On Saturday May 5, more than 30,000 Berkshire Hathaway shareholders are expected to file into the CenturyLink Center in downtown Omaha to soak in wisdom from its legendary CEO, Warren Buffett, and wander through an exhibit hall showcasing dozens of Berkshire’s portfolio companies. They can taste See’s Candy, try on Justin Brands cowboy boots, see a model railroad from BNSF Railway, and, when it’s time to hear the Oracle speak, make a mad dash for the arena in a pair of Brooks running shoes customized with the BRK ticker on the tongue and a cartoon of a running Warren Buffet on the insole.
The shareholders meeting this weekend is a coming out party of sorts for the Bothell, Wash. maker of performance running shoes. Technically, Brooks Sports joined the Berkshire Hathaway family in 2006 when its then parent company, Russell Athletic, was acquired by the Omaha-based holding company.
Early this year, however, Berkshire Hathaway announced that it would spin out Brooks as an independent company. “Now I report directly to Warren Buffett,” says Brooks CEO Jim Weber.
The promotion is well-deserved. In 2011 Brooks saw its revenue surge 34% to around $300 million. What’s more, that growth is not a result of any single product or a big marketing push, but a gradual reinvention of the company itself. “We’ve been quietly building a strategy and growing our brand,” says Weber, who after working in consumer products and sporting goods, joined the Brooks’ board in 1999 and took over as CEO in 2001.
A decade ago, Brooks was a $60 million company that derived much of its revenue from the baseball cleats, basketball shoes and mass-produced running shoes it sold at chain stores, such as Fred Meyer and Shoe Pavilion. Though the company traces its roots to 1914, its ownership and focus had changed so many times that management was struggling to find its footing. “The financial problems were severe,” adds Weber. “We needed a new strategy.”
Weber’s vision was to focus exclusively on performance running shoes. The company scrapped everything else and turned its attention to becoming an expert in the biomechanics of running and winning the trust of independent running stores, which are “the editors of the best product in the industry,” says Weber. This was a novel approach, given that companies usually start with a niche product and eventually expand into other areas or roll out goods at lower price points. Brooks did the opposite, swapping out its $29.99 shoes for specialized running shoes that retail for $85 to $140.
Today Brooks, which employs about 380 worldwide, is the top-selling brand in independent running stores, winner of numerous footwear awards and, as Warren Buffett himself wrote in his annual shareholders letter, “gobbling up market share.” Well, gobbling might be a stretch. At the moment the company has just a sliver – about 3% market share – of the $9 billion global running footwear category.
Yet, Weber believes the company is well positioned to grow its share substantially and reach $1 billion in sales by 2020 by continuing to win over avid runners – who go through two to three pairs of shoes a year. Meanwhile, the company continues to make strides internationally. Brooks sells its shoes in 60 countries and derives about 40% of its sales outside of the United States. This year, will make its debut in Japan, the world’s second largest running market.
Despite the rapid growth, Brooks is staying true to its running culture. Its offsite meetings are often planned around group runs, and its current headquarters just outside Seattle back up to a trail. In 2014 Brooks will move into a new headquarters overlooking Lake Union, a hub of running in Seattle.
For the shareholder meeting this weekend, Brooks made 4,000 of its custom Berkshire shoes – which are based on the best-selling Adrenaline GTS 12 model and retail for $110. Buffet doesn’t purport to be an avid runner, but Weber hasn’t given up plans to convert him. “I’ve encouraged him to come join one of our Friday runs,” says Weber. “I even promised him a Cherry Coke at the end.”