Kanye West made Adidas billions, but he can also destroy it

When Ye said last month that he wanted to end his partnerships with Gap and Adidas,  and criticized the German company and its outgoing Chief Executive Officer Kasper Rorsted, Adidas stayed quiet. His fanbase — a crucial part of his ability to sell everything from padded jackets to ugly sneakers — would have made any corporate collaborator think twice about breaking things off.

But Ye’s recent behavior has crossed new lines, and Adidas now looks more at risk of a boycott from its broader customer base for maintaining ties with the musician than of a backlash from Ye fans for severing them.

First came the White Lives Matter T-shirts at his Paris fashion week show in early October. This alienated some of his closest allies, such as Supreme creative director Tremaine Emory. It drew criticism from Vogue fashion editor Gabriella Karefa-Johnson. It likely hurt many of his fans. And anti-Semitic comments, prompting Twitter and Instagram to restrict his account, only added to the damage.

Adidas said last week, in the wake of the Paris show, that it was reviewing its arrangement with the celebrity. In a statement, it said that although the Yeezy tie-up is “one of the most successful collaborations in our industry’s history,” all successful partnerships were rooted in “mutual respect and shared values.”

But Adidas gets part of the blame for its current predicament.

It stayed quiet after Ye’s many previous controversies, including his run for president in 2020 and his harassment of Kardashian. If anything, these episodes only kept Ye in the limelight and his Yeezy line a big seller. One of the few times Adidas weighed in was in 2018 when Rorsted said the company didn’t support Ye’s comments about slavery being a choice.  Adidas declined to comment for this column; Ye could not be reached.

Now his behavior has become so egregious that the sportswear giant can’t avoid being drawn in. As a German company, it is likely to be particularly sensitive to any perceptions of ignoring anti-Semitism.

But a review doesn’t necessarily mean a split. Even during the interim period, the company and the musician will “continue to co-manage the current product.”

This may be because the Yeezy line is still a cash cow. It is estimated to contribute annual sales of €1bn ($974.5 million) to €1.5bn, or 4%-8% of Adidas group revenues. In the worst-case scenario, if all Yeezy products were to be taken off shelves, it would lose these sales at a time when it is also battling a slowdown in China and muscular rivals Nike Inc. and New Balance in the US.

But if the two were to go their separate ways, right now, Adidas may have a stronger negotiating hand. Ye’s personal brand is diminished. Meanwhile, going it alone won’t be easy, as Ye will have to replicate all of the infrastructure provided by his corporate partners. And he has recently taken aim at Bernard Arnault, CEO of LVMH Moet Hennessy Louis Vuitton SE and the most powerful man in luxury. That may limit his ability to find high-end backers for future Yeezy endeavors.

Against this backdrop, Adidas may find it easier to come to an agreement with Ye, whereby it can keep some Yeezy designs on the market, even as the two no longer develop new products. That, in turn, could reduce the financial pain from a split.

Ye is seeking to make amends. He said he met with Vogue’s Karefa-Johnson and is reported to have reached out to Arnault’s son and Tiffany & Co. executive Alexandre Arnault, and he has also been open about his mental health struggles. Still, companies will be more reluctant to sign him up than they were just two years ago when Gap shares rose the most in 40 years on the news of their tie-up.

“You can’t manage me. This is an unmanageable situation,” Ye told the audience ahead of the now infamous Paris show.

For Adidas, and any other firms wanting in on Kanye’s marketing magic, that is at the very heart of the dilemma.