Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, our
Speaker 1: next guest is headed up Brooks running from more the
Speaker 1: twenty years Brooks, of course, being a century old Seattle
Speaker 1: based company that makes a shoe with a guest running gear.
Speaker 1: If you go back some twenty years ago, this was
Speaker 1: a company tinkering with bankruptcy and got one more thing
Speaker 1: for you. It is a subsidiary standalone company of Warren
Speaker 1: Buffett's Berkshire Hathaway. The journey is all in a book
Speaker 1: by Brooks running CEO Jim Webber, his book Running with Purpose,
Speaker 1: How Brooks outpaced Goliath competitors to leave the pack. Jim
Speaker 1: joining us via zoom from Seattle. Jim, it is so
Speaker 1: nice to have you here with Tim and myself on Bloomberg.
Speaker 1: How are you and how are things going? Well? I'm
Speaker 1: excited to be with you today, Thanks Carol and Tim,
Speaker 1: and things are things are good? Right? It's volatile. There's
Speaker 1: so much disruption, as we all know in the business
Speaker 1: world over the last two years especially, but all through
Speaker 1: it people are running and they're buying gear and they're
Speaker 1: getting outside. And so we feel fortunate because running made
Speaker 1: the hut in this crazy COVID disruptive world that we've
Speaker 1: been in. And uh, we've had a record year last year,
Speaker 1: and I think we're gonna have another record here this year. Wow,
Speaker 1: because that's what I wanted to ask you, Jim. I mean,
Speaker 1: we're passing through big earnings, Google, Microsoft, Visa, GM today,
Speaker 1: so many Uh, and you are someone who understand right
Speaker 1: when you came to the company, it was in turmoil.
Speaker 1: You understand pressure, you understand stress, you understand volatility. So
Speaker 1: how would you kind of place today's challenging environments. You're
Speaker 1: doing really well, but when you take a step back,
Speaker 1: how does the macro environment feel to you? You know,
Speaker 1: I think there's there's more uncertainty in our world, maybe
Speaker 1: than ever before for business people. And you know, there's
Speaker 1: so many things you don't control, and and that's such
Speaker 1: a cliche, but it's just true. So we start with
Speaker 1: the fact that we're going to have things that we
Speaker 1: have to navigate that we don't control. And so I
Speaker 1: think the key for us has been customer focused. And
Speaker 1: I'll give you one example, Carroll, you know, and in
Speaker 1: when in March the pandemic hit. All the lights went
Speaker 1: off all retail clothes. We had no radar for demand,
Speaker 1: what was going to happen. And because we were customer
Speaker 1: focused on the Runner, once we saw them starting to
Speaker 1: run and buy gear, we we sort of you know,
Speaker 1: hit the gas pedal again. So so I think the
Speaker 1: key for us to navigate all these crazy times is
Speaker 1: our customer focused on the Runner and its advantage. I
Speaker 1: think we have because it's it's it's all we do.
Speaker 1: Jim back in, it feels like years ago at this point, Uh,
Speaker 1: you moved or shed much of your presence in China
Speaker 1: this according to Reuters, and instead moved a lot of
Speaker 1: the shoe production to Vietnam. I think that for a
Speaker 1: lot of people, that looks really prescient doing that before
Speaker 1: COVID even hit. But I'm wondering if that actually managed
Speaker 1: to help you over the last two years. Because it's
Speaker 1: not just China where supply chains are are snarled. This
Speaker 1: is a worldwide issue. There's no question about it. Tim,
Speaker 1: and and you know the truth of the matter is
Speaker 1: that last fall being in Vietnam, in the south of
Speaker 1: Vietnam where where many of our key production partners were
Speaker 1: was a tough place to be because for three months,
Speaker 1: almost half of our our production capacity did not make
Speaker 1: one shoe that was in Q three last year, and
Speaker 1: so we're we're short on inventory now, we're not delivering demands.
Speaker 1: So I don't think it matters maybe where you are.
Speaker 1: Of course, the supply chain disruption and transportation and logistics
Speaker 1: has impacted impacted everyone, no matter what your product is.
Speaker 1: So yeah, I think I think it's been super challenging.
Speaker 1: But you know, given our history, we've been through challenging
Speaker 1: times before, and so you know, our team rolled up
Speaker 1: our sleeves and we just have to roll with, you know,
Speaker 1: the changes that have come forth and do our best
Speaker 1: to keep our customers informed, and we communicate with our
Speaker 1: retail partners and runners. You know, we don't have all
Speaker 1: the product that they are demanding today, but you know,
Speaker 1: we're doing our best to help them understand why. I
Speaker 1: would say though in the last several months, things have
Speaker 1: stabilized for us, you know, in our industry, and that
Speaker 1: you know, we've been pretty much running at full capacity
Speaker 1: now for over four months, so we're no more normal mode,
Speaker 1: if there's such a thing as normal in this supply chain. Well,
Speaker 1: you know we're going with we're going with smaller boats
Speaker 1: to smaller ports. Um air air freight isn't even affordable anymore.
Speaker 1: So we've just tried to navigate around, you know, the
Speaker 1: constraints that that are out there in the supply chain
Speaker 1: right now that we all have to deal with and
Speaker 1: costs your up. But you know we're because you know,
Speaker 1: again we're focused on the customers. So we just we're
Speaker 1: trying to do our best to navigate through that and
Speaker 1: supply demand well. And in terms of pricing, what kind
Speaker 1: of pricing pressure leverage do you have with consumers right now?
Speaker 1: And just got about forty seconds and then we're gonna
Speaker 1: come back, and I promise we're gonna talk in Yeah,
Speaker 1: I would say, we don't feel like we have a lot.
Speaker 1: We've raised prices where we could modestly, I would say,
Speaker 1: And we don't raise prices every year. So this is
Speaker 1: the first price increases that I think we've made on
Speaker 1: our key shoes. The adrenaline goes in probably three or
Speaker 1: four years, so so we have raised selectively some prices up.
Speaker 1: But you know, we don't think the consumer can bear
Speaker 1: bear everything, so we've got to navigate that all right,
Speaker 1: sit it for a second. We're gonna come back to
Speaker 1: Jim and we are going to talk more with Brooks
Speaker 1: Running CEO Jim Webber. He has a new book out,
Speaker 1: UH and as we mentioned, the forward is by Warren Buffett,
Speaker 1: Running with Purpose. How Brooks out pace goliathe competitors to
Speaker 1: lead the pack? And I do think this is just
Speaker 1: such a great point, especially where we live in an
Speaker 1: economy where upstarts and smaller companies can really disrupt, like
Speaker 1: what Ellen Musk did with the auto industry. Yeah. I
Speaker 1: really want to talk about innovation when we return, and
Speaker 1: really what consumers want in this day and age. We
Speaker 1: have competitors making shoes from recycled materials, more earth friendly focus,
Speaker 1: and I'm wondering how we've seen that at Brooks and
Speaker 1: what's it like when the Musk want elon must give me.
Speaker 1: Warren Buffett says he wants to buy your company. You say, okay,
Speaker 1: maybe come on in. I want to get back to
Speaker 1: Jim Webber, CEO Brooks Running. He's still with a sun
Speaker 1: zoom from Seattle. His new book, UH that is out
Speaker 1: is Running with Purpose. How Brooks out pace goliathe competitors
Speaker 1: to lead the pack. Jim, thanks for staying with us.
Speaker 1: UM talk to us about like, what's the first your
Speaker 1: first exposure or interaction with Warren Buffett when he became
Speaker 1: interested in the company. Well, it goes back for me.
Speaker 1: I was reading his annual letters when I started in
Speaker 1: the business world in the eighties, so I felt like
Speaker 1: I knew him. But we were owned at the time
Speaker 1: by for the Loom, which was a Virture Hathaway subsidiary,
Speaker 1: and we began to sell shoes at the annual meeting Expo,
Speaker 1: and so I sent him a note saying how much
Speaker 1: fun we had, and we met a lot of shareholders,
Speaker 1: we sold a lot of shoes, and he said, great,
Speaker 1: if you're ever in Omahawk, come by. We'll go have
Speaker 1: a steak. And so I went. I went to lunch
Speaker 1: with Warren. We met for three hours and and I
Speaker 1: knew he was going to like the Brooks story because
Speaker 1: it's we're building a brand very uniquely and distinctively, where
Speaker 1: a challenger brand in a great category, and it's a
Speaker 1: great business and and we've been growing at double digit
Speaker 1: now for literally for twenty years. So I knew he
Speaker 1: would he would be intrigued by the story, and it
Speaker 1: was just a wonderful meeting. And he's a sponge, He's
Speaker 1: just so curious about anything in business. And and that's
Speaker 1: the conversation, the first one that we had about Brooks.
Speaker 1: What about the conversation, sent I mean, how would you
Speaker 1: characterize how much you're in touch with Warren Buffett? I
Speaker 1: mean he even himself in the forward to your book
Speaker 1: rights that Berkshire Hathaway has followed a dramatic hands off
Speaker 1: style in its operations, with only twenty five employees, well
Speaker 1: three sixty employees go about their jobs and the many
Speaker 1: dozens of individual companies like Years, Yeah, so does he
Speaker 1: talk to him? I believe Berkshire must be one of
Speaker 1: the most unique corporate cultures in all the world. I
Speaker 1: cut my teeth at Pillsbury, and in banking and and
Speaker 1: and then in in building brands like Brooks. But Berkshire
Speaker 1: is so unique. They never call in one sense. You know,
Speaker 1: they've described they have a very distinct acquisition strategy and
Speaker 1: investment strategy looking for great businesses, but once they buy
Speaker 1: the business, they don't. They don't require us to morph
Speaker 1: our reporting around their needs. They take all of our
Speaker 1: reporting in the way we want to look at the
Speaker 1: business and we share it with them. So so they
Speaker 1: morph to these hundreds some different businesses. We don't morph
Speaker 1: to them. And so the only why don't we send
Speaker 1: them our quarterly reports and any report, much like any
Speaker 1: any public company would do, and the only required conversation
Speaker 1: is annual camp frankly and uh, and they they empower
Speaker 1: us to run the business. We love that we take
Speaker 1: full responsibility for everything that happens here, good and bad.
Speaker 1: And Uh. You couldn't ask for a better home if
Speaker 1: you want to build a brand in It's wonderful. It's
Speaker 1: like our lesson is we're always told like if you
Speaker 1: don't hear from your bosses, that means you're doing your
Speaker 1: job and that's good. So it's like it's when there's problems,
Speaker 1: that's when they come. They come a knock and they
Speaker 1: expect you to manage it and solve those problems. And
Speaker 1: we know that, so it really works. Great. What did
Speaker 1: you learn in doing this book? Because it sounds like
Speaker 1: you know you obviously when you came to the company
Speaker 1: it was very different. It was, as I mentioned earlier,
Speaker 1: like on the brink of bankruptcy, a lot of different
Speaker 1: heads of companies um tell us about that journey. Yeah.
Speaker 1: I think the reason, one of the reasons I wrote
Speaker 1: the book is Brooks is a is a fantastic challenger
Speaker 1: brand story, and and we're in a great category. It's
Speaker 1: global and running and every big platform brand some of
Speaker 1: the best brands in the world, from athletic footmar and apparel,
Speaker 1: from the outdoor industry, from fitness is doing rhyme gear, shoes,
Speaker 1: head to tell, and and obviously Bras and jackets and
Speaker 1: everything else. So that's where we're competing. But I think
Speaker 1: in the world there are more challenger brands and there
Speaker 1: are leading category platform players, and so I wanted to
Speaker 1: share the story because I think what we're doing is
Speaker 1: has been a lot of fun, and it's we're building
Speaker 1: a great brand and a great company and uh and
Speaker 1: hopefully there's other people that are involved in categories. Maybe
Speaker 1: there are a challenger brand that will get some value
Speaker 1: out of it. But what let the turnaround because you
Speaker 1: are a smaller player and what is a massive you know,
Speaker 1: I just go down the block and there's the huge
Speaker 1: Nike store, Like it can be tough being a smaller
Speaker 1: player in a market that's got some really giant players.
Speaker 1: There's no question about that. In every category is unique.
Speaker 1: But I think the key for us has been an
Speaker 1: absolute obsession on runners mile after mile and and with
Speaker 1: the right people, we can actually build better product than
Speaker 1: the largest companies in our industry. And in many cases
Speaker 1: we do in our sales and and our customer affinity
Speaker 1: reflect that. So we're earning the customer. Um, it's not
Speaker 1: an accident. I say, we've built this billion dollar brand
Speaker 1: of parapet of the time, and it's really true. You know,
Speaker 1: we've gone after the most discerning runners out there that
Speaker 1: that are putting high mileagein and trying to build gear
Speaker 1: that mile after mile, they know they're going to buy
Speaker 1: that shoe again. How do you really challenged ourselves to
Speaker 1: to earn their second pair of purchase? Jim? How do
Speaker 1: you continue to grow though with such a sharp focus.
Speaker 1: How do you make sure that you're still expanding, that
Speaker 1: you're creating new products that appeal to a larger number
Speaker 1: of people that goes beyond that core serious runner. Well,
Speaker 1: here's the key is that the running category is huge.
Speaker 1: A hundred and fifty million people run worldwide on a
Speaker 1: regular basis to compete or to invest in themselves and um,
Speaker 1: and then of course it's much broader than that walking
Speaker 1: and and just hiking and trail running. They're all wearing shoes, right,
Speaker 1: So it is a huge category. And so we're trying
Speaker 1: to build a very unique, focused brand with with within
Speaker 1: this monster category. And you know, we've got we've got
Speaker 1: growth runway for the next decade. We believe that our
Speaker 1: niche in this category in the next two years could
Speaker 1: be a four billion dollar brand. So we've got plenty
Speaker 1: of opportunity. What's been the most difficult time though at
Speaker 1: the company was at first coming in and just dealing
Speaker 1: with kind of a really messy environment, or going through
Speaker 1: the Great Recession, or even going through the pandemic. What
Speaker 1: was the trickiest time? You know? And I share a
Speaker 1: lot of the stories and things that we've had to
Speaker 1: navigate over twenty years. The hardest one for me, I
Speaker 1: would say, is when the customers shifted. Um. We see
Speaker 1: there was a big newspaper article in May of sixteen
Speaker 1: of how millennials killed the running boom, and the key
Speaker 1: is millennials. Millennials right, theory a project to be They
Speaker 1: were still active, but they were doing a lot of
Speaker 1: different things. So we had to resolve for that and
Speaker 1: recommit to some things that we believed were there. We
Speaker 1: we planted a flag that performance was timeless and that
Speaker 1: some people are always gonna want the best gear, and gosh,
Speaker 1: that's you know, we've doubled our business since and so
Speaker 1: that that in that focus has paid off for us.
Speaker 1: But the customer decided it and uh, fortunately, I think
Speaker 1: we've been able to create create gear that's just resonating
Speaker 1: with the runner. Jim, you've been CEO since two thousand one.
Speaker 1: What's next for you? I mean, how long do you
Speaker 1: stay at Brooks? You know. One of the things that
Speaker 1: happened to me, Brooks was the fourth business I ran.
Speaker 1: I came out of consumer products and sporting goods. I
Speaker 1: became a sporting goods person. But what by the time
Speaker 1: I got to Brooks, I really wanted to build a
Speaker 1: brand and you had to do that over the long term.
Speaker 1: You can't really build you can't create fabulous value in
Speaker 1: three years. And so when I came in, I committed
Speaker 1: to build it, you know, be part of a team
Speaker 1: that was going to build a brand. And I still
Speaker 1: have it. I think, I really think I have the
Speaker 1: best job in the business. World. It's just fun and
Speaker 1: we like our jobs to well. Come back anytime, really
Speaker 1: fun and inspirational to talk with you. I'm glad you're
Speaker 1: doing well. Jim Webber, Chief executive Officer Brooks, running via
Speaker 1: zoom from Seattle. His new book, Running with Purpose, How
Speaker 1: Brooks outpaced Goliath competitors to lead the pack.