New Balance has opened its fifth manufacturing facility in North America. This one is in Methuen, Massachusetts.
Source: New Balance
While many retailers are struggling to maintain ties with overseas suppliers and manufacturers, one is doubling its presence in North America amid pandemic uncertainty and shaky foreign ties.
New Balance, a privately held company known for its cushioned sneakers and retro-inspired training equipment, has opened a manufacturing facility in Methuen, Massachusetts, the company announced Monday. The move strengthens its reliance on North America for manufacturing as companies seek to navigate a blocked global supply chain, said President and Chief Executive Joe Preston.
The move comes as prominent business leaders ponder whether globalization as we know it is coming to an end. Larry Fink, chairman and chief executive officer of the world’s largest wealth manager BlackRock, said last week that the Russian invasion of Ukraine has turned the world order in place since the end of the Cold War on its head. Over time, this could result in US companies reducing their dependence on foreign economies for growth.
New Balance said the 80,000-square-foot space recently underwent a roughly $20 million renovation.
Currently nearly 100 people work at the facility where they make New Balance’s most popular Made 990v5 running shoe. New Balance said it aims to more than double the size of its workforce there as well as its manufacturing capacity by the end of the year. It will help produce another 750,000 pairs of sneakers annually.
“It’s part of our overall mantra to control our destiny, which has really come into play in recent years with Covid,” Preston said in a phone interview. “The supply bottlenecks have certainly affected our business, but we were still able to grow [revenue] over 30% in 2021.”
The Boston-based footwear company is building on its current manufacturing capabilities in the United States. Including the Methuen acreage, New Balance has five manufacturing facilities in Maine and Massachusetts employing approximately 1,000 people. These spaces help compile its line of “New Balance Made” sneakers, which the retailer says are at least 70% domestically made and make up a limited portion of U.S. sales. New Balance said its global sales totaled $4.4 billion last year.
According to Preston, the goal is to continue growing in North America – a move that is at the core of the brand’s “Made in America” ethos.
“It differentiates us from our competition when we make products and not outsource all of our production,” said the CEO. “That helps with the quality and the craftsmanship.”
New Balance has approximately 1,000 employees in North America working at its manufacturing facilities.
Source: New Balance
The footwear industry has been particularly hit by pandemic-related supply chain disruptions, including temporary factory closures in China and Vietnam. Retailers like Nike and Adidas are incredibly dependent on cheap overseas labor and materials.
According to Footwear Distributors & Retailers of America, before Covid, about 70% of shoes sold in the US came from China. In recent years, however, a trade war between the US and China has pushed retailers to increasingly diversify their manufacturing footprint into other countries in hopes of avoiding high tariffs.
But then the coronavirus pandemic hit and factory closures hampered operators in places outside of China, including Vietnam. Russia’s attack on Ukraine has heightened uncertainty, as have the resulting US-China tensions.
Matt Priest, President and CEO of FDRA, said the unpredictability is forcing brands to make decisions on a daily basis, such as where to source their next orders.
“There’s this big geopolitical shift happening under our feet,” he said in a phone interview. “When you see what can happen in a place like Russia, where brands from across the western corporate world are pulling out together in a matter of weeks… you’re just blown away by the kind of changes taking place.”
Nike said last week that its facilities in Vietnam are all operational but that the window to bring goods from overseas to North America remains extended. It’s still taking about six weeks longer to receive goods than it did before the pandemic, the company said, and two weeks longer than the same period a year earlier. As a result, Nike said it is pushing ahead with purchasing schedules to prepare for the fall season and try to keep shelves stocked.
It might seem like the simple answer is to increase production in the US, but Priest says it’s a costly option and labor can be difficult to come by.
“If you can’t find anyone working at the coffee shop on Main Street in your hometown, you definitely won’t be able to find workers for a shoe factory,” he said. “We don’t have the raw materials. We don’t have the supply chain here.”
New Balance says it sees low turnover rates among its US factory workers. And of course, the retailer still relies on factories abroad for the rest of its production. So it faces some of the same challenges as Nike and Adidas, but can at least overcome some hurdles with a North American presence, according to Preston.
“The fact that you can get products to market faster, the fact that you can respond to consumer trends faster when you’re closer to the consumer… that’s what domestic manufacturing gives you,” he said.
And, he added, New Balance needs the extra capacity as it sees increased momentum for its running shoes and is reaching a new generation of younger customers.
New Balance is the fifth-largest sneaker brand in the US by dollar sales, with a 3.4% market share, according to data from The NPD Group. While that might seem like a small percentage, it’s behind only four rivals: Nike, Adidas, Jordan and Skechers, NPD said.
“The brand momentum that we have right now is rooted in our performance business and our lifestyle business,” said Preston. “And it’s the intersection of those two things that can really fuel some energy.”