WEBVTT - Brooks Running CEO on Running to Success 0:00:00.080 --> 0:00:03.640 You're listening to Bloomberg Business Week with Carol Messer and 0:00:03.720 --> 0:00:08.039 Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, our 0:00:08.039 --> 0:00:09.840 next guest is headed up Brooks running from more the 0:00:09.880 --> 0:00:12.680 twenty years Brooks, of course, being a century old Seattle 0:00:12.720 --> 0:00:15.240 based company that makes a shoe with a guest running gear. 0:00:15.560 --> 0:00:17.439 If you go back some twenty years ago, this was 0:00:17.480 --> 0:00:20.400 a company tinkering with bankruptcy and got one more thing 0:00:20.480 --> 0:00:23.479 for you. It is a subsidiary standalone company of Warren 0:00:23.520 --> 0:00:26.079 Buffett's Berkshire Hathaway. The journey is all in a book 0:00:26.120 --> 0:00:29.440 by Brooks running CEO Jim Webber, his book Running with Purpose, 0:00:29.520 --> 0:00:33.080 How Brooks outpaced Goliath competitors to leave the pack. Jim 0:00:33.200 --> 0:00:35.680 joining us via zoom from Seattle. Jim, it is so 0:00:35.760 --> 0:00:38.800 nice to have you here with Tim and myself on Bloomberg. 0:00:38.880 --> 0:00:41.880 How are you and how are things going? Well? I'm 0:00:41.880 --> 0:00:44.080 excited to be with you today, Thanks Carol and Tim, 0:00:44.120 --> 0:00:47.560 and things are things are good? Right? It's volatile. There's 0:00:47.600 --> 0:00:49.760 so much disruption, as we all know in the business 0:00:49.800 --> 0:00:53.360 world over the last two years especially, but all through 0:00:53.360 --> 0:00:56.400 it people are running and they're buying gear and they're 0:00:56.400 --> 0:00:59.800 getting outside. And so we feel fortunate because running made 0:00:59.800 --> 0:01:03.320 the hut in this crazy COVID disruptive world that we've 0:01:03.320 --> 0:01:06.119 been in. And uh, we've had a record year last year, 0:01:06.120 --> 0:01:08.200 and I think we're gonna have another record here this year. Wow, 0:01:08.200 --> 0:01:09.920 because that's what I wanted to ask you, Jim. I mean, 0:01:10.080 --> 0:01:14.840 we're passing through big earnings, Google, Microsoft, Visa, GM today, 0:01:15.040 --> 0:01:18.600 so many Uh, and you are someone who understand right 0:01:18.640 --> 0:01:20.679 when you came to the company, it was in turmoil. 0:01:20.880 --> 0:01:24.720 You understand pressure, you understand stress, you understand volatility. So 0:01:24.760 --> 0:01:28.280 how would you kind of place today's challenging environments. You're 0:01:28.319 --> 0:01:30.319 doing really well, but when you take a step back, 0:01:30.640 --> 0:01:33.920 how does the macro environment feel to you? You know, 0:01:34.000 --> 0:01:37.360 I think there's there's more uncertainty in our world, maybe 0:01:37.360 --> 0:01:40.880 than ever before for business people. And you know, there's 0:01:40.920 --> 0:01:43.440 so many things you don't control, and and that's such 0:01:43.440 --> 0:01:45.840 a cliche, but it's just true. So we start with 0:01:46.240 --> 0:01:48.480 the fact that we're going to have things that we 0:01:48.560 --> 0:01:51.960 have to navigate that we don't control. And so I 0:01:51.960 --> 0:01:54.920 think the key for us has been customer focused. And 0:01:54.920 --> 0:01:57.160 I'll give you one example, Carroll, you know, and in 0:01:57.440 --> 0:02:00.640 when in March the pandemic hit. All the lights went 0:02:00.680 --> 0:02:03.800 off all retail clothes. We had no radar for demand, 0:02:03.880 --> 0:02:06.560 what was going to happen. And because we were customer 0:02:06.600 --> 0:02:09.160 focused on the Runner, once we saw them starting to 0:02:09.240 --> 0:02:12.000 run and buy gear, we we sort of you know, 0:02:12.120 --> 0:02:14.560 hit the gas pedal again. So so I think the 0:02:14.680 --> 0:02:17.760 key for us to navigate all these crazy times is 0:02:17.760 --> 0:02:20.720 our customer focused on the Runner and its advantage. I 0:02:20.760 --> 0:02:23.400 think we have because it's it's it's all we do. 0:02:23.919 --> 0:02:29.040 Jim back in, it feels like years ago at this point, Uh, 0:02:29.320 --> 0:02:32.440 you moved or shed much of your presence in China 0:02:32.480 --> 0:02:35.799 this according to Reuters, and instead moved a lot of 0:02:35.840 --> 0:02:38.560 the shoe production to Vietnam. I think that for a 0:02:38.600 --> 0:02:41.079 lot of people, that looks really prescient doing that before 0:02:41.120 --> 0:02:44.440 COVID even hit. But I'm wondering if that actually managed 0:02:44.480 --> 0:02:47.040 to help you over the last two years. Because it's 0:02:47.040 --> 0:02:50.040 not just China where supply chains are are snarled. This 0:02:50.120 --> 0:02:53.280 is a worldwide issue. There's no question about it. Tim, 0:02:53.320 --> 0:02:55.400 and and you know the truth of the matter is 0:02:55.480 --> 0:02:59.040 that last fall being in Vietnam, in the south of 0:02:59.120 --> 0:03:02.600 Vietnam where where many of our key production partners were 0:03:03.200 --> 0:03:05.640 was a tough place to be because for three months, 0:03:06.120 --> 0:03:09.520 almost half of our our production capacity did not make 0:03:09.600 --> 0:03:12.400 one shoe that was in Q three last year, and 0:03:12.480 --> 0:03:15.800 so we're we're short on inventory now, we're not delivering demands. 0:03:15.840 --> 0:03:18.400 So I don't think it matters maybe where you are. 0:03:18.480 --> 0:03:22.560 Of course, the supply chain disruption and transportation and logistics 0:03:22.800 --> 0:03:26.240 has impacted impacted everyone, no matter what your product is. 0:03:26.280 --> 0:03:28.760 So yeah, I think I think it's been super challenging. 0:03:29.160 --> 0:03:32.040 But you know, given our history, we've been through challenging 0:03:32.080 --> 0:03:34.800 times before, and so you know, our team rolled up 0:03:34.840 --> 0:03:37.320 our sleeves and we just have to roll with, you know, 0:03:37.400 --> 0:03:40.320 the changes that have come forth and do our best 0:03:40.360 --> 0:03:42.960 to keep our customers informed, and we communicate with our 0:03:42.960 --> 0:03:45.520 retail partners and runners. You know, we don't have all 0:03:45.520 --> 0:03:48.680 the product that they are demanding today, but you know, 0:03:48.720 --> 0:03:51.360 we're doing our best to help them understand why. I 0:03:51.400 --> 0:03:54.240 would say though in the last several months, things have 0:03:54.320 --> 0:03:57.920 stabilized for us, you know, in our industry, and that 0:03:57.960 --> 0:04:00.640 you know, we've been pretty much running at full capacity 0:04:00.680 --> 0:04:03.680 now for over four months, so we're no more normal mode, 0:04:04.520 --> 0:04:07.040 if there's such a thing as normal in this supply chain. Well, 0:04:07.120 --> 0:04:09.200 you know we're going with we're going with smaller boats 0:04:09.200 --> 0:04:13.880 to smaller ports. Um air air freight isn't even affordable anymore. 0:04:13.960 --> 0:04:16.320 So we've just tried to navigate around, you know, the 0:04:16.360 --> 0:04:19.200 constraints that that are out there in the supply chain 0:04:19.320 --> 0:04:21.080 right now that we all have to deal with and 0:04:21.240 --> 0:04:23.919 costs your up. But you know we're because you know, 0:04:23.960 --> 0:04:26.480 again we're focused on the customers. So we just we're 0:04:26.480 --> 0:04:28.400 trying to do our best to navigate through that and 0:04:28.440 --> 0:04:31.080 supply demand well. And in terms of pricing, what kind 0:04:31.080 --> 0:04:33.880 of pricing pressure leverage do you have with consumers right now? 0:04:34.120 --> 0:04:35.839 And just got about forty seconds and then we're gonna 0:04:35.839 --> 0:04:37.440 come back, and I promise we're gonna talk in Yeah, 0:04:37.680 --> 0:04:39.640 I would say, we don't feel like we have a lot. 0:04:40.120 --> 0:04:43.279 We've raised prices where we could modestly, I would say, 0:04:43.520 --> 0:04:45.520 And we don't raise prices every year. So this is 0:04:45.560 --> 0:04:47.599 the first price increases that I think we've made on 0:04:47.640 --> 0:04:50.479 our key shoes. The adrenaline goes in probably three or 0:04:50.520 --> 0:04:54.360 four years, so so we have raised selectively some prices up. 0:04:54.680 --> 0:04:56.520 But you know, we don't think the consumer can bear 0:04:56.760 --> 0:04:59.599 bear everything, so we've got to navigate that all right, 0:04:59.640 --> 0:05:01.160 sit it for a second. We're gonna come back to 0:05:01.200 --> 0:05:03.359 Jim and we are going to talk more with Brooks 0:05:03.400 --> 0:05:06.279 Running CEO Jim Webber. He has a new book out, 0:05:06.560 --> 0:05:09.000 UH and as we mentioned, the forward is by Warren Buffett, 0:05:09.279 --> 0:05:12.160 Running with Purpose. How Brooks out pace goliathe competitors to 0:05:12.240 --> 0:05:13.760 lead the pack? And I do think this is just 0:05:13.760 --> 0:05:16.159 such a great point, especially where we live in an 0:05:16.200 --> 0:05:19.440 economy where upstarts and smaller companies can really disrupt, like 0:05:19.480 --> 0:05:21.320 what Ellen Musk did with the auto industry. Yeah. I 0:05:21.360 --> 0:05:23.520 really want to talk about innovation when we return, and 0:05:23.560 --> 0:05:26.000 really what consumers want in this day and age. We 0:05:26.080 --> 0:05:30.279 have competitors making shoes from recycled materials, more earth friendly focus, 0:05:30.360 --> 0:05:32.240 and I'm wondering how we've seen that at Brooks and 0:05:32.279 --> 0:05:34.480 what's it like when the Musk want elon must give me. 0:05:34.520 --> 0:05:37.960 Warren Buffett says he wants to buy your company. You say, okay, 0:05:38.000 --> 0:05:40.080 maybe come on in. I want to get back to 0:05:40.160 --> 0:05:42.720 Jim Webber, CEO Brooks Running. He's still with a sun 0:05:42.800 --> 0:05:45.839 zoom from Seattle. His new book, UH that is out 0:05:46.000 --> 0:05:48.880 is Running with Purpose. How Brooks out pace goliathe competitors 0:05:48.880 --> 0:05:51.240 to lead the pack. Jim, thanks for staying with us. 0:05:51.440 --> 0:05:55.200 UM talk to us about like, what's the first your 0:05:55.240 --> 0:05:58.600 first exposure or interaction with Warren Buffett when he became 0:05:58.640 --> 0:06:02.400 interested in the company. Well, it goes back for me. 0:06:02.520 --> 0:06:04.840 I was reading his annual letters when I started in 0:06:04.880 --> 0:06:06.840 the business world in the eighties, so I felt like 0:06:06.880 --> 0:06:09.800 I knew him. But we were owned at the time 0:06:09.839 --> 0:06:12.400 by for the Loom, which was a Virture Hathaway subsidiary, 0:06:12.480 --> 0:06:16.719 and we began to sell shoes at the annual meeting Expo, 0:06:17.240 --> 0:06:19.000 and so I sent him a note saying how much 0:06:19.000 --> 0:06:20.560 fun we had, and we met a lot of shareholders, 0:06:20.600 --> 0:06:22.239 we sold a lot of shoes, and he said, great, 0:06:22.600 --> 0:06:24.640 if you're ever in Omahawk, come by. We'll go have 0:06:24.720 --> 0:06:28.719 a steak. And so I went. I went to lunch 0:06:28.760 --> 0:06:31.599 with Warren. We met for three hours and and I 0:06:31.720 --> 0:06:34.400 knew he was going to like the Brooks story because 0:06:34.400 --> 0:06:37.680 it's we're building a brand very uniquely and distinctively, where 0:06:37.680 --> 0:06:40.320 a challenger brand in a great category, and it's a 0:06:40.360 --> 0:06:42.919 great business and and we've been growing at double digit 0:06:42.960 --> 0:06:46.000 now for literally for twenty years. So I knew he 0:06:46.040 --> 0:06:49.440 would he would be intrigued by the story, and it 0:06:49.520 --> 0:06:51.960 was just a wonderful meeting. And he's a sponge, He's 0:06:52.040 --> 0:06:56.080 just so curious about anything in business. And and that's 0:06:56.080 --> 0:06:58.560 the conversation, the first one that we had about Brooks. 0:06:58.640 --> 0:07:00.560 What about the conversation, sent I mean, how would you 0:07:00.640 --> 0:07:03.200 characterize how much you're in touch with Warren Buffett? I 0:07:03.240 --> 0:07:06.039 mean he even himself in the forward to your book 0:07:06.720 --> 0:07:10.480 rights that Berkshire Hathaway has followed a dramatic hands off 0:07:10.520 --> 0:07:14.040 style in its operations, with only twenty five employees, well 0:07:14.160 --> 0:07:17.080 three sixty employees go about their jobs and the many 0:07:17.160 --> 0:07:19.880 dozens of individual companies like Years, Yeah, so does he 0:07:21.200 --> 0:07:24.280 talk to him? I believe Berkshire must be one of 0:07:24.280 --> 0:07:26.800 the most unique corporate cultures in all the world. I 0:07:27.080 --> 0:07:30.160 cut my teeth at Pillsbury, and in banking and and 0:07:30.160 --> 0:07:33.040 and then in in building brands like Brooks. But Berkshire 0:07:33.160 --> 0:07:36.720 is so unique. They never call in one sense. You know, 0:07:36.800 --> 0:07:40.600 they've described they have a very distinct acquisition strategy and 0:07:40.600 --> 0:07:43.480 investment strategy looking for great businesses, but once they buy 0:07:43.520 --> 0:07:46.640 the business, they don't. They don't require us to morph 0:07:46.640 --> 0:07:49.960 our reporting around their needs. They take all of our 0:07:50.000 --> 0:07:51.560 reporting in the way we want to look at the 0:07:51.600 --> 0:07:53.880 business and we share it with them. So so they 0:07:53.960 --> 0:07:58.040 morph to these hundreds some different businesses. We don't morph 0:07:58.120 --> 0:08:00.600 to them. And so the only why don't we send 0:08:00.640 --> 0:08:03.520 them our quarterly reports and any report, much like any 0:08:03.600 --> 0:08:07.040 any public company would do, and the only required conversation 0:08:07.120 --> 0:08:11.040 is annual camp frankly and uh, and they they empower 0:08:11.120 --> 0:08:13.400 us to run the business. We love that we take 0:08:13.440 --> 0:08:17.400 full responsibility for everything that happens here, good and bad. 0:08:17.960 --> 0:08:20.920 And Uh. You couldn't ask for a better home if 0:08:20.920 --> 0:08:23.080 you want to build a brand in It's wonderful. It's 0:08:23.120 --> 0:08:24.920 like our lesson is we're always told like if you 0:08:24.920 --> 0:08:26.480 don't hear from your bosses, that means you're doing your 0:08:26.520 --> 0:08:29.760 job and that's good. So it's like it's when there's problems, 0:08:29.840 --> 0:08:32.719 that's when they come. They come a knock and they 0:08:32.800 --> 0:08:36.080 expect you to manage it and solve those problems. And 0:08:36.080 --> 0:08:39.199 we know that, so it really works. Great. What did 0:08:39.240 --> 0:08:41.120 you learn in doing this book? Because it sounds like 0:08:41.320 --> 0:08:43.440 you know you obviously when you came to the company 0:08:43.440 --> 0:08:45.600 it was very different. It was, as I mentioned earlier, 0:08:45.640 --> 0:08:47.839 like on the brink of bankruptcy, a lot of different 0:08:47.920 --> 0:08:52.800 heads of companies um tell us about that journey. Yeah. 0:08:52.880 --> 0:08:54.840 I think the reason, one of the reasons I wrote 0:08:54.840 --> 0:08:57.960 the book is Brooks is a is a fantastic challenger 0:08:58.040 --> 0:09:00.679 brand story, and and we're in a great category. It's 0:09:00.679 --> 0:09:04.199 global and running and every big platform brand some of 0:09:04.280 --> 0:09:07.120 the best brands in the world, from athletic footmar and apparel, 0:09:07.320 --> 0:09:11.320 from the outdoor industry, from fitness is doing rhyme gear, shoes, 0:09:11.360 --> 0:09:14.640 head to tell, and and obviously Bras and jackets and 0:09:14.640 --> 0:09:17.960 everything else. So that's where we're competing. But I think 0:09:17.960 --> 0:09:20.160 in the world there are more challenger brands and there 0:09:20.160 --> 0:09:24.200 are leading category platform players, and so I wanted to 0:09:24.240 --> 0:09:26.880 share the story because I think what we're doing is 0:09:27.080 --> 0:09:29.000 has been a lot of fun, and it's we're building 0:09:29.000 --> 0:09:31.679 a great brand and a great company and uh and 0:09:31.720 --> 0:09:35.040 hopefully there's other people that are involved in categories. Maybe 0:09:35.080 --> 0:09:37.120 there are a challenger brand that will get some value 0:09:37.120 --> 0:09:39.960 out of it. But what let the turnaround because you 0:09:40.040 --> 0:09:42.679 are a smaller player and what is a massive you know, 0:09:42.760 --> 0:09:45.040 I just go down the block and there's the huge 0:09:45.160 --> 0:09:48.599 Nike store, Like it can be tough being a smaller 0:09:48.600 --> 0:09:52.040 player in a market that's got some really giant players. 0:09:52.880 --> 0:09:55.320 There's no question about that. In every category is unique. 0:09:55.320 --> 0:09:57.720 But I think the key for us has been an 0:09:57.760 --> 0:10:02.439 absolute obsession on runners mile after mile and and with 0:10:02.520 --> 0:10:06.240 the right people, we can actually build better product than 0:10:06.320 --> 0:10:08.959 the largest companies in our industry. And in many cases 0:10:09.000 --> 0:10:13.040 we do in our sales and and our customer affinity 0:10:13.520 --> 0:10:17.560 reflect that. So we're earning the customer. Um, it's not 0:10:17.679 --> 0:10:20.400 an accident. I say, we've built this billion dollar brand 0:10:20.480 --> 0:10:23.520 of parapet of the time, and it's really true. You know, 0:10:23.600 --> 0:10:27.160 we've gone after the most discerning runners out there that 0:10:27.160 --> 0:10:29.680 that are putting high mileagein and trying to build gear 0:10:29.800 --> 0:10:32.679 that mile after mile, they know they're going to buy 0:10:32.720 --> 0:10:35.200 that shoe again. How do you really challenged ourselves to 0:10:35.200 --> 0:10:37.559 to earn their second pair of purchase? Jim? How do 0:10:37.600 --> 0:10:40.359 you continue to grow though with such a sharp focus. 0:10:40.520 --> 0:10:43.120 How do you make sure that you're still expanding, that 0:10:43.160 --> 0:10:46.400 you're creating new products that appeal to a larger number 0:10:46.400 --> 0:10:49.760 of people that goes beyond that core serious runner. Well, 0:10:49.840 --> 0:10:52.760 here's the key is that the running category is huge. 0:10:52.760 --> 0:10:56.320 A hundred and fifty million people run worldwide on a 0:10:56.320 --> 0:11:00.559 regular basis to compete or to invest in themselves and um, 0:11:00.600 --> 0:11:03.120 and then of course it's much broader than that walking 0:11:03.440 --> 0:11:07.600 and and just hiking and trail running. They're all wearing shoes, right, 0:11:07.640 --> 0:11:10.760 So it is a huge category. And so we're trying 0:11:10.760 --> 0:11:13.679 to build a very unique, focused brand with with within 0:11:13.760 --> 0:11:17.760 this monster category. And you know, we've got we've got 0:11:17.800 --> 0:11:20.760 growth runway for the next decade. We believe that our 0:11:21.000 --> 0:11:24.400 niche in this category in the next two years could 0:11:24.440 --> 0:11:27.000 be a four billion dollar brand. So we've got plenty 0:11:27.000 --> 0:11:29.679 of opportunity. What's been the most difficult time though at 0:11:29.679 --> 0:11:31.840 the company was at first coming in and just dealing 0:11:31.840 --> 0:11:33.920 with kind of a really messy environment, or going through 0:11:33.920 --> 0:11:36.600 the Great Recession, or even going through the pandemic. What 0:11:36.679 --> 0:11:39.280 was the trickiest time? You know? And I share a 0:11:39.280 --> 0:11:41.280 lot of the stories and things that we've had to 0:11:41.360 --> 0:11:43.839 navigate over twenty years. The hardest one for me, I 0:11:43.880 --> 0:11:47.120 would say, is when the customers shifted. Um. We see 0:11:47.240 --> 0:11:51.720 there was a big newspaper article in May of sixteen 0:11:51.800 --> 0:11:54.600 of how millennials killed the running boom, and the key 0:11:54.679 --> 0:12:01.040 is millennials. Millennials right, theory a project to be They 0:12:01.040 --> 0:12:02.839 were still active, but they were doing a lot of 0:12:02.880 --> 0:12:05.760 different things. So we had to resolve for that and 0:12:05.840 --> 0:12:08.800 recommit to some things that we believed were there. We 0:12:08.800 --> 0:12:11.679 we planted a flag that performance was timeless and that 0:12:11.800 --> 0:12:14.920 some people are always gonna want the best gear, and gosh, 0:12:14.960 --> 0:12:18.559 that's you know, we've doubled our business since and so 0:12:18.679 --> 0:12:21.559 that that in that focus has paid off for us. 0:12:21.559 --> 0:12:25.120 But the customer decided it and uh, fortunately, I think 0:12:25.120 --> 0:12:27.760 we've been able to create create gear that's just resonating 0:12:27.760 --> 0:12:31.240 with the runner. Jim, you've been CEO since two thousand one. 0:12:31.720 --> 0:12:33.960 What's next for you? I mean, how long do you 0:12:34.000 --> 0:12:36.760 stay at Brooks? You know. One of the things that 0:12:36.840 --> 0:12:39.600 happened to me, Brooks was the fourth business I ran. 0:12:39.679 --> 0:12:42.599 I came out of consumer products and sporting goods. I 0:12:42.640 --> 0:12:44.640 became a sporting goods person. But what by the time 0:12:44.679 --> 0:12:46.920 I got to Brooks, I really wanted to build a 0:12:46.960 --> 0:12:49.560 brand and you had to do that over the long term. 0:12:49.600 --> 0:12:52.800 You can't really build you can't create fabulous value in 0:12:52.840 --> 0:12:56.000 three years. And so when I came in, I committed 0:12:56.000 --> 0:12:58.000 to build it, you know, be part of a team 0:12:58.000 --> 0:13:00.360 that was going to build a brand. And I still 0:13:00.440 --> 0:13:02.040 have it. I think, I really think I have the 0:13:02.080 --> 0:13:04.559 best job in the business. World. It's just fun and 0:13:04.640 --> 0:13:08.520 we like our jobs to well. Come back anytime, really 0:13:08.559 --> 0:13:10.600 fun and inspirational to talk with you. I'm glad you're 0:13:10.640 --> 0:13:13.800 doing well. Jim Webber, Chief executive Officer Brooks, running via 0:13:13.880 --> 0:13:16.400 zoom from Seattle. His new book, Running with Purpose, How 0:13:16.400 --> 0:13:18.959 Brooks outpaced Goliath competitors to lead the pack.