For a pair of German cork sandals, the private equity fund of the LVMH Group spent 4 billion euros.
Editor’s note: This article is from the micro-channel public number “Lazy Bear Sports” (ID: lanxiongsports), Author: Xu Tao.
On February 26, L Catterton, a private equity fund under the LVMH Group, announced that Financière Agache, the family investment company of LVMH Group Chairman Bernard Arnault, has acquired the German footwear brand Birkenstock. The majority stake, the latter is known for its cork-soled sandals. The three parties did not announce the transaction amount, but the two brothers Christian Birkenstock and Alex Birkenstock of the Birkenstock family will retain a minority stake.
L Catterton Fund is the world’s largest consumer investment institution. Its portfolio includes fashion brands such as Pepe Jeans, Seafolly, Gianni, and Everlane. In January 2016, LVMH Group, Bernard Arnault (the chairman of LVMH Group)’s family holding company Groupe Arnault and private equity fund Catterton established a joint venture company to merge part of the private equity business of the three companies into the new L Catterton company. L Catterton Fund invests through its six fund platforms. Among them, L Catterton Aisa Fund has invested in GXG parent company Mulsanne Group, chain fitness Welsh, and skin care brand Marumi in China.
▲ Reichert, one of the co-CEOs of Birkenstock.
Birkenstock is a family business with a history of 246 years. Its brand history can be traced back to 1774 in the German shoemaker Johann Adam Birkenstock (Johann Adam Birkenstock). But it wasn’t until 1963 that family member Karl Birkenstock launched the Madrid series of sandals that are familiar to consumers today, and they have already used cork latex footbeds. Karl Birkenstock is the father of the aforementioned Christian Birkenstock and Alex Birkenstock, and his other son StephenStephan Birkenstock has left the family business.
Birkenstock focuses on the health function of the cork latex footbed, which can help orthopedics while gradually adapting to consumers’ feet. As consumers wear longer, the cork-latex footbed of Birkenstocks will gradually fit the shape of the wearer’s foot. This process may take several weeks. It is also closely related to hippie culture and sports trends. In the 1960s, Birkenstock’s American distributors abandoned the difficult-to-enter American shoe stores and moved to stores selling healthy foods, which instead made Birkenstock a favorite of hippies. It is also a daily wear for many surfing, skating and other sports enthusiasts.
Rebecca Mead, author of “The New Yorker” magazine, believes that Birkenstock’s Madrid shoes are more like exercise sandals: if consumers don’t often use their toes to grab the “toe groove” “, you will feel that slippers will slip off. In this process, consumers can also exercise their calf muscles.
▲Product demonstration at the Birkenstock Tmall flagship store.
The sale of Birkenstock’s equity is also the first time in the history of the brand that the brand has been sold to a private equity fund. The British “Financial Times” quoted Xinyuan as reporting that the transaction price for the majority stake of Birkenstock to be sold to new shareholders was 4 billion euros, but Birkenstock refused to respond to this.
Birkenstock has wanted to sell most of the company’s shares for many months. In January this year, the British “Financial Times” quoted sources as saying that Birkenstock had spent several months working with Goldman Sachs to find investors. The negotiating object at the time, the established European private equity fund CVC Capital Partners, gave a valuation of 40%. Billion euros. Xinyuan said that Permira and another private equity fund are also interested in this sandal brand.
According to the press release, Birkenstock will use new shareholders to seek a new round of growth, including: promoting the growth of new markets such as China and India; investing in local production capacity, logistics, sales, etc. in Germany to meet the needs of Europe and the United States. Demand; the last is to strengthen its e-commerce andThe development of direct business.
L Catterton’s investment portfolio may be one of the reasons that attracts Birkenstock. “In L Catterton and Financière Agache, we have found not only new shareholders, but also partners who seek global growth goals.” Oliver Reichert, who took over the position of co-CEO of Birkenstock in 2013 Said, “They have a lot of know-how and good channels for entering the international market.”
With the help of capital to expand, this is the latest change of Birkenstock in recent years. Birkenstock’s company is a fairly old German family company. Its products are mainly produced in German factories. This company does not have bank loans, does not authorize distribution, and does not pay for KOL to take product advertisement pictures, etc.
The changes started in 2013. This year, Oliver Reichert and Markus Bensberg (Markus Bensberg) stationed in Birkenstock as co-CEOs, becoming the first batch of externally hired executives of the family business. Prior to this, Birkenstock was affected by internal power struggles between Karl Birkenstock’s three sons. Reichert used to be the managing director of the former German sports station (DSF, now part of the German sports station Sport1). In 2009, he was invited by Stephen Birkenstock to become an advisor to the founding family of Birkenstock and was subsequently promoted to co-CEO. Members of the Birkenstock family are no longer involved in the company’s specific operations.
▲The retail store Birkenstock Box tried by Birkenstock, photo source: Birkenstock
Under the leadership of the two new heads, Birkenstock has gradually got rid of the framework of a family business, while opening up new markets, launching new products, and cooperating more frequently with external fashion brands. It seems that it has become more fashionable. In 2017, Birkenstock entered Paris Fashion Week for the first time. It has also expanded into new products such as backpacks, mattresses, and cosmetics. The co-branded partners include fashion designer Rick Owens and luxury.Brands Fendi, Valentino, etc. The American fashion magazine Women’s Wear Daily (WWD) stated that Reichert created a new era in Birkenstock in 2013.
But in terms of cooperation, Birkenstock seems to have a stronger voice: it has refused the invitation to cooperate with fashion brands Supreme and Vetements. According to Reichert, Birkenstock wants to maintain the vitality of the brand while retaining the core of the brand’s health function. He also said in an interview with Women’s Wear Daily: “We don’t want to turn Birkenstock into a fashion brand, but we also don’t want to become a traditional Birkenstock consumer, a museum for old hippies. “
However, in the trend of fashion brands gradually approaching the streets, the co-branding of fashion brands and the Birkenstocks exposed in star street photography have all promoted Birkenstock’s influence and product sales in the past few years. In 2017, Oliver Reichert told The Japan Times that the sales of the company’s sandals increased from 10 million pairs to 25 million pairs during his tenure.
In 2020, in the 2020 annual report released by the global fashion search engine Lyst, Birkenstock’s best-selling sandals Arizona ranks among the top 10 products consumers want to buy. The Lyst platform has also received investment from the LVMH Group.
The new crown epidemic has pushed consumers to stay home longer, and the sales of products that can meet consumers’ needs for comfort and safety have also increased significantly. A Birkenstock spokesperson said that within the year ending September 2020, even with the closure of factories due to the impact of the epidemic, revenue is close to the results of 2019. Birkenstock’s 2019 revenue was 721.5 million euros and net profit was 129 million euros, an increase of 40% year-on-year. The company sold 24 million pairs of cork sandals.
From the public performance data, Birkenstock is a very well-functioning company. This means that, in addition to seeking capital to obtain resources for expansion, Birkenstock may also be given a higher valuation by L Catterton Fund and Financière Agache.