Kanye gave Adidas an Off-Ramp Yeezy

Kanye West has given Adidas AG the perfect excuse to back out of their long-standing partnership – and in a way that might be less financially damaging to the sportswear giant.

West, now known as Ye, commands an almost fanatical following. Until now, this has been part of the appeal of companies that have collaborated with him. If Ye puts his name on something, it will sell.

Even after his years of controversy, those who dared to criticize him became the subject of his fans’ ire. For example, when people took to Gap Inc.’s Instagram account earlier this year, imploring the retailer to end its deal with Ye after he treated his ex-wife Kim Kardashian, his followers called on Gap to to hold onto.

When Ye said last month that he wanted to end his partnerships with Gap and Adidas, and criticized the German company and its outgoing CEO Kasper Rorsted, Adidas remained silent. Its fanbase — a crucial part of its ability to sell everything from padded jackets to ugly sneakers — would have made any company employee think twice before breaking things off.

But Ye’s recent behavior has crossed new boundaries, and Adidas now seems more threatened by a boycott from its wider customer base for maintaining ties with the musician than a backlash from Ye fans for severing them.

First, White Lives Matter t-shirts at her Paris Fashion Week show in early October. This alienated some of his closest allies, such as Supreme Creative Director Tremaine Emory. It drew criticism from Vogue fashion editor Gabriella Karefa-Johnson. It probably hurt a lot of his fans. And the anti-Semitic comments, prompting Twitter and Instagram to restrict his account, only added to the damage.

Adidas said last week, following the Paris show, that it was reviewing its arrangement with the celebrity. In a statement, he said that while the Yeezy tie-up is “one of the most successful collaborations in our industry’s history,” all successful partnerships were rooted in “mutual respect and shared values.”

But Adidas is partly responsible for its current situation.

He remained silent after Ye’s many previous controversies, including his 2020 presidential bid and his harassment of Kardashian. If anything, these episodes have only kept Ye in the spotlight and his Yeezy line a big seller. One of the few times Adidas weighed in was in 2018 when Rorsted said the company did not support Ye’s comments that slavery was a choice. Adidas declined to comment for this column; You could not be reached.

Now his behavior has become so egregious that the sportswear giant can’t avoid being dragged down. As a German company, it is likely to be particularly sensitive to any perception of ignoring anti-Semitism.

But a review doesn’t necessarily mean a split. Even during the interim period, the company and the musician “will continue to co-manage the current product”.

Maybe it’s because the Yeezy line is still a cash cow. It is estimated to contribute to annual sales of €1 billion ($974.5 million) to €1.5 billion, or 4-8% of Adidas Group revenue. Worst-case scenario, if all Yeezy products were to be pulled from shelves, it would lose those sales at a time when it is also battling a slowdown in China and tough rivals Nike Inc. and New Balance in the United States.

But should the two go their separate ways, right now Adidas might have a stronger negotiating hand. Ye’s personal mark is diminished. Meanwhile, going it alone won’t be easy, as Ye will have to replicate all the infrastructure provided by its business partners. And he recently took aim at Bernard Arnault, CEO of LVMH Moet Hennessy Louis Vuitton SE and the most powerful man in luxury. This may limit its ability to find high-end backers for future Yeezy endeavors.

In this context, Adidas might find it easier to reach an agreement with Ye, allowing it to keep certain Yeezy models on the market, even if the two are no longer developing new products. That, in turn, could reduce the financial pain of a split.

Ye seeks to make amends. He said he met Vogue’s Karefa-Johnson and allegedly reached out to Arnault’s son and Tiffany & Co. executive Alexandre Arnault, and he was also open about his mental health issues. Still, companies will be more reluctant to sign it than they were just two years ago, when Gap shares rose the most in 40 years on news of their tie-up.

“You can’t handle me. It’s an unmanageable situation,” Ye told the audience ahead of the now infamous Paris show.

For Adidas, and all other companies that want to cash in on Kanye’s marketing magic, it’s at the very heart of the dilemma.

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times.

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