Colin KaepernickRipple of Hope Awards Dinner, Show, New York, USA - 13 Dec 2017

Nike Inc. is more ready to court controversy than its stockholders.

Shares of the active giant fell 3.2 percent to $79.60 on Monday after tapping Colin Kaepernick for its prominent “Just Do It” ad campaign — backing the quarterback who sparked a national conversation by kneeling during the national anthem at football games to protest racial injustice.

The decline cut Nike’s market capitalization by nearly $3.2 billion to $128.4 billion and made the company the worst performing stock in the Dow Jones Industrial Average.

But Nike is playing a game that runs much longer than a day in the market.

“Nike has never shied away from taking risks with their products and with their endorsers and with their marketing, that goes to the heart of who they are,” said Simeon Siegel, an Instinet equity analyst who follows Nike. “They’re as much a marketing company as they are a product company and what they’ve been able to achieve building their brand is obviously unparalleled.”

Siegel described the company’s marketing budget as one of its “competitive long-term advantages.”

According to its annual report, Nike’s “demand creation expense” rose 7.1 percent to $3.58 billion for the fiscal year ended May 31 and included “advertising and promotion costs, including costs of endorsement contracts, complimentary product, television, digital and print advertising and media costs, brand events and retail brand presentation.”

Siegel said the company, which logged revenues of $36.4 billion last year, has such a large customer base that any strong stance is going to alienate someone although it’s not clear how much even such a hot-button issue will impact sales one way or the other.

“I wonder how many people generally make political decisions with which shoes they buy,” Siegel said.

But even though Nike has not shied away from controversy — for instance sticking by Tiger Woods despite personal missteps by the golfer — featuring Kaepernick indicated to some experts that the brand was becoming more daring with its big market budget.

Branding expert Martin Lindstrom said: “Conventional advertising doesn’t work — it is simply too difficult and too costly to secure the degree of attention needed in order to build or just maintain a brand…unless controversy becomes part of the recipe. Using Colin Kaepernick adds an edge to Nike we’ve never seen before…Nike hasn’t been in the news for a long time — with a major risk of the brand turning into a wallpaper — just like all the other superbrands.

“Nike believes in ‘just do it’ — in courage and taking big risks — as they say in their brand statement,” Lindstrom said. “So far, they’ve done so in their labs but rarely outside their campus. Which is the issue — global brands are dying. By pursuing this approach, Nike is back in the public conversation — and, yes, they’ll create some enemies (that’s for sure) but they’ll also reactivate their core base — and create true believers.”

(The choice of Kaepernick also shifts some attention away from the company’s corporate culture scandal, which saw Nike brand president Trevor Edwards leave under a cloud and raised questions about how equally women are treated at the firm).

While the immediate stock market reaction was clear, the full branding impact of the Kaepernick ad remains to be seen.

A Nike spokeswoman noted: “The current ‘Just Do It’ campaign celebrates some of the most inspirational athletes who have chased dreams no matter the obstacle or outcome. We kicked off the campaign last week with ‘Voice of Belief,’ a film featuring Serena Williams.”

Kaepernick revealed his participation in the campaign Monday, tweeting a dramatic close-cropped portrait with the comment: “Believe in something, even if it means sacrificing everything. #JustDoIt.”

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