"If your feet aren't happy, you're not happy. If you're not happy, we're not
happy. So what do we do? We simply make the most comfortable running shoes
imaginable. "
Company History:
Brooks Sports Inc. is a small yet well-recognized athletic footwear and
apparel manufacturer, best known for its running shoes, which ranked as one of
the top three brands in the United States during the late 1970s. Success during
the late 1970s sent the company reeling during the 1980s, as it failed to
sustain its market leadership and floundered. A refocused market strategy during
the 1990s, targeted toward serious runners in the 35- to 54-year-old age
bracket, reinvigorated Brooks, prompting diversification into apparel in 1997.
The company designs and manufactures a full range of running and fitness
footwear and apparel, maintaining a global presence in the athletic market.
Origins
Founded in 1914, Brooks began business as a maker of ice skates and cleated
sports shoes, but the company did not distinguish itself until more than 60
years later, when it thrived as a manufacturer of running shoes. During the
1970s, the popularity of jogging swept across the United States, carrying with
it the popularity of Brooks footwear. Led by its signature Vantage brand, Brooks
rose to dizzying heights in the fast-growing athletic footwear industry,
securing a large share of the ever increasing revenues and profits that helped
transform an upstart rival named Nike into a multibillion-dollar business
empire. Like Nike, Brooks emerged as a favorite among the burgeoning ranks of
running enthusiasts who embraced the sport from coast to coast. By the late
1970s, Brooks ranked as one of the top three running shoe brands in the country,
seemingly bound for the same size of fortune that the much younger Nike would
later claim. The comparisons between Nike and Brooks ended shortly after the
late 1970s, however; to the chagrin of Brooks's management, Nike was able to
sustain the momentum generated during the late 1970s and develop a sprawling
business with a domineering presence in the athletic market. Brooks, meanwhile,
faltered quickly, tripped up by the confidence instilled during its meteoric
rise into the industry's elite during the late 1970s. Industry pundits later
theorized that the cause of Brooks's sudden collapse came from the company's
errant attempts to ape the strategy used by Nike. Ironically, Nike, albeit
indirectly, later intervened as Brooks's savior, but during the intervening
period separating Brooks's collapse and its resurrection, the company teetered
precariously on the brink of insolvency. Although the company was founded at the
start of World War I, the story of its success truly began in the wake of the
disaster that followed its late 1970s rise to prominence.
Caught up in the fervor created by the running craze during the late 1970s,
Brooks overextended itself and quickly paid the price for its zeal. The company
expanded into other athletic footwear markets, using its success in the running
shoe market as the basis for diversifying into an array of footwear markets,
including basketball, aerobics, and baseball. As Brooks diversified, it also
entered the expensive realm of securing celebrity endorsements from
well-recognized, professional athletes. Signing big-name athletes was a
marketing strategy employed by Nike, and Brooks, eager to keep pace with the
rising giant of the industry, followed suit, signing athletes such as football
quarterback Dan Marino and basketball star James Worthy to endorse the company's
$70 shoes. Problems began to surface when Brooks's business began to slacken,
leaving the company overexposed to the business downturn and unable to operate
efficiently or effectively. In response to the financial difficulties that
subsequently beset Brooks, the company trimmed operating costs by using cheaper
materials for its footwear. In a further bid to stanch the mounting financial
losses, the company slashed prices and began distributing more and more of its
merchandise to deep discount chains such as Kmart, where Brooks footwear
retailed for as low as $20. Consequently, the brand lost credibility, its image
tarnished by inferior products and a marketing strategy that repelled the
company's original customers, joggers.
Behind the scenes, Brooks had a parent company that endured the perennial
losses posted by its subsidiary. Rockford, Michigan-based Wolverine World Wide
Inc., best known for its brand of Hush Puppies shoes, acquired Brooks in 1982,
operating the company as a subsidiary named Brooks Shoe Inc. During the 1980s,
Wolverine World Wide felt the sting of Brooks's pervasive problems, guilty
itself of perpetuating the problems by supporting Brooks with what critics
described as weak marketing. During Wolverine World Wide's decade of ownership,
Brooks racked up $60 million in losses, recording eight consecutive years of
unprofitability. By the early 1990s, Wolverine World Wide was ready to unload
the burdensome drag on its earnings, and in early 1993 the company found a
willing buyer. Ownership of Brooks changed hands in February 1993, marking the
beginning of a new era for the troubled shoe manufacturer. To Brooks's new
parent company fell the difficult task of injecting the 79-year-old concern with
the vitality it had lost during the 1980s.
New Ownership for the 1990s
Brooks's new parent company was the Rokke Group (later Aker RGI ), a
privately held Norwegian investment group with interests in shipping, real
estate, commercial fishing, and sporting goods. Led and founded by Bjorn
Gjelsten and Kjell Rokke, the investment firm paid $21 million for Brooks, a
deal that included Brooks's U.S. operations and its worldwide licensing and
distribution network. Following its acquisition by the Rokke Group, the company
was renamed Brooks Sports Inc. and relocated near the Rokke Group's U.S.
headquarters in Seattle. Brooks's international headquarters in Grand Rapids,
Michigan, and its domestic headquarters in Hanover, Pennsylvania, were
consolidated in Bothell, Washington, a Seattle suburb, as were the finance and
accounting office in Michigan and the company's sourcing office in Taiwan. At
the time of the acquisition, Brooks was generating roughly $100 million in
annual, worldwide sales, although company officials would later contend that the
financial figures reported by Wolverine World Wide were inflated. What was
beyond argument, however, was the anemic domestic performance of Brooks. Sales
in the United States had plateaued at approximately $25 million annually.
Further, the eight years of consecutive financial losses were compounded by the
deteriorated strength of the Brooks brand name. The company that had once ranked
as one of the top three brands in the United States had plummeted to 25th place
by 1993, when Brooks controlled 0.4 percent of the domestic market.
Profound changes were clearly needed, but in the midst of the reorganization
and consolidation that occupied the company's attention throughout much of 1993,
there were few signs that sweeping reforms were underway. In fact, the company
appeared to be regressing rather than pressing forward with a restorative plan,
as the launch of a new shoe dubbed 'The Truth' fell victim to numerous delays
and the lack of a marketing campaign. The problems stemmed from Brooks's senior
management, which was in disarray following the Rokke Group's acquisition of the
company, thereby delaying the implementation of any program designed to cure
Brooks's ills. The cloud hanging over Brooks's managerial ranks was cleared away
substantially in August 1993, when three of the company's senior
executives--including the president--departed, each leaving the company,
according to various, contradictory accounts, either after being fired or after
voluntarily stepping aside. With the departure of what the July 1, 1994
Puget
Sound Business Journal described as 'a faltering management team,'
stewardship of the company devolved to Rokke Group's chairman and CEO, Bjorn
Gjelsten. Gjelsten's leadership of Brooks was a temporary solution to the
company's most pressing problem. Gjelsten assumed day-to-day control over the
company while he searched for a permanent replacement. By the end of 1993, he
had found such a person, a well-regarded executive named Helen Rockey, who at
the time was working for Nike.
Raised in Seattle, Rockey graduated from the University of Washington with a
bachelor's degree in economics in 1978, ending her academic career two years
later, after she had earned her master's degree in business administration.
Rockey joined a production management training program at a plywood and sawmill
in Oregon, spent one year working as vice-president of marketing for a Tacoma,
Washington, company called Big Toys Inc., and then found a lasting position at
Nike. Nike hired Rockey in 1984 as a special sales manager of the company's then
small apparel division. She quickly distinguished herself at Nike, ultimately
earning promotion to the position of general manager of the company's sport
graphics and accessories divisions, which marketed merchandise such as hats,
T-shirts, and water bottles. Rockey spearheaded tremendous growth at the
divisions, highlighted by a four-year period in which she increased sales from
$8 million to $500 million. Gjelsten was impressed, convinced that Rockey was
capable of marshaling Brooks towards profitability and restoring the company's
brand image to its former luster. In January 1994, Rockey was named president of
Brooks, becoming the first female to head a major athletic shoe company in the
United States.
Comeback Beginning in 1994
Upon assuming control over Brooks, Rockey implemented sweeping changes,
announcing her intention to increase sales and profits by 25 percent during the
ensuing three to five years. Her plan centered on reengineering Brooks's
products rather than restructuring the company itself, an approach that focused
the company's attention on serious runners--the core of the company's
traditional success. Other sports categories were discontinued, eliminating any
traces of Brooks's attempts to present itself as a 'mini-Nike.' After sharpening
the company's focus on the running shoe market, Rockey turned to redesigning
Brooks's footwear, as she desperately sought to distance her regime from the
company that sold its cheaply made products in Kmart stores for as little as
$20.
By June 1994, Rockey had delivered 'The Truth' to retailers, a back-to-basics
running shoe that retailed for $109. Concurrently, Rockey began circuiting the
country's retail establishments, concentrating on the specialty running stores
that had always served as Brooks's strongest distribution channel. In trying to
restore confidence in the Brooks name, Rockey articulated three corporate
objectives that assuaged retailers' fears of dealing with the Brooks brand.
First, she preached product excellence, promising revamped products with a
drastically reduced defect rate. She stressed operational execution, promising
on time delivery of the company's merchandise. Lastly, she promised better
sell-through support, detailing plans to provide marketing support that
incorporated individual retail establishments. Part of the program involving
closer ties between Brooks and retailers included the sponsorship of
athletes--in the new Rockey era, expensive celebrity endorsement deals were
eliminated. Instead, Brooks began building a stable of 200 runners grouped into
four sponsorship categories: world class, national, regional, and local.
Sponsorship deals in many cases were restricted to free gear, rather than cash
payments, and required the athletes to forge a relationship with their local
retailer by making promotional appearances and conducting running clinics at
particular stores. Because of the company's policy to eschew celebrity
endorsement deals, Brooks gave up its chase of the hotly pursued youth markets,
in which success was heavily dependent on the fame of the athlete who endorsed a
particular shoe. Instead, Brooks concentrated on 35- to 54-year-old customers,
the strongest market niche of serious runners.
The changes implemented by Rockey created a more focused, leaner company.
Profitability, conspicuously absent during the eight years preceding Rockey's
appointment as president, was restored after her first year of stewardship,
putting the company on firm footing. Initially, the aim was to strip down the
company and narrow its focus, eliminating all expenditures that did not address
Rockey's three objectives. Once profitability had been restored and the Brooks
brand name began to exude some of its former strength, Rockey could assume a
more aggressive posture. Accordingly, the full effect of her influence did not
materialize until Brooks's exited the mid-1990s and began building on its
distribution base of specialty running stores.
Sales during the late 1990s rose energetically, driven upward by the palmy
mood pervading Brooks's Bothell headquarters. Having re-established the brand in
specialty running stores, Rockey endeavored to win back the business of regional
sporting goods stores and department stores, and registered quick success. In
1996, for instance, Nordstrom Inc. carried Brooks footwear at just one store,
but a year later, the department store chain carried the company's shoes at 30
locations. As the number of retail locations stocking the company's footwear
increased, sales increased as well, particularly in the United States, where the
company had incurred its greatest damage prior to Rockey's arrival. Against the
backdrop of a 48 percent increase in domestic sales in 1996, Rockey unveiled her
next plan of attack, announcing in mid-1996 that Brooks would enter the apparel
business. The company introduced a full-line of technical running and fitness
apparel for women and men in the spring of 1997, adding a substantial revenue
stream to Brooks's business. After a 29 percent increase in apparel sales in
1998, the company's apparel business accounted for 15 percent of total sales by
the end of the decade.
Despite the undeniable resurgence of Brooks, Aker RGI--Brooks's parent
company--decided to cut its ties to the footwear and apparel manufacturer. In
November 1998, the Norwegian holding company sold controlling interest in Brooks
to Stamford, Connecticut, venture capital firm J.H. Whitney & Co. for $40
million. Aker RGI, which had decided to pay more attention to its commercial
fishing and real estate holdings, retained a 20 percent stake in Brooks, selling
60 percent to J.H. Whitney. The remaining 20 percent interest in Brooks was
purchased by Rockey and 70 other Brooks employees, giving management a
substantial stake in what promised to be a promising future. In early 1999,
orders from specialty running shops were up 84 percent, punctuating the strident
success of the company during the latter half of the 1990s. Between 1995 and
1999, sales increased an average of 30 percent annually, fueling confidence that
Rockey, who now had a substantial, vested interest in Brooks's success, would
spearhead commensurate growth as the company entered the 21st century. In March
1999, such expectations were shattered when Rockey made a startling
announcement.
In March 1999, Rockey announced she was leaving Brooks to join Birmingham,
Alabama-based retailer Just For Feet Inc. as president and CEO. Insiders and
outsiders were shocked by the news, coming a few short months after Rockey had
led an employee buyout of the company. Rockey saw her chance to join a higher
profile company, and took it, leaving Vice-President of Sales and Marketing
Bruce Pettet, a Brooks executive since 1995, in charge of running the company.
Pettet took over the titles of president and CEO from Rockey, promising a
continuation of the policies and strategies developed and pursued by his
predecessor. In November 1999, Pettet presided over the acquisition of Total
Quality Apparel Resource Inc., a National City, California, company that had
previously served as an independent apparel contractor for Brooks. The
acquisition, organized as a subsidiary of Brooks, strengthened the company's
presence in apparel, which company officials projected to be a 25 percent
contributor to the company's overall sales. With the change in leadership and
consistently strong financial performance behind it, Brooks prepared for the
decade ahead, resurrected by the Rockey era and confident that Pettet's tenure
of leadership would engender further success in the 21st century.
