Chelsea FC and adidas end sponsorship, who will replace them?

The biggest move of the off-season may have nothing to do with the transfer window. Will Chelsea FC be the first Premier League team sponsored by Chinese giant Li Ning?

In a shock move, adidas announced today that it has agreed to terminate its sponsorship with Chelsea FC next year, only four years into a 10-year deal. Chelsea signed a deal with the German sportswear giant in 2013 that saw the club receive approximately $45 million each year. Add to that the club’s five-year, $300 million deal with Japanese tire manufacturer Yokohama, and Chelsea’s strip is one of the most valuable pieces of fabric in the world.

Neither Chelsea nor adidas are pointing fingers over the termination, stating that the decision will facilitate each party’s respective strategies.

"This mutual agreement on early termination of the agreement will allow Chelsea Football Club to enter a new equipment agreement with a competitor of adidas AG. It will allow adidas AG to continue to implement its sports sponsorship strategy as set out in its strategic business plan ‘Creating the New’. Under this plan, adidas AG will partner with fewer assets on a team level. (4-traders)"

Under the terms ending the contract Chelsea will pay adidas an undisclosed fee that will “positively impact [adidas’s] net income this year.”

adidas began a 10-year sponsorship of Manchester United last year. That deal was worth $1.3 billion, and adidas projected $2.5 billion in sales over the duration of the deal. adidas replaced Nike as the kit sponsor at Old Trafford.

Given the value of a Chelsea kit sponsorship, Nike is the most likely replacement for adidas at Stamford Bridge. Under Armour and New Balance are both aggressively expanding their operations globally across all sports, including the Premier League. Under Armour sponsors Tottenham on a $16 million per year deal that is up for renewal this year. New Balance took over the kit sponsorship at Liverpool in 2015, signing the largest deal in club history valued at just over $450 million.

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Sponsoring Chelsea would be an enormous expense for any company other than Nike, and would mark a shift in the soccer apparel industry’s balance of power. Nike may be looking to recapture some of the market they lost when Manchester United shifted to adidas. However, a 9th place Chelsea team is not consistent with Nike’s habit of saying “Nice trophy case, but what have you done for me lately?”

The wildcard in this equation is Chinese sports apparel company Li Ning. Li Ning has grown aggressively, moving beyond Asia into global sports by sponsoring Olympic sprinter Asafa Powell, NBA legend Shaquille O’Neal and Spanish football club Celta Vigo. Li Ning overtook adidas for the second-place spot in the Chinese sports apparel market in 2009.

Chelsea has built significant commercial and fan ties to China over the past few years. John Terry led a Chelsea delegation on a goodwill tour to China in 2015, and is primed to follow in the footsteps of fellow Blues legend Didier Drogba by transferring to the Chinese Super League next year. These moves take on added significance if they occurred in the context of Li Ning scouting out an entry point in the lucrative and global Premier League marketplace.

Chelsea is not the only Premier League team to undertake an aggressive strategy to capture the Asian sports market. Several Premier League clubs – including champions Leicester City, Tottenham, Watford and Everton – have Asian-based companies as their shirt sponsor and have completed pre-season tours in Asia. A Li Ning sponsorship would provide a Premier League team unprecedented access and engagement opportunities in Asia, and would offer Li Ning a window to the world.

Next: Predicted 4-3-2-1 Chelsea FC Team for Liverpool

For the last six months Chelsea fans first wondered who would be the manager, then speculated about who would leave and who the Blues would bring in during the summer transfer window. What if the biggest transaction of the off-season is not a Blue going to China, but China coming to the Blues?