On: The fastest-growing company in the sporting goods industry

• On is the fastest growing company in the sporting goods industry

• Success comes from a product designed for runner’s needs

• A strong running brand supports the story of the product

• A focus on sustainability gives conscious consumers what they want

On: The fastest-growing company in the sporting goods industry

For the first time in the company’s history, in the financial year 2022, On exceeded the billion mark. In the end, a turnover of CHF 1.22 billion (€1.23bn) was recorded – 69 percent more than the previous year. Ebitda increased by an incredible 71.4 percent to CHF 165.3 million. With these numbers, On is now the fastest-growing company in the sporting goods industry.

On is active in over 60 countries and has 19 of its own stores and an online shop. In addition to shoes, the brand also features clothing.

Over the past ten years, the Zurich-based company has increased its turnover by an incredible 75 percent on average.

Chief Financial Officer and Co-CEO Martin Hoffmann, who joined On ten years ago in July 2013, reflects on the company’s success. “I don’t know of any sporting goods company that has grown as fast as we have in the past year.”

Recent results have reconfirmed this. Once again. In the first quarter of 2023, turnover increased by 78.3 percent to CHF 420.2 million (€418.6m). And Hoffmann has raised the turnover target for the whole year to “at least CHF 1.74 billion” (€1.79b). 

The Swiss company is thus closing in on the largest sporting goods company, Adidas, which has not released any concrete figures for the Running sector, but has said sales will be around €2 billion.

According to one analyst who does not want to be named, On will overtake Adidas by 2024 at the latest. Some banking experts are predicting that by 2034, On sales are expected to skyrocket to CHF 16.98 billion – 15 times as much as last year.

Success built on a product for runners by a runner

None of this success was planned when Caspar Coppetti, a brand builder, founded “On” 13 years ago together with David Allemann, a marketing visionary and now Executive Co-Chairman, and Olivier Bernhard, a former professional triathlete who also now serves on the Executive Board. Their plan was to maybe achieve €20 million in turnover at some point.

It began with cutting garden hoses. Bernhard, an ex-endurance athlete, had problems with his Achilles tendon but couldn’t find suitable shoes to continue doing sports. So he glued hoses to the bottom of his soles. What sounds like a joke worked.

Other manufacturers at the time would often just use a thick mattress as a sole and sell this as a top-line shoe. Bernhard, together with a Swiss engineer, instead developed a cushioning system that allows a soft landing and dynamic push-off when running. Like a hinge, the system can absorb the impact forces not only vertically but also in forward movement. As Coppetti explains it, with this product, “We are simply not comparable to anyone in the sporting goods industry.”

Coppetti used to ask himself, “What if we’re the only ones who think our product is really good?” So twice a year, he and his colleagues stand on the most popular running routes around the globe and count what products people are running in Berlin, Boston and Bilbao.

“In the meantime, we can, fortunately, say that a few others besides us also find our shoes quite good,” explains Coppetti, adding, “We all have just one goal here: we want to be number one on runners’ feet.”

On Running: An exercise in brand building

The innovations of On perhaps stem from the fact that not a single board member comes from the sporting goods industry.

The On story, as Markus Götting from Focus once wrote, is the “wet dream for everyone who deals with brand building.” You first have to come up with the idea of “walking on clouds.” Once On had that idea, they did everything differently, with its special design and very reduced aesthetics.

“In the beginning, we really felt like aliens in the sporting goods industry,” says Coppetti.

His only problem from the start was that the shoes looked too good. “Okay, On items look pretty cool. But if I want to go jogging, I’d rather take real running shoes,” he says, explaining the thinking of many people. Consumers were buying the high-performance shoes and then wearing them in the city to go shopping. That bothered Coppetti massively.

On in Germany and Switzerland: Still a lifestyle brand 

In Switzerland and Germany, On is still partly perceived as a lifestyle brand. In the USA (On’s biggest market) and England, however, On is a classic performance brand. 

“Everything we do, we do to bring running culture further forward,” explains Hoffmann. Whenever possible, he is also outside, with jogging and cross-country skiing his preferred forms of meditation.

To build this image of a performance running brand, On has a roster of elite athletes across track and field, road, triathlon, trail running and tennis. Most recently, On partnered with Norwegian triathlete Gustav Iden, who, shortly after the announcement, claimed the Ironman World Champion title in Kona, Hawaii. In tennis, Roger Federer has been a shareholder since 2019 and has also co-produced his own tennis collection.

So when will On (finally) become the market leader? First, for Coppetti, it is important that On grows healthily and profitably: “We achieve above-average margins and can therefore invest more than others. Whether and when we will break any sales records, however, is honestly less important to me because these are only interim time measurements, to use the image of a running race.”

His continuing goal for On? “We put the fun into the run.”

On taps into consumers’ drive for sustainability

The Swiss firm is also one step ahead in terms of sustainability. While others produce shoes from petroleum, On is experimenting with non-fossil materials such as exhaust gases, waste or plants for shoe production.

Coppetti has pledged to reduce CO2 emissions by 55 percent by the end of the decade via CleanCloud. With CleanCloud, On captures carbon monoxide from industrial waste gases such as cement or steel plants. Then – similar to the brewing beer process – the carbon-rich exhaust gas is fermented with bacteria. The result, Coppetti explains, is liquid ethanol, or alcohol, consisting of carbon and hydrogen molecules. This ethanol is dehydrated to produce ethylene. On then turns this into EVA foam and injects it into the outer soles of its shoes.

The fully recyclable Cloudneo running shoe from On is made from a single polymer derived from beans and can be remade again and again from returned shoes. It is only available through a subscription scheme, retaining the valuable material within the company as well as customers. 

On has also welcomed Cyclon-T to its circular product portfolio. Like Cloudneo, the Cyclon-T is made from castor beans and is fully recyclable. When the product reaches the end of its life, it can be returned to On.

The company’s Onward resale program includes footwear and apparel, with consumers able to shop a wide assortment of pre-owned On products.

The future of On: “The best” is yet to come

Analysts see a bright future for On. Almost all investment banks unanimously recommend buying shares. Alex Straton from Morgan Stanley is particularly confident. In her study, the analyst assumes a price of around €55 in a “bull case” scenario; currently, the long-running share is at €25.

Jay Sole from the Swiss UBS Bank is also more than optimistic. Despite the astronomical growth rates in the past, the analyst expects more of the same in the future. He projects growth of more than 34 percent per annum for the next five years alone.

On, the outsiders in the sports industry, continue to be bold. In recent years, the board has already earned the trust of its shareholders; together, they hold around 60 percent of the voting rights. “That means we can work strategically for the long term, and no one can kick us out or take us over,” Coppetti says with a laugh.

Coppetti quickly realized that he doesn’t always have to please everyone, concluding: “If we continue on our path so consistently, the best times are still ahead of us.”