A local Adidas apparel plant could lose about one-fourth of its business when the company's NBA contract expires in 2017, industry experts said. But Adidas officials are confident there will be no layoffs to the local staff of 1,100, as a plan takes shape for life after Nike takes over the lucrative deal.
This week, the loss of the NBA contract faded from prominence in the minds of Adidas officials at the plant off of Interstate 70 and Post Road.
With the National Hockey League champion crowned Monday and Golden State winning the NBA title Tuesday, plant manager Blake Lundberg has three shifts working at full capacity and also remote locations in Oakland, San Francisco and Chicago—where the NHL champions reside—to oversee.
“Right now, I’m concerned with what we’re doing today,” Lundberg told IBJ on Thursday. “We’re as busy from a volume standpoint as we’ve ever been in the 15 years I’ve been here. We’re busier than we were after the Super Bowl.”
The business is being fueled this week by the fact that Golden State hasn’t won an NBA title in 40 years, and Chicago is a crazy hockey town with a team whose following extends well beyond the Windy City.
The local Adidas apparel plant was running at full tilt through the night Monday and all day Tuesday, making and shipping Stanley Cup items. Tuesday night, plant workers began cranking out Golden State gear after the Warriors defeated the Cleveland Cavaliers for the NBA championship. They were still going strong Thursday.
Even though Adidas has the NBA apparel contract for two more seasons, sooner or later company officials will have to try to replace the sizable chunk of NBA business they’re losing to rival Nike. Adidas officials declined to say how much of the business at the east-side plant is NBA-related.
Adidas has been the NBA’s apparel supplier since it signed an 11-year, $400 million contract with the league in 2006. The company had been in talks with the NBA since 2012 about a contract extension, but in March, discontinued those talks when the NBA said it was opening up the bidding process. Nike agreed to pay $1 billion for an 8-year deal.
Adidas officials this year “decided [to] change [their] investment strategy and invest more in players on the court,” said Chris Grancio, Adidas’ global basketball general manager. It’s unclear what that strategy will mean for the local plant, but Adidas officials are promising to double their list of sponsored NBA athletes from 70 to 140 by 2020.
Local officials haven’t been contacted by Adidas corporate executives on what the exact post-NBA plan is and what impact that will have on the local factory, Lundberg said.
Adidas’ contract with the NHL also is set to expire after the 2016-17 season, but company officials are currently trying to extend that deal. Lundberg hopes to learn the fate of those negotiations later this summer.
Either way, Lundberg is confident there will be a need to keep the local shop running at full speed.
“I am convinced there is no better workforce in the licensed apparel industry than the group we have at this facility,” Lundberg said. “I’d put this [plant] and its people up against anyone.”
Industry experts agree the experienced staff, coupled with the facility’s central location and state-of-the art equipment, have allowed the local operation to survive many industry changes.
“That plant is the largest embroidery and silk-screening plant under one roof in North America,” said Robert McGee, editor of Sporting Goods Intelligence, a Pennsylvania-based trade publication. “The level of expertise they have there is unmatched in the U.S., and it gives Adidas a real competitive advantage.”
And it’s not as if the facility hasn’t had to change course in the past.
In 2012, after an 11-year run, Adidas lost its huge NFL apparel contract—to Nike. Industry analysts estimate the local facility—the largest of Reebok-Adidas’ three U.S. plants—generated at least $200 million in annual revenue from the NFL deal.
The facility was founded in 1971 by Thomas Shine under the Logo 7 banner to manufacture sports apparel.
Mall pioneers Herb and Mel Simon bought the operation in 1984, just after purchasing the Indiana Pacers. In 1992, when the Simons sold Logo 7 to Virginia-based Tultex Corp., the company employed about 500.
In 1997, as employment at the plant grew to more than 900, the operation changed its name to Logo Athletic.
In 1998, a local group headed by Shine, the Simon brothers and the Indianapolis Motor Speedway bought the company back from Tultex. But just two years later, Logo Athletic declared bankruptcy during a free fall in the sporting apparel industry.
In 2001, Reebok bought the operation for a fire-sale price of $13.8 million—$83 million less than it sold for three years earlier—and used the facility to produce much of its NFL-related merchandise.
The plant became a part of Adidas when the German company bought Reebok in 2006 for $3.8 billion.
Adidas has used a big push into high school and college sports to help replace the NFL business lost three years ago, and Lundberg said that push continues.
“Our college and high school business is thriving,” he said, despite the loss in 2014 of one of its key accounts, Notre Dame, to Under Armour.
Adidas has added several key accounts recently including Arizona State and the University of Miami (Florida).
Lundberg said the local facility also is growing with Adidas’ Major League Soccer contract, a growing number of Adidas deals with individual athletes, and with the expansion of Adidas’ own line of branded apparel.
“We have two full years left with the NBA and we’re 100-percent committed to maximizing that business during that time,” Lundberg said. “The one thing we’re very good at here is change. After the NBA contract ends, I’m sure there will be plenty to do here.”