In a high-stakes game of corporate rivalry, New Zealand Rugby nearly secured a groundbreaking deal with Nike, only to pivot back to Adidas at the eleventh hour. Discover the strategic decisions behind this dramatic shift, about NZR’s ambitious vision to double its apparel merchandising revenue by the end of the decade and the calculated steps it is taking to achieve this lofty goal.
In March 2023, New Zealand Rugby (NZR) revealed that it was extending its 24-year partnership with Adidas.
It was perceived as a run-of-the-mill announcement, an expected outcome given the length of time the two had worked together and the strength of the relationship they had built.
But those privy to what had happened in the last 18 months were aware that it was anything but a routine renewal, because unbeknown to those outside the inner sanctum, just weeks before announcing that Adidas would continue to be its apparel partner, NZR was working with Nike as its preferred bidder and had all but secured a deal with the US giant.
Yet more amazing was that this was the second time that NZR had got to the altar with Nike, only to jilt the world’s largest sports brand for its arch-rival Adidas.
At the end of 2020, US-based insurer AIG confirmed that it would not be looking to renew its front-of-jersey sponsorship with the All Blacks when the deal expired in December 2021.
AIG had come on board in 2012, buying the naming rights to the whole suite of teams in black – the All Blacks, the Black Ferns, the Māori All Blacks, the sevens teams and the Under-20s – and was believed to have paid US$70m ($118m) for a five-year agreement.
When the deal was renewed in 2016, AIG upped the offer to US$80m over five years, and so the prospect of losing the Americans should have been causing alarm at New Zealand Rugby.
But it wasn’t. While the AIG deal had been transformational both financially and in repositioning the All Blacks as a global brand, within New Zealand Rugby HQ there was a growing conviction that it undervalued the true worth of such an iconic piece of sporting real estate and that sponsorship, licensing and merchandise was an underperforming category.
When AIG had renewed its front of jersey deal in 2016, some NZR directors felt that money had been left on the table.
AIG had upped the offer but there were concerns that without having conducted independent research or any open tender process, there had been no ability to gauge whether the offer represented fair market value.
The following year, just before the British and Irish Lions arrived in New Zealand, the apparel partnership with Adidas was renewed through to 2023.
The value was undisclosed, but the original deal signed in 1999 saw Adidas pay US$10m and provide US$10m of marketing spend, while NZR also secured an 18% royalty on each replica jersey sold.
It was recognised as the most lucrative apparel agreement in rugby, and when it was extended in 2017, NZR chief executive Steve Tew said: “The re-signing of adidas will mean this is by far the largest rugby sports sponsorship in history.
“The total is huge when it is measured across the 19 years the deal has been running.
“The second thing is that they help us take the All Blacks and the New Zealand story into markets that we don’t get to any other way.”
No one on the NZR board disputed Tew’s belief the All Blacks had the best apparel deal in world rugby, but that of itself didn’t serve as evidence that it was fair value in relation to the power and reach of the brand.
That deal, like the one with AIG, had been agreed in an exclusive closed window of negotiation, and while Adidas had been a strong and trusted partner for the All Blacks since 1999, the nature of the contracts agreed (whereby there was a first right of refusal extended to the German apparel manufacturer) meant that there had been no ability to test the market for more than 20 years.
If there was underperformance in the category of sponsorship, licensing and merchandise, it was hard to pick up from the annual accounts.
In 2019, the last full fiscal year without Covid disruptions, NZR made $72m from sponsorship, licensing and merchandise, up from $55m in 2016.
But by mid-2021, NZR had its confirmation that it had been right to believe it could strike improved agreements relating to all aspects of the All Blacks kit, when the first part of its reworked plan came to fruition.
In 2020, the decision was made to unbundle the available assets and sell the naming rights to the front of the jersey, the back of the shorts and the training kit separately.
As part of that process, NZR engaged Two Circles, a London consultancy firm with specialist knowledge in this field, and it forecast that the total value of naming rights on the All Blacks kit could be worth up to $36m a year.
It turned out that $36m was a gross underestimate and with the French-owned construction group Altrad buying front-of-jersey rights and UK petrochemical conglomerate Ineos putting its name on the back of the shorts and training tops, the value of sponsorship attached to the All Blacks kit jumped to more than $50m a year.
Part two of the plan would begin in late 2021, with NZR having decided it would put the contract to be its apparel partner out to tender.
Of all the major partners the All Blacks had worked with in the professional age, no one company understood them as well as Adidas, which had an innate appreciation of how to extract its commercial pound of flesh without impacting the team’s high-performance needs.
But NZR kept coming back to the issue of whether it was being paid enough by Adidas, and perhaps more importantly, whether the partnership was enabling the All Blacks to fulfil their potential in merchandise sales.
Major football clubs such as Real Madrid and Manchester United make about 20% of their annual income from selling branded apparel, but for NZR, kit sales have never exceeded 5% of turnover.
Craig Fenton, who in January 2024 began work as chief executive of New Zealand Rugby Commercial (NZRC) – the company set up in 2022 to manage the game’s revenue-generating assets – says that while the last apparel partner renewal process pre-dates him, the ambition to sell more product doesn’t.
“We do see merchandising and specifically apparel merchandising as a growth area,” Fenton says.
“I don’t think it is ever going to be a significant proportion of our business, but it can be a lot bigger than it is.
“Currently we are less than 5% of the revenue so under $10m, and we think that can be more than doubled easily in the coming years through to the end of the decade.”
To achieve this growth target, NZR wanted an apparel deal that would enable it to build a range of lifestyle clothing that was separate to replica shirts and other performance wear, and it wanted to be able to more effectively sell merchandise in non-traditional rugby markets.
It felt, given its ambition, that it had no choice but to tell Adidas that it wouldn’t enter an exclusive, closed window to renegotiate an extension, but instead wanted to conduct a global tender.
If NZR was worried about how Adidas was going to take the news, it needn’t have been.
It turned out that Kasper Rorsted, who had taken over as Adidas chief executive in 2016, had already decided that the All Blacks didn’t fit into his plans.
Rorsted had targeted sales growth in China and was reducing the number of sports Adidas supported to try to fix its relatively weak financial position.
Adidas was all about categories – football, women, running, lifestyle and speciality sports – and the latter, where rugby sat, was deemed to no longer be an area of interest.
Its contribution to Adidas’ global revenue was relatively tiny, and the Danish-born Rorsted had never seemingly quite realised or believed in the power of the All Blacks to transcend rugby and drive sales in territories where the game was not played.
When Herbert Hainer had been CEO of Adidas between 2001-2016, he’d built a strong working relationship with Tew – and despite being a hardcore football follower, he’d taken time to understand rugby and the legend behind the All Blacks.
When he first came into the job, he was taken to Lansdowne Road to watch the All Blacks play Ireland in Dublin, and while he knew little about the laws of the game, what captured his attention was the spirit in which New Zealand played, their unity of purpose and desire to play as a team and not individuals.
It is believed that whenever All Blacks manager Darren Shand went to Germany to discuss product innovation, Hainer would ask to be notified by his PA so he could catch up.
But Rorsted hadn’t built the same closeness of relationship or affinity with the sport or the All Blacks and, seen through a financial lens only, he couldn’t make sense of why Adidas was spending millions to have the association.
NZR opened the tender to be the All Blacks apparel partner in 2021 knowing that Adidas was not going to bid and that the longest-running partnership in professional sport was going to end after the 2023 World Cup.
There were 10 names on the target list to replace Adidas, with six companies making offers, but the global trawl for an apparel partner ended up coming down to two serious bidders – Nike and the emerging UK firm Castore.
NZR set up an internal advisory committee to evaluate the two bids – looking at the cash value, the proposed marketing spends, product range, sales channels, innovation potential and ability to align with the All Blacks’ brand values – and it recommended to the board in late 2022 that it progress with Nike.
In early 2023, the NZR legal team began working through the proposal with Nike, to sift through the fine detail and progress to a final contract.
NZR staff were not told that Nike was the preferred bidder, but various people have said to the Herald that they all knew what was happening and that they were preparing to see what the All Blacks jersey would like with the famous swoosh.
And for Nike, this deal with the All Blacks had been 25 years in the making, because back in 1997 it thought it had secured a binding contract to be the apparel provider to the world’s most famous rugby team.
A few months after David Moffett had started work as the first chief executive of the then New Zealand Rugby Union in 1996, he felt the All Blacks were massively undervaluing their apparel.
Local firm Canterbury Clothing Company was paying $3m a year for the partnership – a figure Moffett instinctively felt was low.
“I realised we had never gone on to the market,” he said in the book Black Gold, published in 2023.
“Canterbury had been our sponsor forever and I said to the board one day, look, I am going to go to the market because we need to find out what this brand is now worth.”
Independent board member Kevin Roberts was charged with leading the process to find a new partner and midway through 1997, he was closing in on Nike.
The US firm, the world’s largest sports brand, had been building its rugby presence in New Zealand through the mid-1990s.
Led by former New Zealand cricket international Richard Reid, Nike had struck individual sponsorships with high-profile players Jeff Wilson, Josh Kronfeld and Ian Jones, and was also Auckland’s kit provider.
These were pre-emptive strikes to build credibility ahead of making a play for the All Blacks, should the chance arise.
Roberts, aware of Nike’s ambition to become the dominant player in rugby, turned up at its headquarters in Portland asking for US$75m over five years.
It was a figure that Nike couldn’t agree to until Roberts sold the idea that the only way it would be successful in its goal of owning rugby was to firstly have a relationship with the All Blacks and to not view that relationship as a sponsorship, but as a partnership.
He told Nike: “It is not going to work if you look at it like a sponsorship.
“You have to look at it as a total package. You are going to have the All Blacks. You can have this big swoosh on the jersey and we will play wherever you want.
“If you want us in LA, we will be there. If you want us to play in China, we will play and we will do big dinners everything you want. So I agree to five games and then we got to a number on the cash and that’s how we got there.”
Roberts signed a letter of intent with Nike and Saatchi & Saatchi were appointed to handle the account and prepare creative content and campaigns to advertise and promote the new All Blacks apparel provider.
The process of agreeing a deal was so far advanced as to have got to the point where Nike had booked executives on flights to New Zealand, where there was a scheduled press conference to break the news that an agreement had been reached with the All Blacks.
But two days before the Nike deal was supposed to be made public, NZR announced Adidas as the new apparel partner of the All Blacks.
The news stunned Nike, as its executive team thought it had been in exclusive negotiations and that the terms of the deal had been agreed.
But unbeknown to them, when Roberts had returned from Portland with the letter of intent, NZR’s board was not keen on the idea of the All Blacks having to play games at Nike’s behest.
There was some concern, too, that Nike, which had built Michael Jordan into one of the best-known athletes on the planet, was not culturally aligned with the team ethos and humility of the All Blacks.
The other game-changer was that Adidas had unexpectedly made contact to express interest, and after NZR chair Rob Fisher had met representatives from the German firm in Amsterdam, and liked what he heard, Roberts and Moffett were despatched to San Francisco to continue discussions.
The timeframe for Adidas to make a compelling bid and persuade NZR to ditch Nike was tight – it had just a few weeks rather than months.
But according to Martyn Brewer, the man who led Adidas’ pitch, it pulled it off by focusing on innovating the All Blacks kit, respecting tradition and accentuating the compatibility of their respective brand values.
“We agreed that it was not just a rugby play, it was bigger than that,” Brewer revealed in Black Gold.
“The All Blacks are bigger than that and when you do a deal of this magnitude, you have to think how you are going to separate yourself from Nike.
“You are never going to outbid them because if they want something, they are just going to write bigger and bigger cheques until they get it.
“Our guys did research to show that so many tackles in the game of rugby were made by people grabbing a hold of someone’s shirt. We made that shirt tighter and harder to get a grip on.
“Then we looked at putting little grip pads on the shirt; it would stop the ball from slipping or getting knocked out from underneath the arm.
“We also knew Nike’s intent was for the All Blacks to be part of a portfolio and play friendly rugby games within its sports agency. Now, anyone who knows rugby knows there is no such thing as a friendly rugby game.
“I thought we did a good job of undercutting the credibility of Nike as the partner for the All Blacks.
“Our story was we are going to do the right thing for the athletes and the right thing for the All Blacks. We are not going to own you. We are going to be your partner and I think that was the difference.”
In February 2023, while Nike and NZR were trying to finalise the deal they never quite managed to finish in 1997, the possibility of history repeating suddenly became live.
Nike was on the home straight, but there were problems in trying to work the detail of the deal into the contract.
And then, out of nowhere – just like in 1997 – Adidas made a surprise play to keep hold of the All Blacks.
There had been a dramatic development at Adidas – and it was one that would once again change the course of the All Blacks’ commercial history.
Rorsted had been told by the Adidas board in August 2022 that a search was going to begin to find a new chief executive, and in January 2023, Bjorn Gulden took over.
The quirk of fate in this was that Gulden would be joining from Puma, where he had been CEO, and in early 2022, he had spent two hours with NZR in Germany, weighing up to whether to bid for the apparel contract.
He’d been taken with the presentation about where the All Blacks brand was heading, the plans to grow merchandise sales and break into new territories and he was keen for Puma to bid.
But a few weeks after he’d met NZR, he’d been shortlisted to join Adidas and so the trail went cold with Puma.
The instant he joined Adidas, though, he made it a priority to see where things were at, and whether it was too late to make a bid.
That Adidas was back in play when the deal with Nike was as advanced as it was left NZR in an ethically grey area.
There had long been disappointment within the All Blacks that the relationship with Adidas was going to end – there was mutual understanding about how each party worked and to complicate matters, many of the higher-profile players had separate individual contracts that were likely going to be hard to unwind and reconcile with the collective Nike sponsorship.
In 2021, former All Blacks coach Ian Foster spoke to the Herald about the challenges the team faced in being so heavily commercialised, taking the opportunity to publicly endorse Adidas.
“What we have learned is that if we communicate and get aligned with our partners, that can enhance rather than drain the relationships,” Foster said.
“With Adidas, both parties have come to understand the brand values and legacy of each other and adapted their expectations, so the relationship has grown rather than stifled each other.
“They are a really good example of a sponsor that has changed some of their expectations once they have understood at a deeper level a bit more about the All Blacks.”
But to drop Nike so late in the piece, simply because Adidas had changed its position, would carry the risk of damaging NZR’s reputation as an entity that could be trusted.
In the end, NZR’s executive team concluded that persevering with Nike carried too much risk as it was starting to feel more probable than possible that the deal would collapse, such were the mounting difficulties with the contract.
Richard Thomas, the then chief executive of NZRC, told Nike in February that the status of the process was being changed from closed to competitive, which effectively meant Adidas was being given a few weeks to mount a counter-bid.
And while Adidas staged a late coup in 1997 by focusing on innovation, respecting tradition and accentuating the compatibility of their respective brand values, this time round there would be three different keys to success.
Firstly, having gone to the open market, NZR discovered that it had been undervaluing its apparel rights, so if Adidas was to usurp Nike, it would have to offer, it is believed, a 30-40% premium on what it was currently paying to match what the Americans were offering.
It would also have to accept that Super Rugby Pacific would not be part of the new agreement, but most critically, it had to agree to allow NZR to sign a secondary deal with Fanatics – a digital sales platform and expert in producing licensed merchandise.
NZR wanted a partnership with Fanatics because of its proven ability to quickly produce, market and distribute specialist product such as commemorative T-shirts and lifestyle wear.
It also wanted Fanatics to be its e-commerce partner and take over the running of NZR’s existing digital sales platform.
The importance of enabling Fanatics to get involved was critical, as Fenton says: “In our assessment they are the best e-commerce operator in the world.
“In New Zealand, we have always been able to buy teams in black stuff but that has not been the case in many parts of the world.
“As of July, that is now live so if you are in California, Austria or Japan, you can buy our stuff and have it delivered to you in a reasonable timeframe.”
When Adidas was able to agree to all NZR’s key considerations, and additionally suggest creating a lifestyle range of branded clothing and apparel, the deal to extend for an undisclosed period was announced on March 30 – just weeks after Nike believed it would be unveiled as the All Blacks’ apparel partner.
History had repeated – Nike was once again foiled in its attempt to get its swoosh on the All Blacks jersey and as one source told the Herald, it is unlikely to ever try again.
Gregor Paul is one of New Zealand’s most respected rugby writers and columnists. He has won multiple awards for journalism and has written several books about sport.