China Soccer $$$
China wants to get awesome at soccer, and that means big bucks for a handful of companies!
Despite the fact that China’s population currently stands around 1.3 billion (roughly 20% of the earth’s population), its men’s soccer team currently ranks at a measly 81st in the world.
On top of that, the men’s team has competed in the FIFA World Cup only once — back in 2002.
But now, China is on a mission to become a major force in the soccer world.
And that’s going to be great news for big sportswear companies.
In March, the Chinese government announced plans to refurbish its soccer sector, including the separation of the Chinese Football Association (CFA) from the government sports regulator, which would, ideally, help decrease corruption.
Additionally, the government also plans to increase the number of soccer schools to promote soccer for the younger generation. They want to go from the current 5,000 to 20,000 in five years, and then to 50,000 in ten.
But while the whole winning-a-World Cup-thing would be great, Barclays analysts think that the real winners of China’s foray into the soccer world could be major sportswear companies that already have a presence in the country.
“We believe recent sports campaigns and initiatives introduced by the China government have created large pockets of opportunities in the region for brands such as adidas and Puma,” says Barclays analyst Vineet Sharma.
“The latest deal between adidas and the Chinese education ministry to develop a [soccer] training program should act as catalyst in promoting football to the youth and we believe could make [soccer] the fastest growing sport in China over the next three to five years, albeit from a small base,” he added.
Notably, Barclays’ call comes at a time when major US and EU-based companies have not only been worried about China, but have also attributed their weaker Q3 numbers to it.
However, “despite recent uncertainty regarding China’s economic performance, it appears that international sports brands have not been impacted and are not seeing an end to the growth story within the region. Sports and lifestyle is becoming increasingly popular amongst Chinese consumers alongside with a willingness to spend on strong international brands such as Nike, adidas and Puma,” writes analyst Julian Easthope.
Notably, Nike saw revenues jump 30% in China in Q3, and it is now the sponsor of the Chinese national football team. Furthermore, adidas’s Q2 results showed a +19% organic revenue growth in China, according to Barclays.
Already, “adidas and Nike combined dominate the US $5bn/year football kit market and adidas recorded EUR2.1 bn (US $2.35 bn) of [soccer] sales in 2014,” notes Easthope. And, if moreChinese people get into soccer, then these companies only stand to benefit from it.
adidas also recently signed a three-year deal with the Chinese education ministry to promote football in schools “in the hope of creating interest in the sport,” according to Easthope.
“The deal should help adidas nurture the next generation of football players and inspire new football fans in China, in our view. This comes at an important time, where the number of fans watching football is on the rise,” adds Easthope.
In sum, as China works to pump up its soccer sector to the top, the big name sportswear companies will be standing on the sidelines, collecting the winnings.
Thank you businessinsider.com
by Elena Holodny