Warren Buffett tells his Berkshire Hathaway shareholders: 'Brooks is on Fire.' He's absolutely right.
Brooks' revenue has soared from $189 million in 2009 to $409 million in 2012, and the company is well on its way to reach $500 million revenue in 2013.
We're proud to be part of the Brooks team, as a sponsored athlete and partner since 2002, and we're pleased to be a small part of their exceptional growth.
Here's the article from Forbes posted 5/20/13 by Kurt Badenhausen
Brooks Running Shoes Hit Their Stride
"Brooks is on fire," writes Warren Buffett in his annual letter to Berkshire Hathaway shareholders.
Brooks was a hot running brand in the 1970s and ’80s, but it also tried to be a full-on athletic company selling cleats, high-tops and a wide range of apparel. The firm’s endorsement roster included football’s Dan Marino, James Worthy of the NBA and tennis legend Jimmy Connors. “We used to play the game that Nike has perfected and we were not successful,” says Brooks Sports CEO Jim Weber.
Brooks, based in the Seattle suburb of Bothell, celebrates its centennial anniversary as a company next year, but it is only in the past dozen years that Brooks has found its rhythm. Weber joined Brooks in 2001 as CEO and spearheaded a new initiative that focused the company on performance running shoes and gear. No more basketball or football. Tennis was out. Distribution was narrowed to mostly just top running retailers and specialty retailers. The results have been outstanding in recent years.
Sales have more than doubled from $180 million in 2009 to $409 million last year. Weber expects sales to hit $500 million in 2013. Brooks’ U.S. market share in the performance run category this year is 11.8% behind only Nike (40%) and Asics (24.3%), according to research firm SportsOneSource. Elite runners are increasingly turning to Brooks. Weber says that more people were outfitted in Brooks sneakers than Nike at this year’s Boston Marathon. “We’re building a brand with runners and that is where we pay the most attention to,” says Weber.
The sneaker business is a $21 billion (retail) industry in the U.S. with running the biggest component at $6.7 billion. The market has expanded with the explosion of running races (running and trail), triathlons and obstacle races like Spartan Race and Tough Mudder. There were 23,000 timed races in the U.S. last year and 19 million people ran at least twice a week. Participation in running has been on a steady climb for more than 15 years.
Overall U.S. running shoe sales were flat in 2012 after a 6% gain in 2011. Sales at Brooks were up 34% each of the last two years. Brooks pours all of its R&D resources into creating a better running shoe. “We are creating a brand that doesn’t have to be cool with high school football players,” says Weber taking a subtle shot at Nike and Under Armour UA +0.64%.
Competing with $26 billion-in-sales Nike is a challenge. “Nike will spend more by noon today on marketing than we spend in a whole year,” says Weber. Adds SportsOneSource analyst, Matt Powell, “You don’t try and out Nike, Nike. Brooks has come out as a strong alternative.”
Nike’s ad campaigns have included taglines like: “Second place is the first loser” and “You don’t win silver, you lose gold,” as well as the recent Tiger Woods’ ad that ruffled feathers: “Winning takes care of everything.” Brooks takes a different approach with the simple slogan: “Run Happy.” Says Weber: “Our whole ethos of being inclusive and connected with runners is under the umbrella of Run Happy.”
Brooks eschews expensive media ad campaigns and pours money into grassroots marketing. It invests in events and specialty run retailers. It relies heavily on social media and word of mouth. Brooks is the title sponsor of the Rock ‘n’ Roll Marathon series which includes 29 running events each year with half-a-million participants.
Running has traditionally been a very serious sport where runners religiously pound the pavement to hit their weekly mileage goals. “Run Happy” turns that idea on its head. Bathrooms are always a challenge at long-distance running events. So Brooks offers a VIP Porta Potty at its sponsored races. It rents super deluxe heated or AC equipped toilets that have mahogany wood. The Brooks marketing team is in t-shirt tuxedos and the area is equipped with red carpet, linens and mints. Buy enough product at the company’s booth the day before the race and you get access to the high-end restrooms. “We have some fun with it and everybody smiles,” says Weber. He compares Brooks to Volkswagen. Both companies have superior engineering in their products, but also convey a fun image for the brands.
It is remarkable that Weber is still in charge of Brooks, as the company has had four different ownership structures since he arrived. Private-equity firm J.H. Whitney owned the company before selling it to sporting goods maker Russell in early 2005. Russell was sold to Fruit of the Loom, part of Berkshire Hathaway , in 2006. Last year, Brooks was spun out of Fruit of the Loom and Weber now reports to Warren Buffett. The Oracle of Omaha highlighted Brooks in his annual letter to Berkshire shareholders writing: “Brooks is on fire.”
Brooks is right up Buffett’s alley. It is a strong brand that competes in the premium end of the market. The average Brooks shoe sells for $94 compared to $72 for the rest of the industry, according to SportsOneSource. Buffett added a 5-K race to Berkshire’s annual weekend meeting this month. Weber won’t reveal profit margins at Brooks, but says the industry ranges from: “ugly to the mid-teens” and Brook is in the middle of that.
Next up, Weber wants to expand his “Run Happy” ethos further overseas. The international market is roughly a quarter of Brooks’ business, and sales were up 41% in a sluggish European economy last year. The brand operates in 50 other countries with distributors and partners. Asia-Pacific is a great opportunity. Weber says: “Running is more than a sport. It is a lifestyle of health and wellness and investing in yourself.” It is a message that translates into any language.
For more, see www/brooksrunning.com and visit Brooks on Twitter @BrooksRunning