How the jersey row unravelled a brand

The retail version of the All Blacks jersey is likely to be top of the souvenir list for fans during the Rugby World Cup. Photo / Getty Images

At least the launch went to script. Just a fortnight ago at Westpac Stadium, the All Blacks came out in their tight new adidas jerseys and slipped through the Canterbury-suited Springboks with teflon-coated ease.

The partial comeback of the traditional white collar looked a bit naff but didn't raise half the fuss that followed adidas' first redesign of the sacred black jersey. Diehard fans were even prepared to swallow the $200 price tag on the one-off Rugby World Cup jerseys to show their support for the national team.

The furore in New Zealand since fans realised they were paying twice what online shops are charging overseas may seem incredible in a week which saw rioting in Britain and panic in global financial markets. But the three events at least have a few common elements - like greed, envy and poor crisis management.

This was meant to be harvest time for adidas - time to reap the rewards for putting big money into the world's biggest rugby team as the land where rugby rules hosts the biggest event in the sport.

"This is them taking advantage of all the stuff they've done up till now," says marketing lecturer Phil Osborne of Otago University. "It's almost like they've poisoned the crop at the last minute."

As a global sporting brand, the All Blacks are up there with the likes of AC Milan and the New York Yankees. Jersey sales in Europe before the 2007 World Cup helped prompt the German company to go early to renew its deal with the NZRU.

They secured the All Blacks brand until 2019, paying somewhat more than the previous $200 million over nine years. The reason: fans as passionate as the followers of Manchester United or the Indian cricket team, says Dr Mike Lee, senior lecturer in marketing at Auckland University.

"It's a double-edged sword," says Lee. "Being able to tap into that passion is a very good place [for a sporting goods manufacturer] to be but it's also a dangerous place. Once you are seen to be taking advantage or making it look like the All Blacks or rugby union are selling out, then fans will react. Because it's a multinational company, there's always potential for some sort of patriotic backlash."

This is a backlash you can inflate as big as Tourism NZ's giant rugby ball. It's about more than the price consumers are willing to pay to become mobile billboards for premium brands. Adidas is seen to be abusing a brand New Zealanders value above all else - the All Blacks jersey - creating a lightning rod for grassroots fans who resent the corporate takeover of the sport.

But the cash-strapped rugby union depends significantly on adidas to fund the grassroots game by promoting the All Blacks. It has to stay loyal to its major sponsor, without which the game would be in even worse financial straits. Cue Ma'a Nonu in orange boots. Cue the "seamless tube" World Cup jersey, the company claiming the "new technology" could be the difference between winning and losing the biggest game of the year in the 79th minute.

Unfortunately, the short-term fallout is likely to hit local retailers more than the multinational's net profit forecast of €650 million ($1.17 billion) this year. But, for a while at least, brand adidas may not look quite as teflon-coated as the All Blacks' jersey. The damage to its reputation may give other sports a stronger hand at the negotiating table.

It's not that the jersey was priced too high, experts in sports marketing and branding say. It's that adidas made basic errors - a pricing strategy which ignored the trend for consumers to shop online and lack of communication with retailers. Then their crisis mismanagement was a case study in what not to do.

"It does seem they've overlooked the fundamentals in this launch," says Osborne.

The first mistake was in setting a lower wholesale price for overseas distributors - dismissing the online shopping factor and the "transparent global marketplace" - without having a strategy to justify it.

"They've made a pretty rudimentary mistake about controlling their supply chain and their distribution channel.

"The most important sales for them were in the New Zealand market so they should have linked the wholesale price overseas to whatever they wanted the new Zealand price to be."

After the price gap was exposed, their response only made things worse. They ignored three golden rules of crisis management: apologise at the outset, give a plausible explanation and promise to put things right.

It would seem the multinational has failed to take note of the mistakes of others. PR nightmares tend to spiral from initial strategies to deny and hang tough - think Toyota's communications vacuum early last year over safety issues. PR disasters in this country include GlaxoSmithKline over Ribena's vitamin C content, Contact Energy's customer exodus over directors' fees and Cadbury's loss of market share and trust over palm oil.

Osborne says companies that recover quickly tend to be those that come out and say "look, we've made a mistake" and promise to learn from it. But even late this week, adidas was sticking to excuses such as exchange rate fluctuations, or searching for "touchpoints" like supporting retailers and grassroots rugby.

"Their comment about currency fluctuations doesn't wash," says marketing commentator Jonathan Dodd. "They've been condescending and basically lying."

Dodd suspects the company under-estimated the foothold online shopping (aka bargain-hunting) has gained in this low wage economy in recessionary times. They also forgot the All Blacks brand was more than commercial.

"Rugby is still seen as a fairly egalitarian thing - the national sport in which everyone can participate. But people are feeling it's too expensive to be patriotic. It's taking something that is owned by all New Zealanders - the black jersey - and making it inaccessible.

"Generally, the rule is to maintain the premium status of your brand and make it a must-own object for its exclusivity. But they damaged their position through lack of communication and the misleading communication they have bothered to give."

Their biggest New Zealand retailer, Rebel Sport, wasn't buying the spin. Managing director Rod Duke showed how to twist threat to opportunity by turning on the supplier and dropping the retail price - the local hero taking on corporate greed.

Julian Smith of brand consultancy BRR says the sight of a retailer kicking back exposed the holes in adidas' pricing strategy. "That was really surprising. It's clear Rod Duke and his salespeople were not on board with the pricing structure."

Adidas then blew up the scandal exponentially by clamping down on two big online sellers, which looked like bullying, says Mike Lee. In one stroke, they went from giving people a basic reason - cost - to having a higher ethical reason to reject the product, he says.

"It defies common sense because they would have already sold the stock to online retailers, so it wouldn't have cost them anything."

It's a bubble they should have pricked at the outset. BRR principal Brian Richards says if adidas wanted a differential price structure they needed a strategy, such as linking the higher price in New Zealand to a cause such as children's rugby or supporting local clubs.

"They could have done so much better with the right kind of story - a cause-related strategy would have been the smart thing to do here."

Smith says it should have been an easy sell. The new jersey was about buying a piece of history - a memento of a milestone event. The price was "very reasonable in that light but they didn't take their retailers with them and now they've got their retailers kicking back".

One apparel importer says adidas could have conveyed messages about duty and GST costs which retailers face but which online shoppers avoid. He says the New Zealand dollar's appreciation against the US dollar has worked against adidas at the factory - the point about exchange rate fluctuations was valid. But they failed to communicate these messages at the outset.

The other line adidas should have pushed from the start - they are now - is their contribution to the national sport, says Richards. The current agreement with the NZRU is thought to be worth $20 million a year, he says, increasing for the next five.

"New Zealand needs these big companies and their sponsorship dollars - that money really does put the All Blacks on the world stage." It's also what keeps leading All Blacks in New Zealand.

Possibly forgotten in this debate is the price tag on the jersey. Surprisingly few commentators see the recommended retail price of $220 as outrageous - even if the garment cost less than a tenth of that to make.

Shoppers who buy premium branded products accept they are paying more than they might, says consumer behaviour expert Denise Conroy of the Auckland University business school.

"You're not buying the shirt, you're buying an All Blacks shirt. You're not buying the handbag, you're buying a Louis Vuitton handbag. You are purchasing the emotional content above the functionality of the good." And nothing stirs the emotions of All Blacks fans more than the jersey.

But rationalism returns if consumers find that they could purchase the same item for a cheaper price, says Conroy, "because then it's not a fair market".

"If we're the only ones paying the premium then it comes back to being a functionality thing - 'why would I pay more?'

"This seems to be playing on the good side of New Zealand rugby supporters - did they think we wouldn't notice?"

The row has given disenchanted fans free rein to vent online and in print about "tainted money" and "profits gained from overseas sweatshops". But it's not expected to tarnish the All Blacks brand, nor leave any lasting impact on adidas' profit from jersey sales. "Most people buy the jersey not because it's adidas but because it's the All Blacks," says Lee.

More significant is the small matter of 85,000 rugby fans preparing to descend on New Zealand. Many will have bulging wallets - and the black jersey will be top of their list of souvenirs.

As for locals, "People will forgive anything if we win the Cup," says Jonathan Dodd. "If the All Blacks lose, it's going to be the hair shirt on their back."