How Proventus got Puma back on track

In 2005, Puma was voted one of the coolest brands in fashion. Just over a decade earlier the company faced bankruptcy. The transformation of Puma from a low-image brand with poor finances into a high-profile and profitable company was partly achieved through restructuring. But its real leap to success was made through powerful product development. Proventus provided the tools for the transformation.

Creativity and extending the limits of the brand. These are key explanations to why a leaping cat has become one of the top sporting goods brands along with the three stripes symbolizing Adidas and Nike’s swoosh. But more than this, it is now also competing on the fashion arena, attracting fashion conscious consumers who are not necessarily interested in sports. The initiative to extend the focus of the brand made Puma into one of the fastest growing companies in the industry, with sharply rising order books, profits and stock price.

Yet, merely a decade earlier, when Proventus came into the picture, Puma was on the brink of a collapse after many years of losses. “Puma was underperforming badly, but Proventus’ analysis indicated that given time, appropriate management and a product-centred approach, it had the potential not only to recover, but to grow into a successful, international company”, says Daniel Sachs, CEO of Proventus, which acquired the loss making company in February 1993.

The story of family, rivalry – and two leading sports companies 

But the Puma story begins much earlier than this. The seeds were, in fact, planted in the 1920’s in the small German city of Herzogenaurach. Two brothers, Adolf and Rudolf Dassler, set up a joint sports footwear company. Rivalry split the brothers, the company – and the city – in the late 1940’s. Adidas, led by Adolf, and Puma, run by Rudolf, were formed. Story has it that the two brothers never spoke to each other again. Be that as it may, but the enmity between the companies still exists.

After a period of initial successes for Puma, in the early 1990’s Puma was perceived as a copy-cat, following its competitors in their tracks rather than leading the field. It was, in fact, equally unattractive to investors, employees and customers.

New management – creativity and structure

The first objective was to stop Puma from bleeding. Proventus, represented by Thore Ohlsson (CEO of Aritmos, a subsidiary to Proventus) and Mikael Kamras (then CEO of Proventus and Chairman of Aritmos) started by installing a new, young management team that could provide the necessary structure – as well as the visionary thinking.

The somewhat unlikely team put in charge consisted of a 29-year old German marketer and business professional, Jochen Zeitz together with his colleagues Martin Genzler and, about a year later, Tony Bertone, a 22-year old American parking attendant warden and sneaker fanatic.

One of Zeitz’ and his management’s first tasks was to streamline Puma’s operations and transform the organization into entrepreneurial, market-oriented and cost-conscious. An initial measure was to perform a thorough clean-up of the assortment, which was huge but lacked edge. Meanwhile, plants and warehouses were closed and production outsourced. In total, costs were reduced by 20 per cent.

But equally important in Proventus’ plan for structural changes was to introduce a company culture that fostered entrepreneurship, teamwork and creativity, i.e. vital ingredients for breathing new life into the brand. The brand building activities included forming a globally integrated marketing and sales strategy, which increased marketing spending. At a later stage, part of Proventus’ growth strategy was also to regain control over the Puma brand on all markets through acquisition and termination of licenses.

“The effect of these measures was that Puma was able to re-emerge with a new, profitable and competitive structure – and with an image that was improving rapidly among consumers”, says Sachs. By the end of 1997, Puma had returned to solid profitability and financial stability.

Back on the stock exchange

As Puma returned to profitability and proved its competitiveness, the company was re-introduced to the capital market. As a result of the successful share offering, which took place in 1996, Proventus’ ownership was reduced to 25 per cent. At a time when Proventus itself was taken private and exited most of its industrial holdings to become free of the debts incurred in the privatisation, half of its Puma holding was sold to US investor Arnon Milchan who had major interests in the entertainment and sports business. To improve Puma’s presence in the North American market, the company needed a strategic partner in the US. The same investor acquired Proventus’ remaining holding in November 1997 and became Puma’s main shareholder.

By that time, in addition to creating a structure and cost base that returned Puma to profitability, the platform was built for continued product development and a rapid expansion of the brand.

“The only sustainable way to drive development in stagnating companies like Puma is by changing them with the product at the center. The structural changes that had been made in the company had prepared it for turning its focus on product development”, says Sachs.

Fashion taking a hold of the brand

In the following years, the borders between, sports, lifestyle and fashion were quickly dissolving. To attract consumers that were not in the traditional sports categories, Puma felt that lifestyle and fashion needed to take a bigger role in the company’s brand strategy. And in order to be interesting to a stylish or younger consumer, Puma had to create its own products and looks geared towards that target group. In that context, the company developed a number of collections in cooperation with high profile designers like Jil Sander, Philippe Starck and Alexander McQueen. Another measure was to develop a line of accessories, including a Puma scent.  

The widening and re-positioning of the brand was successful. Puma became one of the fastest growing companies in the industry in the early 2000’s, orders were up sharply and the stock price soared. Today, Puma has stepped up the pace and has become even more associated with lifestyle and street fashion. And it has regained its position at the top of the sports brands, along with its brother Adidas and Nike.

“The story of Puma underlines that you can’t restructure a company to real success. What you can do is to provide the tools for innovation and product development; which are the only real catalysts for change”, says Sachs.

Clawing its way back into football

But Puma is not resting on its newly won glory in street and sports’ fashion. The company’s wish to also become a leading football brand became evident ahead of the 2006 World Cup in football in Germany, when Puma emerged as the company sponsoring most teams, i.e. 12 out of the 32. In comparison, its rivals Adidas (the official Fifa sponsor) supplied kit for six teams and Nike for eight.

Puma’s strategy for sponsoring all African teams was considered as far-sighted as the next World Cup will be held in South Africa in 2010. Jochen Zeitz of Puma was quoted by the Financial Times as saying that the goal for the competition in Germany was to be taken seriously as a football brand “and there is no doubt that we have succeeded”.