Adidas says it has launched an investigation into allegations of “compliance violations” in China, a key market for its sportswear.
Chinese state media Jiemian reported last week that local executives were accused of embezzling “millions of euros” in an unsigned letter written by whistleblowers calling themselves Adidas employees China. The letter was widely published online.
Claudia Lange, head of media relations at the clothing giant, told CNN on Monday that it had received an anonymous letter on June 7 “pointing to possible compliance violations in China.”
“Adidas is currently intensively investigating this matter with external legal counsel,” she said in an emailed response. Lange declined further comment pending the outcome of the investigation.
Shares of Adidas fell 3.7% on Monday.
Jiemian wrote that the whistleblower letter was sent directly to the company’s German headquarters before being shared on social media.
The reported complaint alleged that a senior executive in Greater China, who controls Adidas’ marketing budget, embezzled millions of euros and received huge kickbacks from third-party advertising and celebrity agencies. Several members of the management team and other employees were also involved, according to a copy of the letter published by Chinese state media.
Adidas Greater China’s total promotional budget was 250 million euros ($268 million) per year, including spending on marketing, branding and trade shows, Jiemian reported, citing the letter.
The senior manager was also accused of “nepotism” and “workplace bullying,” including isolating some employees and forcing them to leave, the whistleblowers said. People who followed her instructions were promoted, she added.
The complaint also alleged that one of the manager’s subordinates had received “millions… from suppliers and physical items such as real estate.”
The whistleblowers promised to disclose the matter to the media and law enforcement if the company did not address the allegations.
Adidas is the second largest sportswear retailer in the world. Greater China – a region that includes mainland China, Hong Kong and Taiwan – contributes 15% to the company’s revenue.
In mainland China, Adidas is the second-largest international sportswear brand, behind Nike (NKE). The German company saw a recovery in sales growth in China after Beijing lifted Covid restrictions at the end of 2022.
But its market share has fallen significantly from pre-pandemic levels due to competition from local rivals and a controversy over its refusal to Xinjiang cotton.
In 2021, Adidas – along with H&M, Nike and other major Western clothing brands – faced a boycott in China due to the stand they had taken against the alleged use of forced labor to produce cotton in the country’s western Xinjiang region.
Adidas is known for playing the ‘celebrity’ card in its marketing in China. It has previously collaborated with popular actors and singers as brand ambassadors, including Yang Mi, Dilraba and Yi Yangqianxi.
CNN’s Juliana Liu and Hassan Tayir contributed reporting.
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