Crisis lessons from the Adidas-Kanye debacle
by Tony Jaques, Director of Issue Outcomes Pty Ltd, for people who work in issue and crisis management
New revelations – variously described as shocking, jaw-dropping, and bombshell – brutally expose how a company ignored long-standing warning signs in pursuit of profit, leading to a costly financial and reputational crisis.
Although it’s more than 12 months since Adidas parted ways with Kanye West, a fresh New York Times investigation late last year documented how the German footwear company tolerated years of bad behavior and anti-Semitism from West (now officially known as Ye) while other sponsors severed links with the troubled rapper.
While it’s a tale of high finance and the challenge of working with a problematic celebrity, it’s also a stark lesson about balancing sales against reputation risk, which the New York Times called “the price of appeasement”.
In October 2022, following a tweet calling for “death-con 3 on Jewish people”, the singer and fashion designer was dropped by Adidas after a viral public campaign, leaving the shoemaker with more than £1bn of unsold Yeezy stock.
The split contributed to a £350m drop in sales for Adidas in the first quarter of 2023, and now investors are suing Adidas in the US, alleging the company had long known about West’s offensive remarks and harmful behavior and failed to take measures to limit financial losses.
After initially suggesting the designer shoes might be destroyed, Adidas eventually decided to sell them, with a percentage of the proceeds going to groups that combat hate speech (and a percentage to West). CEO Bjørn Gulden said at the time: “There is no place in sport or society for hate of any kind, and we remain committed to fighting against it.”
However, the devastating New York Times investigation revealed that West’s questionable behavior stretched back years, including allegedly showing pornography to employees “to spark creativity” and advising a Jewish Adidas executive to kiss a picture of Hitler every day “to practice unconditional love”.
To make the crisis even worse, just one week before the New York Times bombshell, Gulden seemed to excuse the singer’s anti-Semitism. He told a Norwegian podcast West made “some statements which weren’t that good” which caused Adidas to break the contract and withdraw the product.
“Very unfortunate, because I don’t think he meant what he said, and I don’t think he’s a bad person – it just came across that way,” the CEO explained. “That meant we lost that business. One of the most successful collabs in history – very sad.” In fact, the company reportedly earned an estimated £1.5 billion a year from Yeezy shoes.
“But again,” he added, “when you work with third parties, that could happen. It’s part of the game. That can happen with an athlete, it can happen with an entertainer. It’s part of the business.”
It may well be “part of the business”, but it’s also a stark lesson for other companies about the reputational risk of managing controversial celebrities.
Regardless of the merits of the case, and regardless of individual opinions, the risk is very real and demands action. Like when Johnny Depp’s alleged behavior towards his ex-wife led Warner Brothers to remove him from the next movie in the Fantastic Beasts franchise (even though they had to pay his full $10 million salary for filming only one scene).
Or when Jeep withdrew its costly Super Bowl advertisement after learning that singer Bruce Springsteen had been arrested months earlier for drink-driving (the charge was later dropped).
Or when Director Ridley Scott cut scandal-plagued star Kevin Spacey from his already-completed movie All the Money in the World. The reshoot with replacement actor Christopher Plummer reportedly added $10 million to the budget.
Scott’s explanation could stand as good advice for the Adidas CEO and executives everywhere facing similar celebrity reputational crises. “Whatever you do in private is not my business. It only becomes my business if it infects the business that I’m in. Then it’s my duty to do something about it.”
Footnote: In December 2023, West apologized for his 2022 anti-Semitic outbursts.
A Parting Thought
At the heart of every reputational crisis is a bad business decision
Learn more about Reputation Risk, CEO apologies, and Crisis communication in Tony Jaques’ new book, Crisis Counsel: Navigating Legal and Communication Conflict.
Click HERE to find Tony’s book at Amazon.com
“Crisis Counsel confirms Tony Jacques’ position as one of the industry’s foremost experts on issues and crisis management. In addressing the complex interactions between legal and communication crisis responses, Dr. Jacques provides riveting case studies and practical advice. It highlights the financial and reputation risks of not effectively integrating communications and legal counsel. It should be on every communications practitioner’s reading list, and companies should insist their in-house and external legal counsellors read it.” – Noel Turnbull, Former Chair of Turnbull Porter Novelli, Adjunct Professor, RMIT University.