To answer the question posed yesterday, I must provide additional background. (Be patient, I’ll get to Moscow eventually.)
Starting in 1990, I occupied a senior management position in global brand marketing at a sporting goods company--adidas. This company had a long history of supplying athletic equipment to athletes and organisations around the world, including all communist countries. Many products were produced under license in factories in communist countries and royalties were collected, just like in a capitalist country. adidas was the first western company to hold a majority in a joint venture in a communist country--Hungary--before the fall to the Iron Curtain. Relationships were deep and long-standing; the demise of the Soviet Union had no impact, other than intensifying the needs of former adidas partners. Their world had fallen apart, but adidas was a familiar friend in an unfamiliar world. What they did not know was that adidas has also changed and was also in trouble.
The well-known sports brand had grown out of the ashes of World War Two based upon the inventive genius of Adi Dassler, products better than any competitor, and sports sponsorship. In the days prior to Nike, sponsorship meant free product and generous entertainment (free food, drink, and accommodation). adidas owned two hotels, one in Herzogenaurach, Germany, and one in Landersheim, France, which had a Michelin-starred restaurant and one of the best wine cellars in the world. Partners were wined and dined as part of any sponsorship negotiation, signing, or simply a friendly visit. IOC members and sport federation officials were welcomed guests and frequent visitors. During the 80s and 90s, adidas “owned” the Olympic Games and World Cup soccer events (managed by the Dassler family company, ISL), in part due to Horst Dassler’s saving of these bankrupt organisations. Soviet sports officials loved to visit adidas, because they could live like decadent capitalist at no cost. Hard currency was rare, even for those permitted to travel outside Russia on business, so adidas’ generosity was welcome and expected. Hotel staff expected the minibars to be emptied, and charges were passed to the sport promotion department. The sommelier in Landersheim hated these visits, because his cellar was depleted and he could charge the sport promotion department only his purchase cost and not the restaurant wine menu price. Sport managers at adidas each had a huge T&E budget for home or away “games”. (To put this into perspective, my personal T&E budget for my first year with the company was DM150,000. I used only a small portion and asked for far less in the second year. This is compared to my entire budget DM25,000 at my previous employer--Young & Rubicam--allocated to manage the global adidas advertising account.)
I took over responsibility for adidas sport promotion (their name for sponsorship) at a time when the company was sliding towards bankruptcy. Deaths of Adi Dassler and his son, Horst, had led to leadership struggles and ownership turmoil; bad strategic decisions had led to product disasters; and the rise of real competition had led to sales decline. I was responsible for the company’s largest budget, therefore was expected to make the largest cuts.
In the early 1990s, adidas was stuck in the past and needed to change the way it did business. Sport promotion accounted for 85% of marketing spending at a time when media advertising was building brands. Sacred cows dominated the herd, and no one liked to cut back. I was not popular, because I was new and “did not understand”. But, I was given the job of butcher, and I could decide what had to be slaughtered.
The primary stumbling block to cutting sponsorships was the contracts with sports bodies. These ran on a four year cycle of major events. The contract with the Soviet Union accounted for about 19% of the budget and had been signed before the fall of the country. Being desperate to save money at a time when the company faced bankruptcy, I argued that the contract with the Soviet Union was null and void, because the other party no longer existed. Company lawyers agreed with me. (This later proved to be false, but that’s another story.) In December, after the budget meeting, I wrote a letter to the Russian Olympic Committee canceling our support for the Olympic Committee.
The response came by an unusual route. I received a call from the CEO informing me that we had to support the “Russians” and that I should find other cuts to the budget. He had received a plea from Juan Antonio Samaranch, president of the IOC. He had stated that if adidas did not support the “Russian Olympic Committee”, they could not attend the games in Albertville or Barcelona (his hometown). Samaranch had been the Spanish ambassador to the Soviet Union, so he had strong ties to Moscow. I would have to negotiate a new contract with the “Commonwealth of Independent States”, represented by the IOC member of Russia, Vitali Smirnov, then chairmen of the Russian Olympic Committee (and still IOC member, who could be seen sitting behind Putin at the ceremonies in Sochi). Fortunately, this could be done in Switzerland, home of the IOC, so I traveled by train two days before Christmas to Lausanne. At some point during the meeting, I agreed to fly to Moscow to sign the agreement....