Birkenstock Footprint Sandals, Inc.

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Birkenstock FootprintSandals, Inc.

founded: 1966

Contact Information:

headquarters: 8171 redwood blvd.
novato, ca 94945 phone: (415)892-4200 fax: (415)899-1324 toll free: (800)761-1404 url: http://www.birkenstock.com

OVERVIEW

Birkenstock Footprint Sandals, Inc. is famous for its trademark product—bulky but comfortable leather sandals, worn by "hippies" in the late 1960s and by almost everyone else in later years. The California-based company does not manufacture shoes itself; instead, it is the exclusive American importer and distributor of Birkenstock footwear, which is made in Germany by a two-century-old company. The founder of Birkenstock Footprint Sandals, Margot Fraser, discovered the sandals in Germany while on vacation in 1966. Although she had no business experience, she decided to sell the sandals in the United States when she realized how much better her feet felt after wearing them. However, traditional shoe stores had no interest in the admittedly unattractive sandals; Fraser found her original market in health-food stores.

Birkenstock grew from a one-woman company operating out of Fraser's home and selling a few pairs of shoes at a time, to a highly successful company with $82 million in sales in 1997. Almost two million pairs of "Birkenstocks" are sold in the United States every year. In addition to its original brown leather sandals for adults, Birkenstock now sells 300 styles and colors of shoes and sandals for adults and children. Some new products come in bright colors and in synthetic materials, and many celebrities and fashion models were seen wearing Birkenstocks in the 1990s. Birkenstock is noted for its community activism and its excellent employee relations.

COMPANY FINANCES

Because Birkenstock is a private company, it does not release detailed financial information to the public. Its 1997 sales were $82 million, a 26-percent increase over 1996 sales of about $65 million. However, sales for both 1995 and 1994—$55 and $50 million, respectively) were down from sales in 1993 of $60 million.

HISTORY

Although Birkenstocks have only been sold in the United States since the 1960s, in Germany the Birkenstock family has been manufacturing shoes since the 1700s. In 1774 J.A. (Johann Adam) Birkenstock was registered in the church archives of Langenbergheim, Germany, as "subject and shoemaker." Since that time, the Birkenstock family has continuously made and sold footwear. J.A. Birkenstock's grandson, Konrad Birkenstock, owned two shoe stores and was the person who shaped the family business for the next century. In the late 1800s shoes were made with flat soles and were very uncomfortable since the human foot is curved. In 1897 Konrad Birkenstock invented the first contoured insole, which allowed his cobblers to design custom footwear. However, custom footwear became less popular as cheaper factory-made shoes were more widely manufactured. So Birkenstock turned to another idea: in place of the rigid metal arch supports used in factory-made shoes, he designed a flexible arch support insert.

Around the time that World War I began, Konrad's son Carl joined the business. Soon the company concentrated on developing orthopedic shoes and inserts to be worn by wounded soldiers. By the 1920s Birkenstock orthopedic products were being sold throughout Europe. In the 1930s and 1940s, thousands of people in Europe attended Birkenstock-sponsored educational seminars about the benefits of orthopedic shoes. In 1954 a new family member, Karl Birkenstock (Carl's son) stepped into the leadership role. Karl Birkenstock moved the company back into the shoe manufacturing business, and focused on developing a shoe that was based on the shape and movement of the human foot—a shoe that would provide all of the benefits of walking barefoot. In 1964 Birkenstock presented the result of years of design work: a shoe with a footbed made of latex, cork, and jute, with a raised toe bar and a heel cup to better distribute the body's weight. The following year the sole was attached to two leather straps, and the first Birkenstock sandal was born.

At this point Margot Fraser entered the picture. She was a German-born dress designer who had moved to the United States. While on vacation at a spa in Germany in 1966, Fraser asked for advice about her chronic foot problems. Someone suggested that she try the new Birkenstock sandals; she did, and within months her foot pain had vanished. Fraser decided that she should share the sandals with other American women who experienced constant discomfort and even pain from the high-heeled, pointed-toe shoes that were in fashion. But when she approached the owners of shoe stores, they told her that American women would never wear such ugly shoes, no matter how comfortable they were. So Fraser took a different approach, and brought the sandals to a convention of health-food store owners in San Francisco. Her first customer was the manager of a health food store, whose feet were so sore that she was carrying her shoes around the auditorium. The manager bought three pairs to sell in her store, all in her own size in case nobody bought them.

FAST FACTS: About Birkenstock Footprint Sandals, Inc.

Ownership: Birkenstock is a privately owned company.

Officers: Margot Fraser, Pres. & Founder; Dennis Cutter, CFO; Mary Jones, VP & HR Manager

Employees: 195 (1997)

Principal Subsidiary Companies: Birkenstock is the exclusive importer and distributor of German-made Birkenstock Original Contoured Footbed sandals and shoes in the United States. It maintains two company-owned retail stores, two mall outlet stores, and a large distribution and marketing center at its headquarters in Novato, California.

Chief Competitors: Birkenstock has a host of competitors in the footwear business. Its top competitors include: NIKE; Deckers Outdoor Products; and Wolverine World Wide.

Sales of the shoes were slow through the early 1970s, with Fraser ordering 20 pairs at a time from Germany and using her garage as a warehouse. Fraser had no business training and no financial resources to build the business. Her marriage broke up in 1969 and she left everything behind, including her business. But the few customers she did have convinced her to start it again, which she did with the financial help of the woman who had bought the first pairs of sandals at the convention. In 1971 Fraser moved the business to a small office above a California health-food store, and incorporated it as Birkenstock Footprint Sandals, Inc. In the same year, the classic "Arizona" sandal, still a best-seller today, was introduced. The German company made Fraser its sole importer and distributor within the United States, and opened a larger factory to meet the increased demand for its products.

Sales of Birkenstocks dropped during the 1980s, as customers became more interested in athletic shoes and luxury items. In 1988 sales were a mere $8.6 million. In 1989, Birkenstock changed its logo and began to increase the number of styles and colors available, including new sandals for children. An attractive mail-order catalog was launched in 1990, and other catalog sellers, such as L.L. Bean and The Sharper Image, also began to sell Birkenstocks. Sales of Birkenstocks soared through the 1990s, as Baby Boomers who had first worn them in the 1970s returned to their comfortable favorites, along with their children who bought the new designs. In the late 1990s celebrities such as Madonna, Harrison Ford, and even the emergency room staff on the television program ER were seen wearing Birkenstocks. Photographs of models in fashion magazine ads also frequently paired high-fashion clothing with a pair of Birkenstock sandals. By 1995 annual sales had leapt to $55 million, and in 1997 they reached a record $82 million. Margot Fraser still heads the company, but has initiated a plan by which employees will take over ownership.

STRATEGY

Founder Margot Fraser has always followed a simple but incredibly successful strategy. She believes that her product contributes to health and comfort; if her company continues to produce a quality product, people will continue to buy it. Birkenstock does very little advertising, and considers its customers its best salespeople. As she told Entrepreneur magazine in 1995, "All we have to do is stay in business and perform."

While Birkenstock continues to produce the sandals that made it prosper in the early 1970s, it has expanded its product line in the 1990s to reach a new generation of customers, still insisting that every product meet a high standard of quality and be orthopedically sound. Fraser also is noted for encouraging employee participation in business decisions of all kinds. She herself had no business training, and believes that a company that treats its employees with respect will encourage creativity and be successful.

CURRENT TRENDS

As Birkenstock celebrated its thirtieth anniversary in 1996, it also went off in several new directions. The company had to face competition from athletic shoes, sport sandals (such as "Teva" sandals), and cheaper imitations of its own products. Several hundred new customers were approved as Birkenstock retail outlets, bringing the national total to 3,500 by 1998. And Birkenstock itself went into the retail business for the first time, although in a limited fashion. It opened two company-owned retail stores (in San Francisco and Berkeley, California) and two mall outlet stores (in Gilroy, California, and Orlando, Florida).

Birkenstock also sought to reach new customers in addition to its loyal existing customers. New lines of more trendy Birkenstocks, featuring brighter colors and using synthetic materials, were introduced. But, along with its new and often younger customers, the company still understood the importance of loyalty to its original customers from the "hippie" days. As Margot Fraser told Entrepreneur, "Quality of life is back in. Baby boomers are aging and noticing foot problems, and that alone may be enough to give us a 20-year growth curve."

PRODUCTS

As of 1998 Birkenstock sold 300 styles and colors of shoes and sandals, for both adults and children. In addition to offering its traditional leather sandals (such as the ever-popular "Arizona"), Birkenstock was reaching out to the new generation of customers who grew up during the athletic shoe craze, as well as aging Baby Boomers who wanted more comfortable footwear once again. New product lines include the "Betula" collection, colorful sandals and clogs with lug soles; the "Footprints" collection of walking and trekking shoes; "Tatami" wedge shoes and sport sandals; and an expanded line of "Birkikids" sandals and clogs for children. Even though many of the new models come in fashionable colors and use synthetic materials instead of leather, all of them retain Birkenstock's orthopedic design.

In the late 1990s Birkenstock also began to market a line of professional footwear designed for clinical, medical, and food-service workers. These shoes are water-and grease-resistant, and can be bought in fashionable colors. The "ESD" shoe is another unique professional product—a shoe for computer technicians that prevents the buildup of static electricity.

CORPORATE CITIZENSHIP

Birkenstock is frequently listed as one of the most socially and environmentally responsible companies in the United States. It donates a portion of its annual profits to more than 100 community organizations, particularly those near its Marin County headquarters (such as the Marin Conservation League and the Marin Agricultural Trust). It also has donated generously to national organizations, such as Canine Companions for Independence, which trains assistance dogs for physically challenged people. Since 1991 Birkenstock has had a corporate "Green Team" that educates employees about environmental activities and practices in the workplace, and the company is committed to being environmentally responsible. Its home page describes this overall environmental policy: "At Birkenstock, if we had a choice, we'd leave nothing behind but our footprints."

GLOBAL PRESENCE

Birkenstock Footprint Sandals, Inc. limits its business operations to the United States, in which it is the exclusive importer and distributor of Birkenstock footwear. The shoes and sandals are made in Germany by the company founded over 200 years ago by J.A. Birkenstock. The two operations are totally independent; the German company owns no share of the U.S. operation, and vice versa.

CHRONOLOGY: Key Dates for Birkenstock Footprint Sandals, Inc.

1897:: Konrad Birkenstock develops the first shoe with a contoured insole
1902:: Birkenstock develops the first flexible arch supports
1925:: Birkenstock's arch supports are being exported all over Europe
1932:: Leading medical specialists support the Birkenstock system in international training seminars
1964:: Karl Birkenstock uses his father's arch support as the basis for a shoe and creates the Birkenstock sandal
1966:: Margot Fraser begins importing Birkenstocks into the United States
1970:: The most recognized Birkenstock, the Arizona, is introduced
1971:: Fraser incorporates her company as Birkenstock Footprint Sandals, Inc. and becomes the sole American distributor
1989:: Fraser joins with the German designers to expand the product line
1997:: Birkenstock USA is entered into the Footwear News Hall of Fame

EMPLOYMENT

Although it employs only about 200 people, Birkenstock has received numerous awards based on its innovative employee practices. Internal communication is highly emphasized and openly appreciated. As each fiscal year begins, all employees meet to discuss Birkenstock's future direction. It is not unusual for a clerical employee to rise to high levels; for example, Mary Jones (Vice President and Human Resources Manager) began as a part-time bookkeeper in the company's early years. When a company bonus is distributed, all employees, including executives, receive the same amount. Executives do not receive additional benefits such as company automobiles. Birkenstock's appreciation for its employees has been returned; even during the company's lean years between 1985 and 1990, only one manager left.

Margot Fraser, in her late 60s in 1998, started a transition plan for the time when she no longer heads the company. To assure that the company she founded continues in its present direction, she has instituted a plan through which the employees of Birkenstock will eventually buy the company. In fact, in the late 1990s employees already owned 40 percent of the company.