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No limit to Reds commercial gain – now for squad renewal

July 16, 2014 Tags: , , Reads 26 comments
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It is, in every sense, an extraordinary deal. Some 13 years after Manchester United first hooked up with Nike, executive vice chairman Ed Woodward has brokered a shirt manufacturing contract with adidas that is worth at least £750 million to the club by 2025. Possibly substantially more. It is a deal that underlines United’s enduring global appeal despite the damage inflicted both by David Moyes and the Glazer family’s ownership. Now, supporters trust, Woodward will flex United’s commercial muscle once again – to deliver big name signatures that lead the club’s revival under Louis van Gall.

The adidas numbers are, indeed, staggering – a deal that represents a three-fold increase on the contract United holds with Oregan-based Nike, and one that will add around 40 per cent to the club’s bottom line from June 2015. Or, in other words, a material impact on United’s finances at a time when a lack of Champions League football has left a £40 million black hole.

The American company claimed last week that spending some £75 million each season does not represent “good value” for Nike’s shareholders. adidas’ rejoinder was stark – CEO Herbert Hainer boasting that the German company expects “total sales to reach £1.5 billion” over the decade-long contact. One that supports Woodward’s decision to play a game of brinkmanship with a clutch of global kit manufacturers as Nike’s contract ran down.

Indeed, in the global battle for sportswear supremacy United is a pawn set to profit handsomely. In fact so large is the new contract that revenue from adidas in 2015/16 will exceed the £64 million United received from the Premier League broadcast pool last season, making the kit deal the single most important source of ongoing income.

And when put in the context of both United’s historical kit deals, and the global market, Woodward and his commercial team has broken new ground. The total value of Nike’s then record-breaking £302.9 million contract, signed in 2002, has been more than doubled. Meanwhile, United’s new deal outstrips those of rivals Real Madrid, Barcelona and Liverpool by more than £40 million per season.

Or to put the numbers into context, the £75 million that United will receive from adidas is only just shy of the turnover Sunderland and Aston Villa posted in 2012/13. United’s three principal sponsors alone – Adidas, Chevrolet and Aon – will generate income in excess of 14 rival Premier League clubs. Such is the impact that it is no stretch to argue that Woodward’s commercial strategy has reinvented how many clubs now view monetisation.

Just hours after United announced adidas as a record sponsor, the club paraded Japanese noodle firm Nissin as a regional partner, adding to the multi-year sponsorship deal with Korean Pharmaceutical company Cho-A Pharm, reported in June.

In April it was a partnership with curry firm Ottogi and one with Asian confectionery company EuroFood. And in 2013 “Personal Care and Laundry Partner” Unilever was brought on board, along with tyre manufacturers Apollo and Federal Corporation. The club has held longer relationships with Kagome, Bulova, Bwin, Casillero del Diablo, Singha, Aeroflot, Aperol Spritz, Epson, Yanmar, Kansai, and a string of regional telecoms companies.

Each is a smaller, but cumulatively lucrative, junior partner to the £53 million-a-season contract signed with principal shirt sponsor Chevrolet last year that has helped to drive United’s commercial income way beyond £150 million per year.

The new income will help to fill some of the void left by the lack of Champions League this season, which leaves the club short of matches, prize money and likely short-changed by special covenants on some of its commercial arrangements.

Yet, supporters have long-held the view that money – to bastardised Sir Matt Busby – is far better spent on the pitch than sitting in the bank; and certainly nowhere near the Glazer family’s pockets. It is a view held in tandem with a suspicion that Woodward is far better at signing sponsors than he is navigating the European transfer market.

This charge has only partly been rectified by the acquisitions of Juan Mata, Ander Herrera and Luke Shaw over the past six months. After all, long remain the memories of summer 2013 that brought mirth to rivals, embarrassment to United, and Marouane Fellaini to a level beyond his limited ability.

This summer, with van Gaal arriving at Carrington on Wednesday after a successful World Cup with Netherlands, is billed as one of renewal. Herrera and Shaw will add silk and steel to United’s midfield and defensive resources, but popular opinion still has it that United is some way short of rivals both home and abroad.

It is an observation that leaves van Gaal seeking, perhaps, another four more high quality reinforcements, while more than half-a-dozen players will be removed from the club if suitable buyers can be found. Certainly none of United’s expenditure this summer – if Woodward can pull off the deals – is likely to be at the bottom end of the market, reversing years of relative parsimony under the Glazer regime. In spectacular fashion at that.

The Dutchman is believed to be after an experienced central defender – with Rio Ferdinand and Nemanja Vidić having left Old Trafford in May – a box-to-box midfielder, and a sprightly winger. Anderson and Bébé will certainly go, while few of Nani, Shinji Kagawa, Darren Fletcher, Javier Hernández, Ashley Young, Tom Cleverley, Wilfried Zaha, Chris Smalling or Fellaini are secure at Old Trafford.

Nor would many be truly missed. With no European football van Gaal need not work with the full 37-man first team squad he inherits, albeit one that includes half-a-dozen youngsters such as Will and Michael Keane, Jesse Lingard, James Wilson and Nick Powell.

Yet, the new man has just a month until United’s first Premier League match against Swansea City on 16 August; just six weeks until the transfer window closes on 2 September. Enough time, one suspects, for Woodward to close yet another sponsor in a far-off land. Or, perhaps, to add the final touches to a squad that simply must finish in the Premier League’s top four if van Gaal is to retain his job – and the Old Trafford bean counters are to remain content.

Anything less is unthinkable. Then again, few thought United would extract more than £750 million from a kit supplier. Woodward, it seems, is now central to both goals.