New Balance CEO talks athletic shoe technology, growing the brand, and leadership

before a pair of the iconic New Balance 990 can make it out of the box and onto your feet more than likely it was boxed here in Lawrence Massachusetts New Balance the third largest sneaker brand in the United States is privately owned and has a made in USA operation unlike any other sneaker and athletic footwear manufacturer at its Helm is Joe Preston and he's hedging his bets against an eventual dad shoe decline with consumers they're looking for new they're looking for fresh they're looking for authenticity those are all elements that we're trying to deliver and present to them Preston began his career at the company in 1995 as a senior product manager and has risen up the ranks being promoted to president and CEO in 2018 even with its success and popularity New Balance places fourth behind Puma Adidas and Nike but when it comes to revenue growth New Balance has outpaced all three Giants with a 23% increase between 2022 and 2023 that growth fueled by the demand for retro sneakers selling directly to Consumers brand Partnerships with world champion athletes and music Superstars and international growth has put new balance on the map in virtually every corner of the world I look at our competition and I see opportunity we met with Preston at new balance's sports research lab in Boston to unpack how he plans to unseat their competitors and his vision for the Brand's next EV [Music] pollution since 2021 new balance's Revenue has grown around a billion dollars a year for the last three consecutive years hitting $6.5 billion in annual sales in 2023 Preston's goal is to hit1 billion in sales in the next few years but can he maintain new balance's momentum and stay in the athletic shoe race let alone win Preston is banking on Innovative materials to get New Balance across the Finish Line when you think about your top priorities as CEO what comes to mind for you we've been on a a growth trajectory here for a few years now and you want to make sure your systems and your processes can hold up to that growth what is the product that excites you the most right now that you know is coming out of facilities yeah like this it it's probably the one I'm wearing this this SC Elite okay pop it up there so we can so we can see it this is the fuel cell super comp Elite V4 it has a midsole made with peba or polyether block amide a lightweight and bouncy foam that's known for its energy return and responsiveness this is the material Preston sees as the next big win for New Balance I had the opportunity to test it myself we're going to be able to capture all of the force that your foot is putting on during your run we have 20 plus cameras around here which will be able to capture your form I feel like it's it's rolling perfectly with my foot too as I'm making contact to the ground so you've got so many different sensors that are in this room how do you take all of that data and synthesize it into what's going to be best for the athlete well you have the quantitative data from the force plate the qualitative data from the cameras and from conversations you package that together right we want to make sure that we're getting that comprehensive look at you as a runner that combined with the quantitative data is really how we can package something to our designers to say this is what we might want to change or influence New Balance needs to find a new home run to replace its iconic dad shoe Preston is investing in materials like peba to drive the company's growth what is that next chemical compound that you're really experimenting with now that gets you excited about the future for New Balance we do believe that the next big revolution is is going to come in materials I fundamentally believe that and I think it'll come plant-based or something that will revolutionize the industry creating the next material that will transform the athletic shoe industry is not without obstacles just last year Nike filed Federal lawsuits against New Balance and Sketchers for patent infringement the lawsuit says that New Balance has likewise used Nike's flynet Technologies without authorization Nike claims new balan's Fresh Foam fuel cell and other lines violate their patent rights what goes through your head when you have companies that are trying to say hey you guys copied what we're trying to do intellectual property is a key element of a company's assets so we want to protect our assets and likewise if we feel companies are overstepping their bounds when they come after us then we're going to defend ourselves New Balance and Preston are betting on a future where technology materials and Design meshed together to create the shoes of the future like its competitors though that also means keeping customers fitted in cool retro kicks like the 990 we have the 990 the original 990 or 996 here fashion Canam and flow but this remains a core item for so many people around the globe the 990 V1 debuted in 1982 and is now in its sixth iteration the sneaker is a part of New Balances made in USA running line meaning it contains a domestic value of 70% or greater domestic manufacturing and local community are key components of the company's value stream as new balance is the only major athletic shoe company to maintain factories in the United States there's a ma in USA strategy that New Balance can really tout for itself in this very competitive landscape why is that so important to the brand made in USA is important to the brand from a community standpoint from a quality standpoint the craftsmanship that comes comes for our from our Associates been making these products but we've been in these communities making product in Lawrence Massachusetts for more than 40 years we know that the product that we're producing the impact it can have on people that are running and exercising and we also know the impact that it can have positively with the nonprofits and helping those communities Thrive and it's been a a perfect storm of consumers looking to spend plus sneaker culture reinvigoration over the past couple years as well have you ever woke up one day and just just thought to yourself why is there so much popularity or or were you shocked by the market demand for Silhouettes that debuted in the 80s and 90s there's always been an appetite within athletic footwear to look to the Past New Balance a more intelligent approach to building shoes why don't New Balance shoes come with pumps discs or other gimmicks to make them fit better because they fit better to begin with if you go back into our archives and you want understand that these products that we introduced were state-of-the-art the 990 was the first $100 running shoe and there's multiple models in there that were worn by the best runners in the world so that's a discovery item and I think our designers do a great job of developing new product and then taking some of our old classics and reimagining them and the consumer is really gravitating towards it we're seeing it in our Google search which is up significantly and has been for three consecutive years those Trends even extend to stockx according to the online Market Marketplace reseller new balance is among the top 16 retro and running Silhouettes Shoppers were obsessed with in 2023 the New Balance 1906 D had the second biggest year-over-year spike in searches on the [Music] site Sydney has she's a world record holder and she comes into the Olympics as raining champion in there so this has been designed with her and our Innovation team consumers are also gravitating toward New Balance because of their brand Partnerships a business strategy New Balance has had a Fickle relationship with we do have a history Beyond running with athletes we were the first ones to sign an NBA player to a million dollar contract it was James Worthy back in the day and then we we went away from endorsements for quite some time by the late ' 80s they were out of the sponsorship game adopting an endorsed by no one philosophy at New Balance we don't pay celebrities to wear our shoes we got back into it through baseball today about 20% of major league players wear New Balance and since 2018 New Balance has seen significant wins with their sponsored athletes like Coco goof sh Otani and Sydney mclin how have athlete Partnerships really helped with New Balances story in success and and a broader turnaround as you remain relevant with consumers I definitely think it's helped get the brand younger it appears teens are gravitating toward New Balance according to a 2023 Piper Sandler survey New Balance surpassed Vans as the number four favorite Footwear brand gaining about 200 basis points of Mind share year overy year I think you want to find athletes that you believe share the same values that you have as an organization and I think we have but you have to do it in a meaningful way so every single relationship that we have with an athlete or with an ambassador we make sure that it's curated so it's not just a roster that we're bringing their stories to life although new balance is a Boston based brand it's also a global Powerhouse with over 4,000 retail locations worldwide more than Nike and Adidas combined and before becoming CEO Preston spent several years managing the brand overseas as vice president of asia-pacific and Executive Vice President of international he says that time shaped his leadership style sign signicantly that's where I learned that the role of a leader is to enable and facilitate not audit and control so enable and facilitate is how I would describe my leadership I always love hearing about the advice to my younger self what do you wish you could tell young Joe you know I think patience is uh is always one that I could look back on and make sure that you were given that advice but I tell any person that they're trying to start out in their their careers is to try to find a company that's growing and that has Soul no pun intended and New Balance has both of those things you need to find a company that has a good culture a place that you can learn develop and grow and be valued as an associate soul in two ways you got the so of the shoes you got the soul of the company what is the soul of New Balance that you want to ReSound throughout the walls of the research lab the walls of the corporate offices well Innovation it's throughout our offices all the experiences that we have with the consumer Innovation is an important part and within that you're going to fail so you got to have an environment that promotes Innovation but also recognizes that not all of them are going to be [Music] successful we finished 2023 at 6.5 billion about a third of it's in the United States about 2third of it is outside of the us earlier than Year New Balance celebrated 35 years in Japan a partnership that dates back to 1988 how did that influence the decisions that you brought back to the us as well well everyone's goal is to be a global brand the top sellers are the top sellers everywhere but that doesn't mean the consumer is getting the information the same way it doesn't mean they're getting the right cues so you got to make sure that those nuances are in place so that you can benefit from it let's talk a little bit more about the community aspect and why Boston and Boston Landing specifically is so important for New Balance this commitment to Austin Brighton into Boston and the community has been here since 1972 today within new Mass Boston we've created and undergraduate degree program in sports leadership that we're proud of we're in the Celtics Arena right here the practice facility and we have a partnership with them that involves the community next door is the Bruins practice facility we have a relationship with them within the community and then the track that we also were in outside of the 90-day window of indor track that facility is full all year long with Community programs when you think about the next 5 years and being able to continue to top the results that you've seen here is that sound daunting to you our Future's bright we have so much room to grow in every single market around the globe in the areas that we are in whether it's basketball or Global football or baseball or running so we're just trying to stay focused on that and if we do that we think we're going to be able to continue to grow you and I have talked at length in the past about whether or not we could ever see a new balance IPO Deckers made their way public and has seen the success with some of their brands you've seen ammer Sports as well is this the opportunity where in the legacy of an and Jim Davis they say it would be nice to maybe take your company public they've had the company private since they purchased it back in 1972 that's over 52 years ago the company was founded in 1906 has been private since then and I think that's going to [Music] continue

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Id: 1nKhJkyUcrE

Length: 13min 36sec (816 seconds)

Published: Thu Apr 11 2024