Adidas is examining claims of misappropriation and bribes originating from China.
Last week, Chinese state media Jiemian disclosed that unidentified executives in Adidas China were allegedly swindling "millions of euros" as per an unsigned letter penned by anonymous employees. This letter was circulated extensively online.
CNN was informed by Claudia Lange, Adidas' media relations head, on Monday that the company received an anonymous letter on June 7, hinting at potential breaches in compliance regulations in China. In her emailed response, Lange stated that Adidas is thoroughy investigating this matter alongside external legal counsel. She chose to remain silent until the probe's conclusion.
On Monday, Adidas' shares dropped by 3.7%.
Jiemian revealed that the letter was first sent to Adidas' German headquarters before being shared on social media.
The letter accused a high-ranking executive in Greater China responsible for Adidas' marketing budget of embezzling millions, accepting massive kickbacks from external advertising and celebrity agencies. The executive's team members and other colleagues were reportedly complicit, according to the Chinese state media outlet's published copy of the letter.
Adidas' annual promotional budget for Greater China, which includes marketing, branding, and trade show expenses, amounts to 250 million euros ($268 million), as reported by Jiemian, citing the letter.
The executive was also accused of nepotism, workplace bullying, isolating some employees, and forcing them to resign. According to the whistleblowers, those who followed the executive's directives were promoted.
The complaint also alleged that one of the executive's subordinates had received "millions ... from suppliers and tangible items such as property."
The whistleblowers threatened to reveal the allegations to the media and law enforcement if Adidas failed to address them.
Adidas is the second largest global sportswear retailer, and Greater China, comprising mainland China, Hong Kong, and Taiwan, accounts for 15% of the company's sales.
In mainland China, Adidas ranks second among international sportswear brands, trailing only Nike. The company saw a sales growth rebound in China following Beijing's scrapping of Covid-19 restrictions at the end of 2022. However, its market share has significantly dwindled since pre-pandemic levels due to competition from local brands and the controversy surrounding its refusal to use Xinjiang cotton.
In 2021, Adidas, along with H&M, Nike, and other major Western apparel brands, faced a boycott in China due to their stance against the alleged use of forced labor to produce cotton in Xinjiang.
Adidas has a reputation for leveraging celebrities in its Chinese marketing efforts. Previously, it partnered with popular actors and singers as brand ambassadors, including Yang Mi, Dilraba, and Yi Yangqianxi.
Juliana Liu and Hassan Tayir of CNN contributed to the reporting.
