Recovering brand reputation

Adidas says it is making good progress with turning the business around after reporting its first annual loss in more than three decades earlier this year. The losses have come after the company terminated its partnership with the rapper previously known as Kanye West and his Yeezy line in 2022 after, among other things, anti-Semitic remarks.

The scandal negatively affected the brand’s reputation and cost it significantly in the form of lost revenue. In 2023, a group of Adidas shareholders filed a class-action lawsuit against the company, claiming that Adidas was aware of West’s problematic behaviour but failed to mitigate the financial risk posed to the company by its exposure to the controversial rapper.

In an effort to shift excess stock, Adidas offered high levels of discounting, a decision which the company has admitted hurt the business. Adidas has since been weaning itself off discounting. After reducing its marketing spend in 2023, the company says it plans to over-invest in marketing spend in 2024 and to drive long-term growth, as opposed to optimising short-term profit.

Another brand which is battling to restore its reputation after pursuing short-term profit is Australian airline Qantas Airways, which has agreed to pay A$120m in compensation and a fine for selling tickets on thousands of cancelled flights in 2021 and 2022. Brand Finance has estimated that the furore wiped $384m off the airline’s brand value.

While much has been written about the brand damage Qantas suffered, branding expert and marketing professor Mark Ritson predicts in The Australian that the brand will recover. “Big brands are tough old things that ride out short-term sensationalism every time,” he writes, adding: “It’s true that brands are built from image and positive associations, but they are mostly built from salience.”

Citing the airline’s very successful loyalty programme and the exit of the “main source of the problem”, CEO Alan Joyce, Ritson says he is confident that Qantas will emerge from this scandal. “Brands aren’t like people. You don’t need to trust them to prefer and purchase from them,” he says. And while losing trust is not an ideal outcome, “it’s also not the brand-killing issue many portray it to be.” 

New Qantas CEO Vanessa Hudson told shareholders after she was appointed in November 2023 that “brand renewal” was her top priority.

The big take-out: While brand trust is important, big brands are able to ride out short-term turbulence.