Weber soon found himself in Omaha, where he took Buffett up on his offer—and talked him through Brooks’ strategy. “I knew he’d love Brooks,” Weber recalls. “We have high returns on capital, we’re very profitable, we’re growing double-digit, we have a brand, we understand what our competitive strengths are and we are stoking the fire on being who we are. We’re not chasing any other brand.”
Buffett did indeed fall in love with the company. Six months later, he called Weber to say, “You guys are doing some interesting, unique things and we’re going to spin you out of Fruit of the Loom [Brooks’ parent company at the time]; we will set you up as a standalone subsidiary of Berkshire Hathaway, and you’ll report to me.”
The sage of Omaha’s conglomerate owns or has a controlling interest in a bewildering array of businesses, from Acme Brick and car insurer GEICO to over-the-road trailer-rental company Xtra. People marvel at how he and sidekick Charlie Munger keep track of the menagerie of 53 companies. The short-hand answer is that Buffett acquires well-run, growth businesses and never sells. He gives his individual enterprise CEOs a long leash but a tight cultural tie that binds them to the Berkshire Way. In 2001, Brooks had an epiphany in which it decided it could not sustain growth in the athletic shoe business if it was going to chase the volume price points and go up against major players such as Nike and Asics. The company, which did about $60 million in revenue at the time, exited about $15 million of that business by abdicating the cheap-shoe sector in favor of higher-end, highly engineered products retailing between $90 to $160. Today, it has annual revenues just under $480 million.
“We were 8th or 9th or worse at everything we were playing at,” recalls Weber. “We were a very small brand in a very large category, and we were overspent by our competitors in every space, from R&D to marketing.” The firm concentrated on what it did best—running shoes. No lifestyle or family shoes. It treated the product with the same technical-performance focus that manufacturers of ski boots practice.
“Everybody has a relationship with their shoe, and so the shoe is a pretty important piece of equipment, even if you’re just running two or three days a week,” Weber says. Fifty million people say they run for fitness and an even greater number say they walk for the same reason. The athletic-footwear market is estimated globally at $8 billion. The average runner has 2.6 pairs of running shoes. Over 80 percent of Brooks’ business is running shoes; the rest is athletic apparel. Due to high growth in its U.S. market, the domestic vs. non-U.S. split in its business is 50-50.
In the interview to follow, Weber discusses the future prospects of being a premium player in this huge, global arena, as well as his experiences as a Berkshire Hathaway portfolio CEO.