Birkenstock: inside a $5bn brand
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“As you can see, we have grown somewhat…” says Stefan Schulz, head of production final assembly. He is gesturing at hundreds of rows of industrial shelving units, 15m high, in Birkenstock’s factory in Görlitz, eastern Germany, a town within borscht-spilling distance of Poland. The 36,000sq m factory – a corrugated modern block the colour of a dirty white Fiat – opened in 2009, runs 24 hours a day, five days a week, and employs around 1,900 workers.
Schulz is courteous, friendly and quick to share; but his affability cloaks the steely grip he has on shoe production efficiency. Need to squeeze more than 80,000 sandals a day out of a multinational, sometimes Covid-hit workforce in a factory that barely sleeps? You need a man like Stefan.
“We didn’t need this when I started nearly 10 years ago,” he explains of the spaceship-sized building before us. “Now we’re building a big new factory nearby. More capacity. More automation…” he says. “But I can’t tell you where.” Everything at Birkenstock is ringfenced with professional secrecy. “The Birkenstock story is one that is rising all the time. Rising, rising, rising.”
In its 248-year history, the orthopaedic-looking-shoe brand founded by Johann Adam Birkenstock has transformed from a family business plagued by infighting and efficiency squabbles into a global sandal sensation that last year went into partnership – for $4.87bn – with private equity firm L Catterton, a company created in part by Bernard Arnault and his family’s holding company, Financière Agache. Over the years its simple two-strapped shoes have enjoyed various iterations and maintained a reputation for dignified quality. But while the cork-based sandals were once derided as a fashion faux pas worn only by hippies and health professionals, the brand has lately been infused with high fashionability. In the financial year ending September 2019, the brand sold 23.8mn pairs of shoes and saw an 11 per cent increase in sales to €721.5mn.
The team at Görlitz crafts 50,000 cork sandals, and 30,000 ethylene vinyl acetate (EVA) pairs every day. Unlike many other big brands that outsource their manufacturing, Birkenstock owns each step of its production line – all of which is in Germany. This means that the business can quickly react to growing or shrinking markets, control and trademark each part of the shoe-making process, and protect its heritage as a German company.
The brand has four – soon to be five – factories in Germany, although only the Görlitz operation houses the complete assembly, crafting together the footbed, the leather sides, the straps and the buckles. It also partially produces Birkenstock’s higher-end range, 1774 (starting at £260), launched in 2020 and marking its evolution from a practical shoe brand into one offering luxury status symbols. A huge part of the Birkenstock rehabilitation, the 1774 line has elevated the brand to the realm of high fashion, and offered dozens of potential collaborations.
“Business is too good. Always. For 10 years we have been sold out. Managing the capacity with such demand, it’s a different kind of pain, but it is still pain. You know?” Oliver Reichert has been the Birkenstock CEO since 2012. We are sitting opposite one another at a huge wooden table in the brand’s Munich premises. A floor-to-ceiling photograph of Joseph Beuys hangs on the wall and I spy an original copy of The Face with Corinne Day’s famous shoot of a then-unknown Kate Moss wearing black Birkenstocks. Reichert’s belief and commitment to the brand are unequivocal. “We are in the century of quality – because people are sick and tired of all the cheap, quick, £8 trousers they wear once.”
Business remained strong even through the pandemic. “At the beginning of the situation it was pure fear for everyone,” says Reichert of the flux throughout the industry. “We don’t need to source anything, and we didn’t have worries about the impact on the global supply chain – everything we own can be moved around using trucks – but then when we saw the situation in Italy, we became very concerned for the people in our tanneries in this area.”
He decided to shut the production sites for two months, balancing the company’s responsibility towards its family-owned suppliers with the need to protect their workers. “And then, overnight, demand for our produce went through the roof.”
Reichert believes there was a psychological reason for Birkenstock’s sustained increase in sales. “Everyone was at home, and although there was no office people still cared about their desk, their chair, their jogging bottoms and, yes, their footwear. Birkenstock was a part of this self-reinvention; and the casualisation of workwear during the pandemic was mirrored by the mass casualisation of fashion.”
Reinvention is precisely the currency that Reichert spends his days pushing, not least when considering the 1774 line’s range of potential partners. “When you have a 250-year-old company – a very big beast – you have to be careful not to end up closed like the Catholic church, with everything locked away. Then you will die in your own greatness. The company will become a mausoleum. I want to keep the roof open. And this is what we do with 1774 – invite influential and creative people to come and have a picnic with us. I don’t need the money; I need their energy stream. Their view and interpretation of the brand.”
He gets up, walks over to a locked wood-and-glass cabinet and pulls out two seemingly standard blue-and-white Birkenstock shoeboxes. These house the brand’s recent collaboration – with Dior and its men’s artistic director, Kim Jones. They are a twist on the popular Tokio mule and Milano sandal, in Dior grey and felt and suede styles. First revealed at Jones’s AW22 show in January, they will arrive in stores in June. They are the perfect hybrid of ugly, comfy and desirable.
Much was made of the brand’s L Catterton deal last year. Before the LVMH-associated company was involved, another private equity firm, CVC Capital Partners, had been in talks for months. “It was a tactical thing,” explains Reichert. “If you want to convince somebody to love you even more, you probably have to talk to someone else as well. Look, the normal finance investor strongly believes that he is the predator. But the truth is they are not. It’s easy to spot the chicken trying to be the tiger in the room, you know?”
At the time of the agreement, Arnault commented: “Birkenstock was founded nearly 250 years ago and has grown to become one of the few iconic brands in the footwear industry. We truly appreciate brands with this long heritage.” According to Luca Solca, a luxury goods analyst at Bernstein, part of Birkenstock’s appeal is that it has captured the trend for fast growing informal footwear. “[These] brands are prized by investors as they promise significant future growth. Examples of this have been the recent IPO of Dr Martens and the private equity takeover of Golden Goose.”
How is Reichert’s relationship with Arnault now? “They [LVMH] have such an incredibly good track record; and the strength they have rests on giving space – whether to Celine or Kim Jones at Dior – to do their business.” Will the deal see more LVMH brands collaborating with Birkenstock?
“Not necessarily,” says the CEO firmly. “No one has talked to me about this. Of course, we are the new kid on the block, but this means that lots of people are calling.” Many brands have approached them, but others have produced their own sandal versions. “They decided to copy us,” says Reichert. “But if you are going to play remixes it should be a good one.”
Notwithstanding the success of the 1774 fashion collaborations, Reichert wants the future of Birkenstock to be more democratic. “In 10 years I want to give everyone access to the Birkenstock footbed. All this  range is very high, but I want to go even deeper. I don’t want us to be misused as a fashion brand. We are like bread and water. So, for example, how do we get the footbed accessible to people in India? This needs a rough pricing of five to 10 euros. This is the challenge. But we don’t have a preference for serving kings. We want to serve people.”
Back on the shop floor, I watch the making of an Arizona, one of the brand’s most popular models, which was relaunched last month in olive-green leather as part of the 1774 range. The production journey starts with big, pillowy brown bags filled with cork granules, part of which are a by-product of the making of wine corks, imported from Portugal. These are mixed with latex milk to make a sticky, unctuous paste, which is then fed into one of the footbed presses by a robot. The cork mixture is sandwiched between a thin lower sheet of jute and a leather inner sole, then baked in what looks like row upon row of individual waffle makers for around 10 minutes.
Belief in the Birkenstock footbed – or Fußbett, as it was coined by Konrad Birkenstock in 1896 – borders on cult-like. As well as being the brand’s true point of difference, it is also its DNA, its soul, and legally protected to the millimetre. Every raised bump and curve is designed to encourage a healthy gait. The general idea is that it stimulates the leg and foot muscles – big and small – much like walking on a sandy beach. Brands who want to collaborate with the company are encouraged, politely but firmly, not to touch it.
The inner sole and upper can be switched out with a vegan alternative or, in the case of the 1774 models, encased in a premium type of leather. The 1774 models also undergo a refining treatment known as “full exquisite”, which means none of the cork mixture can be seen around the edges. They also get fancier stitching and piping, with the details close to 80 per cent handmade, while the standard line is roughly 60 per cent.
With every stage come controls, beats in the production process where eagle-eyed employees both check for small faults and prep the shoes for the next stage of production. Control benches are distinguished by their harsh overhead lamps and laminated cheat sheets. “So much is still checked, of course, by the human eye,” explains Schulz. “At the end it is 1,000 per cent accuracy, rather than 100 per cent, that we require.” Every step is programmed for high quality at maximum capacity; whether that’s to add a layer of glue to the bottom of the footbed via a “waterfall” system or attach the leather straps via heat-activated glue tunnels and abrasion.
The whole process is a dance: part-metal, part-human. It ends when a friendly woman called Emily hands me a shiny white shoebox with 1774 Birkenstock branding on the outside. Inside are a gleaming pair of Arizona sandals and a centuries-old brand with one foot grounded in the past and the other – with its sense of collaboration and innovative spirit – firmly in the future.