Q&A With Reebok’s Uli Becker

CANTON, Mass. — Uli Becker says Reebok is back, and he’s eager to prove it.

Sitting in his office overlooking the brand’s campus, Becker has the evidence in his hands, including colorful fall ’10 product from the EasyTone and ZigTech lines and detailed handouts laying out the brand’s fresh vision. Beside him is a giant notepad, where the executive has scribbled several additional points, a list he annotates as he talks.

As the CEO methodically charts the brand’s recent history, he’s the first to admit it’s been a rocky ride. In the years following Adidas Group’s acquisition of Reebok in August 2005, the once-powerful athletic label suffered from an identity crisis as price points hit all-time lows, retailers lost faith in the company and consumers ran away.

“Our reputation was in the toilet, [and customer recognition] was too,” Becker said.

During that difficult chapter, Reebok learned plenty of lessons, said the exec, a 20-year veteran of the Adidas Group who took the head position at the brand in March 2008, after spending two years as its chief marketing officer.

As one of the architects of Adidas’ breakout “Impossible Is Nothing” campaign, Becker knows the importance of creating a strong identity, so that was his first priority at the ailing brand.

“Our vision should never change, and it should be broad enough so it is a home … for everyone,” he said. “What’s our DNA? What are our values? How do they translate into activities? In the last 18 months, [that’s what] we have driven toward.”

The ultimate strategy, he said, comes down to one mandate: Stay in shape and have fun. Supporting that mission are three underlying priorities: the women’s business, focused on fitness; the men’s segment, with a focus on training; and a classics business that draws on the brand’s heritage.

And while it’s too early to call the plan a success, the efforts seem to be paying off.

Reebok reported a 4 percent sales increase in the North America home market for the fourth quarter — the first positive movement since the brand was acquired. And Adidas Group CEO Herbert Hainer is banking on Reebok to be one of the company’s key growth opportunities in 2010 and beyond. (For more, see the sidebar on page 10.)

A pair of high-profile launches have stimulated the brand during the past year: the EasyTone toning product, debuted for spring ’09; and the running- and training-focused ZigTech shoes, which hit retail last month and use an eye-catching wavy bottom to reduce impact on joints.

Matt Powell, an analyst for SportsOneSource, said the ZigTech launch had been strong for retailers, with a good sell-through that boded well for Zig as a second technological platform. And EasyTone sales, he added, have continued to grow as the company has shipped more product.

“In the U.S., in footwear, this is a significant improvement for them,” Powell said, adding that he sees the potential for the brand to “virtually double” the $500 million in wholesale footwear sales he estimates the firm did in 2009. “They’ve put in lots of effort, and it has paid off.”

“The brand is experiencing a renaissance,” added Glenn Lyon, CEO of Finish Line Inc. “Our customers are telling us they like shoes that deliver both design aesthetics and comfort. Reebok is clearly on to something with their latest offerings.”

Sales of the ZigTech shoes have been “brisk” since their introduction last month, and the brand has potential to win market share, Lyon said.

“We have been encouraged by the innovation we’re seeing from the brand. Their pipeline, with the introduction of the EasyTones and now the Zigs, is generating some compelling products that resonate with our customers.”

Becker is convinced that it’s Reebok’s new focus that has brought it to this point and will keep it moving. He said, “I truly believe if you put the brand in the forefront of your thinking, the business will follow.”

FN: Getting the company to this point has taken several years. Did it take longer than you initially thought?

UB: Everyone thought that after one quarter we could come up with [a winning strategy]. And trust me, I’ve got a chairman and CEO who is very impatient, and he wanted to see results. But what we don’t realize, in our own impatience, is that creating success sometimes takes much longer [than expected]. I could argue that there was a recession that didn’t help us, but maybe right now it does help us because we’re spending money when others aren’t.

You think about the Apple turnaround: They were five years in the shitter. They were almost gone. Today, it looks like [their turnaround] was much quicker. It’s all relative. If we have five successful years, do you think anyone is going to talk about whether it took us four years or three years? So I don’t know if it could have gone better. I also don’t care, because it took what it took and now we’re here and we can improve.

FN: What were the brand’s biggest problems when you took over?

UB: Our reputation was in the toilet, and [customer recognition] was too. The business was very much characterized by low price-point product, which drove it to the lower end of distribution. Reebok [fell] between a branded and unbranded business. From a consumer point of view, if you buy unbranded, maybe Reebok was the first brand you considered because … there were minimal differences in prices. Or if you’re a branded person, Reebok was really the last brand you considered. And that is not a good place to be for a brand that has high aspirations to position itself in the big game.

All of it was the result of going after financial results. The challenge is always to make sure you hit your financial results. And you can do that with a strategic approach to brand building, or you can do that by using up that part of the brand equity to keep the numbers stable.

FN: Given the challenges, what made Reebok an attractive project to take on?

UB: I don’t want to paint too bad of a picture. One of the biggest strengths of Reebok has always been that it is very much an idea-driven company. They reinvented the license business. They came [up] with RBK and the music concept, but unfortunately, they made it too big, which was a screw-up. But innovative thinking was always part of the Reebok brand. The ambition of people here to go for it and the talent we have, I saw those things when I came here and I fell in love with the brand straightaway. Reebok is such a great brand with a long history. Getting a brand with a strong history back into a good place has happened many times before. If you find the right direction that connects you to where you come from, you have a great chance to be successful again.

FN: What were the first steps you took to resurrect the brand?

UB: We immediately, beginning in 2007, decided to get rid of the mess. We had to get clarity for the brand. We changed the logo to make it timeless and readable. I’m a brand guy, and you can only have one signature. It can be ugly, it can be good-looking, whatever, but it is a signature; it personalizes you. We had like 200 signatures: the old Reebok logo, the vector, the RBK branding. That’s not good when it comes to [corporate identity]. The new [Reebok] logo creates the face of the brand, which won’t change anymore. It still takes a long time to actually bring that branding through. 2010 is the year where pretty much all the RBK branding, for example, is out of the market, and you have Reebok branding.

FN: And what steps did you take on the product and brand mission side?

UB: The first step was to create our brand fundamentals. Our vision should never change, and it should be broad enough so it is a home for people, for the brand and for everyone. What’s our DNA? What are our values? How do they translate into activities? In the last 18 months, [that’s what] we have driven toward.

FN: And what was the DNA?

UB: What I want is for Reebok to become the biggest and best fitness and training company for people who are interested in staying in shape. If you go and do your workout and you like the results, but you’re not enjoying how you get the results, that’s a big issue. I played sports because I really loved it — and I had fun doing it, I had fun training. My kids have more fun today playing video games, which is a problem. So I took on this big topic and said we, as a brand, want to bring fun back into sport. That includes recreational sport and it includes performance dimensions.

FN: How critical was it to connect Reebok’s past to the new positioning?

UB: No brand that came back was a different brand when it came back. You can’t be something completely different. Never. I’m very, very proud to say that the strength that brings Reebok back to life today comes from Reebok. The [Adidas] Group obviously gave us the financial backing to do what we had to do — which was needed — but it’s Reebok’s DNA that actually made Reebok successful.

FN: Much of your early success has been centered around the women’s market. Why is that such a big opportunity?

UB: We always wanted to go back into women’s. We always wanted to be about fitness on the women’s side. It’s an area that’s a big business and is not owned by anybody. This was our premise, and we made that a priority. That’s what we’re profiting from today. The Jukari collaboration [with Cirque du Soleil] came from there. Toning came from there. Toning has done an incredible job in terms of giving us that one engine that pulls us out. Now that the women’s side is up and running [with EasyTone], we see good results. ZigTech is a shoe for both genders, but we’re marketing on the male side first.

FN: EasyTone was a breakout last year. What did you take away from that?

UB: If people are willing to spend $100 on a product today, in a time when the world has many different challenges, then it’s because they’re buying something they really want. Because we actually create the point of difference, they’re making a commitment to the brand. That, for me, is massively positive. We weren’t able to sell a $100 shoe before the recession hit. We’re doing that now.

FN: Why has toning become the story for the industry?

UB: No retailer, a year-and-a-half ago, had any belief that toning was actually a business that could be interesting. Today, you have retailers with buyers dedicated to this category and walls dedicated to this category. [Toning product] came out of a conversation with consumers. If I can provide solutions that will work for the consumer, I can convince retailers. The nice thing about it is that it is very global, across all demographics. Toning, by itself, happens everywhere. It’s not something that is reduced to the mall channel; it’s not reduced to the sporting goods channel; it’s not reduced to anything.

FN: If it’s open to all channels, how do you segment the market?

UB: You need to make sure you find the right distribution mix across the channels. If my EasyTone is a $100 shoe, I can only sell that $100 shoe in specific locations across the distribution mix. That is what we’re doing. We’re not over-

delivering that shoe in channels where we feel there’s a price resistance to a $100 shoe. The moment we start reducing price points and becoming a promotional business, I’m killing my own sustainable business. That’s committing suicide. We don’t want to make EasyTone just a one-product deal. What we [want to do] is create our iPod.

FN: Are you worried about the sudden influx of new brands in the space?

UB: That’s the regular competitive [market] we’re in, so hey, welcome. Thanks for letting us alone — and maybe also Skechers — for a year. We’ve got a clear plan, we will execute against it, and that’s what’s going to make us successful. I saw, at Payless, a Champion shoe for $30. Great. I’m purposely not covering price points of $30 anymore. The clear competitor in our business right now is the negative heel [technology]. But they’re visually different. That’s why we have a toning shoe that you can run in. You would have a big difficulty in negative heel shoes to create a product that you can do anything in but walk.

FN: What things are you trying to avoid as you grow the business?

UB: It would be very easy to get greedy. How you execute your strategy day-to-day is absolutely [crucial]. For me, it’s not about going absolutely crazy with our growth potential in the first year. Our sales guys need to know who they sell to, why they sell to them, who they’re not supposed to sell to and what is too much of an order. We need to come to a place where we’re actually making this sustainable growth. Everything that goes smartly has a far bigger foundation than craziness. We need to make sure we don’t get crazy.

At the same time, we also need to make sure we have built the structure for it. We’ve been an organization that has been in reduction mode for the past three-and-a-half years. One of my bigger challenges last January was to sign off on the plan to reduce head count.

FN: Is the firm in hiring mode now?

UB: It’s a question of the next six months. We’re not yet in a hiring mood, but it is not so far away. If I want to build apparel, I need to have apparel people. I can have a big plan, but if I don’t have that infrastructure built, it’s not going to work.

FN: On the advertising front, you’re rolling out the new “Ree” campaign in a big way. What message are you trying to send to consumers?

UB: We’re reinventing ourselves, so to speak. It’s a very symbolic way of actually communicating to consumers that the brand is back.

FN: “Ree” focuses heavily on EasyTone and ZigTech. How much are you planning to spend?

UB: A lot. It’s the single biggest investment that we’ve done [since the acquisition]. Last year, we started rolling out the campaign in the U.S., [focused on] toning. Now we’re bringing it to life in selective European markets, as well as in Asia. You’ll see in the next couple of months a major investment that goes toward EasyTone. We launched the single biggest overall marketing campaign that this brand has done on the ZigTech side. There’s a viral component to it, there’s a digital marketing component to it, there’s a commerce component to it and there’s a TV component.

FN: What’s the next step as you build the ZigTech and EasyTone franchises?

UB: We have another technology coming out [for fall ’10] called U-Form. It’s customizable, an idea that comes out of ski boots or skateboards. [It’s in cleated basketball and footwear now, but] you could even say there will be a U-Form upper with a toning sole in the future.

FN: How important is it to build on those technical platforms?

UB: The whole idea of having a clear strategy and creating inside-driven and benefit-driven advantages helps differentiate us. Let’s say you buy the EasyTone shoe, six months later you can actually buy the toning shoe you can run in, [RunTone, which launches globally in June]. Or you can [buy a ZigTech shoe] that makes you run faster. The marquee brand drivers should be driven by [technology], and that allows you to bring a lot of forward momentum to the brand. That is what, again, defines us. It’s about you getting in shape.

FN: With all the new initiatives under way, are you more confident about your retail relationships?

UB: In the U.S., a year-and-a-half ago, we were having meetings, but not creating results because there was a lot of doubt about what Reebok could do. Those relationships have highly improved because all of a sudden we have something to talk about, something that helps retailers differentiate themselves in a time when there’s so much sameness in the market. We paid the penalties for what we had done in the past. Now we’re actually harvesting the fruits of the seed we planted.

FN: What is your long-term outlook for the brand?

UB: For me, the fun part starts now. I always use the analogy of a big oil tanker. You want to go from A to B, but you first need to direct it, and the directing takes far more time because it’s big, heavy and difficult. Once you have it directed, the second [challenge] is you need to create some forward momentum. That’s my analogy. Once you’re driving, once you have momentum to speed it up, it’s, in my eyes, the easier times. Do I believe Reebok can go far in this market? Absolutely. Reebok is an American brand. America made Reebok big. America let Reebok go because it might not have done some things right. America will embrace Reebok to its fullest again.

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