Adidas admits to large irregularities in India unit

Global sportswear major Adidas has admitted to “commercial

irregularities” in its Indian unit of Reebok, the most popular and the leading sportswear brand in the country. The admission came a month after MD Subhinder Singh Prem and chief operating officer (COO) Vishnu Bhagat stepped down after long stints. Adidas said the situation in India could result in a pre-tax impact of up to euro 125 million (Rs 871 crores), while further restructuring could cost up to euro 70 million (Rs 488 crores) in 2012.

“The situation in India, although unfortunate, will allow us to now accelerate plans to improve a specific underperforming part of our business,” Chief Executive Herbert Hainer said in a statement. Adidas had replaced Prem with Claus Heckerott. The COO’s position was abolished; Frederic Serrant was appointed as sales director, instead.

“Under the new management the company is undertaking an accelerated restructuring of its business activities, including significant changes to its commercial business practice, as part of the course of action to protect the Group’s interests in India. “Adidas Group is firmly committed to India and is well positioned to build on its leadership position in the coming years,” a statement from the group said.

Adidas has three brands in India, including the flagship brand that shares the same name, Reebok and TaylorMade. The latter targets the golfwear market, while Reebok and Adidas are known for sportswear products. Prem, who was earlier the Reebok India MD and took over as the Adidas India MD last year, has been credited with turning around Reebok’s fortunes in the country. Globally, Reebok comes fourth after Adidas, Nike and Puma. However, in India, the pecking order is led by Reebok. It leads with a share of 53 per cent in a market estimated to be Rs 3,500 crores in size.