Adidas is currently under investigation for potential compliance violations in China, a key market for the sportswear giant. The investigation was launched after an anonymous letter from whistleblowers, claiming to be employees of Adidas China, alleged that local executives had embezzled millions of euros. The letter, which was widely publicized on social media, accused a senior executive in Greater China of embezzlement and taking kickbacks from external advertising and celebrity agencies. The whistleblowers also raised concerns about nepotism and workplace bullying within the company.
The alleged compliance violations at Adidas Greater China included embezzlement of millions of euros from the company’s promotional budget, as well as accusations of nepotism and workplace bullying by a senior executive. The whistleblowers expressed their intention to disclose the matter to the media and law enforcement if the company did not address the allegations. The reported complaint also claimed that one of the manager’s subordinates had received kickbacks from suppliers and physical items such as real estate. Shares of Adidas fell 3.7% following the news of the investigation.
Adidas Greater China has an annual promotional budget of 250 million euros, which includes expenses for marketing, branding, and trade fairs. The region contributes 15% of the company’s sales, making it a crucial market for the sportswear retailer. In mainland China, Adidas is the second largest international sportswear brand behind Nike. Despite facing competition from local rivals and controversies over its refusal to use Xinjiang cotton, Adidas has seen a rebound in sales growth in China since Covid restrictions were lifted in 2022.
In 2021, Adidas, along with other Western apparel brands such as H&M and Nike, faced a boycott in China over their stance on alleged forced labor in Xinjiang. The controversy led to a decline in Adidas’ market share in China, but the company has continued to leverage celebrity endorsements in its marketing efforts. Adidas has worked with popular Chinese actors and singers as brand ambassadors, including Yang Mi, Dilraba, and Yi Yangqianxi. The outcome of the investigation into the compliance violations in China is pending, with Adidas intensively investigating the matter with external legal counsel.
