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20 May, 2008 15:33

Russia to become Adidas’s biggest European market

Adidas is shifting its manufacturing operation away from China because of rising labour costs, according to the company’s head. It comes as the German sportswear manufacturer targets huge growth in the Russian market.

In Moscow to promote its sponsorship of Wednesday’s Champions League Final, Adidas predicted sales of US$ 1 billion in Russia next year, making it the biggest market in Europe by 2010.

But the firm admitted the country remains massively underdeveloped. Unlike similar events in the West, it claimed there wouldn’t be a big sales hike from its blanket Champions Final promotion, blaming the lack of what it calls a “jersey culture”.

“I don’t expect this to be a commercial boom for us they don’t have a jersey culture here, they don’t walk around in jerseys,” says Martin Shankland, CEO of Adidas in Russia & CIS Group.

The company’s selling ski brand Solomon, blaming climate change for sales in the sector falling 40% a year. But it has expansion plans for newly-acquired Reebok, opening 120 branded stores in Russia this year alone to make the brand number two in Russia and third worldwide.

The head of the German company said the other key to catching rival Nike meant cutting costs, including shifting production out of China.

“There is a tendency now going more to Cambodia, Laos, Vietnam, with factories there, due to increasing labour costs in China,” Herbert Hainer, Adidas Group CEO said.

Adidas 15% share in the world’s biggest market the US lags behind Nike’s 40%. It’s counting on continuing its 50% annual growth in China and Russia this decade to cut its American rivals’ lead.