Specialist
Former C-level executive at Birkenstock GmbH & Co KG
Agenda
- Sustainability of Birkenstock's sales growth and regional expansion opportunities, highlighting China and India
- New category expansion opportunities, highlighting closed-toe shoes, children’s shoes and skincare
- Distribution shifts, including growth in D2C online and in-store
- Manufacturing capacity outlook to support growth
- Unit economics assessment
Questions
1.
Birkenstock has been a darling in the shoe market, with a CAGR of 19% from 2012-20. What do you think has been the core growth driver for the company over the last eight years?
2.
What drives purchasing patterns for Birkenstock’s classic sandal shoe models, including the Arizonas?
3.
How much growth has been driven by fashion trends vs orthopaedic usage?
4.
How is Birkenstock marketed, if we compare the purely functional or orthopaedic approach vs the fashion components?
5.
How much more room is there to grow the classic sandal category in markets such as Europe and North America where Birkenstock is already relatively well-penetrated?
6.
How likely is it that Birkenstock can repeat its success in Europe and North America in regions such as China or India?
7.
Given that fashion has been the number one growth driver in Europe and the US, do you expect a similar number of customers in markets such as China and India to find these shoes attractive? How attractive is the Birkenstock portfolio to these customers?
8.
To what extent would you say there is a risk the core products could lose their appeal, given the focus on fashionability? How exposed is Birkenstock to changes in customer preferences?
9.
How much fashion risk is there?
10.
Do you think the volume of sandals sold has reached its peak?
11.
What do you think is a realistic growth rate for Birkenstock from 2021-25?
12.
What is the rough category split across core shoes, closed shoes, kids and EVA [ethylene-vinyl acetate]?
13.
What do you think Birkenstock’s strategy is in skincare? Why is Birkenstock pursuing this category and what is the outlook?
14.
Why is Birkenstock trying to grow the skincare category?
15.
Do you think the way resources are allocated towards new categories potentially threatens the core product’s growth outlook? Could there be a loss of focus on the core product due to new adjacent categories?
16.
Who is the core Birkenstock customer in your opinion?
17.
How many core products are owned per customer, on average?
18.
How loyal do you think the newly acquired fashion customers are to the Birkenstock brand? There’s clearly loyalty among the orthopaedic customers.
19.
Are the customers buying the new products also buying the core products, or is this a new breed of customer entering the Birkenstock brand?
20.
If we assume a 5-10% annual growth rate, what manufacturing developments would be required to support that growth?
21.
Birkenstock prides itself on being made in Germany, but what are the opportunities to outsource production?
22.
Who do you think are Birkenstock’s key competitors?
23.
What are the barriers to entry for new competitors?
24.
What’s the threat of new entrants with cheaper products? This has been a challenge area for Birkenstock.
25.
Birkenstock has a sales split of 70% wholesale, 25% online and 5% physical retail. How is that likely to change from 2021-25?
26.
How do you think Birkenstock will approach the reduction in its wholesale footprint? You mentioned that it’s over-distributed in Europe.
27.
What do you think will happen to Birkenstock’s sales as the wholesale network is slowly consolidated or the number of partners is reduced? How easy is it to ensure those sales are transferred to online and retail?
28.
What are your store openings expectations? How many stores can Birkenstock realistically open per year and what do you think the saturation point will be? It has around 52 stores globally.
29.
How much CAPEX is needed to open a new Birkenstock store? I appreciate that will vary globally.
30.
If there is an increase in online and retail sales and a decline in wholesale, how is this likely to impact unit economics and market-level margins?
31.
Why do you anticipate a gradual decline in EBITDA margins? Is that something you expect at a group level?
32.
Do you expect regions such as China and India to have structurally lower margin profiles in the short-to medium term?
33.
Birkenstock has managed to grow despite limited marketing investments. Is that strategy sustainable over the next 4-5 years?
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