Back in April, it was first reported by Sport Business that Liverpool were ready to make the move away from Nike at the end of the current contract, which finishes at the end of this current season, with a return to German sportswear giant Adidas expected.
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The club has remained coy on the prospect of changing its kit partner to Adidas, declining to comment on the situation when asked by the ECHO recently, with no official confirmation on what will be happening in terms of next year’s kit supplier expected until early next year.
The Sport Business report had suggested that the Reds were to ink a five-year deal with Adidas when the current Nike contract was up, while Puma were also reported to have been in the running.
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Liverpool chief commercial officer Ben Latty told the ECHO recently: “We've had really successful kit launches with Nike over the in the last few weeks,” said Latty.
“Our focus at the moment is delivering with Nike. We've got some exciting collaborations with them coming up as well.”
Liverpool were willing to go to the High Court in London back in 2019 in order to partner with Nike and extricate themselves from a partnership with New Balance, with the US firm having had a clause that allowed them to extend the partnership if they met a rival bid. However, while the Nike deal was lower in annual value, a 20% slice of the sales of LFC-branded merchandise meant that the High Court sided with Liverpool due to the scale and scope of the Nike deal offering a greater chance of a commercial lift beyond the sum that New Balance would have been paying.
Liverpool, who receive around £35m per annum from Nike in terms of a flat fee but where the additional value takes it above the £60m mark, have attempted to create more variety in the club merchandise through the partnership, releasing lines with basketball icon and Fenway Sports Group part-owner, LeBron James, as well as with the iconic brand Converse, with the Reds having looked to tap into the lifestyle brand market.
But the kit market is a healthy one right now, with the several major clubs having put down markers as to what the current value of such inventory is to clubs.
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Across the Premier League, Arsenal and Manchester United are the most prominent clubs to have partnerships with Adidas, with Newcastle United joining the list this season, albeit at a far smaller annual sum than the former two.
Adidas’ deals with both Arsenal and Manchester United are longer term, with the Gunners deal having been eight years at a reported value of £75m per season, and United’s over 10 years and worth a reported £900m over the life of the deal.
For the kit manufacturers that might seem like a steep price, but from their point of view longer-term deals lock in the value of the partnership at a fixed level for a long time. That means that they avoid having to engage in renewals at higher prices over shorter cycles, with the value of kit deals having been on an incline for some time.
It also gives clubs financial security and allows for more effective planning, but with some having baked in clauses that see a reduction in value based on performance, such as if a club fails to make Champions League football for two seasons on the run, it carries some risk and also sees them miss out on going to market sooner for potentially higher rates.
Should Liverpool partner with Adidas, and over the reported five-year period, then it likely wouldn’t be at the value of United’s annually, but would likely be on par with Arsenal. Adidas would know that they would face another tender process in three to four years time and have to likely pay the market rate at the time, which could be significantly higher.
For Liverpool, Adidas would maintain the size and scale of global retail operations, both physical and online, that Nike does. As the club looks to create stronger connections with its global fanbase, and as the importance of the ‘fourth pillar’ of football business, which is finding better ways to generate revenue from global fanbases, that would be vital.
Liverpool have grown commercial revenues considerably in recent years, the most recent standing at £272m for the 2022/23 financial year. That is likely to be pushing closer to the £300m mark for the financial year just ended, 2023/24, with the next kit supplier contract, whether it be Nike, Adidas or another firm, potentially driving revenues to near £350m by the time that contract starts to appear on the books.
Liverpool, as a global brand and with millions of fans worldwide, with markets such as the US now coming on board in bigger ways, have more leverage than ever.
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