The Ballad of the Birkenstock (2024)

For centuries, Burg Ockenfels was home to medieval knights angling to control traffic along the Rhine River. Today the stone castle flaunts two round towers, a row of Renaissance-style statues and a courtyard that looks out over hills and farms. To visit, you take a train from Bonn to the sleepy village of Linz, then climb a long, steep hill until you reach the compound’s elaborate gate. From there, the place looks something like Xanadu, the mountaintop palace in Citizen Kane.

Since the 1990s, the property has belonged to Christian Birkenstock, the seventh-generation scion of the German footwear dynasty. Out front, the mailbox has a camera and buzzers for 19 corporate entities with “Birkenstock” in their name, along with almost as many others belonging to Christian personally, as well as the family office of his brother Alex. In early October, when Birkenstock capped off a decade of explosive growth with an initial public offering, Christian and Alex became billionaires.

The man most responsible for their windfall, however, typically works out of an office about 300 miles southeast, in Munich. Standing about 6-foot-6, with a thick, bushy beard, a baritone voice and a dry sense of humor that can be intimidating,Oliver Reichertisn’t exactly what you’d expect from an orthopedic shoe company executive. Among those who’ve worked for or sat across the negotiating table from Birkenstock’s chief executive officer, a word sometimes used to describe him is “bully.”

When Christian Birkenstock hired Reichert in 2009, the family business was in disarray, with stagnating sales and no coherent plan for the future. After their domineering father, Karl, stepped back years earlier, Christian and Alex—then in their late 30s and early 40s, respectively—began fighting with their older brother, Stephan, for creative control. It had been more than a decade since the public had fawned over Birkenstocks, and suddenly upstarts such asCrocswere jolting a category long relegated to stoners, geriatrics and German tourists.

At the time of Reichert’s arrival, the one thing everyone at the company agreed on was that Birkenstock’s patented “footbed”—the bulky sole of the distinctive sandals—was the source of the magic. Beyond that, nobody agreed on what exactly to do. Plenty of company veterans, whom Reichert eventually referred to as “footbed fascists,” looked to change absolutely nothing. “It was almost like the Bible had been written, and we didn’t need a New Testament,” Reichert, who became the first outsider to run the business in its 250-year history, once told a German newspaper. “Then I came in like a mix of Martin Luther, Muhammad Ali and Napoleon.”

Reichert’s unsubtle confidence worked. Before long, Birkenstock sandals were landing everywhere from Parisian runways and high-end department stores to the feet of entire families from Brooklyn to Boise. Gone were the days when you could pull off Germany’s autobahn and snap up a pair of Arizona sandals for under $50 at a rest stop. Under Reichert’s watch, Birkenstock became an accessible luxury, the company’s sales more than tripling, to $830 million by 2020.

Then, the following year, Reichert unexpectedlysold a majority staketoL Catterton Management Ltd. in a deal that valued Birkenstock at about $4.9 billion. The private equity firm, based in Greenwich, Connecticut, happened to be backed in part byBernard Arnault, the French mastermind behind the luxury empireLVMH, which owns brands including Louis Vuitton, Dom Pérignon and Tiffany. In the three years since, Birkenstock has continued raising prices, rolling out higher-end models and cutting out retail partners while building up its own direct-to-consumer sales. It’s also expanded its German manufacturing plants, with plans to double production in the next few years to enable a big push into China, India and other countries for the first time. And, of course, it went public.

When the company held its IPO in New York last fall, Reichert waxed philosophical. The world was no longer a primordial forest where humans walked barefoot all day on yielding, uneven ground, he said. We now have to contend with hard surfaces such as pavement and office floors, which don’t support the arches of your feet. So, Birkenstock’s footwear has become the next-best option. “The footbed promotesNaturgewolltes Gehen,” the native German explained in aregistration statementwith the US Securities and Exchange Commission, using a phrase that essentially translates as walking the way nature intended.

The IPO was a disaster. After raising about $1.5 billion, shares promptlyfell about 13 percenton the first day, which made it the worst debut for a big US listing in more than two years. In January, after the company’s first quarterly earnings report awkwardly described Birkenstock as a “global zeitgeist and purpose brand,” investors were still confused, and the company’s shares plunged again.

A few days later, Reichert, clad in Boston clogs and a cozy sweater in his Munich office, bristled at investors’ lack of understanding. Birkenstock isn’t really a footwear brand at all, he mused. It can’t be lumped in with sneaker makers that are willing to contract out the manufacturing process to factories half a world away, nor is it a true creature of fashion. If anything, he concluded, it is more of a health-care company focused on feet. “We have a total addressable market of every human being,” says Reichert. “Which is weird—I’m fully aware of that. But if you think about it, you think: ‘OK, yes. Somehow it’s right.’”

Finding Its Footing

In 1930, Carl Birkenstock—Christian and Alex’s grandfather—published a book called The Foot and Its Treatment. Carl was the son of Konrad Birkenstock, a fourth-generation cobbler who’d developed two innovations around the turn of the century: more realistic models of feet upon which to build shoes (back then, shoemakers rarely differentiated between left and right) and a flexible insole designed to enable a more natural stride. Konrad, however, never persuaded Germany’s footwear industry to adopt his developments and nearly bankrupted the family. Carl, on the other hand, would evangelise his family’s patented footbed and only sell his products to people who completed his weeklong seminar on the “System Birkenstock.”

In the 1930s, Carl also repeatedly tried, unsuccessfully, to accelerate wider adoption by getting Nazi authorities on board. He pitched his insoles to the Hitler Youth and performed tests on the feet of 170 members of the SS, according to a forthcoming Birkenstock-commissioned book. He failed to secure any government orders. Still, even without a formal deal, Nazi soldiers, after marching around Europe in ill-fitting boots, bought his insoles, and production more than doubled from 1938 to 1942. Carl joined the Nazi Party himself in 1940—”relatively late,” the company writes on its website, clarifying that he never did business with Hitler’s government, confiscated assets from Jews or relied on forced labor. (The new book qualifies some of those assertions, noting that Carl repeatedly sought to secure government contracts and in 1943 even tried to join the Sturmabteilung, the Nazi paramilitary group of storm troopers that played a key role in Hitler’s rise, though he wasn’t accepted.)

The influx of money from soldiers helped sustain Carl’s real passion, the pursuit of an “ideal shoe” that would incorporate the family’s ideas into a mass-produced product. After decades of tinkering, Carl retired in 1961, still flummoxed by the challenge of efficiently binding the family’s insoles into shoes.

From Carl’s failure, today’s Birkenstock was born. His son, Karl, cracked the code in the early 1960s: an open-footbed sandal with a deep heel cup and raised toe grip, made from materials including cork and latex. Inspired by the no-frills Brutalist architecture that was all the rage in postwar Europe, Karl created a model that featured a single fat leather strap affixed with a buckle, which would become known as theMadrid.

Unlike his forebears, Karl also figured out how to make money. After reading a book calledHow I Made a Fortune in Mail Order, he sent catalogs to doctors all over Germany, many of whom bought the sandals and recommended them to patients. Then, in 1966, Margot Fraser, a Berlin-raised seamstress who’d left Germany after World War II and settled in Northern California, visited a Bavarian spa and chanced upon a pair of Birkenstocks, discovering that they relieved her foot and back pain. Back in San Francisco, she began importing the sandals and set up an American outpost, Birkenstock Footprint Sandals Inc. (Years later, in the mid-1970s, Karl Birkenstock finally agreed to sign an agreement with Fraser, making her the sole US importer of Birkenstocks.)

The sandals, which Fraser sold through health food grocers, became a Bay Area cult favorite and soon a totem of hippies looking to rebel against their parents. Shoe stores came calling. It didn’t hurt that Karl kept churning out silhouettes that would turn into classics, including the double-strappedArizonain 1973 and the low-slungBostonclog in 1976. Fraser experienced almost nothing but growth with her business for almost two decades, until the boom ended in the 1980s with the rise of the power-dressing movement. Even so, loyalists wanted Birkenstocks no matter what. “The people who had gotten used to comfort didn’t want to give up,” Fraser wrote in her bookDealing With the Tough Stuff: Practical Wisdom for Running a Values-Driven Business. “Maybe they didn’t wear the shoes to the office anymore, but they kept a pair under their desk.”

To some extent, Birkenstock’s staying power epitomised the steadfast “Made in Germany” businesses that helped fuel West Germany’s rapid economic growth during the Cold War. The companies, often called Mittelstand firms or “hidden champions,” are typically quiet, family-owned, thrifty affairs that focus on dominating market niches for the long term by producing high-quality products, often in Germany, that are hard to replicate. That ethos was evident in two of Karl’s guiding rules. First, sock away money in good years to bridge the gap in tough times. And second, keep each new shoe model in catalogs for at least five years to avoid falling prey to fickle fashion trends. (Karl even extended this frugal mindset to his home life—his three boys often had to share the same bathwater, Christian once told a German newspaper.)

By the 1990s the brothers, now in their 20s, had joined their father in the business. At the time, companies such asNike Inc.andAdidas AGwere outsourcing shoe manufacturing to lower-cost countries including China and Taiwan. Birkenstock opted instead to buy factories in formerly communist East Germany, though that came with its own complications. For several years the Birkenstock family battled with trade unions and employees who wanted to organise “works councils,” bodies in Germany that allow workers more say in management decisions, among other things. At one point, Karl raised howls by referring to some of his workers as “lepers”; he even dubbed some of them “implementers of simple production,” which, in German, forms an acronym that also means “morons.”

With his retirement approaching, Karl carved up the family business into a constellation of entities that he parceled out to his sons. That made it harder for employees to organise, since technically they worked for smaller companies. But it also made it more difficult for the brothers to forge a shared vision for the future. Instead, they began cooking up a bunch of separate brands that used the family footbed, which they expected distributors, including Fraser’s company in the US, to market. Stephan, the oldest brother, hewed closest to Karl’s conservative approach and focused on a line of cheaper plastic clogs calledBirkis. Alex, the middle child, was more interested in exploring fashion-forward styles and created other brands such as the lacquered, shiny sandals he called Tatami and closed-toe shoes known as Footprints.

Christian, meanwhile, caused turmoil for the family. He and his wife, Susanne, had bought and refurbishedBurg Ockenfels, the castle overlooking the Rhine, and created their own brand of sandals. But after separating from Christian, Susanne launched her own line called Beautystep, which purported to help women fight off cellulite. Before long, Susanne was appearing in ads saying she stood behind the sandals with her name, which remained Birkenstock even years after the divorce. Journalists dubbed theongoing drama“Dallason the Rhine,” and a German court eventually put a restriction on Susanne’s use of the Birkenstock name. (Her business went broke.)

Back in the US, Fraser’s old staff had struggled since her retirement in 2002. She’d sold her distribution company to employees, but the workers-turned-owners couldn’t decide on a strategy. Meanwhile, the Birkenstock brothers’ escalating rivalry over the company’s direction was coming to a head. According to one former worker, Stephan frequently visited the Northern California office, while Alex and Christian typically dispatched German consultants. Occasionally, Stephan chanced upon his brothers’ proxies in the Marin County facility as they chatted with Birkenstock workers. Then he would blow up. “It was basically like, ‘What the f--- are you doing here?’” recalls a former Birkenstock US executive, who asked not to be named because he still works in the industry. “‘You’re here to do Footprints. Go talk to the Footprints people. Why are you mingling with a customer service manager of Birkenstock? You have no reason to be doing that.’”

By the late 2000s, the brothers’ battle for creative control had reached a breaking point. With Birkenstock’s American outpost adrift, the siblings finally bought it out. Christian, meanwhile, smoldering away one morning in the posh Austrian Alpine resort of Kitzbühel, had a chance encounter with a towering, brusque unemployed TV executive who’d recently been fired from his job at a German station. While sipping a beer early in the day, Christian began rattling off his list of problems—above all, with his father and brother Stephan. Oliver Reichert listened and offered encouraging words, sharing the details of his own recent setback. Impressed, Christian invited Reichert to become his consultant and help sort out the family’s problems.

An Outsider’s Perspective

In the dynamics of German family businesses, being a turnaround guy was no simple task. Asked to characterize the nature of such a career move,Marko Sarstedt, head of the marketing department at Ludwig-Maximilians-Universität Munich, burst out laughing. “In German we would call this aHimmelfahrtmission,” he said, which basically translates as “suicide mission.”

Reichert concluded that in trying to reconcile the brothers, the sticking point was Stephan, a homebody who wanted to play it safe with basics, which clashed with Christian and Alex’s desire to experiment. One of Reichert’s first accomplishments: persuading Stephan to sell his stake to his younger brothers in 2012 for more than $100 million, according to a German magazine. (Birkenstock declined to say how much was actually paid; Stephan couldn’t be reached for comment, while Karl, Christian and Alex all declined to talk toBloomberg Businessweek.)

Reichert told Christian and Alex that each of them owning 50% of the company couldn’t work for long; there was simply too much baggage. Eventually, they’d need either to sell the business to a more organized owner or to prepare it for an IPO. With Christian and Alex agreeing to step back from operations, Reichert worked to simplify the dozens of interlocking business entities Karl Birkenstock had created, along with the various product lines the brothers had concocted.

By 2013, Birkenstock’s organization had been streamlined from a tangle of 38 individual companies to a unified group structure that had divisions focused on production, sales and other services. To cap off this transformation, the company appointed Reichert as co-CEO alongsideMarkus Bensberg, a 22-year company veteran. Bensberg, a buttoned-up, clean-shaven manager, quickly faded into the background, while Reichert, overwhelming everyone with his size and energy, dominated the show. (Bensberg declined to talk toBusinessweek.)

Managing Buzz

Around that time, designerPhoebe Philo, then of the LVMH-owned French brand Celine, shocked the fashion world—and Birkenstock—by including Arizona-like sandals lined with mink on the catwalk at Paris Fashion Week. Even though they weren’t technically Birkenstocks, it set off a frenzy for the brand, something that had been happening on and off for decades—as in the early ‘90s, whenKate Mossappeared inThe Facemagazine wearing Rio and Palermo sandals andMarc Jacobsfeatured the footwear in his Grunge collection. But the company had never quite figured out what to do next after these flurries of publicity.

In 2015, Birkenstock—still focused on a few dozen big distributors and wholesalers around the world—didn’t have a sophisticated, centralized sales or marketing team, a company-branded website to sell the shoes or even a Facebook page. (Reichert’s four kids appeared in catalogs.) Meanwhile, for decades, its factories, all local, had struggled to meet demand. Whenever the brand became buzzy, order backlogs became longer, accidentally upping the shoes’ desirability, but also causing production headaches.

Reichert and Bensberg got to work, adding manufacturing plants in eastern Germany, which allowed the company to double production capacity. In 2016, as Birkenstock was still basking in the Philo-era buzz, it finally entered the modern age of e-commerce with a professional-looking online store of its own. The next year Birkenstock got into ahigh-profile fightwithAmazon.com Inc., accusing it of trying to buy Birkenstocks from retail partners. Birkenstock refused to sell on Amazon, since it believed the retail giant wasn’t doing enough to counter knockoffs. Reichert made a big deal about how he was sending undercover agents to factories in Asia, trying to goad them—on hidden cameras—into agreeing to manufacture fake Birkenstocks. He proudly recounted this approach at a panel in Berlin in early 2018, where the moderator asked him what he would say toJeff Bezosif they met face to face. Reichert, clad in a scarf and sandals, quipped: “Make sure that you treat brands properly, and never fight a bear in its cave.”

Stepping Into Luxury

Birkenstock’s sales kept climbing, from $500 million in 2016 to $810 million in 2019. That year, it opened a showroom in the heart of Paris’ fashion district, in the same building as a Celine boutique selling handbags and perfumes and around the corner from the onetime apartment of Coco Chanel. Then it started partnering with brands for new, luxury-priced Birkenstockian creations—an iridescent Arizona with Rick Owens, a corduroy suede Boston clog with Stüssy and a series of velvet models, their buckles glistening with crystals, with Manolo Blahnik. (Until recently, you could find a $1,000 pair of co-branded Christian Dior Birkenstocks “tinted” with “the ever-present Dior Gray” at the LVMH brand’s shop across the street from Birkenstock’s showroom.)

For once, the company was forging collaborations and driving its own hype cycles. It had certainly missed enough of them—as it did whenCrocs Inc., maker of the cartoonishly chunky, weightless plastic clogs, arrived on the scene in 2002. In its first decade, the Boulder, Colorado, upstart’s revenue rocketed to more than $1 billion, the footwear wooing everyone from toddlers to boomers with seemingly infinite color options and an obscenely comfortable fit—thanks to a novel ethyl vinyl acetate-based foam—for as little as $30.

Birkenstock had actually been churning out its own version of stiffer polyurethane sandals since the 1980s, though it had only targeted niches such as doctors and gardening enthusiasts. The same former Birkenstock US executive recalls the frustration of calling up Germany in the mid-2000s and asking them to create a plastic shoe beyond the weird-fitting plastic Arizona, which was weighed down with the cork footbed and only came in basic colours. “They were like, ‘We have this, it’s perfect,’” he recalls. “And we were like, ‘No, look at Crocs, they’re going crazy. Can you trim them up a little bit, make some decent colours? Not this crap.’ But they never, never got it.”

Years later, Reichert finally did, rolling out Birkenstock’s cork-free, affordable EVA footwear in 2015, a business line that’s pulling in new customers and persuading others to add to their collections. “If you’ve bought a pair of the Valentino [and Birkenstock] collab, buying a pair of white EVAs to go to the beach—it’s pocket change,” saysSam Poser, an analyst at Williams Trading LLC, who’s seen superfans load up in the summer on a half-dozen differently coloured EVA Arizonas—which cost about $50 a pop—to match their nail polish.

Raising the Company’s Profile

While the vast majority of Birkenstock’s sales still came from its traditional models, the limited-edition versions—often featuring jaunty colours, premium materials and bigger buckles—didn’t just command higher price tags; they also raised the whole company’s prestige. Nowhere has this hypebeast awakening been more evident than with Bostons. When Covid-19 hit, Birkenstock was already playing up the model as part of its plan to offer more wintertime footwear. Then, as the whole world settled into sweatpants, Boston mania ensued. Those well-timed Stüssy and Rick Owens Boston collaborations became pandemic-era hits, with YouTubers and TikTokers flaunting them in their “shoe rotation” videos.

As Bostons sold out, online sneaker marketplace StockX stepped in. The platform had already introduced Birkenstock to its community of resellers and buyers in 2019, having observed the growing phenomenon. Over the next three years, transactions of the brand more than tripled annually on the site,dominated by Bostons. Last year, Birkenstock became StockX’s third-most-traded shoe brand, something Rachel Makar, a senior director for merchandising there, attributes in part to aging hipsters: “For the older sneaker heads, I think it’s like, ‘What other comfort styles can we add where I don’t have to put on a sneaker every day?’”

Basking in the brand’s newfound fashion cred, Christian and Alex eyed their next move when the pandemic hit. They’d recently watched another pair of German siblings strike it big: The Wirtgen brothers sold their late father’s namesake road-construction company toDeere & Co.for$5.2 billion. If paving machines could mint billionaires, why couldn’t sandals?

In 2020, Reichert went looking for a buyer. Birkenstock hired Goldman Sachs, and for a while it seemed like the winning suitor might be CVC Capital Partners, a private equity firm with high-profile European brands. CVC managing partnerAlexander Dibelius, often regarded as Germany’s savviest dealmaker, believed he’d struck a gentleman’s agreement with Reichert to buy Birkenstock for more than $4 billion.

But earlier in the year, Reichert had contacted another scion:Alexandre Arnault, the son of Bernard Arnault who at the time was running Rimowa, a German luggage maker LVMH had a controlling stake in. What if LVMH, the world’s largest luxury holding company, could make a similar investment in Birkenstock? The elder Arnault, one of the richest people in the world, was famous for his affection for long-term investments, having rarely sold brands over his almost half-century of empire building. He was also a fan of craftsmanship and quality—not the type to reap quick profits by outsourcing production. But there was a clear problem with the LVMH idea: The luxury conglomerate was focused on exclusivity and desirability, not mass-market stuff.

But there was another possible way into the empire. In 2016 the consumer-focused private equity firm Catterton had joined forces with LVMH and Bernard Arnault’s personal holding company to create L Catterton, with Arnault’s side taking a 40 percent stake in the combined enterprise. In January 2021, with Covid raging and Dibelius’ phone calls to Reichert going unanswered, Birkenstock’s CEO travelled to Paris to meet with Arnault, the culmination of months of meetings with L Catterton’s team.

In late February, L Catterton announced it was buying a majority stake in Birkenstock, with Arnault’s family office taking an additional share. Christian and Alex Birkenstock would also retain minority positions. “Birkenstock was founded nearly 250 years ago and has grown to become one of the few iconic brands in the footwear industry,” Arnault said in a press release. “Together we will provide support to the business so it can fully realise its significant growth potential.”

Going Public

By the time Birkenstock was ready to make its debut on the New York Stock Exchange last fall, the brand was doubling down on Arnault’s playbook. It continued raising prices and cutting off distribution with retailers, something that angered longtime partners and customers, especially in Germany, where locals had long been accustomed to buying the sandals for cheap. The recent opening of a $120 million plant on its home turf and other factory expansion efforts meant that within a couple of years Birkenstock could double its production capacity, from about 30 million pairs a year currently. Even the cultural timing seemed pitch-perfect, with the Arizona sandal getting an unexpected cameo in the summer’s blockbuster“Barbie”movie.

Birkenstock’s team descended on New York to host a series of public-relations events, including unveiling a leather swing and a shearling-lined seesaw near Astor Place and hosting fans at a beer garden in Brooklyn. But back in Germany some major investors were feeling jilted because the company was listing in New York instead of Frankfurt. Then came more Sturm und Drang—the weekend leading up to the IPO, the US government nearly went into shutdown, followed by the Israel-Hamas war breaking out, creating panic in the markets.

On Oct. 11, Reichert showed up at the NYSE in a black collared shirt with the top three buttons unfastened, exposing plenty of chest hair and quickly became something of an internet sensation among the day-trading social media set. He appeared on the balcony overlooking the trading floor alongside Alexandre Arnault, now a Birkenstock board member, who hoisted an Arizona sandal in the air. The mood quickly soured, though. When the shares started trading, they were 11 percent below the $46 IPO price—and then kept falling.

Since then, Reichert has struggled to convince investors that his past decade of success is just a prelude to even more profitable growth. He insists that he’s going to keep Birkenstock’s sales growing by nearly 20 percent a year with profits that are more akin to those of luxury brands like Hermès than sneaker makers like Nike. To get there, Birkenstock is planning to dive into markets in China, India and the Middle East, where plastic shoes are big sellers in the hot, humid weather. The company also hopes to benefit from the expertise of Arnault, who in recent years has found plenty of willing customers for his luxury empire’s products in Asia. It’s also trying to expand Birkenstock’s cold-weather offerings beyond the oft-ridiculed “socks and ‘stocks” look, resulting in theBend, a tennis-style sneaker, along with new boots including theBrysonand theBirmingham. During the holiday shopping season, its closed-toe models outsold its sandals for the first time.

Reichert says that more critical than finding new customers is making sure Birkenstock gets the right amount of the right models—drawing from an archive of 700 silhouettes—to the right locations at the right times. Whereas most footwear companies need to lock in orders with contractor factories in Asia months in advance, and then struggle to adapt if they’ve misjudged consumer sentiment, “we can reload the gun,” Reichert says. He’s referring in part to the company’s new factory in Pasewalk and expansion efforts in Görlitz and in Portugal (one of the only places outside Germany where Birkenstock manufactures). Equally important, the company can decide when it wants to opt for artificial scarcity with a particular line. “We could sell three times more Bostons today, but we just don’t do it,” he says.

For months now, Reichert has bewildered many investors with pontifications about Birkenstock’s rich heritage and hip products, rather than profit margins. But on May 30 he finally got his point across in a language Wall Street understands: raising earnings targets for the year. Birkenstock surged in its best-ever day of trading, bringing the stock up more than 20 percent since the IPO.

It seems the market is finally appreciating what Reichert has known all along. When he was a teenager growing up in the foothills of the Bavarian Alps, he says, his feet grew so large that he couldn’t wear anything sold in local shoe stores—that is, except for the shoes made by Karl Birkenstock, who believed everyone, no matter how big their feet, should have access to his footbed. “For them it was like, ‘Of course, we also have to support this mountain gorilla,’” he recalls.

But even with its decades of staying power, Birkenstock has to have limits to its growth—whether you want to call it an orthopedic shoe company, a luxury fashion house or even a health-care company.

Reichert scoffs at the suggestion. “I can promise you, once we touch this ceiling, I will be not on this planet,” he says. “Even if I was, like, the most anxious person in the world, I would say, ‘OK, this is good for another 50 years.’” He pauses. “But I tell you it’s good for another 250 years.”

By Tim Loh