The company says it has launched an inquiry into claims of “compliance violations” in China, a major market for Adidas apparel.
An unsigned letter allegedly written by whistleblowers identifying themselves as Adidas China employees accused local officials of embezzling “millions of euros,” according to a story by Chinese state broadcaster Jiemian last week. The letter was extensively posted on the Internet.
Adidas Is Investigating Allegations Of Embezzlement And Kickbacks In China
Head of media relations Claudia Lange of the clothing behemoth informed CNN on Monday that the company had received an anonymous letter on June 7 “indicating potential compliance violations in China.”
“Adidas is now intensively investigating this matter together with external legal counsel,” she replied. Lange withheld additional comment until the investigation was completed.
Adidas stock dipped 3.7% on Monday.
Before the letter from whistleblowers was posted on social media, Jiemian claimed it had been delivered straight to the German headquarters of the corporation.
According to the lawsuit, a top executive in Greater China overseeing Adidas’ marketing budget embezzled millions of euros and accepted large payments from outside advertising and celebrity firms. A copy of the letter released by the Chinese state media source also named other employees and executive team members as being involved.
Adidas Is Investigating Allegations Of Embezzlement And Kickbacks In China
According to Jiemian, citing the letter, Adidas Greater China had an overall promotional budget of 250 million euros ($268 million) annually, which included costs for marketing, branding, and trade shows.
The whistleblowers claimed that the senior manager also engaged in “nepotism” and “workplace bullying,” which included separating some staff members and making them quit. They said that those who complied with her directives were promoted.
The accusation claimed that one of the manager’s subordinates had gotten “millions… from suppliers and physical items like real estate.”
The whistleblowers promised to bring the issue to the attention of the media and law enforcement should the corporation fail to respond to the claims.
Adidas is the second-biggest sportswear store in the world. The corporation’s sales are attributed to Greater China, which includes mainland China, Hong Kong, and Taiwan.
After Nike (NKE), Adidas is the second-biggest multinational sportswear brand in China. Sales growth for the German manufacturer has recovered in China since Beijing lifted Covid restrictions at the end of 2022.
Adidas Is Investigating Allegations Of Embezzlement And Kickbacks In China
However, due to rivalry from nearby rivals and an issue surrounding its unwillingness to use cotton from Xinjiang, its market share has fallen precipitously from pre-pandemic levels.
Adidas, together with H&M, Nike, and other major Western clothing companies, was subjected to a boycott in China in 2021 due to its opposition to the purported use of forced labor in the western province of Xinjiang, China.
Adidas is renowned for using the “celebrity” angle in its Chinese marketing. Previously, it collaborated as a brand ambassador with well-known actors and singers such as Yi Yangqianxi, Dilraba, and Yang Mi.
SOURCE – (CNN)
