Birkenstock doesn’t actually mean “sandal” in German, but it might as well. Around the world, the name has become synonymous with a two-strap leather and cork sandal. Fashion is fickle. But Birkenstocks are timeless.
Founded in 1774, the company was run by the same family until 2013, when professional managers came in and completely reorganized it. Even after these changes, the newly named Birkenstock Group was still owned by the founding family, then in its sixth generation.
In early 2021, the family sold a controlling majority of the business to L Catterton, a private equity firm backed by Bernard Arnault and his luxury conglomerate LVMH. Though details were not released, it was reported the investment valued the company at $4.9 billion (€4 billion at the time, €4.48 billion today).
Now just ahead of its 250th birthday, another change is heading the company’s way as plans move forward to list on the New York Stock Exchange as early as September.
Current estimates value the company from $6 billion all the way up to a whopping $10 billion. With such sums, the new owners will surely want to cash in, plus unlock value for future investments. An initial public offering (IPO) seems obvious, even if it means giving up some control.
Always in fashion
Birkenstock was long associated with hippies, health food and sock-wearing Germans. Yet somehow it has managed to become a must-have brand for people around the world. Today the sandals are sold in over 100 countries. Recently Birkenstock has collaborated with high-end names Dior, Valentino, Jil Sander and Manolo Blahnik.
More people working from home could account for a jump in sales of comfy footwear. Over the past few weeks, Margot Robbie’s decision to wear a pink pair in “Barbie” has brought new color and a big push to the brand.
Yet no matter how mainstream, they still make a statement. They are an “anti-fashion shoe that says I don’t care about fashion,” said Allyson Stewart-Allen, London-based CEO of International Marketing Partners, a marketing consultancy. What we wear tells others who we are and what our values are.
Birkenstock: the numbers
On the German website prices for men’s sandals range from €40 ($44) up to €260 for a sheepskin-lined pair. Kids’ pairs start at €30. They come in an array of colors and materials. Some are the classic leather and cork, others are made of synthetic material, still others are vegan.
Yet the company makes more than just sandals. They produce a number of other shoes, boots and sneakers. They have also branched out into socks, cosmetics, and even beds and mattresses.
Allyson Stewart-Allen isn’t surprised by this. Birkenstock is more than sandals, it’s a lifestyle brand. “If you are a fan, you are going to be a fan of what the brand stands for, not just the functionality of the shoe,” the branding and marketing expert told DW. Not to mention their bona fide sustainability credentials.
It would even make sense if they move into fragrances, outerwear, or services like tours or hiking adventures. After all, they are known for walking and outdoors and could leverage that themselves or through collaborations with like-minded companies. But she warns that they should not lean too far out the window: “They should stick with what they are good at and not get distracted,” she argued, “and focus on making shoes.”
Sticking to its German roots?
Since 2014 sales at Birkenstock have climbed dramatically. Back then the company brought in €273 million, according to statistics data provider Statista. In 2020, that was up to €730 million. The latest numbers presented by the company show revenue of €1.24 billion for last year.
Solid production numbers are hard to come by: estimates run to about 30 million pairs of shoes a year. But the company is building up more production capacity. A new €120-million factory is set to open later this fall in Pasewalk, a city north of Berlin near the Polish border.
To support this growth, the company has added 3,300 jobs since 2013 and now boasts about 5,500 employees, 95% of them in Germany, according to the company.
And keeping things “Made in Germany” is essential to the company. Even the name is German, says Stewart-Allen. Making the shoes anywhere else would cost the company creditability. German quality “is part of what Birkenstock is selling. It is part of the brand, it’s an integral part.”
Challenges moving forward
Looking to the future, the company cannot afford to rest on its laurels. Cheap knock-offs, whether lookalike shores or simply fakes, are a major problem for the company.
Another problem is reaching customers directly. Currently a large part of their production goes to wholesalers, who sell the shoes themselves. Birkenstock has a few retail stores and an e-commerce business. These may give them customer intelligence and help build consumer relationships, but they could struggle to get more control over sales outlets while at the same time pushing for more growth.
So far, the IPO is not set in stone. The same goes for how many shares will be sold, any timeline and the final share price. For Birkenstock, a big inflow of money will help it grow production capacity, build up its sales outlets and possibly help it last another 250 years. But the company may no longer have the patience of a family-run business for long-term planning, especially when short-term gains are so golden.
Edited by: Uwe Hessler
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