Crocodiles on your feet
I still remember my reaction the first time I saw a photo of a pair of Crocs Inc (NASDAQ: CROX). At the time, I didn’t know if it was a joke or a fashion meme, as I really refused to believe that footwear with that design existed. But it didn’t take much research to realize a harsh reality: Crocs were real, and they were selling in the millions. I still didn’t understand what their function was or what needs they were intended to meet; I just knew for sure that I would never wear them in my life. Obviously, I had no way of foreseeing that a few years later, a global pandemic would force me to stay much longer than usual at home, causing me to pay more attention to my comfort and well-being. And almost in the blink of an eye, I was greeting the pizza delivery man wearing my new black Crocs classic. But what is it that makes this shoe, considered the ugliest in the world, sell millions of pairs? The answer seems to be: Comfort.
Back in the year 2000, three friends were travelling in the Caribbean and had the idea of designing a shoe that would be comfortable for sailors, that would provide firmness and at the same time solve the problem of “wet shoes.” So they set to work, and in their search for new materials, they came across the Canadian company Foam Creations, responsible for designing a foam resin that would later be patented as “Croslite.” It has very interesting properties for use in footwear. It adapts its shape when it receives heat; therefore, it moulds to the foot by means of the same human heat. It is antimicrobial, odour-repellent, non-toxic and quick-drying. All this combo, coupled with an extravagant design, attracted attention at the 2001 Fort Lauderdale Boat Show, selling only 200 pairs made so far. Just one year later, the Crocs brand (NASDAQ: CROX) was created, and two years later, it bought 100% of Foam Creations to secure full ownership of its main raw material: Croslite resin.
The company enjoyed explosive growth. By 2007, it was selling an average of 50 million pairs of Crocs shoes a year, and major celebrities were joining the trend. But 2008 would bring a slap in the face that would shake the company’s continuity. The plan had been too ambitious, and the expansion too rapid. Factories and stores all over the world and an almost infinite variety of designs were saturating the market and added to the economic crisis of 2008; everything began to collapse. Fixed costs were generating losses that reached $200 million dollars in just one year, so the investor group Blackstone Inc (NYSE: BX) decided to rescue the company by providing that capital and demanding drastic changes to reverse the crisis.
The re-planning included a series of measures to eliminate fixed costs, such as closing the company’s own factories and outsourcing manufacturing, closing unprofitable stores, and discontinuing hundreds of models with low turnover, returning to the basics of the Classic model. The strategy began to generate positive results, and little by little, the balance was regained, leading to profits again. So much so that Crocs Inc (NASDAQ: CROX) expects to generate $5 billion dollars a year by 2026.
It is currently carrying out numerous co-branding strategies with designers, show business figures and prestigious companies, and together with them, it is launching the most extravagant limited editions, such as the “Rise N’ Style” collection planned together with General Mills Inc (NYSE: GIS) to pay tribute to its mythical breakfast cereals. On the other hand, it plans to become a zero-carbon company by 2030, for which it has joined forces with the chemical company Dow Inc (NYSE: DOW), and through Ecolibrium technology, is manufacturing Croslite resin with hydrocarbons extracted from renewable resources and waste products.
The outlook for the future looks encouraging. Over the years, it has added new products to its inventory, such as eyeglasses and socks. It also acquired the Italian footwear company Heydude in a bold expansion strategy that cost $2.5 billion dollars. On the other hand, it managed to create a loyal community of followers that every October 23 celebrates “Croc day” as a tribute to their favourite footwear. This past October 2022 was special, as the company celebrated its 20th anniversary in what it called “Croctober” and gave away tens of thousands of pairs through online sweepstakes and an event held in the Roblox Corp (NYSE: RBLX) metaverse. Not bad for the company responsible for creating the world’s ugliest footwear.