Adidas, the German sportswear giant, is currently under investigation for alleged compliance violations in China. The company confirmed on June 17, 2023 that it had received an anonymous letter accusing local executives of embezzlement and taking kickbacks. Adidas stated that it was working with external legal counsel to investigate these claims.
According to reports from Chinese state media Jiemian, the whistleblowers claimed that a senior executive in Greater China, who manages Adidas' marketing budget, had embezzled millions of euros and taken huge kickbacks from external advertising and celebrity agencies. Several members of the executive's team and other employees were also implicated.
The letter alleged that one of the manager's subordinates had received 'millions' from suppliers and physical items such as real estate. The whistleblowers vowed to disclose the matter to the media and law enforcement if Adidas did not address the allegations.
Adidas Greater China is a significant market for the company, contributing 15% of its sales. In mainland China, Adidas is the second largest international sportswear brand behind Nike. The German company has been working to boost sales in China for 18 months after losing significant market share before the COVID-19 pandemic.
The investigation could jeopardize Adidas' goal of regaining a foothold in China, as it faces competition from local rivals and controversy over its refusal to use Xinjiang cotton. In 2021, Adidas, along with other big Western apparel brands, faced a boycott in China due to their stance against the alleged use of forced labor to produce cotton in the country's western region of Xinjiang.
Adidas is known for its celebrity marketing strategy in China. It has previously worked with popular actors and singers as brand ambassadors, including Yang Mi, Dilraba, and Yi Yangqianxi.
The investigation into Adidas' operations in China comes at a time when other international companies are facing scrutiny over their business practices in the country. In recent months, there have been allegations of corruption and labor violations against major corporations such as Apple (AAPL), Nike (NKE), and Tesla (TSLA).
