There were many reasons to celebrate. The Salomon family was beaming at the $1.4 billion price tag. And Adidas investors also had reason to cheer, since Salomon's high-margin skiing, golfing and biking products would diversify the Adidas portfolio, reducing its dependence on low-margin, marketing-intensive items like sneakers and T-shirts. Industry analysts also noted Adidas would be able to pay for the whole thing out of earnings.
But it was Louis-Dreyfus to whom the day belonged, capping four remarkable years as head of Adidas. Having rescued one of Europe's best-known brands from near death, he had now transformed it into the world's second-biggest sports equipment firm, one well positioned to take on the still-larger Nike Corp. in an expected war for supremacy in a $100 billion market.
A MODERN PARABLE
His career, The Economist averred, could now be seen as a "parable" for how modern, efficient and competitive the best business minds on the Continent could be.
In April 1993, a consortium of desperate European lenders, led by Credit Lyonnais, France's largest bank, virtually gave away control of Adidas to Louis-Dreyfus and his partner, Christian Tourres. For $10,000 each, the price of a compact car, the two men and a small group of friends bought 15% of the venerable German athletic shoe and apparel firm. In addition, they were granted the right to purchase the remaining 85% at a fixed price after 18 months, and given a $100 million nonrecourse loan (so-called because the lenders had "no recourse" if the borrowers couldn't pay it back).
The catch? Adidas was a dead horse in an industry at full gallop. Company founder Adi Dassler had died in 1978, followed by his son Horst in 1987. They were succeeded by a series of inept leaders. The last was a flamboyant French politician named Bernard Tapie, who bought the company in 1990 for around $300 million. But the money was borrowed, Tapie couldn't service the debt and was, in any case, soon on his way to jail for fixing a soccer game, among other things.
A JUMBLE OF BRANDS
By the time the banks took control in 1992, Adidas had degenerated into a jumble of brand names -- Le Coq Sportif, Pony, Adidas -which, says one Adidas executive, made or licensed the right to make, "coats, ties, perfume, everything." The core shoe division, meanwhile, had developed a tragicomic reputation for producing dubious products, like expensive jogging shoes with built-in computers that broke when customers laced them up. It was, says creative director Peter Moore, "A company that had lost its soul, that really didn't know what it was supposed to be doing."
Adidas lost tens of millions of dollars annually starting in the late 1980s, culminating in a $100 million loss in 1992. Sales in that year were about $1.5 billion, half a billion dollars less than a decade before. The majority of those losses stemmed from the U.S., where Adidas' share of the running shoe market had shrunk to a microscopic 1.9% in 1992, from an astonishing 70% two decades earlier. At one particularly depressing moment in the late 1980s, Adidas' sole hot-selling item was a line of Olympic Games sweatshirts.
THE GLORY DAYS
By the 1960s, Adi and Kathe, his marketing-savvy wife, were the most powerful figures in international athletics. During the 1972 Munich Olympics (the year Nike was incorporated) more than 80% of the gold medalists wore Adidas shoes and every Olympic official wore Adidas-designed uniforms. By mid-decade, three-quarters of NBA basketball players wore the three stripes, as did every soccer team worth its shorts. When Adi Dassler died at age 77, his brand was recognized by an estimated 95% of the world.
One of the most telling aspects -- never reported in the press -of Louis-Dreyfus' royal progress at Adidas is that the banks initially turned to Christian Tourres to save their investment. It was Tourres, Louis-Dreyfus' friend and longtime colleague at IMS International, a medical marketing firm, who insisted that Louis-Dreyfus be given the job.
MOVING TO IMS IN 1981
Louis-Dreyfus had joined IMS in 1981 as chief operating officer. Two years later he was named CEO, at which time the company had a market capitalization of $400 million. Louis-Dreyfus kept the company tightly focused on its niche, pulling it back from several ventures outside the medical market, and IMS grew rapidly over the next five years, when it was sold to Dun & Bradstreet for $1.7 billion. Top officers walked away with about $10 million each.
At this point Tourres and Louis-Dreyfus, eight years his junior, decided to retire to a life of directorships and leisurely investing. "Robert and I had a few businesses here and there -- investments only -- and I was in touch with a number of the banks dealing with them," Tourres recalls. "One of them, Banque de Phenix, called me and asked, 'Are you interested in running Adidas?' I said no. They called me back three or four times, until I got fed up and said, even if I was [interested] I would only do it with my partner, and the banker said, fine. So I called Robert."
But in 1991 Louis-Dreyfus was a headhunter's nightmare. Back in 1988, against the advice of his friends, he had accepted the entreaties of the Saatchi brothers to salvage the giant Saatchi & Saatchi advertising agency in London. At the time, it was a huge, swaying house of cards, assembled through debt-backed acquisition, and Louis-Dreyfus spent much of the next three years simply buying time to cut costs. This meant repeatedly going hat in hand to the banks for money, and begging, says his friend Tourres, "is not the style of the Louis-Dreyfus family, especially with banks."
Every cash infusion gave Louis-Dreyfus breathing room to divest a few assets, shed some jobs and slash some expenses. It was grueling, thankless triage, laying the groundwork for Saatchi & Saatchi's ultimate recovery, but not taking the company in any new direction. It was hardly the sort of work for a man who didn't have to work. No wonder Louis-Dreyfus initially told Tourres that the last thing in the world he wanted was another turnaround. Eventually, however, as Adidas's hapless creditors kept sweetening the deal, the two would-be retirees caved in. "For the fun of it," they both said. But Louis-Dreyfus insisted before signing the contract that the banks loan the company $100 million up front -- no more begging. With no other hope of saving their investment, the banks agreed.
'IT WOULD BE MORE FUN WITH HIM'
Why did Tourres insist that Louis-Dreyfus occupy the CEO's chair? The question has several answers. Tourres said, "It would be much more fun to do this with him than without him," and, under the circumstances, it's hard not to believe him. The two men are good friends and partners of long standing, with obvious respect and affection for each other. Tourres lives comfortably and privately, and he loathes the ceremonial elements of executive position -- the endless public relations events, investor meetings, magazine and newspaper interviews -- that are critical to a sports company, which sells image as much as substance. Louis-Dreyfus, on the other hand, loves the company of athletes and seems to enjoy the celebrity and hoopla of big-time sports.
Beyond that, Louis-Dreyfus seems to inspire a remarkable degree of faith and affection, in Tourres and in everyone else. Even at Saatchi, where many people were fired and many subsidiaries were sold, he remained well liked and respected.
Louis-Dreyfus and Tourres arrived in April 1993. Tourres looks more or less like a lot of French executives; he's trim, impeccably groomed and turned out, but in nicely tailored sports coats and loafers, not three-piece suits. Louis-Dreyfus, on the other hand, is habitually referred to in the press as "rumpled." In fact, he can look like an unmade bed. He's a tall man, a bit pear-shaped, with unruly curly hair and a mobile, slightly jowly face that is irregularly shaven and regularly creased by laughter. A sartorial eccentric, he's generally outfitted in old polo shirts, blue jeans, sneakers (or, in the office, barefoot), and often has a large Havana cigar in his mouth. The overall impression is of relaxed informality and self-confidence. Only the eyes belie this effect. They are alert, intelligent and not infrequently something like suspicion or impatience troubles their surface.
STARVING THE BRAND
Robert had seen that Adidas, whatever its other problems, was starving the brand. As its competitors poured money into every conceivable marketing niche, Adidas had faded to near invisibility. Louis-Dreyfus responded by using a good chunk of the $100 million he had demanded from the banks to immediately double the marketing budget. Then, in a gesture of enormous symbolic significance, he conducted an advertising agency review. Everyone at Adidas assumed that the account would be taken from the incumbent agency, Leagus Delaney, and given to Saatchi & Saatchi. Not only did Dreyfus have friends there, Saatchi had made an investment in Adidas. Tom Harrington, director of communications, remembers, "[Robert] came from Saatchi; Saatchi was a part owner. So it was quite obvious that Saatchi was going to become our agency. Then they came in and made a great flashy presentation, but they didn't understand sport, they didn't understand our business, the ideas were terrible. They just didn't get it."
Bob McCullough, then Harrington's boss, and Harrington decided to tell Robert not to change agencies. "We gave him the reasons," Harrington said. "It was a pretty tough indictment, because this was the agency he had just run. He could have fired us, but he basically said, if that's your recommendation, you're the guys who have to live with the consequences. You have to respect a guy who demands from you your honest opinion and who will support it. His ego didn't get in the way."
The turnaround came so fast that even Robert and Christian were surprised. In their first year, 1993, the fashion world decided that the old Adidas three-stripe logo was "retro," and hence cool. Madonna was seen wearing Adidas, so were the rappers Run DMC and models Claudia Schiffer and Cindy Crawford. This fortuitous stylishness helped jump-start the company's new products and marketing efforts, and Adidas closed out the year with a $4.7 million profit, after the previous year's $100 million loss.
The next year, the company earned about $100 million. The sales organization blunted and began to roll back Nike's European charge, and Christian also began to buy back, either wholly or by way of a majority stake, the various independent national subsidiaries, giving Adidas control of how its products were marketed and sold. This time Robert did tell the press, "The Adidas renaissance is now proven. For the first time in many years, revenues will stop declining."
A QUANTUM LEAP
The recovery took a quantum leap in 1995, with yearend profits of $163 million on sales of $3.4 billion. Moreover, Louis-Dreyfus and Tourres pulled off a spectacularly successful initial public offering of its shares late in the year, raising about $2 billion. A year later, profits rose to $209 million, and demand for a new, technologically advanced line of footwear, Feet You Wear, outstripped supply.
Nineteen ninety-seven brought only more good news. Net income rose 48%, to $255 million, and sales rose 23%.
U.S. sales [are] climbing at a blistering 50% a year.
"In the next few years," says Louis-Dreyfus, "we're going to grow to 10% to 15% of [the] U.S. market, which is aggressive. I'm ready to spend over the next four to five years 15% to 17% of [our] budget on marketing. We're already a billion-dollar company in the States, so we're talking about $170 million. At that level, you start to be a presence. Other than Nike and Reebok, nobody else will