China’s Anta Gains on Nike, Adidas Over Forced-Labor Issue

In March, it got another boost. Chinese news outlets and social-media users called for a boycott of Western brands in an industry group that highlighted allegations about forced labor among minorities in China’s cotton-rich Xinjiang region. Group members Adidas and Puma each reported third-quarter sales declines of about 15% in their Chinese markets, citing political challenges and other issues. Fellow member Nike Inc. said its sales there fell 20% in its latest quarter, though it pointed to supply-chain disruptions.

After the backlash, most Western fashion brands stopped talking about Xinjiang. Anta did the opposite to fall in line with Beijing, which calls the forced-labor allegations lies. Anta quit the group that raised the human-rights concerns, saying it would keep using Xinjiang cotton.

Anta, which declined to comment for this article, said revenue rose 56% in the first half of 2021 compared with the same period a year earlier. In its latest financial report, it said “guochao,” a Chinese term meaning “national tide,” is making domestic brands more popular.

Companies that do business in China are walking the line between addressing human-rights concerns and acquiescing to Beijing, which can choke access to the world’s second-biggest economy. H&M Hennes and Mauritz AB disappeared from Chinese e-commerce sites and map apps last year after raising Xinjiang-related concerns. Walmart Inc. and Intel Corp. recently faced Chinese social-media backlash over their business relationships in Xinjiang.

A Nike spokeswoman declined to comment. Adidas didn’t respond to a request for comment.

In industries such as sportswear, Chinese shoppers now have comparable homegrown alternatives such as Anta, which faces its own geopolitical challenges.

A human-rights group this week criticized the International Olympic Committee for its ties with Anta, the official supplier of IOC uniforms and other apparel for next month’s Beijing Winter Games. The IOC said a recent third-party audit of its Anta-provided uniforms found no issues related to forced labor.

And while Anta’s commitment to Xinjiang cotton helps in China, it dims prospects overseas as Washington and other governments take steps to restrict imports of Xinjiang-sourced goods. Just as people in China and Western countries use different internet services and infrastructure, they could increasingly wear different sportswear from separate supply chains.

Ranking third in market share behind Nike and Adidas in China, Anta has narrowed the gap in recent years, according to research-firm Euromonitor. Because of the size of China’s sportswear market, valued at $50 billion a year and growing with the country’s prosperity, Anta has become the world’s fourth-biggest athletic-apparel company by market capitalization.

It used its fortunes to expand globally in 2019, leading a consortium that bought Amer Sports, a Finnish-based conglomerate that owns Wilson Sporting Goods, Louisville Slugger and other brands.

Based in the beach-lined city of Xiamen, Anta was founded in 1994 by Ding Shizhong, who sold shoes his father made at home. He then ran factories that manufactured shoes for other companies before focusing on Anta’s own brand. Anta also bought the Chinese business of Italian-founded Fila, which now represents half its sales.

In 2015 Anta pried Mr. Thompson, then an up-and-coming National Basketball Association player, from a Nike endorsement deal by offering more money and promise, said David Bond, who managed Anta’s U.S. office from 2015 to 2018. Mr. Thompson has since teamed up with Stephen Curry on the Golden State Warriors to lead the NBA’s most successful team—and in the process boost Anta’s image in basketball-crazy China.

“They’d be a lot less successful without Klay,” Mr. Bond said.

During trips to headquarters, Mr. Bond saw colleagues cover windows with foam boards during product meetings to shield secrets from a rival across the street. He also saw Anta’s efficiency firsthand.

Mr. Bond, who has also worked at Nike and Adidas, said Western companies negotiate with third-party factories and retailers to prioritize the production and display of their products. “There’s a lot of time dealing with Foot Locker when you’re at Nike,” he said.

Anta controls factories and about 10,000 stores. “If they get an idea like super huge pink shoes are all the rage,” Mr. Bond said, “it would take Anta six to nine months” to make them and get them in stores—half the timeframe of Western rivals. In-house factories and stores also mean more profit, he said.

Mr. Bond said Anta had the same talent as the Western companies he worked for, but without the bureaucracy. Six or seven executives made decisions at Anta, he said.

Its challenges are greater outside China. Anta wanted to open a consumer business in the U.S., but Mr. Bond said it abandoned plans around 2017, partly because of a dispute with Brooks Sports Inc. over similar shapes in their logos.

Politics would complicate a new effort today. President Biden recently signed a bill that would ban imports of Xinjiang goods unless businesses demonstrate they were made without forced labor. European Union lawmakers are considering similar legislation.

In June, leaders of the Congressional-Executive Commission on China wrote to the NBA players’ union, encouraging players to cut ties with Anta. “The NBA and NBA players should not even implicitly be endorsing such horrific human rights abuses,” wrote Sen. Jeff Merkley (D., Ore.) and Rep. Jim McGovern (D., Mass.).

Union president Michele Roberts responded, saying the group “does not—implicitly or otherwise—endorse the ‘commission of genocide or crimes against humanity.’” A spokeswoman for the union said it doesn’t comment on endorsement deals of individual players.

Mr. Thompson’s sports agency declined to comment.

Anta has continued making progress with the NBA, by signing more athletes to deals and via Wilson Sporting Goods, which recently replaced Spalding as the league’s ball provider. While Wilson is a subsidiary of Amer, which is owned by the Anta consortium, Amer told the newspaper Nikkei last year that it follows its own policies and doesn’t tolerate forced labor. An Amer spokesman declined to answer questions.

Write to Stu Woo at [email protected]