New York ( Business) — In 2013, Adidas struck a deal with Kanye West to create Yeezy-branded footwear and apparel collections for the sportswear giant.
Landing the deal with West, who previously had an endorsement deal with Nike, was a huge boost for Adidas. Three years later, Adidas expanded its relationship with him, heralding it as the “most important partnership ever created between a sports brand and a non-athlete.”
It was a lucrative relationship. Yeezy products generated nearly $2 billion in sales last year for Adidas, accounting for 8% of the company’s total sales, according to Morgan Stanley. The line also helped Adidas gain shelf space at major retailers and brought new customers to stores that bought other Adidas products.
Adidas’ big bid for West, who has legally changed his name to Ye, has now collapsed, leaving a hole in the brand’s strategy and illustrating the dangers and drawbacks of celebrity endorsements.
This Tuesday, Adidas distanced himself de Ye for a series of anti-Semitic tweets and comments from the musician and designer, saying it will end production of all Yeezy-branded products and stop paying him. The move will deal a 250 million euro ($246 million) hit to Adidas’ fourth-quarter sales.
Other fashion brands that bet on Ye, such as Gap and Balenciaga, have also ended their collaborations in recent weeks. Gap shares soared in 2020 as the company ad that West would create a Yeezy Gap clothing line.
The association with Ye and his subsequent downfall highlights the risks of retail brands relying on celebrities to lure shoppers.
Celebrity deals can generate big sales and attention for brands. A study A 2012 study published in the Journal of Advertising Research found that endorsements from athletes and celebrities can increase a brand’s sales by 4%. “Sales and stock returns spike markedly with each major athlete achievement,” the researchers found.
But there are significant costs if a celebrity who is closely tied to a brand becomes embroiled in a scandal or controversy.
“Ye’s saga, not just with Adidas, but with brands like Gap and Balenciaga, underscores the importance of thoroughly researching celebrities and avoiding those who are too controversial,” said Neil Saunders, an analyst at GlobalData Retail. “Companies or brands that don’t pay attention to this will be hurt.”
Some examples of collaborations with long-time celebrities whose scandals impacted the brand they were associated with: Subway and Jared Fogle, Jell-O and Bill Cosby, and Nike and Lance Armstrong.
Although Ye was not a commercial promoter for Adidas and Gap, as Fogle was for Subway, he designed exclusive merchandise for the company and was a key part of their overall strategy.
Brands have stood by Ye, and even strengthened their associations with him, despite a series of controversies and inflammatory comments he has made in recent years. He described 400 years of slavery as a choice, he claimed that Harriet Tubman, who rescued dozens of enslaved people, “never freed the slaves.” Ye is also running as a presidential candidate in 2020.
He has said that he was diagnosed with bipolar disorder in 2016 and was hospitalized.
“Kanye has been, and is, a huge part of our strategy and he’s been a fantastic creator,” Adidas CEO Kasper Rorsted said in 2018. “I’m not going to comment on every comment that he or anyone else makes.”
Adidas waited too long to cut ties with Ye after he posted a threatening, anti-Semitic comment on Twitter on Oct. 8 and followed up with a series of anti-Semitic comments in interviews on Oct. 16 and 17, said Stefan Hock, an assistant professor of marketing. at the University of Connecticut.
Hock has studied brand responses to negative publicity around celebrities and found that the timing of a company’s reaction can affect its share price.
Instead of removing Ye immediately, Adidas’s slow response allowed anger and protests over the brand’s ties to him to simmer online for more than a week.
“The best thing to do if you have a misbehaving sponsor is cut ties quickly,” Hock said. “If you delay, it creates a downward spiral.”
