Adidas claims to have opened an inquiry into claims of “compliance violations” in China, one of its main sportswear markets.
Last week, local officials were accused of embezzling “millions of euros” in an unsigned letter written by whistleblowers posing as Adidas China employees, according to a story by Chinese state broadcaster Jiemian. Online, the letter received a lot of attention.
An anonymous letter “indicating potential compliance violations in China” was received by the garment giant on June 7, according to Claudia Lange, head of media relations, who spoke with CNN on Monday.
“Adidas is currently intensively investigating this matter together with external legal counsel,” she said in an emailed response. Lange declined further comment pending the outcome of the inquiry.
Adidas’s stock dropped 3.7% on Monday.
Before being posted on social media, Jiemian stated that the whistleblowers’ letter had been forwarded straight to the company’s German headquarters.
According to the accusation, a top official overseeing Adidas’ marketing budget in Greater China is accused of embezzling millions of euros and accepting substantial bribes from outside advertising and celebrity firms. A copy of the letter released by the Chinese official media source also named additional employees and members of the executive’s team as being involved.
According to Jiemian, who cited the letter, Adidas Greater China’s annual promotional budget was 250 million euros ($268 million), which included costs for trade shows, marketing, and branding.
According to the whistleblowers, the senior manager was also charged with “nepotism” and “workplace bullying,” which included isolating and evicting some employees. They further said that those who obeyed her orders were given promotions.
One of the manager’s subordinates was also accused in the lawsuit of receiving “millions… from suppliers and physical items such as real estate.”
If the corporation failed to respond to the charges, the whistleblowers promised to report the story to police enforcement and the media.
The second-biggest sportswear retailer in the world is Adidas. 15% of the company’s sales come from Greater China, which includes Taiwan, Hong Kong, and the Chinese mainland.
After Nike (NKE), Adidas is the second-biggest multinational sportswear brand in mainland China. The German company’s sales growth in China has recovered since Beijing lifted the Covid limitations at the end of 2022.
Its refusal to employ cotton from Xinjiang and competition from local rivals have caused a significant reduction in its market share from pre-pandemic levels.
Adidas, H&M, Nike, and other well-known Western clothing companies were the target of a boycott in China in 2021 as a result of the positions they had taken against the purported use of forced labour in the production of cotton in the western province of Xinjiang.
Adidas is renowned for using the “celebrity” angle in Chinese marketing. It has previously collaborated with well-known performers and actors, such as Yi Yangqianxi, Dilraba, and Yang Mi, as brand ambassadors.
