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A Possible Starting Point on How Puma and Arsenal Joined Forces

The news yesterday, that Puma was shattering the English kit deal record by signing on with Arsenal, came out of nowhere. Perhaps this generally passed-over announcement from a couple weeks ago could help further explain why Puma and Arsenal connected

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So yesterday afternoon was fun, right? While it's been harped about for years, I think few realized how significant the year 2014 would be for Arsenal. That is, until we saw the recent news of the renewal of the Emirates sponsorship at £30m a year, and yesterday's bombshell news that Arsenal and Puma were teaming up at the rate of up to £34m a year to design and make the kits for the next five years. The amount of money now available for things like squad development without first selling existing players should be the club's new future as a result of these two deals (among other new secondary sponsorship deals the club have been slowly securing), and hopefully this in turns starts to ease pressure off of Arsene Wenger and other upper management and Board member types that are usually targets of abuse from sections of Arsenal supporters.

While the kit deal news has been very much welcoming and definitely out-of-the-blue, to many industry folks this news shouldn't come as too much of a shock. Witness this piece of news from April 18, 2013:

Puma AG (PUM.XE) said Thursday it has appointed Norwegian industry veteran Bjorn Gulden as its new chief executive, bringing in a turnaround expert to lead the German sportswear maker as the company steps up its stalling recovery efforts.

The 47-year-old former soccer player is set to join Puma from July 1, 2013, after more than a year as head of Danish jewelry brand Pandora A/S (PNDORA.KO).

Now, before you wonder, the Pandora that Bjorn Gulden led isn't the Pandora that probably came to your mind first; the Danish company is a leading exporter of diamonds and other jewelry that, prior to Gulden's appointment, was suffering from a severe downturn in profits, demand and share prices. Under Gulden's leadership, Pandora cut costs by reducing overhead expenses like stores and implementing a stock-balancing program that helped clear out older inventory and thus afforded the company to free up more channels of fresh distribution of products while gaining back previously-lost demand in the market. In his short time at Pandora, Gulden's efforts led to Pandora's stock jumping close to 150% in his time there. Further, while still relevant in regards to footwear, Puma's been on their own rocky road of sorts lately. In October 2012, the German outfit announced profits "significantly lower" than 2011's results with a net profit loss of 70 percent.

Enter Bjorn Gulden.

He's no stranger to a pitch: Gulden is a former professional footballer who spent some time at 1. FC Nuremberg and, after finishing his career due to an injury, pursued higher education that helped elevate him to upper management positions at German shoe company Deichmann, Norwegian sportswear brand Helly Hansen and Senior Vice President of Apparel and Accessories at another German company you might have heard of a time or two. To say that he's been a success and a major influence and trusted resource in a company's performance at every stop he's been would be an understatement: on the day of his announcement of his appointment as Puma CEO, shares of Pandora dropped 6.8 percent.

Now, the question is: why Gulden and Puma, and how does this explain Puma and Arsenal? As noted here, Puma went down a sponsorship strategy path as of late that centered around African soccer and Jamaican athletic sponsorships. While the success and subsequent visibility of Usain Bolt and the rest of his fellow teammates certainly helped Puma, it hasn't afforded them an ability to compete against sportswear behemoths Nike and adidas, mainly due to past strategy of completely avoiding a costly battle with them in such a risky showdown. Aside from a couple of prominent national team sponsorships, Puma stayed out of the lucrative, but costly, partnerships with leading European clubs. Unfortunately, as popular as Bolt is in his sport, he and the African soccer partnerships weren't enough to steer Puma to financial glory: although their sales increased 8.7% in 2012, this was due to their own cost price-cutting program, similar to what Pandora underwent with Gulden at the helm, that led to a 13% drop in operating income.

As a result, Puma has been slowly undergoing a change in strategy when it comes to European club sponsorships; Borussia Dortmund and Rangers now have kits with the famous leaping cat adorned on them, and Puma also has a couple of famous former Arsenal players, among other top European-based players, signed to individual sponsorship deals as well. In regards to Arsenal, they now cement themselves as Puma's biggest sponsorship to date (don't kid yourself when comparing them to Bolt; while he's a force in his sport, he's also a name not worth nearly £1.4b). Much like how Nike pushed all their focus and attention to Manchester United and Barcelona, or adidas' attention to Bayern Munich (and rightfully so, mind you), Puma will do very much the same with Arsenal. Considering the overall outlay, there will be no stone unturned when it comes to Puma marketing Arsenal in a manner befit of their status and wealth.

With the Arsenal announcement yesterday, one could say the previously-avoided path of a confrontation with Nike and adidas for the coveted European club sponsorships has now become a head-on collision to compete and ultimately take away established shares in that marketplace. In order to spearhead such a move towards this route and, ultimately, to turn a profit, it's little wonder that Puma would turn to a person who's reversed the fortunes of other companies who've fallen on hard times.