In a recent development, Adidas has announced that they are conducting an investigation into allegations of “compliance violations” in China, a crucial market for the sportswear giant.
According to Chinese state media Jiemian, local executives at Adidas China have been accused of embezzling “millions of euros” in an unsigned letter written by whistleblowers claiming to be employees of the company. The letter gained widespread attention online after being published.
Claudia Lange, head of media relations at Adidas, confirmed that they received an anonymous letter on June 7, highlighting potential compliance issues in China. She stated that Adidas is currently investigating the matter with external legal counsel and declined to comment further until the inquiry is complete.
Following these allegations, Adidas saw a 3.7% drop in their shares on Monday.
The letter from whistleblowers was reportedly sent directly to Adidas’ headquarters in Germany before being circulated on social media, Jiemian reported.
The complaint detailed accusations against a senior executive in Greater China who allegedly embezzled millions of euros from the company’s marketing budget and received kickbacks from external agencies. The letter also implicated several members of the executive’s team and other employees.
Adidas Greater China’s promotional budget, including marketing and branding expenses, was reported to be 250 million euros ($268 million) annually.
The allegations also included claims of “nepotism” and “workplace bullying” by the senior manager, who was accused of isolating employees and promoting those who followed her instructions.
The whistleblowers threatened to escalate the matter to the media and law enforcement if Adidas failed to address the allegations.
Adidas is the world’s second-largest sportswear retailer, with Greater China contributing 15% of the company’s sales. In mainland China, Adidas ranks second among international sportswear brands, behind Nike.
Adidas has faced challenges in China recently, including competition from local rivals and controversy over their stance on Xinjiang cotton. In 2021, the company, along with other Western apparel brands, faced a boycott in China over allegations of forced labor in Xinjiang.
Despite these challenges, Adidas has seen a rebound in sales growth in China after Covid restrictions were lifted, and the company is famous for its use of celebrities like Yang Mi, Dilraba, and Yi Yangqianxi in its marketing campaigns.
