The casual observer can be forgiven for thinking New Balance is a smaller brand than it is. After all, the 116-year-old company is best known for its shoes for the serious runner, a niche market in the sports gear world. But with sales in 2022 surpassing the $5 billion mark, five times that of its major rival Brooks Running, New Balance has shown it is successfully expanding beyond running.
Under CEO Joe Preston, a New Balance lifer since 1995, the company has made significant inroads into footwear and clothing for pro baseball, basketball, and tennis players. And taking a page from larger rivals Nike and Adidas, which have teamed up with celebrities and other brands to double-down on lifestyle offerings, New Balance has ramped up "collabs" like its current collection with Miu Miu that includes $1,050 sneakers. (Adidas' disastrous tie-up with Kanye West, which recently ended over the entertainer's anti-Semitic rants, shows these "collabs" don't guarantee success.) That, plus more growth overseas, makes Preston confident New Balance will become a $10 billion brand within a few years.
To that end, New Balance last year opened "The Track," a massive $300 million multi-sport facility near its Boston headquarters, with several tracks and areas for basketball, soccer, and volleyball, an adjustable floor for indoor sports, and a 19,000 square-foot research lab with motion capture equipment. It's a facility akin to Nike's and Adidas' on the West Coast, a sign of who Preston sees as his real competition. (While New Balance is much larger than rivals like Brooks, On, and Hoka, it is only one-seventh the size of Nike by revenue and one-fifth that of Adidas.)
"We are a running company at our core, but we have evolved beyond running," Preston tells Fortune. "It's also allowed us to appeal to a broader audience."
This interview has been edited and condensed for clarity.
Fortune: You see a path for New Balance to hit $10 billion in sales, implying branching out further into other sports. Do you still see yourself as a running company?
We have top athletes across all sports, like track and field, basketball, and others. We have [Los Angeles Clippers small forward] Kawhi Leonard in basketball. In tennis, we have Coco Gauff; in soccer, we have Raheem Sterling from the Chelsea Football Club. This has forced us to progress and develop more innovative products because these athletes will not wear our product on the field, track, or court if it's not the best. But running has always been the core of who we are. We were the first brand to introduce the 990, a $100 running shoe, in 1982, and it's a model we still have today.
So how did New Balance get into sports?
About 10 years ago, people told me, 'You're going to have trouble expanding outside of running.' But we took the same approach we took with running: When we get into other sports, we want to be the player's brand. We want to make sure that it's not hype and that we focus on the attributes necessary to succeed in that sport. Today, 25% of Major League Baseball players use New Balance.
And what can New Balance provide them that incumbents can't?
Baseball players play 162 games, nine innings, and are on their feet for hours, so we must provide comfort. For basketball, you're making the product lighter and more flexible.
You're collaborating with Miu Miu and periodically selling your sneakers at J.Crew. What do collaborations with fashion brands do for New Balance?
It allows us to introduce New Balance to a new audience and give our brand some energy. It helps that we have a performance heritage that makes us authentic from a brand standpoint. But we are a performance brand that is fashionable, not a fashion brand that's good for running.
You and your rivals update shoe models every year, but those can be incremental. What's the big leap forward in running shoes?
There's always evolution in making a lighter, more responsive, and more cushioned product. The consumer's preferences are always shifting. About 10 years ago, less was more, barefoot running was a trend, and there was less cushioning. Now it's the opposite—people want the thickest cushioning. At our innovation center inside The Track, we are working to make a best-in-class product that is lightweight, responsive, and environmentally sound.
Some sports gear companies like Nike and Under Armour don't dominate the specialty running shoe market as much as they do other sports. Why are serious runners so loyal to the New Balances, Asics, and Brooks of the world that focus on runners?
For some of those brands, their lineage doesn't come from running, so they may overlook the elements you need to succeed in the specialty running segment.
New Balance has long advocated for more 'Made in the U.S.A.' products, yet only a tiny percentage of what you sell is made stateside. Why is that?
We'd ideally like 100% of what we make to be U.S.-made, and it's quite a passion of our owner Jim Davis. Partly, what holds us back are the suppliers of materials. The whole infrastructure for the industry is in Asia, so it's a challenge. We've got good suppliers here, and we're looking for ways to develop new avenues to keep up with our expansion plans. 'Made in the U.S.A.' allows us to get closer to the consumer because supply lines are shorter than bringing it in from overseas. At the same time, we're trying to automate some elements of our U.S. manufacturing, which would help with the challenge we face today from a labor shortage standpoint.
But wouldn't your shoes nonetheless get more expensive if more were made in the U.S.? Your 'Made in USA' line currently has shoes near the $200 range, which is pricier than your ordinary shoes.
We're a big company, so there are many opportunities for onshore products. We aim to bring more of our technical running shoes here to the U.S. Manufacturing is also important for our culture. We've been manufacturing in Lawrence, Massachusetts, for over 40 years. (New Balance has five plants in Massachusetts and Maine.)
New Balance sponsors major marathons like the New York City and London races, but not the iconic Boston Marathon, whose gear sponsor is Adidas. Are you going to try to snag your hometown race one day?
The Boston Marathon has a longstanding agreement with Adidas, but we know we need to win in Boston with runners, so we know where every billboard in the city and along the marathon course is. We do a pretty good job of making sure that if you're coming to do the Boston Marathon, you know New Balance is here. And we do have two of the six major world marathons.
Get to know Preston:
- He became the chief executive in 2018 after stints as chief commercial officer, executive VP in charge of international markets, and head of the Asia-Pacific business.
- Preston is a member of the U.S. Trade Representative's Advisory Committee for Trade Policy and Negotiations, which provides policy advice on trade agreements.
- He is not a serious runner but played baseball in high school and at Merrimack College in North Andover, Mass.
