital to grow and talks about the “financial and also brand firepower that Nike can bring”.
For Nike, the three lions on the England shirt are crucial to the deal. The company’s president and chief executive Mark Parker says: “The England team deal is critical for the Umbro business. We see it as the jewel in Umbro’s crown.”
The FA has given its approval and must also be rubbing its hands with glee. Any decision in the past to get rid of Umbro from the shirts in favour of a higher paying opponent would have been branded opportunistic and history slaying. Now with Umbro’s new owners, the FA has carte blanche to negotiate. Umbro without England would have sounded the death knell for the company but that is not the case for Nike.
Parker adds: “We expect it [the contract] to continue beyond 2014, but we wouldn’t want to speculate.”
Leagas Delaney planning director Tony Quinn says the England shirt was one of the few “hot” properties still in play for the triumvirate of Adidas, Nike and Puma – all keen to boost their football credentials. Nike already boasts Brazil, Adidas has kept Germany despite spirited determination from Nike, while the smaller Puma supplies World Cup winners Italy.
For Nike, says Quinn, the addition of the England shirt “seriously boosts” its ambition to be the world’s biggest football brand in terms of shirt numbers – as well as its kudos.
How times have changed for the company founded in 1920 in Cheshire and originally known as Humphrey Brothers Clothing. During the 1966 World Cup, all but one of the 16 finalists wore its strips. Meanwhile, by the late 1980s its nylon football shorts – nicknamed “Umbros” – were worn as everyday clothing, although by the mid-1990s Umbros began to lose their appeal as young people migrated to other styles such as cargo shorts.
Since then, the company has dipped its toe in fashion and style circles, but despite collaborations with designers including Kim Jones it has failed to match the impact of its bigger, “cooler” rivals. A source close to the business believes the Nike money will give it the “oomph” it needs.
A Nike spokesman says there is no need to change Umbro’s strategy – even its licensee arrangements – “in the short term”.
He adds: “We will try to take the Umbro brand on and develop it to help it release its full potential. We see a huge potential for the brand in different markets globally. With Nike’s marketing resources and expertise we can do that. It will stay as a standalone brand, much as we have done with Converse, with its own management team and separate headquarters.”
The spokesman points to Converse as an example of how the Oregon-based apparel company takes brands with a heritage and develops them. Since acquiring Converse in 2003, revenue has grown at a compound rate of 22% and topped $550m (£275m) this year.
But Quinn, who has worked on Adidas in the past and now works on Adidas-owned Reebok, has doubts about the strategy. He believes – despite Nike’s protestations – that the Nike swoosh will sooner rather than later adorn England’s football shirts, as Adidas replaced Reebok on Liverpool FC shirts following their £2.1bn merger in 2005.
“Nike is looking at growth – where is that growth?” asks Quinn. “If you laid all the options on the table then the England team is the one you would want. And that’s not just about the number of shirts you’re going to sell but the halo effect of those players.”
He points to the mistakes made in marketing Umbro in the past, such as giving it the wrong image, while another marketing executive close to the business says it has relied on a sales-led “pile ’em high” strategy with little marketing spend apart from in store.
Quinn concurs: “Umbro has a big trading background. It is the Ronseal of football brands.”
He adds: “Umbro is absolutely without question rooted in football. But it is more about Sunday league, park games, and hard knocks rather than the glamour and style of the Champions League, which Adidas and Nike have.
“While Umbro is a true reflection of the game – and it has set about owning it – it is not a reflection other brands want to own because it is not aspirational. And that is what consumers want. Nike, Adidas and Reebok have all the best players.”
But regardless of its reasons or designs on the famed England shirt, Nike does bring the means to make what many see as a rough diamond sparkle.