The magazine for alumni and friends of Massey University.
Issue 14, April 2002

Chief Financial Officer
Robin Stalker
Bachelor in Business Studies

Earning his stripes

There must be mornings – rare mornings when he is at home and at leisure – when he wakes and wonders if it is all real. The house is set, as seems right, in a Grimms fairy tale setting, bordering a Bavarian forest. He has the run of a sports campus and golf course, with the pick of the newest and best in sports equipment. He can have, if he wants, the most coveted seats at some of the most epochal international sports events. His employer is the darling of the German stock exchange. And he gets to travel as much as a self-confessed 747 addict could ever want.

Such is the predicament of Robin Stalker, the Chief Financial Officer for adidas-Salomon, the second-biggest maker of sporting goods in the world. Home, for this Kiwi, is Herzogenaurach, close by Nuremberg. “Herzogenaurach,” pronounces Stalker in a fishbone-stuck-in-the-throat kind of way. “You need to put your teeth in when you say it.”

With just 24,000 people and an intact medieval market place of half-timbered buildings, Herzogenaurach – literally the duchess’s estate – stands in contrast to other places Stalker has lived in during the past 20 years: London, Seoul, Tokyo. “When you get a bit older it’s good to be in smaller towns,” says Stalker, a venerable 40-something. “I guess that has something to do with my background in New Zealand.”

He must be particularly glad to be back there now, even on a grey, wet, winter day. For the last several weeks he has been barnstorming the world. A week ago he was in New York making a presentation to several hundred potential investors. Today his audience and interlocutor is Chris Moore, Professor of Finance and Banking, sitting by the speaker phone on a summer’s night on the Palmerston North campus, Stalker’s home campus.From his days as a pupil at Palmerston North Boys’ High, Stalker had always planned on spending time overseas and eventually doing something significant in business. So when he enrolled at Massey it was for a BBS, majoring in Finance and Accounting. The way he figured it, becoming a chartered accountant – if not his lifetime career choice – would be his entree into the business world. In his first year he tried to combine work and study.

“ I soon discovered this was not a good idea. I had the worst of both worlds. A lot of my acquaintances were having this whizzo time being full-time students while I was going backwards and forwards from an office.” With the switch to full-time study made, Stalker relished his time at Massey. The Faculty of Business, then just over a decade old, was something close to how he had imagined an American business school to be. “I had a feeling this was something special. “But I was also pleased to qualify and move on.”He began work for Arthur Young chartered accountants in Wellington and was eventually offered a transfer to the London office; the life plan was shaping up nicely. Eighteen to 24 months would do it, he thought. “But before coming back home I said to the Arthur Young partner in New Zealand, ‘I want to come home, but give me a year to do something different. I’d really like to be working for a company where I can do some travelling.’ He said ‘Sure, no problems, great idea, you get more experience. A job will be waiting for you here’.”

Stalker went to a head-hunting company and dictated his terms: travel, there must be travel. They matched him with a media company. Stalker was apprehensive. “I thought at the time ‘media company? Oh, no, no... long-haired, this is

not-my-kind-of-business, guys.’ But I went to the interview and was so impressed by the clean desk, white shirts, and the prim-and-proper business approach they displayed that I took the position.”

His terms were met. Stalker jetted around the world, first setting up licensees and subsidiaries for CIC International BV, a joint venture between Paramount and Universal, and then working for the sister company United International Pictures, where his title was Controller for the Far East.

A stand-out for him was a stint in Korea, where a new government was, for the first time, allowing foreign companies to set up their own fully owned subsidiaries. “In those days film, particularly American film, was something that was fairly sensitive,” explains Stalker. The venture was “not received very well by the locals”. Students demonstrated and snakes were freed in the cinemas. For a year Seoul was Stalker’s second home as he learned how to operate in a different culture and nursemaided his project through a decision-averse bureaucracy.

While travelling for UIP, Stalker had met his wife-to-be, Connie, and after they married it seemed only sensible to curtail his footloose lifestyle. “I thought ‘We’ll go to Germany, we’ll live there for a couple of months, I’ll learn the language, and then we’ll decide where to live’.”

But going cold turkey was not so easy. Warner Brothers had heard of Stalker’s departure and presented him with a ticket to California for an interview. “Although I resisted for some weeks, eventually the withdrawal symptoms I had from not being in a 747 — I was weak — induced me to go and visit them.”

He became Director of Operations for Warner Bros International, and once again set up a wholly-owned subsidiary in Korea. “They were also involved at that stage in setting up retail units and cinemas around the world. But, quite honestly, it became too much travel and too much of the same. I thought ‘This is not the real world; I need to settle down’.” Back it was to Germany, full of good intentions – to spend a few months out of the workforce and learn the language.

“ But then I was approached by a British firm that had just purchased a couple of factories in what had been East Germany and were looking for someone to help them sort that out. So I did that for a couple of years, which was also an exciting time, learning how Germany worked, and also participating in the aftermath of the reunification.

“ Then I got approached by a headhunter and joined adidas at the end of 1996.”Stalker did eventually learn German. He now speaks fluently, though Connie tells him that working for adidas, where English is the working language, has not done it any good.

Not that English is the only language you’ll hear in this very multinational multinational. “If you were to go into our cafeteria at lunchtime you would be confronted with conversations in Chinese, in Japanese, in Spanish, in British English, in American English – it’s quite a mix,” says Stalker.

You may be surprised to learn just how large and various adidas – or to give it its full name, adidas-Salomon – is. Sure, it makes running, basketball, tennis, football and rugby shoes. It makes swimwear and other apparel. But did you know that it also owns the TaylorMade brand of golfing equipment and the ski, snowboard and, latterly, inline skate and skateboard manufacturer Salomon? That this very European marque manufactures in China and other parts of Asia? That adidas-Salomon has its own shops: concept shops, which are effectively retail laboratories for other outlets; retail outlets in places like Eastern Europe, where the market is not well served; and more than 100 factory outlets, designed to release oversupplied product in a controlled manner?

So varied are its products that adidas-Salomon segments its products according to its market aspirations, hence the Sport Performance, Sport Heritage and – relatively fresh to market – Sport Style line-ups.

In 2002 adidas-Salomon achieved sales of 6.5 billion Euro ($NZ13 billion) and a net income growth of 10 percent – and this in a lacklustre world economy.How did it all begin? Well, once upon a time there lived a cobbler, a man quite unfamiliar with concepts like market segmentation.

The time was post-World War I Germany. The place was Herzogenaurach, where Adolf Dassler, nicknamed Adi, joined his family in making and selling home-made house slippers to put food on the table. Adi’s sister marked chalk patterns on leftover military bags, while Adi glued, sewed and nailed.

In 1920, at age 20, Adi began producing soccer shoes. Later, with his brother Rudolph, he set up a company, Brothers Dassler. Success upon success followed. The shoes Jesse Owens wore during his spectacular Olympic performance in 1936 were Dassler’s handiwork. Running spikes and nylon soles were among his numerous innovations.

In 1948 Adi and Rudolph quarrelled. Rudolph started Puma across town. Adi stayed and, a year later, renamed the company using the first syllables of his first and last names: adidas. In the postwar world, adidas dominated its market
.
The usurper, Nike, was launched in the United States in 1962. Its two principals, Bowerman and Knight, imported cheaper, high-tech athletic shoes from Japan. In the 1970s Nike overtook adidas in its share of the key American market and by 1985 adidas was scraping in with just 2 percent of a market in which it had been comfortably dominant.

In the late 1980s, as Nike and Reebok began marketing assaults on the European market, it even looked as if the once-mighty adidas might topple. In 1992 the company lost $US62 million.

“ It was a family company that had been a world leader for many years,” says Stalker. “It had had almost no competition, and many factories here in Europe… Nike and Reebok had started off in Asia. That manufacturing base was one of the reasons why Nike was growing more successfully in the late ’80s than adidas was.”

The white knight came in the form of a rumpled and charismatic Frenchman, Robert Louis-Dreyfus. Louis-Dreyfus was a sports fanatic with a Harvard MBA. His invitation into the fortunes of adidas came from an executive of one of the two French banks that had taken control of the firm. He was fresh from turning around the fortunes of an ailing Saatchi & Saatchi.

Now he proceeded to do the same with adidas. Taking lessons from the competition, Louis-Dreyfus closed the last of the European plants. He spent massive sums on marketing. And he stripped out layer-on-layer of management, bringing in his own hand-picked staff. He was also lucky: his arrival coincided with 1970s retro becoming hip – adidas was suddenly fashionable.

Louis-Dreyfus took the company public in 1995. Stalker came aboard in 1996 .
“ I was hired to help them with the accounting and finance and reporting,” explains Stalker. “Before they took the company public they had sorted out the product and the marketing, but there was still a lot of work to do in turning what had been a very, very decentralised private company into a real public company in terms of financial disciplines and reporting.”

Bumps lay ahead. In 1997, with Stalker by now the Vice President of Corporate Reporting, the company purchased Salomon and TaylorMade, paying, in the market’s view, more than it should for the loss-making ski manufacturer, and by the end of the 1990s things were starting to slow.

“ For instance, adidas had had some item-based success in America,” says Stalker, “but hadn’t set itself up to ensure proper growth in that major market.”

In 2000 Louis-Dreyfus, who had admitted that saving the company was always going to be more fun than running it day-to-day, began a change of regime. Herbert Hainer – today Chief Executive – was appointed Deputy Chief Executive; Stalker became the Chief Financial Officer; a new head of global marketing was appointed; the head in America was replaced and a company strategy devised. “That strategy is the basis of the growth we are starting to see today,” says Stalker.

“ Robert is a person who understands sport and marketing, and adidas owes him a lot,” says Stalker. “He has set the foundation that has made us the major multinational we are today. We now have a responsibility to our shareholders, to our investors and employees to continue to build upon this foundation, to grow and become more and more profitable. Herbert Hainer is a disciplined, organised CEO who has a passion for sport. He was a semi-professional soccer player, but having led our German organisation and subsequently the European organisation he has a very good understanding of managing people and also managing relationships with customers. We’ve got a very good team to continue this success.”For Massey, Robert Louis-Dreyfus is an unforgettable figure. This was the man who helicoptered in for the opening of the six-million-dollar adidas Institute of Rugby on the Palmerston North campus. A consummate marketer, well aware of the value of sponsorship, Louis-Dreyfus initiated the relationship between adidas, the New Zealand Rugby Football Union and Massey University.

Sponsoring rugby was a hard-headed decision for adidas. “Let’s face it, we are a multinational, multi-brand company out to make money at the end of the day,” says Stalker, who is at pains to distance himself from any imputation that adidas is swayed by his love of the game. “We are a supplier and a supporter of sport, but our decisions about who we sponsor are based on the merits of what we believe the relationship is worth to the company.”

The company wants teams or individuals who are identified with the performance values that adidas itself represents and who are able to communicate world-wide. “In basketball, for instance, we have key players under contract who have an international image. We are partnering the All Blacks because there isn’t a better symbol for that sport internationally and because they best represent the true values of sport.”

Being French, Louis-Dreyfus was no stranger to the sport, but Hainer, under whom the relationship with the NZRFU has continued, was at first less familiar. Stalker remembers sitting alongside Hainer at his first international test match: New Zealand versus Ireland in Dublin.

“ Five or ten minutes into the game he turned to me and said ‘My goodness, it is a very physical sport, isn’t it?’ Afterwards I introduced him to the team and he said, ‘You know, these are normal guys.’ They didn’t have an ego he knew certain sportspeople to have. Some top sportspeople can be… a little bit more sure of themselves, let’s put it that way. We have a genuine feeling in adidas that we’ve got something in rugby, and definitely in the All Blacks, that maybe best represents what real sport is all about. It’s not about a lot of professional big-money-making events; it is about guys going on to the field, playing as hard as they can, and at the end of the day, you win or you lose, you shake hands, you have a nice meal together, you’re all friends, you go home, and you look forward to the next time.”

On the other hand, adidas does want the All Blacks to do well. “This has been a learning period. We’ve extended the contract because we expect it to be beneficial for us. We haven’t achieved all of the goals we have identified, but the All Blacks haven’t achieved all of their goals either. They have expectations and hopes to come back from Australia with the World Cup, and we’ll be very happy if they do that. We are confident that we have a very good partner in the new board and the new management of the NZRFU.”The major adidas sponsorship still fresh in people’s minds is the 2002 Football World Cup; adidas was the major sponsor, official outfitter and licensee. Ten teams wore the adidas brand (including Japan, China and finalist Germany). Here, too, there were sound commercial reasons for the sponsorship, particularly for the Asian market.

“ We set up our own business in Japan three years ago. We used to sell in Japan through a distributor and that distributor had positioned our brand more in the leisure-lifestyle area than in sport. That’s not where we want to be. Worldwide we want to capitalise on growing leisure and lifestyle – there are opportunities there – but the whole basis of our business and our marketing philosophy is our credibility in performance sport. So sponsoring the Japanese team, sponsoring the Chinese team, having the whole competition in Asia gave our association with pure sport tremendous visibility. That is what is going to assure us of growth, not just this year but in years to come.”

Asia is also where adidas bases its manufacturing. Much as the anti-globalists may lament it, Asia, and particularly China, is the world’s factory. Ninety percent of adidas footwear is produced in Asia, says Stalker, and half of that in China. (The mix of locations is decided by a risk-management process.)

Here adidas really had little choice – it was only going where Nike and Reebok had gone long before.

It strives to act ethically and sustainably. “We have a team of 30 inspectors who help us enforce what we call our standards of engagement, which we oblige all of our suppliers to adhere to,” says Stalker. “These cover issues such as working ages, minimum wages and matters of an environmental and safety nature. We look at whether there are sufficient fire extinguishers in the factories. What are the safety measures for machines? What’s the water quality like? We have been very rigorous in terminating production with suppliers who haven’t complied or haven’t shown a willingness to get themselves up to speed there.

“ We have been recognised for our success in this area by being admitted to both the DOW Jones Sustainability Index and the FTSE4GoodEurope Index.” All well and good, but will good green credentials be the single reason you choose to buy adidas next time you go looking for sports shoes? Probably not. You are more likely to buy because you wore adidas in high school, or because you have been seduced by the mystique of those who wear it – say, Thorpie or David Beckham or Anna Kournikova – or because it represents the latest in technology, or because it is just so cool. Or some compound of all of these.

To stay ahead of your fickle tastes adidas has invested heavily in supply chain management. “We have an industry which has a lead time of 18 months: 12 months’ design and development and six months’ procurement time,” says Stalker. “What we’ve done is said we want to halve that, and for a lot of the footwear we’ve been able to achieve that. We are able to get that footwear manufactured and in the shops within 90 days.”

The company has introduced technical innovations: ‘new technologies’ as they term them. The two that are particularly mentioned are ClimaCool, a 360° ventilation and moisture management system which keeps the foot cooler and drier, and the a3, an energy management system which cushions, guides and drives the foot through each stride.

“ We thought that ClimaCool might sell 500,000 pairs in 2002, its launch year; we actually ended up selling more than a million, and we are looking at growing that again in 2003,” says Stalker.

Stalker personally endorses the technology embodied in TaylorMade metalwoods. TaylorMade has the number one driver used in all of the world’s major golf tours. “Not that this has been able to totally compensate for my lack of practice,” Stalker laments.

Conspicuous innovations like these benefit the entire brand. “People say, ‘Hey look at this. These guys are innovative, they are technical leaders’.”

This diffusion of brand values extends to the fashion market. Stalker believes adidas presents itself as fundamentally different from fashion houses such as the Tommy Hilfigers and the like. “Because people want to identify with sport, with the authenticity, the attractiveness. There’s no one who has more authenticity than adidas.

“ We are growing significantly in the leisure and lifestyle market. We have doubled our business in three years – but we are careful. We aren’t giving the product to everyone who wants it. We don’t want to grow too fast in this area because, as I have said, this is fashion and not sport.”

And adidas has big plans for America, the market it let slip in the ’80s. “We want to grow in America on a solid basis. We’ve changed 11 of the 12 management positions in the States. We have better identified who our consumer is. We have started working better with the retailers, and clearly we’ve got better product.

“ We currently have a market share which is only around 11 percent. Our target is to get to 20 percent within the next three-to-five years. That’s very do-able.”If Stalker talks a good game, then so he should: investor relations is part of his brief. The company’s shareholders are neither solely German nor solely institutional, says Stalker. It is his role to communicate with them all. That he is at the same time the Chief Financial Officer, and so has a command of the day-to-day workings of the company’s finances, helps.

So, for example, when investors took fright at adidas’s purchase of a 10 percent stake in football team Bayern Munich for US$77 million and the share price tumbled, it was Stalker’s job to allay their fears. When press releases and conference calls failed to correct things, he headed off for a whirlwind set of one-to-one meetings with influential investors. The share price duly recovered.

For someone who had never set out to be a public face of a company, fronting before audiences of several hundred was at first very intimidating. “The first few months it was, ‘Oh my God, what am I allowed to say?’ You have to remember that back in 2000 there were a lot of issues where we needed to regain the confidence of the investor community.”

These days, with adidas doing very well, he enjoys what he does. “We have a good strategy; we want to be transparent in communicating that strategy; and we want to be fair. If we don’t know the answer, we’ll say. We’ve been given the benefit of the doubt by analysts. We’ve said what we’ve wanted to do, we’ve kept our heads down, and we’ve delivered.” A successful formula judging by the adidas share price performance, which topped the German DAX 30 index in 2001 and again in 2002.An hour-and-a-half’s international phone call nears its end. Stalker is now heading for a meeting about the company’s international currency policy. Recently the Euro has risen against the dollar, which can only be good for adidas.

It has been over 20 years since he headed off on his two-year OE, but the tug of his homeland – or what the Germans would call heimat – is strong.

“ I am still very much a New Zealander. I still have a New Zealand passport. There’s no way I am going to take on a different nationality. I identify very much with New Zealand. I honestly believed I would return to New Zealand after those two years, but it just got complicated and I kept moving further away. New Zealand is always home.

“ The initial reaction that people have to you as a New Zealander is a positive one. You come from a country that people feel positive about, so initially you get given the benefit of the doubt. And I think being a non-German has helped me here in that people accept you are not the ‘formal German guy’. Or when I used to work in London I wasn’t stereotyped into one part of the society or another; I was a New Zealander.

“ I continue to be impressed when I travel the world and bump into New Zealanders, who seem to be all over the place. My position is no way unique. I would encourage every New Zealander to get some overseas experience. You never know what might come out of it. And even if you do go back in two years you are going to go back with experiences that will be good for you and your career when you get home.”

Professor Chris Moore, who interviewed Robin Stalker, heads Massey’s Department of Finance, Banking and Property. Professor Moore started out as an engineer, taking an honours degree in engineering science at Auckland University's School of Engineering in 1972. Following an OE to Britain, he won a PhD (economic modelling using Leontief input-output techniques) scholarship with the Ministry of Works and Development at Auckland. After serving his bond with the MWD he joined BERL (Business and Economic Research Limited) as an economic consultant. In 1986 he joined the then Westpac Merchant Finance as an economist and in 1988 when Westpac Merchant Finance was merged into Westpac Bank, he became Westpac's chief economist. In 1994 he was appointed to the Chair in Banking at Massey University. His areas of research interest include competition and innovation, New Zealand superannuation and the economy, the effect of baby boomers on the demand for real estate, and environmental performance and shareholder value.