Nike’s Presence in Brazil Threatened by Counterfeit Jersey Sales

The FIFA World Cup is a great opportunity for global brands to make their mark.  More specifically, authentic World Cup jerseys become increasingly sought after by fans around the world.  Companies such as Nike, Adidas, and Puma have paid the official football associations of nations for the rights to design and supply official jerseys for nations participating in the World Cup.  For example, Nike struck a 10-year deal with the Brazilian Football Confederation (CBF) in 2008 to design and produce jerseys for the team.  Nike will make their investment worthwhile by selling replica jerseys of the five-time World Cup champions all around the world.

Even fans that live in nations that did not qualify for the World Cup can have great purchasing power for companies that make official World Cup jerseys.  Nations such as China and India have become unique target markets to sell popular jerseys for countries such as Brazil and Argentina.  It has been recently reported that Nike will run into problems in the most obvious market for their most popular selling jersey, Brazil.

Bloomberg News recently reported that the price of Brazil jerseys has dropped by as much as 35% in some stores in the host nation.  The jersey originally was sold in that market for approximately $103, almost one-third of the monthly income for Brazilians working at minimum wage.  Brazil’s passion for football is almost unmatched and Nike expected many Brazilians to find ways to purchase a jersey despite the price tag.  Bloomberg News reports that a rise in counterfeit jersey sales in Brazil has led many football-crazed fans to support their team through cheaper methods, driving retailers with the original jerseys to drop their prices in order to compete.

One Brazilian merchant in Salvador, Brazil told Bloomberg News she was selling 200 to 300 knockoff jerseys a day, much more than Nike’s official jersey, simply because of Nike’s unreasonable price point.  According to a Brazilian sports marketing consultant, Nike is paying the CBF $60 million for exclusive rights to sell Brazilian jerseys.  If Nike sold one million jerseys at the initial $103, they would generate $103 million in sales.  With the 35% price reduction mentioned earlier to $67, Nike would only make $67 million for every one million jerseys sold.  That’s a potential loss of $36 million for every one million jerseys sold in Brazil.

Nike has invested heavily in the 2014 World Cup, going toe-to-toe with Adidas, which has been an official sponsor of the FIFA World Cup since 1970.  According to Forbes, this is the first time that Nike has sponsored more teams in a World Cup than Adidas.  Nike reported that at the end of May 2013, they sold $1.9 billion in soccer sales, 7.6% of their total $25 billion total sales, a number they hope to increase with the help of the World Cup in Brazil in 2014.

There may be some period of sustained increased interest in the national teams of some countries based on performance, but after the World Cup is over the majority of the footballing world will turn its attention back to their club teams. This is where soccer manufacturers can capitalize on the World Cup even after it is over. Some of the increased interest in the sport that is generated translates to the club level via breakout player performances that occurred during the tournament. For example, if James Rodriguez were to land a spot at say Real Madrid, you could expect a fairly large increase in Real Madrid Rodriguez jerseys that Adidas could not count on prior to the World Cup. Rodriguez is just one player – there are dozens of others that will have gathered massive followings because of the World Cup and both the clubs and their sponsors will look to capitalize on this newfound fan interest.

 

Reporting on the business side of the world's game.