Innovation

Creating innovative concepts to meet the needs of athletes and consumers is a prerequisite to strengthening our market position in the sporting goods industry and a premise to being the best sports company in the world. We therefore remain highly committed to maintaining a full and innovative concept pipeline, bringing new groundbreaking technologies and processes to life, investing into sustainable enablers and exploring the possibilities of digitalization across our entire value chain. True to the vision of creative collaboration, our innovation approach is widely based on our Open Source mindset.

MEETING THE NEEDS AND EXPECTATIONS OF OUR CONSUMER

The modern innovation landscape extends beyond product and increasingly requires innovation teams to consider the development of experiences and services, as well as the provision of greater levels of transparency and direct integration of our consumer through co-creation.

In partnership with our trend and cultural insights teams, foresight and trend analysis are shared on an ongoing basis, documenting shifts in society and culture. This provides the starting point to build concepts of relevance.

The FUTURE team at adidas is tasked to develop a strong portfolio of innovation capabilities such as new materials, production processes and consumer-centric scientific research to provide a platform for meaningful concept development. Projects are incubated within the company and aligned to the broader sourcing, marketing, creative and strategic functions across the organization, ensuring a robust and impactful innovation pipeline.

INNOVATION APPROACH BASED ON OPEN SOURCE MINDSET

Our approach to innovation reflects our commitment to the Open Source mindset, where we seek to build value together with athletes and consumers, universities and innovative companies as well as national and international governments and research organizations. In addition to opening up our doors to valuable feedback, we also get inspired by the input from knowledgeable partners:

• BASF: Together with BASF, we manage and enhance BOOST, a cushioning technology designed to deliver maximum energy return, responsiveness and comfort to athletes.
• Carbon: Together with Carbon, a Silicon Valley-based tech company, we are revolutionizing product creation through hardware, software and molecular science, and have enabled mass production of additively manufactured components, coming to life with adidas 4D.
• Fashion for Good: Together with Fashion for Good, a global cross-brand initiative to make all fashion sustainable, we are accelerating sustainable innovation in the apparel industry through, among other things, mentorship of and collaboration with circular start-ups.
• Oechsler: Together with Oechsler, an expert in high-tech automated manufacturing of technical components and assemblies, we operated our Speedfactories in Ansbach, Germany, and Atlanta, USA. However, in 2019 we decided to deploy the Speedfactory technology at Asian suppliers. Our collaboration with Oechsler will continue in other manufacturing areas.
• Parley for the Oceans: Together with Parley for the Oceans, we are developing products partially created from upcycled plastic waste, intercepted before it reaches the ocean from beaches and coastal communities.
• Platform A at Station F: In January 2019, we launched our global sports accelerator program Platform A. Station F is the biggest start-up campus in the world, based in our key city Paris, France. The accelerator aims to use the innovative power of the global start-up scene to create the best digital innovations in sport. The first generation of start-ups started the program in January and presented their digital pilots in September 2019. In the meantime, adidas onboarded a second generation that will develop new concepts and identify opportunities in the areas of women empowerment, sustainability, retail and e-commerce.

FIVE PILLARS OF INNOVATION

Within our innovation principles, we identified five strategic pillars which enable us to develop the best products and experiences for athletes and consumers, while at the same time drive game-changing innovations in the fields of manufacturing, digital and sustainability.

Athlete innovation

Our clear focus is to produce the best and most innovative products for athletes to enable them to perform at their very best. To achieve this, we work closely together with athletes and teams as well as numerous universities and innovative companies, to deliver against the needs of our target consumer.

Manufacturing innovation

To simplify manufacturing, enable product innovation and increase speed-to-market capabilities, the company’s innovation activities are also focused on new manufacturing technologies. Our goal is to combine state-of-the-art information technology with new manufacturing processes and innovative products. For this reason, we commit ourselves to long-term cooperation with innovative companies and organizations to take a leading role in manufacturing innovation.

Digital and experience innovation

The adidas brand was amongst the first in the industry to comprehensively bring data analytics to the athlete. With decades of continuous investment in sports science, sensor technology and digital communication platforms, adidas has already taken a leading role in terms of changing the sporting goods industry through technology. With the increasing speed of digitalization, this field will remain one of our core areas.

Sustainability innovation

Our commitment to manage our business in a responsible way has long been one of the company’s principles. To stay at the forefront of sustainable innovation, adidas is pursuing a proactive approach to establish internationally recognized best practices and achieve scalable improvements. As part of our sustainability roadmap, we have set ourselves the target for 2020 to invest in materials, processes and innovative machinery which will allow us to upcycle materials into products and reduce waste. In 2019, we further focused on taking responsibility for the entire product life cycle and established a clear game plan for moving toward a circular business model. see Sustainability

Female athlete innovation

Our long-term commitment to the female athlete continues to be a focus for the company. To fuel the growth of our women’s business, we have taken a holistic approach to understanding the female athlete’s performance and non-performance needs throughout her active life. We therefore look at this target group as an integrated part of our business but from a separate and unique angle. With a focus on the female consumer, it is crucial to fully understand the specific product needs of the female athlete to help unlock her full potential. To enable this, we are working to establish a robust network of industry leaders and academic experts with our ‘Path to Expert’ approach, which will help to accelerate the building of insights and foresights that keep us at the forefront of product innovation.

COMMERCIALIZATION OF INNOVATIONS

We believe developing industry-leading technologies and consumer experiences is only one aspect of being an innovation leader. Equally important is the successful commercialization of those innovative concepts:

• Parley Ocean Plastic: Products made of Parley Ocean Plastic focus both on the needs of our athletes, by living up to their performance promise, and on the needs of the world, by helping to protect our oceans from marine plastic pollution. We have taken sustainability to the product level and continue to roll it out across our product portfolio. In 2019, we made more than eleven million pairs of shoes containing Parley Ocean Plastic, across various footwear franchises in both Sport Performance and Sport Inspired. In addition, nearly three million pieces of our 2019 apparel offering featured Parley Ocean Plastic, including jerseys for high-profile teams such as Real Madrid, Bayern Munich, Juventus Turin and Manchester United.
• Futurecraft Loop: Futurecraft Loop is our first 100% recyclable performance shoe made entirely from one material (TPU), using no glue or solvent. The first generation of the shoe was rolled out in April 2019 as part of a global beta program with consumers from across the world’s major cities. They were asked to test and return the shoes to start the recycling process. In November 2019, we introduced the second generation of Futurecraft Loop. We will take the learnings from the recycling process to further develop the concept and to prepare for the commercial release in 2021. Futurecraft Loop was recognized by Time Magazine as one of the ‘Best Inventions 2019’.
• adidas 4D: The high-performance footwear produced under the adidas 4D concept features midsoles crafted with light and oxygen using Digital Light Synthesis, a unique technology developed by Carbon. The midsole pioneers a digital footwear component creation process that eliminates the necessity of traditional prototyping or molding. With the new technology, adidas brings additive manufacturing in the sports industry into a new dimension. After having produced more than 100,000 pairs of this high-performance footwear in 2018, we continued to increase volumes in 2019 and intend to further expand production in the future. In the past two years, adidas 4D has gone from a conceptual innovation to a running shoe that has been made available in larger quantities and multiple variations.
• Creators Club: This new digitally enabled membership program rewards loyal consumers with invitations to exclusive events and access to limited-edition products. In addition, it enhances the e-commerce shopping experience for members through an even faster checkout process and new order-tracking options. The program allows us to deepen the relationship with our consumers and to gain valuable insights into their expectations and needs. Creators Club launched in the US toward the end of 2018, and is now live in France, Germany, Japan, the UK and Singapore.
• adidas by Stella McCartney Infinite Hoodie and Biofabric Tennis Dress: With the adidas by Stella McCartney Infinite Hoodie, we presented the first commercially produced 100% recyclable performance garment made of 60% NuCycl lyocell and 40% organic cotton, which are completely recyclable fabrics. We have also already taken the first steps toward exploring solutions to create products that are made with nature, and can, at some point, also return to nature. The adidas by Stella McCartney Biofabric Tennis Dress is a prototype concept made with a cellulose blended yarn and certified Microsilk, a protein-based yarn that is made of completely renewable inputs, which has the ability to fully biodegrade at the end of its life. see Sustainability see Adidas Brand Strategy
• Forever Floatride Grow: At the end of 2019, Reebok announced Forever Floatride Grow – the brand’s first plant-based performance running shoe and latest example of sustainability innovation. The shoe is made with castor beans, algae, eucalyptus trees and natural rubber and thus builds on Reebok’s successful Cotton + Corn lifestyle collection of footwear.
• Infinite Play: Building on learnings from take-back pilots in Brazil, Canada, and some of our key cities in Europe and the US, adidas is exploring infrastructure for product bring-back and recycling, with partners, governments and regulatory bodies. 2019 saw the launch of ‘Infinite Play’ in the UK to extend the useful life of products by passing them on to new users, thus avoiding waste. The initiative engages consumers in returning used items by rewarding them with gift cards and Creators Club points.
• AM4 Series: The ‘adidas made for’ (AM4) products were created at the adidas Speedfactory facilities in Ansbach and Atlanta. In 2019, we continued to deliver launches jointly with creators supporting moments that matter for our consumers, e.g. limited editions around the Marvel universe and for Bayern Munich. The concept was included into the adidas offerings to Footlocker and exclusive launches with our Creators Club. Going forward, Speedfactory technologies will be used at two of our suppliers in Asia that will allow for more variations of Speedfactory footwear models in the future.

NEW PRODUCT LAUNCHES GENERATE THE MAJORITY OF SALES

As in prior years, the majority of sales were generated with products newly introduced in the course of 2019. New products tend to have a higher gross margin compared to products which have been in the market for more than one season.

In 2019, brand adidas and Reebok sales were again driven by the latest product offerings. At brand adidas, products launched during the course of the year accounted for 77% of brand sales (2018: 74%), while only 3% of sales were generated with products introduced three or more years ago (2018: 3%). At Reebok, 67% of footwear sales were generated by products launched in 2019 (2018: 67%), while 11% of footwear product sales relate to products introduced three or more years ago (2018: 11%).

R&D EXPENSES deCREASE 1%

Expenses for research and development (R&D) include expenses for personnel and administration, but exclude other costs, for example costs associated with the design aspect of the product creation process or the majority of costs related to company-wide Open Source initiatives. In 2019, as in prior years, all R&D costs were expensed as incurred. The company’s R&D expenses decreased 1% to € 152 million from € 153 million in the prior year.

R&D expenses

€ 152 m

In 2019, R&D expenses as a percentage of sales equated to 0.6% (2018: 0.7%). The number of people employed in R&D activities at December 31, 2019, was 1,007 (2018: 1,041).