Adidas has been losing market share to the world’s biggest
sportswear brand Nike, which is seen as far cooler in consumer surveys and is
based near the hip US city of Portland, Oregon.

Adidas acknowledges it is
hard to recruit at its headquarters near the Bavarian town of Herzogenaurach,
particularly for design, marketing and digital roles, and admits it missed
trends in the US market, where Under Armour has just overtaken it as No. 2
behind Nike. Nike’s better than expected earnings on Sept. 25 underscored its
ascendancy.

Adidas is responding by locating some key design roles in the
United States at the same time as investing heavily in new facilities at its
home base near the historic Bavarian town where Adidas was founded by shoe maker
Adi Dassler in 1949.

“We need a lot of that top talent that is cutting
edge. Ideally, they are working in the tech industry, in marketing organisations
or are coming from top competitors. We need an environment that appeals to
them,” said Steve Fogarty, who is responsible for employer branding and digital
recruiting
“Designers tend to gravitate to very large, international cities
like Berlin, Amsterdam, London and it is a bit harder to convince them to move
to the centre of Germany.”

Eric Liedtke, the American who took over as
Adidas head of global brands in March, has promoted Paul Gaudio to the role of
global creative director and moved him from Herzo to the firm’s US base in
Portland in a bid to turn around its fortunes in the world’s biggest market for
sporting goods. Close to 1,000 Adidas staff are based in Portland, compared with
Nike’s 8,500-strong workforce in the area.

Gaudio announced on Wednesday
that Adidas will open a small creative studio in New York’s Brooklyn district in
2015 to be led by three young footwear designers he has poached from Nike with a
mission to explore design direction for the brand.

That will complement
existing creative centres in Shanghai, Tokyo and Rio, but the vast majority of
the company’s hundreds of designers for football, outdoor, Originals fashion,
training and running products remain based in Herzo.

Adidas shares are
down more than a third this year, most recently suffering from a third profit
warning in a year in July that the firm blamed in part on a disappointing
performance in North America, particularly from its golf business.

Adidas
trades at 17 times expected earnings, at a discount to Nike’s 22.5 times and
fast-growing Under Armour’s 58 times.

Despite the new designers in the
United States, long-serving Adidas Chief Executive Herbert Hainer, himself a
native of Bavaria, remains committed to the company’s base in a region proud of
its strong economy and companies including BMW, Siemens, Audi, Munich Re and
Allianz.

About 3,900 of the total Adidas staff of 52,500 work in and
around Herzo, about a third of them from outside Germany, and Hainer said last
month the company planned to add 100-150 new staff at its headquarters every
year.

Global footwear hub

While Bavaria has a reputation
for beer festivals, lederhosen and conservative politics, Nike’s home town of
Portland is a city of 600,000 that prides itself on its liberal values and
environmental awareness, as well as a proliferation of trendy eateries and
microbreweries.

Based on a campus in Beaverton, seven miles (11 km)
outside Portland, Nike’s location in the American northwest also raised
questions in its early days in the 1960s, with founder and Oregon native Phil
Knight saying everybody originally thought it should be located in New England
or the South.

But Portland has since become a magnet for the global
footwear industry, helped by the relatively short hop to Asian production hubs
and a youthful talent pool, prompting Adidas to move its North America
headquarters there from New Jersey in 1993, and drawing US brands like Columbia
Sportwear and Keen.

Herzo, by contrast, is a town of just 24,000 people
set in rolling fields, though many Adidas staff commute from the nearby
university town of Erlangen or the city of Nuremberg, known for its walled old
town, gingerbread and sausages but not for the most vibrant nightlife or fashion
scene.

Nuremberg has an airport with direct flights to many cities in
Europe but not further afield and there is no train link to Herzo from Nuremberg
or Erlangen, meaning most staff have to commute by car.

Herzo’s biggest
employer is family-owned Schaeffler, which has 9,000 staff in the town, mostly
in technical roles producing precision products for the auto and aerospace
industry. It is also home to rival sportswear firm Puma.

Conscious that
it was not the best location for a big global consumer brand, Adidas considered
leaving Herzo in the 1990s when the company was trying to rebuild its fortunes
after flirting with bankruptcy following the death of founder Dassler in 1978
and then his son Horst in 1987.

But when the departure of US troops from
Germany at the end of the Cold War freed up the military base outside Herzo,
local authorities persuaded Adidas to stay. It moved its headquarters to the
base in 1998 from an overcrowded office in downtown Herzo and has been expanding
the campus ever since.

Safe but dull

Herzogenaurach mayor
German Hacker said surveys showed that foreign inhabitants particularly value
the high quality of life and security that the town
offers.

“Herzogenaurach is a sheltered and manageable town. That is its
charm, but you can get to big towns in 10-15 minutes if you want,” he
said.

One former employee, who declined to be named because they still
work on a contract basis for Adidas, said they left the company because they
found living in Bavaria too boring. “It is so odd that this company is in the
middle of farmland. It doesn’t have anything to do with style,” the person
said.

Adidas recruiting expert Fogarty, who spent three years working in
Herzo but moved back to Portland last year, says the vast majority of staff
describe working in Germany as an amazing experience once they arrive.

He
set up a website to extol the virtues of Herzo, featuring employees from around
the world praising the rural running tracks near the office, local beer
festivals and the proximity to Alpine ski slopes.

Fogarty, who often has
to get up at the crack of dawn in Portland to speak to colleagues nine hours
ahead in Herzo, said Adidas does not lose staff due to the location of its base
as it is flexible about where people work.

“While our headquarters is
technically in Herzo, the opportunity to work in many locations is already here,
so why invest in moving the headquarters?” he said.

However, the
experience of Puma, founded by Adi Dassler’s brother Rudolf after the two split
a joint business, shows the pitfalls of dispersing key staff.

Puma had
based its product management and design team for its lifestyle range in London
to be closer to fashion trends, but decided last year to move the division to
Herzo as it sought to centralise functions as part of a restructuring
programme.

Puma is in the process of trying to reaffirm its sporting
roots after sales tumbled in recent years. Puma had lost its reputation for
sports performance gear by moving too far into the fashion
business.

Despite investing in fashion brands like NEO and Originals,
Adidas has so far stayed true to its sporting heritage.

Adidas recently
announced plans to build two new buildings – with a capacity for 3,600 staff –
at its “World of Sports” campus outside Herzo and is about to open a
16-metre-high climbing wall in the grounds.

The Adidas campus already
features sports fields and stylish buildings including a futuristic low-rise
“brand centre” clad in black glass that opened in 2006 and a marketing and
operations office called “Laces” that opened in 2011 and features criss-crossing
walkways above a light-filled atrium.

“You can work in a dull office in
the middle of Munich or an awesome office two hours north of Munich,” said
Christian Dzieia, Adidas director of property development.

An on-site
fitness centre with daily yoga and aerobics classes opened last year as well as
a bilingual kindergarten for 110 children and a campus canteen revamped with
input from German celebrity chef Holger Stromberg.

“We’re hiring a lot of
people with a huge passion for sport whose eyes light up when they walk around
the campus,” said Fogarty.

“You have the best of both worlds, where you
can walk onto this international campus with a lot of high-tech facilities and
then go have lunch in a thousand-year-old Bavarian village.”