How Under Armour bounced back after America blamed it for losing the 2014 Olympics

How Under Armour bounced back after America blamed it for losing the 2014 Olympics
Image: Maxime Francout for Quartz
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In this series, Perfect Company, we are examining pockets of excellence in the corporate world. No single company is perfect, but together they show what the corporate ideal could look like.

The platonic ideal

“Communication leads to community, that is, to understanding, intimacy and mutual valuing.” —Rollo May, Power and Innocence: A Search for the Sources of Violence

The practice

The 2016 Olympics were quite a victory for Under Armour. The sportswear brand attached itself to some of the biggest names in the competition, including endorsers Michael Phelps and the US women’s gymnastics team, which sported Under Armour on the mat. Its clever commercial starring Phelps brought Under Armour major exposure during the Rio games—even though it’s not an official Olympic sponsor. And its only misstep was that the swimmer wore rival Nike on the cover of Sports Illustrated.

During the 2014 winter games in Sochi, Russia, however, Under Armour was in a very different position. What should have been a shining moment for the brand on the world stage devolved into a global public-relations nightmare.

By February 2014, the Baltimore, Maryland-based brand, which started out making compression shirts in 1996, had grown into a major player in the US sports-apparel space. Its sales more than doubled since 2010, reaching $2.3 billion in 2013. And it was angling to become a global household name, on par with larger rivals Nike and Adidas.

Under Armour went all in on the 2014 Winter Olympics, marking its largest sponsorship in the games at that point. Among other efforts, the company shoveled millions of dollars into a collaboration with Lockheed Martin on a suit for the US speedskating team, which was trumpeted as the fastest-ever during the weeks and months leading up to the winter games. The suit, called the Mach 39, was reportedly so amazing that it would give US athletes an almost unfair advantage, said Diane Pelkey, senior vice president of communications at Under Armour, about the coverage at that time.

When the Olympics were underway in Sochi, it became immediately clear that the Mach 39 would not be winning any medals. The US speedskating team was losing. Badly.

And on Feb. 13 the Wall Street Journal suggested that Under Armour was to blame for Team USA’s worst speedskating showing in 30 years. From there, “it really spiraled,” said Pelkey. The news took off on social media and made headlines all over the world.

Pelkey’s communications team quickly met with Under Armour’s top brass, including CEO Kevin Plank, head of innovation Kevin Haley, and then-marketing head Matt Mirchin, who is now the president of Under Armour’s North American operations. They decided to make Haley the first line of defense, and Mirchin available to answer marketing-related questions, rather than shy away from the press until the worst blew over.

“It was popping up everywhere,” said Pelkey. “We really wanted to get our message out there to help control it and shape the story.”

Haley and Pelkey fielded call after call from reporters over the next 24 hours. They answered questions about the suit’s technology and wear-testing, talked about the ways Under Armour was working with Team USA to fix the problems in Sochi, and pushed the brand’s mission of making athletes better through passion, science, and innovation.

The response minimized the fallout from Under Armour’s investors. The stock dipped 2.4% on Feb. 14, but quickly rebounded. “It was one day and then it was over,” said Corinna Freedman, senior analyst at BB&T Capital. “They dealt with it so quickly.”

But the speedskating team was still losing miserably, and the public blamed it on Under Armour.

“A lot of people anticipated that we were going to run away from speedskating,” Pelkey said. The company’s contract with the US speedskating team was up at the end of 2014, and the logical move would have been to distance itself from the sport.

Instead, Under Armour doubled down on its commitment to its athletes. One week after the company was initially blasted for the team’s loss, it extended its partnership with US speedskating for eight more years. Plank made the announcement in an exclusive interview with USA Today and went on a media tour to tout the move.

“The narrative really started to change then,” said Pelkey. “A lot of companies will hide initially. Our approach was, let’s face this head on. … In true Under Armour fashion, we may get knocked down but we’re going to get right back up and come up stronger bigger and bolder than ever.”

The team talked a big game about its speedskating suit leading up to the Winter Olympics.  And it was so confident in the Mach 39 that it didn’t have a contingency plan when the suit failed.

The brand’s confidence hasn’t waned since then. “We make bold declarations and we believe in our product,” said Pelkey.

But the communications team always has a plan B now. It crafts talking points and statements ahead of time in case athletes or products underperform. And it does its homework on every new release—working closely with folks in product and innovation to understand how products were tested before they’re announced to the public. It also talks to athletes who wear-test the gear to hear about the pros and cons.

The company beefed up its public-relations team—from nine employees to 14 globally—to support this new strategy as the company grows. And it retains third party agency Edelman for crisis communications.

You can never be too prepared, Pelkey said. Still, you can’t anticipate everything. Bad publicity can spiral out of control on social media. Under Armour has to be scrappy and adjust its playbook in real-time when the situation warrants it, she said.

Most of all, Pelkey said Under Armour has learned to own up to its mistakes and move swiftly to remedy them. In May 2015, the brand came under fire for releasing a basketball shirt that resembled the US Marine Corp. War Memorial, which offended military veterans. Under Armour quickly pulled the shirt and apologized on Twitter. Plank, the chief executive, also personally apologized to the veterans and their families who complained to him directly about the shirt, Pelkey said.

Last fall, it drew criticism again because it released a line of Star Wars apparel for men and boys, but not women and girls. It turned out that the company had apparel for women and girls as well, but the release dates were staggered. Some customers weren’t impressed.

“The speed at which a lot of these situations happen is so fast,” said Pelkey. “You might get one call, you have seconds to respond, and the next thing you know there’s tons of chatter on social media.”

The takeaways

Under Armour responded to the 2014 speedskating incident on the fly. But the communications team has since applied lessons from the crisis into its public-relations strategy to help it to react more quickly.

The company’s culture of transparency and openness extends beyond crisis communications into investor relations, which is handled by a separate team within the company.

An analyst who covers Under Armour said the sportswear brand is consistently more open with investors than competitors like Nike, even while growing into a $4 billion business. ”That’s a reflection of the CEO’s personality,” said Freedman, the analyst at BB&T. “Kevin has been a very open CEO.”

The company talks in depth about future plans during investor presentations, which are available to the public. Last September, Under Armour executives outlined plans to evolve the company’s digital strategy and leverage the fast-growing women’s category. “They were quite forthcoming in terms of details,” said Matt Powell, sports industry analyst at NPD Group.

In general, Powell said the athletic-wear space is fairly transparent. The industry is forced to be more open than others in the apparel space, or elsewhere, because it has major sponsorship deals with high-profile athletes that draw a lot of attention from the public.

Nike has been slammed for its labor practices in the past, so the sports industry takes corporate responsibility seriously. Under Armour shares details about its suppliers and ethics on its website, for example, as do its competitors.

The contrast with industries like the technology field is stark, however. ”Oftentimes we find entrepreneurs not wanting to share much,” Powell said. “They want to protect what they built.”

But Under Armour, he said, is “highly aware of the necessity of being as transparent as they can.” They’ve got some “real pros” in investor and public relations, he added.

It stems from the underdog mentality Plank established when Under Armour was a tiny sporting-good supplier. The company balances that with the realities of being the second-largest athletic apparel brand in the US.