The End Is Here: Adidas And Ye Go Separate Ways

The end of Yeezy brand has massive implications for both Adidas and Ye, as billions of dollars worth of revenue is now at stake.

The End Is Here: Adidas And Ye Go Separate Ways

For the last few years, Yeezy has undoubtedly been one of the world’s hottest sneaker brands. Started by Kanye West, now known as Ye, in collaboration with Adidas, the Yeezy brand was the first time Adidas decided to give full creative control and branding to another person. The Yeezy brand reinvigorated Adidas at a time when Nike was pulling ahead as market leader, with the Yeezy brand eventually contributing around 8% of Adidas’ annual revenue last year, bringing in $1.7 Billion in revenue for the brand.

But now it’s all over.

This week, Adidas made an official announcement that they are “terminating the partnership with Ye immediately, ending production of Yeezy branded products and stopping all payments to Ye and his companies. adidas will stop the adidas Yeezy business with immediate effect.”

For Adidas, the cost of working with Kanye West has finally come to outweigh the benefits. Kanye West has always been a controversial character, making public statements that have managed to offend or anger people for decades. And his most recent comments have gone one step too far.

As we covered in a recent article, Ye wore a ‘White Lives Matter’ t-shirt at his Paris Fashion Week show earlier this month, which outraged people all over the world. Ye also publicly criticized Adidas executives, including posting pictures on Instagram cursing at them for stealing his designs and treating him poorly. Shortly afterwards, Ye made a series of antisemitic comments in interviews and across social media. The latest backlash against these antisemitic comments was the final fuel added to the fire that led to Adidas cutting ties with Ye this week.

This decision wasn’t taken lightly. In their official statement, Adidas acknowledged that this decision will leave a “short-term negative impact of up to $250 Million on the company’s net income in 2022.” It’s in Adidas’ best interests to downplay this financial impact, which is likely understated considering the unpredictable consequences of not having Yeezy brand moving forward into next year. While many investors and analysts probably consider this financial outlook a negative signal for Adidas stock, others commend the company for taking an ethical stand that the majority of their customers support.

As the announcement came only days ago, there are many practical matters that still need to be decided.

Are all Yeezy shoes completely discontinued immediately? What about the entire supply chain of design, manufacturing and distribution? Presumably anyone working on the Yeezy brand will lose their jobs or contracts, if not immediately than relatively soon. Adidas could transfer these resources into other projects, but it will take time for Adidas management to make decisions around the specific next steps.

Adidas could theoretically create derivatives of Yeezy silhouettes in an attempt to recapture the passion towards Yeezy shoes like the Yeezy Boosts, Wave Runners, or Foam Runners. Since Adidas owns the intellectual property of these shoe designs, they could rebrand the same shoes under new names that are not associated with Ye. But were people really buying the design of these shoes or were they buying the shoes’ association with Kanye West? If Adidas tries to rebrand the Yeezy line, we’ll soon find out the answer to this question.

Does this make the current supply of Yeezy shoes ‘fixed’? If no more Yeezys will ever be created again, all Yeezys that are currently out there in the world will be by definition ‘limited edition items’ over time. Regardless of his words and actions, Ye still has many shoe and music fans all over the world–and some of them are able to overlook his controversies. People holding large quantities of Yeezy shoes could consider the fact that there may still be an active market of buyers looking for Yeezys. However, this is all dependent on how the market reacts to Ye’s products in the future.

The experiment of allowing Kanye West to have significant control and become ‘the face’ of a shoe brand also provides lessons for other companies. It highlights the risk of having a brand so closely attached to a single person’s identity, because it’s a double-edged sword. Kanye’s personal promotion of the Yeezy brand helped sell more shoes, but the brand’s association with Kanye has led to its downfall. There is risk in attaching a billion dollar brand to a specific person, when their actions over time could cause a complete change in how the public views that person, and subsequently the brand attached to them.

For a while, Yeezy was Adidas’ greatest success story. Can this be replicated? There are very few people with the same worldwide cultural cache and passion for design as Kanye West. If Adidas seeks to replace Yeezy brand with a new brand, this will be a huge gamble, take lots of time, and involve many high-stakes strategic decisions. Whatever Adidas does next, they will need to somehow fill that $1.7 Billion gap in revenue that Yeezy provided. The billions of dollars spent on Yeezy could easily turn into an opportunity for another brand to capture market share from Adidas.

And it’s not just Adidas who is cutting ties with Ye. Creative Artists Agency (CAA), Kanye’s talent management company, has dropped him as a client. Foot Locker, among other footwear retailers, has pulled Yeezy shoes from their stores. Online resale platforms like The Real Real and Rebag are saying that they will not accept Yeezy products uploaded on their website or in physical retail locations. Chase bank has ‘ended their banking relationship with YEEZY LLC and its affiliated entities.’ Balenciaga and Gap have also ended their relationship with Ye. Professional athletes like NBA player Jaylen Brown and NFL player Aaron Donald announced they are leaving Donda Sports, Kanye’s marketing agency. Twitter and Instagram have locked Ye’s accounts and deleted his posts.

For these brands, dropping Ye was a moral issue and a way to take a stand against anti-semitism and hate speech. As much as Ye has faced controversy in the past, this is objectively the biggest series of events that indicate the business world is turning away from him. Some analysts calculate that Kanye’s net worth has now been cut down significantly with the end of Yeezy brand and all these severed partnerships.

It’s unlikely that another large footwear or apparel brand will be willing to take on the public relations risk of working with Kanye West, at least no time in the near future. Kanye’s only option is to create his own infrastructure and start his own brand. He has expressed interest in doing this, but it’s unclear how exactly that can happen now.

In addition to his controversial comments, Ye has been known for his highly public battles with mental health, whether described explicitly or implicitly. This long time cultural icon seems to be entering a tragic freefall, beginning with Adidas but likely not ending there. We can only hope there is a positive resolution to this someday, somehow.

Yeezys, undoubtedly some of the hottest shoes of the last decade, are now finished. What most people have largely considered the biggest sneaker success story of the last decade is now over. Sneakers, fashion, and culture will feel the reverberations for years to come.