Puma AG Rudolf Dassler Sport

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Puma AG Rudolf Dassler Sport

Wurzburger Strasse 13
D-91074 Herzogenaurach
Germany
Telephone: (49)(9132) 812-489
Fax: (49) (9132) 812-356
Web site: http://www.Puma.de

Public Company
Incorporated: 1948 as Puma Schuhfabrik Rudolf Dassler
Employees: 1,424
Sales: DM 1.4 billion ($714.9 million) (1999)
Stock Exchanges: Frankfurt/Main
Ticker Symbol: PUM.FSE
NAIC: 316211 Rubber And Plastics Footwear Manufacturing; 316219 Other Footwear Manufacturing; 315212 Women’s, Girls’, and Infants’ Cut and Sew Apparel Contractors; 315211 Men’s and Boys’ Cut and Sew Apparel Contractors

Puma AG is among the world’s leading manufacturers of athletic shoes, sportswear, and accessories. The company is perhaps best known for its soccer shoes and has sponsored such international soccer stars as Diego Armando Maradonna and Lothar Matthaus. The company also offers lines shoes and sports clothing, designed by Lamine Kouyate, Amy Garbers, and others. Since 1996 Puma has intensified its activities in the United States where it has a market share of eight percent. Puma owns 25 percent of American brand sports clothing maker Logo Athletic, which is licensed by American professional basketball and football leagues. The American entertainment group Monarchy/Regency owns 32 percent of Puma.

1920s Origins

In the small town of Herzogenaurach, not far from the German city of Nuremberg, two brothers laid the foundation for what would become the European capital of sportswear. Adolf and Rudolf Dassler were born into a poor family at the turn of the 19th century. Their father, Christoph Dassler, was a worker at a shoe factory, while their mother, Pauline Dassler, ran a small laundry business. At age 15 Rudolf Dassler started working at the same shoe factory as his father and soon showed the qualities of an entrepreneur. He was energetic, persistent, and ambitious, and he saved his hard-earned money instead of spending it right away. However, it was not until after World War I that he had a opportunity to prove himself in business. After the war, Rudolf Dassler took his first positions in business management, first at a porcelain factory and later in a leather wholesale business in Nuremberg.

In the early 1920s Rudolf Dassler decided to go back to Herzogenaurach and team up with his brother Adolf in a business partnership. Their company, which was incorporated as the Gebriider Dassler Schuhfabrik in 1924, produced slippers and outdoor shoes. Rudolf Dassler ran the business, while Adolf took care of the technical operations and production. Soon they realized that there was not a particularly promising market for their shoes and so switched their focus to the manufacture of track shoes and football boots, a market that was just getting started at that time.

With a great deal of luck the company acquired its first major client, the sports club in Herzogenaurach, which ordered no fewer than 10,000 pairs of athletic shoes in 1925. Thus, despite the ongoing worldwide economic depression in the late 1920s, the Dassler company took off and gained a reputation among athletes and sporting goods companies. Half of all athletes at the Olympic Games in Amsterdam in 1928 wore Dassler shoes. In 1936, African-American track star Jesse Owens brought the company into the public eye when he won four gold medals at the Olympic Games in Berlin wearing Dassler shoes.

Three years later World War II broke out. Although the brothers could have given up for a number of reasons during the war, it was not this world-shattering event that led to the Dassler company’s sudden end, but a homemade war of a different kind. In 1948, the two brothers had a serious falling-out, and they stopped talking to each other. Their company was split into two new companies: Adolf Dassler formed his own business named adidas, combining his nickname Adi with the first three letters of his last name; Rudolf Dassler set up his own shop called Puma Schuhfabrik Rudolf Dassler. The two brothers had become competitors.

A number of world-class athletes, especially runners and soccer players, helped the young Puma brand gain acceptance. In 1950, at the first international soccer match after World War II, several German players wore the Puma “Atom” shoe. The Olympic Games in 1952 in Helsinki were a spectacular success for Puma and opened the British market to the young company. The American Olympic Committee made Puma its official shoe supplier in 1952 and again 1956. In 1952 the American women’s 400-meter relay team won the Olympic gold medal in Puma running shoes. Puma’s image was also carried around the world by the rising soccer star Pelé, the Brazilian “king of the stadium” who favored Puma’s “King” shoes. After some early difficulty, the company’s export business began to thrive. Puma shoes were shipped to 55 countries on five continents. The first licensed production line was opened in Austria. In 1959 Rudolf Dassler’s firm was transformed into Puma Sportschuhfabriken Rudolf Dassler Kommanditgesellschaft, as Dassler’s wife and his two sons, Armin and Gerd, became part owners of the firm. By 1962 Puma shoes were exported to almost 100 countries around the world.

Another Puma hallmark was product innovation. In 1960 Puma introduced a new technology for soccer shoes, using a vulcanization process to join the soles to the uppers. Soon 80 percent of all soccer shoes were manufactured with this technology. In the early 1960s Puma also developed running shoes with a uniquely shaped sole that supported the natural movement of the foot, based on the latest medical research of the time. In the late 1960s Puma was the first company to offer athletic shoes with a Velcro strap.

A Second Generation of Family Leadership in the 1970s

Rudolf Dassler died in 1974, and his son Armin A. Dassler, who since the early 1960s had been managing Puma’s first foreign subsidiary in Salzburg, Austria, took his place. Twelve years later Puma went public and was renamed Puma AG Rudolf Dassler Sport. The company continued to introduce innovative products. In the mid-1970s Puma introduced the so-called S.P.A. technology—sport shoes with a higher heel that relieved strain on the Achilles tendon. In 1982 Armin A. Dassler invented the Puma Duoflex sole, with special slots that increased the foot’s mobility. In 1989 the company introduced the new Trinomic sport shoe system with hexagonal cells between sole and shoe that cushioned the runner’s foot. Other innovations followed in 1990 and 1991. Inspector Shoes were shoes for kids with a “window” in their soles that allowed parents or trainers to observe whether the shoes were still the perfect fit during those years of rapid foot growth. The high tech Puma Disc System athletic and leisure shoes, which, instead of laces, used a disk that tightened a series of wires.

During the 1970s and 1980s, world famous athletes wore Puma products on their feet and bodies. High-jumper Dwight Stones broke the world record in Puma shoes three times in the years 1973 through 1976. In 1977 tennis player Guillermo Vilas won the French and U.S. Open in Puma shoes. Sprinter Renaldo Nehemia ran three world records in 100-meter hurdles between 1979 and 1981 in Puma spikes. In the early 1980s American football star Marcus Allen of the Oakland Raiders, as well as baseball greats Jim Rice and Roger Clemens, both of the Boston Red Sox, and George Brett of the Kansas City Royals, favored Puma shoes. American sprinter Evelyn Ashford won two gold metals in Puma shoes at the Olympic Games 1984 in Los Angeles. Tennis stars Martina Navratilova and the young German tennis talent Boris Becker won their events at the famous Wimbledon tennis competition in the mid-1980s in Puma shoes.

In 1991 the Swedish conglomerate Proventus AB bought all Puma common stock traded publicly in Frankfurt and Munich. That same year saw the founding of Puma International, a holding company for Puma’s divisions in the Far East, Australia, Spain, France, Austria, and Germany, which were organized as independent profit centers. Despite the company’s high pro-file and success, its profits had steadily declined until, in the early 1990s, they were nonexistent. It was not until 1994 that Puma again turned a profit, and Puma shareholders received a dividend for the first time in 1996.

Company Perspectives:

We live today in a world that is growing together, that changes ever faster, and that offers information in abun-dance. Puma is convinced that in such a world a brand’s success depends on more than the quality of its products. Behind the products there must be a brand with its own unique personality. Only then will it distinguish itself from the competitor’s “white mountains.” Puma is determined to be one of those special brands that tackle things in a different way: unmistakable and convincing. In the midst of the white mountains Puma will be the “Blue Mountain.” Puma will not be the biggest, but be visible in an unmistakable way, as the alternative sports brand.

New Management in the 1990s

In 1993 Puma’s prospects looked anything but bright. The company had been in the red for almost a decade. In December 1992 parent company Proventus gave Puma a badly needed capital boost of DM 50 million. However, the company was competing in a stagnating market driven increasingly rapid product cycles that resulted in rising research and development and marketing costs, as well as losses through more frequent markdowns of older models. Although Puma scored high in brand name recognition, the company that in the 1980s had generated half of all sales with shoes in the lower price ranges was now struggling with its cheap image. Much like its competitor adidas, Puma tried to succeed by leaving low price markets that allowed only low profit margins; breaking into premium price markets—the traditional territory of American giants Nike and Reebok—became their new goal. It was perhaps too little, too late. This strategy at first resulted in significant losses in sales and market share. Adding to the company’s problems was the fact that the successful introduction of the innovative Puma Disc System shoes in 1992 had been an expensive under-taking. By February 1993 it was clear that Puma needed new leadership, and parent company Proventus replaced Puma CEO Stefan Jacobsson with Niels Stenboej, who came from Abu Garcia, another Proventus subsidiary that made equipment for sports fishing. However, only three month later Stenboej left amidst changes in upper management at the Proventus Helsingborg headquarters.

The arrival of 30-year old Jochen Zeitz hailed better times for Puma. At the time the youngest CEO of a European publicly traded company, Zeitz had an MBA from the European Business School and had traveled the world from Brazil to the United States, making his first mark as a product manager for Colgate Palmolive in New York and Hamburg. In 1990 he joined Puma and as a vice-president of international marketing and sales, where he was responsible for the company’s international communications strategy and contributed significantly to the repositioning of the Puma brand. On year after Zeitz became CEO, Puma reported its first profit—DM 25 million—since its initial public offering in 1986. Under Zeitz’s leadership the company initiated a fundamental, market-oriented “fitness pro-gram” that included rigorous cost cutting and reorganization measures. Inflexible structures were replaced, as was the case when the purchasing and product development departments were merged. Several warehouses were replaced by a central distribution center, and all departments became profit centers.

Puma’s restructuring was but one part of its new success story. The other was its innovative marketing plan. At its core was the positioning of the Puma brand as an international performance sports brand for high-quality athletic shoes, sport textiles, and accessories. The company also based its innovative marketing concepts on the latest trend research, earlier ignorance of which had in part caused Puma’s past downturns.

As a result, Puma launched the “Puma-Offensive ’95,” a marketing program with four key areas of activity. The first was based on the revival of the classic Puma suede shoes in the trendy clubs of New York, Los Angeles, and San Francisco. Puma developed a collection of shoe “originals” in various colors and matching textile collections targeting fashion and trend conscious youth. The second element of the marketing offensive was the Puma “World Team.” Top sports figures, such as German soccer star Lothar Matthäus and Jamaican sprinter Merlene Ottey, represented Puma products in an advertising campaign. The third piece in Puma’s marketing mix was known as “Replica,” a line of “fashions for fans” made available through sports retailers and soccer clubs.

One of the most successful elements of Puma’s concerted marketing effort was the Street Soccer Cup, a worldwide street soccer competition first organized in 1994. The idea was developed in cooperation with Leonberg-based advertising agency Godenrath, Preiswerk & Partner (GPP). In 1993 the “street ball” wave had become immensely popular, as kids began storming Germany’s courtyards, playgrounds, and parking lots to play pick-up games of basketball. Puma and GPP worked together to popularize street soccer, which was characterized by its favoring of technique and finesse over athleticism, its focus on casual fun rather than club regulations, and its preference for free style dress over uniforms. New rules for the game had to be established as well. Street Soccer was played in the street on a concrete or asphalt surface, not on a grass field. The 20-by-14 meter field was bordered by a fence. Four players plus one reserve player stormed two goals. Street Soccer was played in two age groups: ages 10 to 13 and ages 14 to 16.

The event campaign was carried out in cooperation with the major German sports magazine Sport-Bild and was supported by retail sporting goods stores. Other prominent German companies also joined Puma as sponsors. Germany’s teenagers embraced the idea. In fact, demand far exceeded supply, and thousands of registrations could not be accepted. About 31,000 youngsters between age 10 and 16 kicked the ball in over 6,000 teams with names like “Magic,” “Street Attacks,” and “Turkish Brothers.” Over 250,000 people watched the games at almost 200 events. The finals were played out in front of the Reichstag building in Berlin. The success of this innovative concept encouraged Puma to continue it on an international scale in 1995. The Street Soccer Cup ‘95 was also played in France, Hong Kong, and Tokyo. Puma introduced a new line of Street Soccer shoes and a collection of colorful clothing for players and spectators. All told, approximately 800,000 people watched 70,000 kids playing soccer at more than 400 events during this Puma event.

Mid-1990s and Beyond: Conquering Western Europe and North America

The year 1996 marked the end of the restructuring period Puma had been undergoing since 1993. This was followed by a period of new alliances and higher investment in international marketing and new product development. For the first time since the company went public, Puma shareholders saw a dividend in 1996 after the company achieved a three-year sales record in comparison to previous years. A Puma stock offering on the Frankfurt and Munich stock exchanges in June 1996 reduced the holdings of parent company Proventus Handels AB to 25 percent. A few months later the American movie production and distribution firm Monarchy/Regency bought a 12.5 percent stake from Proventus; it obtained the other 12.5 percent in 1997.

Key Dates:

1924:: Rudolf and Adolf Dassler incorporate their first shoe company.
1948:: Rudolf Dassler sets up his own company Puma Schuhfabrik Rudolf Dassler.
1959:: Rudolf Dassler’s wife and two sons become part owners of the Puma Sportschuhfabriken Rudolf Dassler KG.
1962:: Puma shoes are shipped to almost 100 countries.
1974:: Armin A. Dassler takes over as CEO.
1986:: Puma goes public.
1991:: Swedish conglomerate Proventus AB becomes majority shareholder.
1993:: 30-year-old Jochen Zeitz takes over as CEO.
1998:: Puma acquires 25 percent of Logo Athletic Inc.
1999:: Monarchy/Regency becomes Puma’s biggest single shareholder.

In 1999 Monarchy/Regency upgraded its shareholdings to 32 percent. The transaction made Monarchy/Regency Puma’s biggest single shareholder. The interests of the new partners complemented one another in that Monarchy/Regency was interested in a platform from which it could build relationships in the sports world to diversify into new markets, while Puma CEO Zeitz believed that the entertainment company could help Puma with its marketing efforts.

In the second half of the 1990s Puma intensified its international activities. A new subsidiary—Puma Italia S.r.l.—began operations in 1997. Two years later Puma opened its new subsidiary Puma UK. However, the most important strategic market for Puma was the United States. In 1997 Puma generated about 80 percent of its sales outside Germany, and this figure shrunk to ten percent if license income was included. Puma’s position was especially strong in Japan where ten percent of all license fees were collected. On the other hand, only a tiny fraction—4.5 percent—of Puma sales of approximately $846 million derived from the United States, representing less than one percent market share. A first step toward penetrating the largest sports market was the acquisition of Puma North America and the Puma trademark from Proventus AB in January 1996. In 1998 Puma sealed a long-term contract with the Women’s Tennis Association (WTA), making Puma the official supplier of shoes and textiles for the WTA women’s tour. In the same year Puma acquired a 25 percent share in Logo Athletic, one of the leading licensed suppliers for the American professional sports leagues. The deal started paying off in the very next year. In 1999 Puma became one of four suppliers of the American National Football League (NFL). Beginning in the 1999/2000 season 13 NFL football teams were wearing Puma, as well as nine National Basketball Association teams. When two Puma teams—the St. Louis Rams and the Tennessee Titans—competed for the Superbowl in January 1999, about 1.3 billion TV watchers worldwide were exposed to the Puma logo. Another novelty was the 1998 contract between Puma and then 16-year-old American tennis talent Serena Williams. The five-year contract included not only promotion activities for Puma-wear but also engagements in movie and music projects of Puma parent Monarchy/Regency. The strategy certainly seemed to be paying off in 1999 when Puma’s U.S. sales increased by 60 percent, and, moreover, the company seemed well-positioned for the future.

Principal Subsidiaries

Puma United Kingdom Ltd.; Puma France S.A.; Puma (Schweiz) AG (Switzerland); Austria Puma Dassler GmbH; Puma North America, Inc. (United States); Logo Athletic Inc. (United States; 25%); Puma Benelux B.V. (Netherlands); Puma Canada, Inc.; Puma Italia S. r. I. (Italy); Puma Polska sp.zo.o (Poland); Puma Hungary Kft.; Puma Australia Pty. Ltd.; Puma New Zealand Limited; Puma Chile S. A.; World Cat Ltd. (Hong Kong); Puma Far East Ltd (Hong Kong).