The Timberland Company - Company Profile, Information, Business Description, History, Background Information on The Timberland Company

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History of The Timberland Company

The Timberland Company's ascension in the rugged footwear industry was sometimes rocky, but savvy marketing, excellent products, and extraordinary luck eventually turned an obscure bootmaker into a worldwide symbol of rustic chic. The first hint of widespread interest came in the early 1980s, when Italian trendsetters made Timberland hiking boots the ultimate in style and sophistication. The resultant European buying frenzy sent American retailers scrambling for Timberland footwear, sparking the first of many fashion booms. Although Timberland became a household name through a fluke of fashion, the company's outdoor footwear and accessories also became synonymous with quality, dependability, and a return to nature. In 1993, Timberland became the leading producer of rugged footwear in Italy and the United States with net sales of $418.9 million. Continuing its spectacular climb in 1994, Timberland reached $637.5 million in net sales by year's end, an astonishing 52 percent leap from 1993.

In 1952 Nathan Swartz, a shoe stitcher by trade, bought half-interest in the Abington Shoe Company of Abington, Massachusetts. Within three years, Nathan acquired the remaining interest in the company for $20,000 and brought his youngest son, 19-year-old Sidney, aboard. Within the year, Nathan's elder son, Herman, returned from a stint in the navy and joined the business too. For the next decade, father and sons produced and sold handmade footwear to discount outlets and stores that put house labels on them. In 1965, after researching alternatives to the expensive art of hand-stitching soles and uppers together, the Swartzes purchased an injection-molding machine--a new binding process that chemically molded and attached soles to uppers. Injection molding not only produced footwear for 50 cents less per pair, but it also allowed Abington to charge about 20 cents more because the new footwear had some water resistance. Now selling boots for $5.75 a pair wholesale, Abington was able to generate a small profit rather than just breaking even.

In 1968 Nathan retired, leaving Abington in his sons' capable hands. Two years later, the brothers moved the company to New Hampshire and set their sights on producing tough, thoroughly waterproof boots capable of standing up to the worst weather and the ravages of time. Surprisingly, they found a prototype right under their noses--Abington's maintenance man wore rugged workboots year-round that were comfortable, durable, water-resistant. The boots, made in Canada and distributed in the United States by the Vermont-based Dunham company, inspired fierce loyalty in their owner. The Swartzes bought a pair, dissected them, and were determined to make their own, even better version.

After persuading Goodyear to design a synthetic rubber sole capable of withstanding the harshest elements, the Swartzes used injection molding to bond the polyurethane soles to genuine blond leather uppers. To test for water resistance, the brothers tried everything from weighting boots with metal and submerging them in a bucket to filling the boot itself with dyed water and waiting for leaks. The result was Abington's first truly waterproof boots, which the company began marketing under the brand name "Timberland" in 1973 and guaranteed as water-resistant. Targeted at blue-collar workers and sold in Army-Navy stores, Timberland boots were a serendipitous hit on college campuses.

Never big on advertising, Abington hired the Boston firm of Marvin & Leonard to help market Timberland boots. Len Kanzer, the agency's president, convinced the Swartzes to appeal to upscale buyers via ads in the New Yorker. As a result, Timberland boots sold remarkably well at high-brow retailers like Bergdorf Goodman, Lord & Taylor, and Saks Fifth Avenue, and the company produced 5,000 pairs in 1974. By 1975, production jumped to 25,000 and sales neared the million-dollar mark. By the late 1970s, the company was producing 400,000 pairs of Timberlands annually, which prompted the Swartz brothers to consider expanding their product line. Abington Shoe Company's principal output was now Timberland boots, with no-name boots amounting to only about 20 percent of 1978's production. Now on the map with its own brand, Abington discontinued manufacturing for others and concentrated on Timberland boots.

While diversifying was indeed a gamble, Herman and Sidney decided to risk it. First, taking full advantage of their rugged footwear's brand recognition, they renamed the Abington Shoe Company as The Timberland Company and incorporated in 1978. The newly christened company then introduced its first casual shoes for men with handsewn uppers, solid brass eyelets, and water-resistant full-grain leather. Next came 1979's boating or "deck" shoe, which went toe-to-toe with the industry leader--Sperry's perennially popular Top-Sider brand. Timberland aggressively marketed its product, polling dozens of sailors and eventually winning endorsements from hardcore yachters William F. Buckley Jr. and Ted Kennedy.

Also in 1979, an Italian goods distributor named Giuseppe Veronesi visited Timberland's New Hampshire factory and ordered 3,000 pairs of boots. Veronesi, the president of Ritz Firma, a subsidiary of FinRitz SpA (which was responsible for the Louis Vuitton brand and Ralph Lauren's Polo line for women), figured Timberland boots would be a perfect fashion accessory for well-heeled Italians. After testing the market in haute couture shops in Milan and Rome, Veronesi soon began selling Timberland boots in boutiques throughout Italy. Though Timberland products were still selling well in America's pricey department stores, the Italian craze caused even more U.S. retailers to jump on the Timberland bandwagon. Now grossing in the neighborhood of $14 million, Timberland was becoming known worldwide. Boot production rose to 1.8 million pairs in 1983, with a price tag between $70 and $80 per pair in the United States, and nearly double that in Europe.

In 1984, Timberland was flushed with success and poised for more. As a company on the move, moreover, it had caught the interest of several acquisitive conglomerates. The VF Corp., which had holdings including Lee Jeans, was the first to approach the Swartzes with a buyout offer of $60 million. Herman, nearing 60 years of age, wanted to accept the package and retire. Sidney, however, was not interested in selling and wanted Timberland to raise its own funds for a major expansion. Before the brothers could reach a compromise, the offer was withdrawn. Despite what may have been a lost opportunity, it was business as usual at Timberland. The company planned a further expansion into international markets, hoping to capitalize on its continued boom in Italy, where 490,000 Timberland boots were exported in 1984. Soon Timberland began shipping products to France, Germany, Hong Kong, Switzerland, and Turkey. Not only did Italian sales continue to climb, reaching 540,000 in 1985, but worldwide sales soon hit $68 million.

In the early months of 1986, Timberland was again faced with the possibility of acquisition. This time a former partner of Morgan Stanley & Company proffered a bid of about $60 million. Again, the brothers were at odds: Herman for the buyout, and Sidney steadfastly against it. In order to reach an agreement, Sidney sought financing and came up with $34.5 million from Merrill Lynch to purchase Herman's share of Timberland for roughly $30 million. Herman left Timberland and retired, while Sidney became president and CEO of the company.

After 30 years, Herman was no longer at his brother's side as Sidney moved forward with both domestic and international expansion. In 1986, Timberland hoped to claim $20 million worth of the lucrative Japanese consumer goods market. Sidney's 29-year-old son Jeffrey joined the company as head of the international sales division to help steer the company's growing Asian and European presence. Less than a year after Herman sold his stake in Timberland and retired, Merrill Lynch sold 3.35 million Timberland shares, roughly 30 percent of their holdings, at $14 each in an initial public offering. When Sidney and Jeffrey made a public offering on the American Stock Exchange in mid-1987, they kept the "B" shares, with 10 votes each, in the family, and dispersed only "A" shares, which held one vote apiece.

Meanwhile, Timberland's expansion continued unabated, and the Swartzes started to lose control of their vast empire. By rapidly introducing 160 new models, bringing Timberland's total product line to about 500, the company caught its factories unprepared. Inventory control and customer service suffered, frustrating retailers and consumers. Despite the fact that revenues climbed by 24 percent and total sales reached $85 million by the end of 1986, profits fell 14 percent to $4.8 million. In an effort to stem manufacturing and customer service problems, Timberland created a worldwide customer relations department in 1987 to make good on its commitment to quality products and service.

Also in 1987, Marvin & Leonard Advertising made Timberland the first boot producer to advertise its products on television. One memorable commercial featured rural bootleggers extolling the virtues of Timberland boots for hiding from Treasury agents in swamps. The wry ads gained plenty of attention, propelled sales, and solidified Timberland's reputation as a producer of fashionable footwear.

In 1988, the company entered the men's and women's clothing and accessories market. "Versus Ralph Lauren, we have a degree of authenticity," Jens Bang, Timberland's executive vice-president, explained to Advertising Age. The clothing, like Timberland footwear, "would perform under extreme conditions and are good-looking, too." Though sales sputtered initially, apparel and accessories eventually claimed about 20 percent of Timberland's net sales. Later that year, the company began opening specialty stores: the first on Newbury Street in Boston; a second on Madison Avenue in New York City; and a third on New Bond Street in London.

Finishing the year with profits of $8 million on revenues of $133 million, Timberland also posted record exports of $39 million. The majority of exports were still shipped to Italy--528,000 pairs of footwear worth $21 million wholesale. Despite runaway sales, however, Timberland's profit margin continued to erode; from 1987 to 1989, profits fell from $9.4 to $6.4 million. The company had too many products, too little focus, and even less corporate restraint. "I nearly drove this company under the ground," Sidney Swartz admitted to Forbes in 1989. Though his ideas and intentions were good, the reality of Timberland's rapid expansion had proved burdensome for a company still adjusting to its previous growth. "My optimism sometimes gets the better of me," Sidney said as he envisioned Timberland backpacks, canoes, and sleeping bags. "And we're not ruling out mountain bikes."

Luckily for Sidney, his son was a capable business manager. The two set out to regain control of their product line and eliminate costly manufacturing snafus. The company also stopped trying to capture two disparate markets--the fashion elite who wore Timberland boots simply for effect and the outdoor crowd who wore them to get fit and explore the natural world. Eschewing trends, the company stepped up advertising to the outdoorsy men and women its rugged footwear was originally designed for. Integrating its marketing efforts, Timberland also began to stress corporate responsibility and a growing community awareness. The company reemphasized its commitment to consumers interested in hiking, climbing, camping, adventure travel, and environmental protection by backing local and national service organizations like the Wilderness Society, the Boston-based City Year, and Alaska's legendary Iditarod dogsled race.

Timberland's growing relationship with City Year was not just public relations posturing; what began as a request for 50 pairs of boots had turned into a $1 million investment by 1992, enabling the company to expand into four states. "As a company," Jeffrey noted, "we have a responsibility and an interest in engaging the world around us. By doing so, we deliver value to our four constituencies: consumers, shareholders, employees, and the community." The company furthered this commitment by granting all employees between 16 and 32 hours of paid time off each year for community service. The Swartzes also broadened their sensitivity to environmental issues by joining the EPA's Green Lights Program, Businesses for Social Responsibility (BSR), and the Coalition for Environmentally Responsible Economies (CERES) in 1992 and 1993.

In 1989 sales topped $156 million, of which exports represented 30 percent--despite Timberland's withdrawal from China after the Tiananmen Square massacre. In 1991, 31-year-old Jeffrey Swartz was named Timberland's chief operating officer. Overseeing daily operations, Jeffrey implemented several corrective measures to restructure the company, cut waste, boost profits, and maintain shipping schedules. The biggest of these adjustments was the switch from assembly-line manufacturing to teamwork, which cut production time by as much as two-thirds. This year also featured two other milestones: the company's commencement of trading on the New York Stock Exchange, and the fall debut of Elements: The Journal of Outdoor Experience, Timberland's slick, 32-page biannual magazine. Translated into four languages and distributed in nine countries, the magazine's content was written by celebrated outdoor enthusiasts and edited by mountaineer John Harlin III.

By 1992, Timberland's print and media gambits carried the company logo and a social message, like the "Give Racism the Boot" campaign it ran in the United States and Europe. Complete with billboards in New York City, as well as t-shirts, posters, and pins (proceeds from the sale of which went to City Year), the campaign fueled company growth of 22 percent in the first half of the year. To keep its lead in the footwear and apparel industry, Timberland started retooling factories with the latest technology and applied a few tricks of the trade learned from Japanese manufacturers. "Companies that don't adapt won't be around," Sidney told U.S. News and World Report. "It's Darwinism at its best. We will adapt and we will survive." By the end of 1992, Timberland's sales topped $291 million, and its products were sold in 50 countries, 12 retail stores, and over 225 department store "concept" shops worldwide.

As the 1990s progressed, the popularity of Timberland's footwear spawned many imitators. Adidas, Nike, and Reebok all came out with rugged footwear in an attempt to compensate for sluggish athletic shoe sales. According to market analyst Scott Davis in USA Today, however, "Timberland is No. 1 in this market. Everyone else is playing catch-up." As proof, Timberland stock rose 280 percent in 1993 and was named one of the NYSE's "best stocks" by Business Week. Near the end of the year, Timberland's creative advertising campaigns once again struck a chord with television viewers when Mullen Advertising introduced its inspired Muddy Waters campaign. Rife with shots of Mother Nature's mood swings, the quirky, pun-filled commercials drew cheers from fellow agencies and consumers alike.

Timberland's 1994 revenues were even more incredible, partly due to a sizeable increase in its advertising budget, which reached between $18 and $25 million worldwide. Timberland's increasingly aggressive media blitzes paid off handsomely. The Swartzes strengthened Timberland's market share even more by slashing prices, by as much as 25 percent, on Weatherbuck casuals, with plans for more "value pricing." Domestic production climbed from 3 to 5 million pairs annually; combined with improved inventory control and faster delivery, this production helped Timberland secure more business in the American Midwest and South, the company's fasted-growing regions for the third quarter of 1993.

While several prominent athletic shoe manufacturers continued to expand their rugged footwear lines, even Harley Davidson and Caterpillar announced their intentions to join the fray. Yet Jeffrey Swartz was not overly concerned: "We transcend language and geography," he told USA Today at the end of 1993. "We represent something that's more than a product; it's also a point of view. Whether it's the '60s or '70s, whether it's grunge or hip-hop or be-bop, it still snows and it still rains and you're going to get dressed for the snow and the rain." Timberland's revenues bore this out, and the company maintained its quest to make even better products. One advance was Timberland's introduction, in January 1995, of its exclusive Active Comfort Technology (ACT), which was soon to become part of its high-performance hunting and hiking boots.

Community service, too, became a bigger part of Timberland's corporate life. The company made a $5 million pledge to City Year in 1994 and participated in several area events, including the Seacoast Hospice clean-up, a City Year-sponsored "Serv-A-Thon" at the Thurgood Marshall School in Atlanta, and work at the YMCA's Camp Gundalow in both 1993 and 1994. In the latter effort, Jeffrey Swartz and his three young sons (ages six, four, and one) were among over 175 Timberland employees who pitched in to help prepare Camp Gundalow for the upcoming summer season. "As an employee, you don't draw strength from some corporate guy making a speech," Jeffrey told a local newspaper covering the event.

Entering the mid-1990s, the Swartz family had evolved from producers of sturdy, unglamorous work boots to become the titans of the rugged outdoor footwear market. The company experienced rough times during the late 1980s, as Sidney explained to USA Today: "Frankly, we didn't have a disciplined approach or business sense about us," he admitted. "We were very driven, but didn't know where we were going." Timberland overcame this difficult period, however, and appeared firmly focused on the future.

Principal Subsidiaries: Timberland Aviation Inc.; Timberland Direct Sales Inc.; Timberland Europe Inc.; Timberland International Inc.; Timberland Manufacturing Co.; Timberland Overseas Co.; Timberland Scandinavia Inc.; Timberland World Trading Co.

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Further Reference

Angrist, Stanley W., "Betting the Company," Forbes, April 25, 1983, pp. 109--110.Benoit, Ellen, "When the Shoe Fits," Forbes, September 16, 1985, p. 194.Conklin, Michele, "How Three Shoe Manufacturers Found their Pots of Gold," Madison Avenue, October 1985, p. 49--50.Cook, William J., "Four Better Mousetraps," U.S. News & World Report, Aust 24, 1992, pp. 52--55.Greenwald, John, "Timberland Hits Its Stride," Time, November 29, 1993, p. 63.Hill, Julie Skur, "Japan is Next for Timberland," Advertising Age, October 27, 1986, p. 62.Lippert, Barbara, "Blues Power," ADWEEK, November 15, 1993, p. 42.Maremont, Mark, "Timberland Comes Out of the Woods," Business Week, September 13, 1993, p. 78.Meeks, Fleming, "Sidney Swartz' Dolce Vita," Forbes, July 10, 1989, pp. 56--57.Rosato, Donna, and Judith Schroer, "Timberland Steps Into Fashion, USA Today, December 14, 1993, p. B1.Sloan, Pat, "Timberland Tries on Clothes," Advertising Age, Augst 22, 1988, p. 51."Timberland Launches Anti-Racism Ads," Sporting Goods Business, February 1993."Timberland: Walking Tall," The Economist, Augst 4, 1990, pp. 56--57.

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