How did Puma manage to recover its protability?


What is distinctive about Puma’s brand strategy in global markets?

Puma on Top of the World

When Italy lifted the football World Cup in 2006, there were celebrations in the town of Herzogenaurach, Germany. Puma, the sportswear company sponsoring Italy, could celebrate a triumph for their brand. Adidas, also based in the town, sponsored the largest number of teams, including France, the runners-up. Puma sponsored all native African teams in the finals of the competition, using the logo, ‘United for Africa’, looking ahead four years, when Africa will host the finals. Puma’s marketing, which cost a fraction of the marketing budgets of its larger rivals, Adidas and Nike, is indicative of the fresh approach of its entrepreneurial CEO, Jochen Zeitz, who took over the company in 1993. Then, the company was losing money, and its products were more likely to be found in discount stores than in the kit of sports personalities. He was 29 at the time, becoming Germany’s youngest chief executive. His twin strategy to revive the company involved cutting costs and building the brand. Production was moved out of Europe to Asia. He is aware that his competitors, who also outsource in Asia, have faced criticisms for sweatshop conditions in sportswear manufacturing, but he points to the fact that Puma uses independent NGOs to monitor conditions, and has had no complaints for years. Zeitz has transformed Puma into a global brand by focusing on sports lifestyle, rather than getting leading athletes to wear its products, as Nike and Adidas have done. It aimed to add a fashion element, to excite the consumer, paying less attention to matching competitors’ products head on. Puma now has annual sales of 2 billion, and enjoys the highest prot margins in the industry. It has added two other headquarters, one in Boston, USA, and one in Hong Kong. Its workers come from all over the world. Zeitz says of Puma: ‘We are a global company now, no longer German. I mean, can you imagine, when I got here we had what was called an “export manager” and he couldn’t speak English’ (Milne, 12 June 2006). As indicated in the gure, the Americas and Asia together now account for a slightly larger proportion of Puma’s revenue than Europe, the Middle East and Africa.

The Puma brand today relies in large measure on trends in fashion, which can be ephemeral and are notoriously hard to predict. The leaping cat logo has become widely recognised, but Adidas and Nike are also seeking to win over consumers with exciting new products. Adidas has hired Stella McCartney, the fashion designer, to design new sportswear. Puma’s potential in sports fashion caught the attention of PPR, the French group which owns Gucci and other upmarket labels, as well as large retailers. Having taken a 27% stake in Puma, PPR is contemplating taking it over, with a view to exploiting the growing luxury sports sector. Puma would gain from increased capital investment, helping to boost its sports products as well as luxury fashion products. In the past, Zeitz has been sceptical about mergers, but the backing of a strong luxury and retailing group should strengthen Puma’s competitive position.


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