How LVMH turned a boring brand into a luxury brand

Discover how LVMH transformed Birkenstock, once seen as a comfortable but unfashionable brand, into a sought-after luxury product. This article takes an in-depth look at Birkenstock’s history, brand transformation strategy, and how it achieved double-digit growth worldwide, surpassing €1 billion in revenue.

Ugly and comfortable, once the opposite of high fashion, are now symbols of avant-garde.

“How did LVMH turn a boring brand into a luxury brand?”

This is a question about Birkenstock on the social media Reddit. Someone in the comment section questioned whether the term "luxury" was accurate, so the questioner changed "luxury" to "popular".

Birkenstock has undoubtedly been popular over the past three years. Last year, Birkenstock achieved "double-digit growth in all channels, regions and categories", with revenue exceeding 1 billion euros, and nearly half of its sales coming from young people. It even successfully raised prices slightly and launched foot care products. In China, "Birkenstock" has even become a category of shoe types, and e-commerce platforms can be seen everywhere with products ranging from tens to hundreds of yuan. Apart from the similar appearance, they have nothing to do with the brand itself.

But Birkenstock can generally be considered luxury. Its gross profit margin of nearly 60% is almost the same as Dior and Louis Vuitton. The brand has little exposure, but there are many high-priced limited-edition co-branded products. Most products are between 1,000 yuan and 2,000 yuan, and they are never discounted. The more expensive series 1744 is directly sold for more than 5,000 yuan.

L Catterton, the private equity fund that acquired Birkenstock's equity, belongs to LVMH, so some people sigh that Bernard Arnault's vision is as sharp as ever. After the founder's family withdrew, the family business successfully transformed after another hundred years. LVMH also seemed to be giving everyone a business class, the topic of which was, "How to build a luxury brand from scratch."

1. Comfortable and Ugly

The history of luxury brands is always somewhat similar, but Birkenstock does have all the qualities it should have: it has a long history, is handmade, and comes from Europe.

Birkenstock's history can be traced back to 1774, when it was founded by Johann Adam Birkenstock, a shoemaker in Langen-Bergheim, Germany. From the beginning, it targeted wealthy people who came to Germany for spa vacations. The iconic soft oak insole is said to be inspired by footprints on the beach. Each shoe size has nine different shoe shapes, which can be worn comfortably on different terrains.

The Birkenstock family has never sold Birkenstock as a pair of "fashion items", it is more like a tool for arch repair. Although the pace of global distribution is slow, Birkenstock has not been cheap since the 1990s. The price of $100 per pair is not common even in the most affluent and consumerist areas of the United States. Therefore, the association of "Birkenstock is exclusive to the rich, or at least the middle class" has a history of at least half a century.

A Birkenstock shoe factory in Germany Photo: Juergen Teller

But to be honest, a large part of Birkenstock's resurgence can be attributed to the rise of comfortable style during the epidemic. CEO Oliver Reichert said, "Everyone is at home, and people don't care about their desks, office chairs or jogging pants, but they care about what they wear under their feet. Birkenstock has become part of self-transformation, and the pandemic has casualized work wear, which is also reflected in fashion."

Oliver Reichert knew nothing about shoemaking. He had been working for the German sports channel in Munich before becoming the chairman of a radio and television company. He was "a real businessman". In 2012, the Birkenstock family, tired of internal strife, finally agreed to hand over the leadership. Oliver Reichert, who was just a consultant, believed that this pair of shoes could be a global hit (the number of shoes sold in a year was only one-third of what it is now). Perhaps it was this optimism that was not very German that got him the job.

Everything that happened later seemed more like coincidence.

In 2012, designer Phoebe Philo put a pair of plush mink-lined Birkenstocks on the CELINE runway, which shocked the world. "Suddenly everyone wanted a pair of Arizonas." Before that, the shoes that were recognized by the fashion world were pointed high heels like Jimmy Choo. Remember? "If you want to be beautiful, you can't be comfortable."

In the 1960s, American women across the ocean wore "brutalist" leather sandals as a protest against mainstream values. Now their granddaughters have noticed Birkenstock again, and they have never thought that "wearing comfortably in public" is rebellious enough in itself.

High fashion designs are also becoming more and more "ugly", with Balenciaga's giant rubber shoes, Schiaparelli's human lung dress, and Comme des Garcons' models wearing huge bows and stomping their feet in the middle of the show. Designer Rei Kawakubo said, "This series is about my current mentality. I am angry at everything in the world, especially at myself."

Ugly and comfortable, once the opposite of high fashion, are now symbols of avant-garde.

Today, 70% of Birkenstock's consumers are women. In its prospectus, Birkenstock considers "modern feminist breakthroughs" as one of its business drivers. In the movie "Barbie", Kate McKinnon holds a pair of high heels in one hand and a Birkenstock in the other, which is the best advertisement: Do you want to fight against the "male-dominated" society represented by high heels? Choose this ugly pair!

In the past three months, 90% of Birkenstock's growth came from existing stores, and the chief financial officer said in a conference call that buyers have transitioned from "sports and quality life enthusiasts" to a wider range of younger consumers and some consumers with investment intentions, who call Birkenstock a "wodrobe completer" (wardrobe necessity).

2. Learn from luxury goods

Birkenstock was initially sold only in health food stores in California, the reason being that it was too ugly and fashionable ladies who went to department stores to buy high heels would not even look at it. The German businesswoman who was responsible for introducing Birkenstock to the United States at the time changed the "basic Birkenstock sandal" to the simple, easy-to-remember, European-style Madrid, which attracted the first wave of female customers.

Today, the United States remains Birkenstock's largest market.

Apart from this, the Birkenstock family did not make much effort. They had little interest in opening stores (the first direct-operated store in France was not opened until this year!) Contact with distributors was simple but direct. Until 2013, when distributors were out of stock, they just made a phone call to the German headquarters and the shoes would be delivered - it was that easy.

A shoemaking machine sprays water on the soles of shoes. Photo: Juergen Teller

You can't do this if you want to become a global company. The LV boss must have taught you a lot of secrets in this regard.

Birkenstock does not usually ship to distributors’ requests. According to a research report by Evercore, they usually only meet 75% of the number of products that distributors want to order. They also distribute products according to the distributors’ geographic location and demographic structure, which Oliver Reichert described as “strategic distribution.”

Because of its scarcity and accuracy, Birkenstock is rarely discounted on distribution shelves, with 90% of its products sold at full price, and the figure is 95% in the United States.

David Kahan, president of the Americas, said on a conference call in September that scarcity patterns drive consumers to “rush to buy.” “No one is going to compare prices when they buy a product and ask, can I get it cheaper somewhere else?” he said.

At present, Birkenstock's distribution strategy seems to be successful. "All our channels have achieved basically the same EPITDA profit." At present, Birkenstock is still mainly distributed globally. According to the official website, there are only 66 directly-operated independent stores in the world, most of which are in Europe, with 38 stores. India has the largest number of stores in Asia, followed by Japan.

It is worth mentioning that although Birkenstock entered China through Tmall in 2017, its first store was not opened until 2024 in Chengdu Taikoo Li. 36Kr revealed that the brand's expansion in the Chinese market in the future will aim to "find a trustworthy partner."

Birkenstock's gross profit margin is close to 60%, which is already at the level of Dior and Louis Vuitton. This figure fell by 2.2% in the third quarter, which was considered to be due to excessive expansion of distribution, causing the company's stock price to fluctuate. Oliver Reichert calmed the impetuous investors by saying that it is not important how to execute the distribution channel, but to make money on each pair of shoes. "It seems that everything is going well for us at the moment."

A pair of EVA Arizona shoes, one of the company's lower-priced shoes. Photo: Juergen Teller

He is confident enough. Although the company's best-selling products are still the three classic open-toe slippers, the growth rate of closed-toe shoes (referring to half-closed slippers) has also reached 30%. 60% of consumers of the new sports shoes Bend Low are members, and the growth rate of high-priced shoes is twice that of low-priced shoes.

Birkenstock has also begun to gain a foothold in sports shoe stores such as Footlocker. During the Paris Olympics, they launched closed-toe slippers with removable insoles for athletes to relieve their muscles after exercise. In addition, they are also laying out their products in some high-end golf specialty stores, such as Greengrass Golf Shop. Golf shoes are not conducive to standing and walking for a long time, and Birkenstock's shoes (or insoles) can make up for this defect.

In order to cope with the rapidly growing business, Birkenstock opened a new factory in Germany this year. Most of the new products are still handmade - which used to be the only criterion for measuring luxury.

European luxury groups have grown rapidly thanks to the Asian middle class, and they are also happy to start machine production lines in an Asian country. In the future, will Birkenstock be "Made in the USA" or "Made in China"? Oliver Reichert denied this possibility, but his supply chain director Sean Harris, a German-American, is more practical. He believes that as long as it is managed properly, nothing is impossible.

Author | He Zhexin Editor | Qiao Qian