(Bloomberg) — Peter Rea signed a sponsorship deal with Swiss sports brand On AG in 2018, after more than a decade coaching runners in Reebok sneakers.
“People were like, ‘Wait, who’s On?’” recalled Rea, who trains the ZAP Endurance elite team in North Carolina’s Appalachian mountains. Since the switch, members of his band of Olympic hopefuls have come to embrace the unique look and feel of On’s shoes. “Now, no one asks who they are,” Rea said.
That’s because On has quickly won credibility in the world of runners. And it’s increasingly capturing the hearts, and feet, of the wider athleisure-loving public. The pandemic helped raise its profile, thanks to the lockdown-inspired boom in the running, outdoor and casual clothing sectors. A cult following for the shoe’s distinctive tubular cushions on the sole—and backing from tennis champion Roger Federer—haven’t hurt either.
While closely held On doesn’t disclose earnings, industry watchers say it’s most comparable to brands like Brooks Running—a Berkshire Hathaway unit with 2020 revenue of almost $850 million—and Hoka One One—part of Deckers Brands, whose net sales last year ballooned 62% to $571 million. All three have steadily gained market share in the U.S. specialty-running retail industry, according to data from NPD Group, with On closing in on Saucony for fourth place.
These companies, of course, are still small players in the broader world of sports and athleisure wear, and they’re going up against powerful competitors with huge marketing budgets and high brand recognition. The juggernaut in the field is Nike Inc., which recently posted annual sales of $44.5 billion and has a market value of about $250 billion.
On, meanwhile, has been preparing for an initial public offering in New York that could value the company as high as $5 billion, Bloomberg reported in April, citing people with knowledge of the matter. Representatives for On declined to comment for this story.
The young Swiss company now has some 7,800 retail partners around the world, along with its own “global flagship” store that opened in New York in December. However, its roots are firmly in the Swiss Alps.
That’s where Olivier Bernhard—a former world duathlon champ and repeat Ironman triathlon winner—got fixated in the late 2000s on making a running shoe that would offer a soft landing and firm takeoff. In designing prototypes, he at one point started cutting up bits of garden hoses and gluing them to the bottom of shoes.
Bernhard soon called on his buddy and former agent Caspar Coppetti, who’d honed his branding skills at McKinsey & Co. and the ad agency Young & Rubicam. Coppetti then brought in David Allemann, a friend from McKinsey who by then was chief marketing officer for high-end design outfit Vitra and is today On’s chief executive officer.
The three co-founded On in January 2010, and within weeks notched an early victory with an award for being the best new brand at the ISPO sports conference in Munich. Their winning shoe featured On’s now signature attachments made of rubber or foam.
They are designed, the company says, to spread a runner’s weight both vertically and horizontally, creating a feeling of running in the clouds— hence the name “CloudTec.” An early reviewer likened the tubes to rigatoni pasta being stuck to sneakers.
“Just a radical, radical look,” recalls Jon Dennis of sales and distribution agency Fit Brands Ltd., who worked with the company early on when it needed help gaining a foothold in the U.K. Back then, Dennis had just relocated to England after two decades in the U.S. He’d twice won national collegiate titles in 5,000-meter U.S. track races, before working in retail for Nike and the chain of running stores Fleet Feet. Dennis wanted a line of footwear to introduce to U.K. running stores with his new company, and flew to Zurich to meet the On team.
While the shoes caught his eye, Dennis was equally impressed with the professional backgrounds of the three founders —and how focused they were on functional design. Their biggest achievement, Dennis said, is the way people seem so drawn to the brand.
“They do such an amazing job on all the other pieces,” like branding and design, “that the consumer almost wants to like the shoes before they put them on their feet,” Dennis said.
Despite the move to expand globally, the company is still capitalizing on its roots. Consider the move in 2019 to bring on Swiss tennis legend Roger Federer as a part-owner. He’s thought to have invested some 50 million francs ($54 million), Handelszeitung reported in February.
Last summer, On released the “Roger,” an all-white pair that sells for about $200. Federer wore a version at the French Open in June and at Wimbledon earlier this month. The strategy seems to echo Adidas AG’s iconic Stan Smith shoe, named after the U.S. tennis player of the 1970s.
“Federer gets them some star power and some fashion cred,” said Matt Powell, an industry analyst at NPD Group.
Another part-owner is New York -based private equity firm Stripes Group, whose founder and partner, Ken Fox, sits on the On board. Among other things, Fox saw the potential for On “to leverage social media and online marketing,” according to the Stripes website.
While On may lack the advertising war chests of Nike and Adidas, it’s garnered plenty of buzz by producing documentary films about athletes. One followed a team of refugees from Congo, Ethiopia, Somalia, South Sudan and Morocco as they trained for the Tokyo Olympics.
Another featured Ironman triathlete Tim Don, who collided with a truck just days before the 2017 world championship race in Hawaii and broke his neck. Instead of pulling out of the contract, On traced his journey back to health.
And On traveled to the picturesque mountains of North Carolina to film Rea’s team at ZAP Endurance. It captured the athletes training at the camp and ultimately competing in Atlanta in February 2020 at the Olympic trials marathon.
None of Rea’s athletes made the team for Tokyo, but he’s hopeful that will be different next time around. After all, he joined On three years ago and knows what progress looks like.
“Even in that time, they’ve advanced their technologies and I think, frankly, listened to the real runners of the world,” Rea said, “which a lot of brands don’t do.”
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