ON RUNNING GOES PUBLIC AND RAISES USD 746 MILLION IN IPO

©Outside Business Journal

When Swiss-based footwear company On Running debuted on the New York Stock Exchange Wednesday morning, it did so in style—while also staying true to its mission and brand. On’s founders, along with about 100 other runners, jogged along the Hudson River en route to Wall Street, where the company’s leaders rang the NYSE’s opening bell, officially making their business a publicly traded company.

In a world where sports, life, and business mix like never before, it’s no surprise that both audiences appreciate products with performance DNA that can stretch far from the track. On successfully bridges the gap between a highly demanding performance audience and culturally obsessed lifestyle consumers. Today, On is a global brand, resonating with customers in more than 60 countries. On’s half-year net sales for 2021 grew 85 percent to USD 342.5 million compared to the same period in 2020. OBJ will start tracking the company’s sales and profit numbers beginning with its first earnings report later this year.

With its IPO, the brand offered further proof that outdoor and athletic consumers aren’t the only ones buzzing over the company. So are investors. On priced its IPO of 31.1 million shares at USD 24 a share—up from its initial expectations—for an initial raise of USD 746 million. The brand has an estimated market value of USD 7.3 billion based on the number of outstanding shares listed in U.S. Securities and Exchange Commission filings. The company’s first day on the stock exchange didn’t disappoint. On shares spiked USD 11, or 45.8 percent, to USD 35 at market close Wednesday. The business is trading on the NYSE under the ticker ONON. It left the Swiss firm valued at around USD 11 billion by the end of the day.

Olivier Bernhard, Caspar Coppetti, and David Allemann launched On in 2010 in Zurich, but the brand expanded beyond Switzerland quickly. According to a report in Forbes, On now has more than 1,000 employees in nine offices, including its largest in Portland, Ore. On sells shoes in more than 60 countries, with North America now its biggest market, accounting for 49 percent of its business. The brand’s global footprint includes Europe, Asia, Australia, and Latin America. Though the brand is in 8,100 retail doors, On’s direct-to-consumer business accounts for 37 percent of revenue.

Not only was the brand’s bell-ringing Wednesday morning different from the norm, but On’s formal announcement about the IPO also stood out. Gone was the traditional press release with On’s financial figures lined up above a pithy quote from its leadership team about the magnitude of the day. Instead, the brand wrote about its business model in a series of vignettes—about its innovation, its goals of capturing a wider audience, its “explorer spirit,” its mindset to “dream on.”

In 2019 Roger Federer invested an undisclosed sum in the company in 2019. The 20-times Grand Slam winner teamed up with the company to develop the Roger Pro tennis shoe. The tennis player has worn the shoes at recent tournaments including Wimbledon. On also makes a 100% recyclable brand of running shoes, called Cyclon, made from castor beans. The shoes are available only on a subscription basis and have to be returned to the company for new ones once they wear out.

On shoes have gained interested through its cushioning system dubbed “CloudTec,” made up of individual hollow rubber pods that stud the sole. The result is a vaguely cleat-like silhouette. Whereas Nike’s founding myth centers around University of Oregon track coach Bill Bowerman mucking about with a waffle-iron, the story here is that a retired Swiss triathlete named Olivier Bernhard had his eureka moment by cutting up a garden hose and affixing the pieces to the base of his sneakers. Bernhard, who is one of On’s three co-founders, was dissatisfied with all the running shoes on the market and felt he could do better. Things got off to a promising start. One of On’s early prototypes won the award for best new product at the 2010 ISPO, the world’s largest sportswear trade show.

Although the brand initially focused on selling its product in running specialty stores like JackRabbit, its direct-to-consumer business has steadily grown and currently accounts for just under 40 percent of sales worldwide. Most of the latter comes from e-commerce, although last year On opened a new flagship store in New York City, which I recently visited. On the professional side, the attention to grassroots is manifest in the On Athletics Club, an elite running team that launched last year and is based in Boulder, Colorado. On is doing what every brand that has been successful has done, which is support the grassroots on the professional side. By doing that, they are able to capture the dream.

This aspirational ethos is also evident in other areas of On’s business. A major gambit here is “the Cyclon,” a fully recyclable, plant-based running shoe that was initially supposed to launch this fall, but which recent COVID-induced supply chain issues have postponed. The shoes will only be available via a subscription model, in which customers pay USD 30 a month and receive fresh pairs when they need them, while sending back the used product. It’s a radical idea, one whose success will ultimately depend on getting enough people to sign up to make the concept viable. Notably, the Cyclon does not feature CloudTec, presumably because a more complex design precludes making an easily recyclable product. How do you convince people to consume less while buying more of your product? Time for that vaunted Swiss efficiency to show what it can do.