Why Adidas can't quit Kanye West

Daniel Roberts

The Kanye West news cycle has lasted for over a week now, and some fans are fed up with the rapper. Last month, West returned to Twitter after nearly a year off the platform, and tweeted a photo of himself in a “Make America Great Again” hat. He called President Trump, “my brother.” Trump retweeted him and said, “Thank you Kanye, very cool!” Prominent celebrities, over Twitter or in text messages to West that he tweeted out, questioned his support of Trump, while conservative political figures celebrated the tweets.

But West’s activity took a darker turn this week when he said on TMZ that slavery “sounds like a choice.”

Now Adidas, which reported its Q1 2018 earnings this week and has an extensive, long-term agreement with West to design sneakers and apparel, is fielding questions about its relationship with the provocative rapper. An op-ed at Bloomberg declares that Adidas should drop West because of the slavery comment.

But don’t expect Adidas to ditch Kanye unless it is forced to do so.

Kanye West at the MTV Video Music Awards in New York on August 28, 2016. (Chris Pizzello/Invision/AP)
Kanye West at the MTV Video Music Awards in New York on August 28, 2016. (Chris Pizzello/Invision/AP)

On the company’s earnings call, CEO Kasper Rorsted said, “There clearly are some comments we don’t support,” but that Adidas has no plans to drop West. Instead, the company is going to speak to him (and presumably, ask him to rein it in) and hope this negative attention goes away.

West’s “Yeezy” releases and, far more importantly, his stamp of approval on the whole brand, have helped fuel buzz for Adidas and make it hot in America again, after a long drought. Yet there is fierce debate over exactly how much he has helped.

That is impossible to quantify, since Adidas does not break out individual sales of the Yeezy line, but the actual financial contribution of Yeezy sneakers and apparel is unquestionably tiny, since the products are alway released in extremely limited supply to maintain scarcity and demand. Matt Powell, an analyst with NPD Group, uses this reasoning to mostly dismiss the Kanye Effect in the Adidas comeback. The retort that sneakerheads make is that West’s involvement boosts the popularity of Adidas overall, so his role is greater than sales numbers of Yeezy sneakers would prove.

In an interview this week with Bloomberg TV, Rorsted acknowledged this, and gave great significance to the intangible buzz that Kanye brings: “Kanye has been and is a very important part of our strategy and has been a fantastic creator,” he said. “Kanye and the Yeezy is a very important part of our brand—from a revenue standpoint less so, but it’s a very important part of how we promote our products in the US.” Mark King, former president of Adidas North America, told Yahoo Finance at the end of 2016, “I think Kanye definitely helped make the brand cool again.”

In other words, the main benefit of Kanye West to Adidas is hype and cool factor.

Some might retort that if West is tossing out inflammatory opinions on slavery and his reputation gets ruined, he could lose that cool factor and become an albatross for Adidas. Brian Quarles, creative director at sports marketing agency Revolution, told Yahoo Finance in 2016 that, “Kanye has positioned Adidas in a great new place,” but he now says he believes West’s remarks will hurt Adidas.

Still, many celebrities or businesspeople are praising West simply for prompting political discussion free of judgment, whether or not they agree with his politics.

Venture capitalist and author John Durant tweeted that he had “one of the most unexpectedly positive conversations about politics today” with “no battle lines drawn, no polarization,” and asked if it was thanks to “The Kanye Effect?” Twitter CEO Jack Dorsey retweeted it. When West tweeted out that schools should teach students about how Magic Johnson built his business up, Marc Andreessen, arguably the most influential tech investor in Silicon Valley, favorited the tweet.

Those outraged by West’s comments ought to face the fact that there are some legitimate people in business and entertainment who are focusing on the positive message West is sending about open discussion and love. That’s a sign that, for now, his value to Adidas is still clear: he’s a cultural influencer who starts national conversations, even when the impetus is a remark that enrages many. West’s knack for inciting controversy and attracting attention was a major part of his appeal for Adidas all along.

For those tired of hearing about West, it’s wishful thinking to expect him to go away. He’s currently promoting a forthcoming album. and his Yeezy x 2XU line launches this weekend.

Adidas vs Nike shares in 2018 so far
Adidas vs Nike shares in 2018 so far

Adidas continues to gain on Nike in the US sneaker market, particularly through double-digit growth in Originals. That’s the division of the company that houses retro sneakers like Superstar and Stan Smith, and Yeezy. In 2017, Adidas brand sales grew 21% in North America, besting Nike and Under Armour.

And Adidas doubled down on West in 2016 with a long-term deal that it said would eventually include brick-and-mortar Yeezy stores. The German sportswear giant went so far as to call it the “most significant partnership ever created between an athletic brand and a non-athlete.” Don’t expect Adidas to walk away from West after just one week of bad press about a key “creator” whose cultural cachet sparks national debate.

Daniel Roberts covers sports business, tech and media at Yahoo Finance. Follow him on Twitter at @readDanwrite.

Read more:

The ‘Kanye Effect’ is the biggest debate in the sneaker world

Adidas goes all in on Kanye West

From Tiki to Tic Tac, Trump era forces consumer brands into politics