Birkenstock doesn’t mean “sandal” in German, but it might as well. Around the world the name has become synonymous with two-strap leather and cork sandals. Fashion changes. But Birkenstocks are timeless.
Founded in 1774, the company was run by the same family until 2013 when professional managers stepped in and completely reorganized it. Despite these changes, the newly named Birkenstock Group is still owned by the founding family, now 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. Although the details were not released – it was reported that the investment valued the company at $ 4.9 billion (€ 4 billion at the time, € 4.48 billion today).
Now ahead of its 250th birthday, another change is on the way for the company as plans continue to list on the New York Stock Exchange in September.
Current estimates value the company at $6 billion to $10 billion. With such amounts, the new owners will surely want to cash in additional value to unlock for future investments. An initial public offering (IPO) seems obvious, even if it means giving up some control.
Always in fashion
Birkenstock has long been associated with hippies, health food and sock-wearing Germans. Somehow it has turned into a must have for people all over the world. Now it is sold in more than 100 countries. They recently collaborated with high-end brands Dior, Valentino, Jil Sander and Manolo Blahnik.
More people working from home could cause a jump in sales of comfortable footwear. In the last few weeks, Margot Robbie’s decision to wear a pink pair of “Barbie” brought a new color and a big push to the brand.
But no matter how mainstream, they still make a statement. It’s an “anti-fashion shoe that says I don’t care about fashion,” says Allyson Stewart-Allen, CEO of London-based International Marketing Partners, a marketing consultancy. What we wear tells others who we are and what our values are.
Birkenstock by the numbers
On the German website prices for men’s sandals range from €40 ($44) to €260 for a sheepskin-lined pair. Child pairs start at €30. They come in an array of colors and materials. Some are classic leather and cork, some are made of synthetic material, some are vegan.
The company makes more than just sandals. They make many other shoes, boots and sneakers. They also branch out into socks, cosmetics, and even bedding and mattresses.
Allyson Stewart-Allen is not surprised by this. Birkenstock is more than sandals, it’s a lifestyle brand. “If you’re a fan, you become 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 even makes sense if they move into perfumes, outdoor clothing or services such as tours or hiking adventures. After all, they are known for walking and outdoors and can use that on their own or through collaborations with similar companies. But he warned them not to lean out the window: “They should stick to what they are good at and not get distracted,” he argued, “and focus on making shoes.”
Keeping its German roots?
Since 2014 sales of Birkenstock have increased significantly. Previously the company brought in €273 million, according to statistics data provider Statista. In 2020, that will be up to €730 million. The latest figures presented by the company show a profit of €1.24 billion last year.
Solid production numbers are hard to come by, estimated at around 30 million pairs of shoes a year. But the company is building more production capacity. A new €120-million factory is scheduled 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 has around 5,500 employees, 95% of them in Germany, according to the company.
And keeping things “Made in Germany” is important to the company. Even the name is German said Stewart-Allen. The production of shoes at any other cost of the company’s credit. German quality “is part of what Birkenstock sells. It’s part of the brand, it’s an important part.”
Going forward, the company will not simply rely on its legacy. A big problem for the company is cheap knock-offs, whether they look like shoes or fakes.
Another problem is reaching customers directly. Currently, a large part of their production goes to wholesalers who sell the shoes themselves. Birkenstock has several retail stores and an e-commerce business. This may give them customer intelligence and help build relationships with consumers, but they may struggle to gain more control over sales outlets while at the same time pushing for more growth.
As of now, the IPO is not set in stone. As well as how many shares to sell, any timeline and the final share price. For Birkenstock, a large cash flow will help it grow its production capacity, build its sales outlets and possibly help it last for another 250 years. But the company may no longer have the patience of a family-run business for long-term planning when short-term profits are so golden.
Edited by: Uwe Hessler