Allbirds' San Francisco-based co-founder and co-chief executive Tim Brown returned to New Zealand to see his parents for the first time in two years last month. The former All Whites captain also sat down with the Herald to discuss life as a public company, why bricks-and-mortar walk-ins make the best
Business Hub: Allbirds founder Tim Brown on growing revenue through Covid and the ESG backlash
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Tim Brown at the Allbirds store at Britomart, Auckland. Photo / Dean Purcell
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Brown talks up his company's latest footwear, the Tree Flyer, its continued expansion into clothing, its plans to expand both online sales and open more retail stores (his firm still has US$240m cash from its Nasdaq IPO last September) and Allbirds recently finalised Climate Neutral Certification for 2021.
But there were also some not-quite-so spring elements to the March quarter numbers.
Allbirds' net loss widened from the year-ago quarter's US$15.5m to US$21.9m. And although the firm is forecasting more growth, it will be at a slightly slower rate than the first quarter. And co-founder and co-CEO Joey Zwillinger talked about "external headwinds" on May 10, including, "Tumult around the world since our last earnings report, including Russia's invasion of Ukraine and China's Covid-19 restrictions."
And then there's what could be called "The Elon Factor".
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When it listed on the Nasdaq last year, Allbirds' prospectus talked up its B-Corporation green credentials, and its ESG or Environmental, Social, and Governance practices, including use of natural and recycled materials, paying a living wage and committing to carbon-neutral operations.
Recently, however, there's been something of a backlash against so-called "woke capitalism" as the culture wars heat up in the US (witness the political backlash against Disney for supporting rainbow rights at its Orlando theme park) and among some in the business community - in part because the shift to a bear market means less patience for anything beyond the blunt, old-fashioned bottom line.
Elon Musk has offered the sharpest attack.
Notwithstanding that Tesla has benefits from right-on politicians' policies around the world, from rebates on EVs to subsidies for his Gigafactories, the maverick entrepreneur took to Twitter in May to unload about ESG - and in particular an update of the S&P Dow Jones' ESG 500 list that saw Tesla dropped ((S&P defends its rebalancinghere).
Exxon is rated top ten best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn’t make the list!
— Elon Musk (@elonmusk) May 18, 2022
ESG is a scam. It has been weaponized by phony social justice warriors.
"Exxon is rated top 10 best in world for environment, social & governance (ESG) by S&P 500, while Tesla didn't make the list!," Musk tweeted.
"ESG is a scam. It has been weaponised by phony social justice warriors."
More broadly, the Financial Times recently noted that while the amount under management in sustainable funds has recently soared to around US$3 trillion, there were some rumblings about ESG at Davos and a recent conference hosted by the paper. They included accusations of "greenwashing" amid many overly-vague, often inconsistent definitions of what constitutes good corporate behaviour. It noted the US Securities and Exchange Commission has proposed a crackdown, including new rules for more specific disclosures, including specific impacts.
"I think some of the criticism of ESG is, quite frankly, well-founded," Brown says.
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"It's a confusing world, with sometimes a lack of transparency over what is and what isn't [ESG], with a sometimes confusing, convoluted set of standards that are different depending on what industry you're in, what country you're in.
"So the criticisms that we need to be more clear about how businesses measure the environmental performance I think are valid."
But overall, he's sticking by ESG, and staunchly.
"In terms of the criticism of the movement of a lot of money to invest in companies that are caring, deeply, not just about shareholder value, but also broader stakeholders in the communities they exist in - that's fundamentally a good thing. And it's not going away," he says.
"I think it's a responsibility of business to care for not just the people that own parts of the business, but for all the different communities in which they operate.
"And that's been a big shift in a pretty short space of time. And it's going to take a while to work out exactly what that means for every different company that's engaged with it. But it's fundamentally a good thing."
Allbirds opened four new stores during the quarter (for a total of 39, including 17 opened over the past year), and saw physical retail sales increase 129 per cent as Covid restrictions eased around the world. Brown won't say if or when Allbirds could open another store here, but does say more will be opened in the US and around the world.
"We believe deeply in the channel. People want to try and choose," he says.
"Our best customers are the ones we meet in-store and then go on to have a digital relationship with."
While Covid has obviously impacted foot traffic into stores, until the recent pickup, Brown says his company has largely escaped supply chain issues. How did it manage that?
"We've just tried to be really thoughtful in where we base our suppliers, and how we've ordered and managed the supply chain. We haven't got everything right but some really smart people have done a great job through a difficult period so, touch wood, it hasn't really impacted us in terms of our ability to kind of get the product to market."
And what does that supply chain look like these days?
"It's become more complicated as the business has grown. We're now in our sixth year and we've got manufacturing in a lot of different parts of Asia. Korea was the original starting point. We've expanded that into Vietnam," Brown says.
"Our raw material suppliers are now all around the world. We're using New Zealand Merino wool, we have South African eucalyptus fibre, we have 'SweetFoam', which is our midsole technology based on sugarcane from Brazil.
"So it is truly a global supply chain. But we're deeply focused on sustainability. That's our North Star."
For example, the sugar cane used to make SweetFoam is sourced from Southern Brazil, is grown on third-party audited plantations that rely on rainwater rather than irrigation.
Protecting the planet is one thing, but what about your ankles?
Brown bills Allbirds' latest footwear - the Tree Flyer - as a high-performance running shoe, with the lightweight SweetFoam providing extra bounce, stability and comfort, while its eucalyptus fibre makes for breathability.
"We launched our first running shoe, the Tree Dasher, two years ago, more for everyday, sub 10km," Brown says. "The Flyer is more for the elite runner."
Now that Allbirds is on the Nasdaq, Brown can't just wax lyrical about the "critical rebound" in the sole of his latest shoe as analysts pour over his latest numbers, and ESG starts to get the bash in some quarters. But he has no regrets about the listing.
"It's definitely a new set of challenges as a public company, and a new set of pressures, but they're pressures we welcome.
"We're only six years into our journey as a 100-year brand, and we've had just two quarters since our IPO.
"We've always imagined that we could be a great public company, we're in the very early days of proving that in a very, very challenging environment.
"But I sit here today never believing more in Allbirds as a business and a brand in New Zealand and America and around the world."
