Two heirs to one of Germany’s best-known footwear brands emerged as billionaires after agreeing to sell a majority stake in closely held Birkenstock to a private equity group backed by the world’s third-richest person.
Brothers Alex and Christian Birkenstock are worth an estimated $1.7 billion each based on the $4.87 billion value implied by the sale of up to 70% of the business to L Catterton, a firm backed by the billionaire chief executive of LVMH, Bernard Arnault, and his family’s holding company, Financière Agache.
The deal was confirmed by the company last week, which said the brothers, who hold equal stakes, will sell more than half of the company and remain minority shareholders once the sale is concluded. German newspaper Der Spiegel reported that the brothers will sell from 60% to 70%. A spokesperson declined to disclose details of the transaction.
Neither of the brothers has much to do with the business these days. Alex Birkenstock, 52, has instead reportedly spent time collecting properties in cities like Miami and New York and developing a sprawling home on Lake Tegernsee, a spa town in southern Germany, which includes a two-story underground parking lot with 20 spaces. Christian, 48, is said to live hours away from the company’s headquarters. A third brother, Stephan, sold his stake in 2013.
The shoes—favorites among hippies and grandads around the world—have been made by the family for nearly 250 years. Church records from the German town of Langen-Bergheim identify Johann Adam Birkenstock in 1774 as a “subject and cobbler” whose great-great-grandson Konrad opened two shoe stores in nearby Frankfurt and started making and selling flexible footbed insoles. The arches were contoured, rather than flat, which provided additional support.
Demand for the shoes was so great that he relocated to a much larger factory in 1925 to boost production. His son, Carl, joined the business as a teenager and went on to become a leading authority in podiatry circles, launching training courses and writing a textbook about what was needed to create comfortable footwear and promote a healthy gait.
The company began making its trademark sandals in the 1960s, under Carl Birkenstock’s son Karl. The first style, called the Madrid, boasted a deep and flexible footbed made out of cork and latex and was billed as a shoe that could be worn during exercise. They began selling in the U.S. in 1966, after a customer using the shoes to help alleviate her own foot pain began distributing them in health-food stores.
The three brothers took control from their father in 2002. It didn’t go well. After several decades under the helm of a singular, strong-willed family patriarch, each sibling had different visions for the company and struggled to manage dozens of competing subsidiaries their father had created to maximize efficiency in carrying out certain functions like manufacturing and distribution.
To add to the family drama, Christian’s ex-wife Susanne launched a rival shoe brand in 2003 after 16 years of marriage and two children. Called Beautystep, it was marketed as a shoe designed by Susanne Birkenstock and was supposed to make the wearer feel like they were walking on the beach, designed to stretch the leg muscles and promote blood circulation. An ugly legal battle ensued, with a court eventually ruling that she could sell her shoes as long as she didn’t prominently display the family’s storied last name.
In 2013, the brothers decided to step back. Stephan Birkenstock sold his stake to his two brothers and likely pocketed several hundred million dollars, based on the company’s reported financials and multiples for similar publicly traded companies at the time. His brothers hired Oliver Reichert as the first outsider to run the business after a chance encounter—Christian Birkenstock reportedly met Reichert after his art dealer brought him along while dropping off some paintings and the three ended up grabbing beers. Reichert, who had spent the previous decade at a German sports television channel, had no experience in the shoe industry. His main point of reference: He had worn Birkenstocks as a kid. To help run the company, longtime employee Markus Bensberg was named co-CEO.
The new management team quickly shed the company’s 38 separate entities in favor of a more streamlined structure. They expanded production, hired more salespeople and began offering the clunky shoes in edgier colors and styles, which helped make them a hit with celebrities and fashion-forward Millennials. Sales rose by double digits every year, ultimately tripling to $870 million (721 million euros) in 2019.
Today, Birkenstocks are sold in more than 100 countries and the company employs 4,300 people around the globe. It sold nearly 24 million pairs in 2019.