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PUMA confident about its prospects
[June 05, 2006]

PUMA confident about its prospects

(Business Daily Update Via Thomson Dialog NewsEdge)Author: d Clad in a Western-style suit without a tie, Jocen Zeitz briskly steps onto the stage and energetically launches into a speech, seemingly undeterred by the businesspeople assembled before him. His firm yet ambitious message underlines his confidence speaking in front of a packed house. "(We will) quadruple our sales in the next five years in China, the world's fastest growing market, and become the top sports lifestyle brand, both globally and in China." Zeitz was appointed as chief executive officer (CEO) and chairman of German-based sporting goods manufacturer PUMA in 1993, at the tender age of 30. It made him the youngest chairman in German history to head a company listed on the German Stock Exchange. He quickly proved himself by casting off debt in 1994. He has managed to hold onto his top position for 13 years, by turning the PUMA brand into an innovative fusion of sports, lifestyle and fashion. Zeitz's strength lies in his powerful and bold marketing strategy, industry observers say, adding that the young CEO has injected a healthy dose of passion and creativity into the way the sportswear company does business. The young dynamo's accomplishments as company head are impressive enough to put even veteran, ageing CEOs to shame. Under Zeitz's tenure, PUMA has sponsored sports teams and large international tournaments, placed products in major Hollywood movies, collaborated with BMW to design and produce limited-edition luxury driving shoes, and launched a yoga-inspired clothing line. The company has been relentless under Zeitz, with one round of marketing campaigns after another to encourage continual sales growth and PUMA's brand profile. "We are globally reinforcing our position as one of the leading multi-category sports lifestyle brands," says Zeitz. "Our strategy in China is in accordance with our international tactics." At the beginning of this year, PUMA launched the fourth phase of its long-term business plan, which also depends on strong marketing. The company has said it foresees slightly lower full-year net profits this year, due to higher marketing costs, especially for the FIFA World Cup, which is being hosted by Germany this summer. "The FIFA World Cup 2006 is the most significant, aggressive marketing and communications investment in PUMA's history," says Zeitz, without disclosing the exact costs of the campaign. PUMA sponsors 12 teams, making it the dominant kit supplier for the international tournament. PUMA is ready to make a strong mark with its innovative products and marketing concepts during the World Cup. It hopes to build on its position as one of the top three football brands in the world. A survey by sports industry consultancy Sporting Goods Intelligence shows that PUMA ranks as the fifth largest sneaker manufacturer in the world, with a global market share of 4.5 percent. The top four are Nike, Adidas, Reebok and New Balance, which are also active in sponsoring sports teams and tournaments. Zeitz acknowledges that China is the most important market for PUMA, over both the short- and long-term. The company has decentralized its operations as it creates a truly virtual sports company, with four headquarters in Germany, the United States, England and Hong Kong. The company has used Hong Kong Swire Resources as its distributor in China since 2003. The companies are jointly exploring the vast potential in the mainland market, based primarily on Swire Resources' valuable local knowledge. The collaboration has proven effective, with PUMA's business growing by more than 100 percent per year. China has become the company's largest manufacturing base, with over 50 percent of PUMA-branded shoes, apparel and accessories being produced on the mainland. Zeitz has set precise yet ambitious targets. He plans to expand the number of PUMA's retail outlets from 750 to 1,000 by the end of this year. He also hopes to quadruple the company's China sales within the next five years, making the country PUMA's third largest market after the United States and Japan. China is developing quickly, which means marketing models used in more mature markets will also be useful on the mainland. PUMA has contacted a number of Chinese football clubs for sponsorships, and has even signed a contract with Liancheng, a club in Shanghai. Zeitz acknowledges that PUMA's progress in China faces several challenges, however. One of the biggest problems is counterfeiting and trademark protection. He believes the situation will improve, because the Chinese government is paying attention to the issue by strengthening criminal and administrative enforcement, and by encouraging public awareness of the fact that counterfeiting is a crime. Another issue is intensified competition from both domestic companies and foreign players. Adidas has said it will expand its stores from more than 1,300 in 250 cities in 2004 to 4,000 in 400 cities before the 2008 Beijing Olympic Games, with annual sales volume reaching 1.2 billion euros by 2010. A survey by ACNilsen covering 1,200 university students in Beijing and Shanghai shows that Nike is the most popular brand in those markets. Domestic name Li Ning is the top sports gear provider in China by sales, with over half of the market share, according to company sources. The company is confident it will occupy the leading position in the mainland market over the long-term. Zeitz is not particularly worried, however. "The potential of the Chinese market is huge and the 2008 Beijing Olympic Games are likely to further fuel enthusiasm for sport," says Zeitz. Statistics from the China National Garment Association show annual growth in the country's consumption of sports products at 15 percent.

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