Nike plans to take over the distribution of Converse in the U.K. and China by 2011 from its current licensees: a company in Hartfordshire, RPQ Supplies, for the U.K.; and GM Asia Pacific in Hong Kong for China. Officials of these companies and Nike were not available for comment, but observers felt that the takeover was a smart move considering the similarity in language and legislation in these two countries and in North America, plus the fact that the British market is dominated by big shoe retail chains.
Converse, which is owned by Nike, currently sells its products directly only in the U.S. and Canada. It uses licensees in the rest of the world, and this strategy has paid off handsomely, especially in markets such as France, Germany and Italy where annual sales under the brand have increased to more than €100 million in each of these countries.
At a meeting with financial analysts in New York last week, Nike said that the acquisition of the distribution in the U.K. and China should help the company to double its revenues from Converse from the current level of almost $1 billion within the next five years. Including the licensees' sales, Converse already generates annual sales of about $2.2 billion.
In Nike's accounts, Converse is grouped into an ?other businesses? unit along with Cole Haan, Hurley, Nike Golf and Umbro. Total revenues from this unit are expected to double from current levels through low-double-digit average increases in annual sales, and thus reach indicated revenues of $4 billion by 2015, or between $1.5 billion and $2 billion more than current levels. Like Converse, Umbro, which is currently distributed only in the U.K., is likely to take over the distribution from its licensees in some other countries.
Excluding Nike Golf, which generates annual sales of $650 million, the Nike brand alone currently accounts for 85 percent of the Nike group's total revenues. A number of initiatives (outlined in Sporting Goods Intelligence Europe) are planned to raise the Nike brand's sales from $16.7 billion to $23 billion by 2015. Overall, the new strategies laid out publicly last week are set to raise the Nike group's total turnover by 40 percent to $27 billion through 2015.