Brooks Running’s CEO plans to build a $4 billion brand by expanding into lifestyle products: ‘Innovation is how we justify a $160 price tag’

When Jim Weber took over as Brooks Running's CEO in 2001, the sports apparel company was a flailing brand on the brink of bankruptcy with merely tens of millions of dollars in sales. Under Weber's 23-year corner office tenure, which this year came to a close, Brooks has become a highly profitable billion-dollar brand and a cult favorite among serious runners.

His successor, Dan Sheridan, who was made CEO in April, will have to write Brooks Running's next chapter with eyes on larger rivals like New Balance, which is five times its size, and hot new brands like Hoka and On Running that are challenging Brooks' place in the running shoe wars.

In building a legacy of his own, Sheridan, a former schoolteacher who joined Brooks in 1998 and was operating chief in his preceding role, is aiming for a bigger chunk of the overseas markets, notably Europe and China. He also wants to build a much bigger presence in the running apparel market, where Brooks is a tiny player.

Those efforts, if successful, would build on those of Weber, who more than two decades ago saved Books by zeroing in on avid runners rather than trying to cater to enthusiasts of other sports. He also focused Brooks on making premium shoes and jettisoned cheaper models. That strategy helped Brooks achieve high profits and command high prices, but it's also made Brooks a bit of a niche player compared to the likes of New Balance and Nike, which appeal both to serious runners and a broader customer base.

To be sure, Brooks is growing, with revenue last year rising 9% to $1.2 billion, helped by the lingering post-pandemic running boom. Though Weber believes Brooks can become a $4 billion company within a few years, its growth pales compared to New Balance's 23% revenue rise to $6.3 billion last year, partly thanks to New Balance's lifestyle kicks like "dad shoes" that are having a cultural moment. Asics is staging a comeback with a similar strategy. Also challenging Brooks is Hoka, whose sales rose 14% last year to $776 million, and a slew of other brands—not typically known for their running gear—that are jumping into the fray. Lululemon Athletica recently launched a line of shoes for runners, while on the apparel side, Arc'teryx launched a line of shorts and tech shirts, as have popular new brands like Rhone and Vuori.

Speaking with Fortune at Brooks' Seattle headquarters, Sheridan and Weber agree that the company's expansion efforts must include lifestyle products and other gear that goes beyond running, perhaps even in collaboration with a designer. Still, they insist the company must remain focused on the serious runner. "Our ambition is bigger than where we are today. But it's directly correlated to core performance," says Sheridan.

This interview has been edited and condensed for clarity.

Fortune: Dan, you're succeeding a CEO who transformed Brooks. Where can you take Brooks next?

Sheridan: You have to look at your total addressable market. We are lucky to be in a category that's exploding again, but we have an opportunity to become a global performance-running brand. We are 95% footwear now, but we want to be a performance running brand, not just a footwear brand.

What does Brooks bring to the apparel market that isn't already there from other brands like Tracksmith, Nike, New Balance, and so on?

Sheridan: It's a basic universal truth that apparel is a commoditized product. And so our opportunity is not to play in those commoditized areas. Apparel is such a badge people put on their chest, and so from the small brand perspective where we sit, we've got to create more cachet and awareness. Every day, we get up, and all we think about is running, and that's the community we target.

When I look at New Balance, I see a big success with not only shoes for the avid runner but also lifestyle products like its "dad shoes" and classic models for everyday wear. Should Brooks stick to its lane, or can it make "lifestyle" products, too?

Sheridan: We absolutely think that lifestyle will be in our portfolio in the future. We have about 16 million unique customers buying our shoes a year, and they want more access to our products. We have 50 years' worth of products in our portfolio that we can tap into and bring back to the market. But we are going to tiptoe slowly in the pool and not do anything big like a cannonball.

I don't really see big changes year to year in the shoes I buy—or even compared to seven years ago—and I wonder if claims of innovation are just marketing. Is innovation overstated in the running shoe industry?

Sheridan: Innovation is critical to our journey and is the core of what we've built our brand on. But it's not innovation for innovation's sake. It's science-based for the benefit of the runner. In the last five years, we've seen revolutionary innovation in this space. It's based on materials in the midsole into which we've injected nitrogen, and there are carbon plates. What we're seeing is that many runners will buy two pairs when they buy their trainers, one for daily use and the other for when they want to feel this fast innovation underneath them. Innovation is how we justify a $160 price tag.

Jim, your singular focus on running and not other sports saved Brooks. How?

Weber: When we made the shift to run-only, people were worried and thought you needed to have three legs on the stool, so you also had to have basketball and cross-training shoes, for instance. In running, we had mid-price shoes and entry-level-priced shoes, and we were losing money. So, we shifted to premium performance running in 2001. We were the first running brand to do that, and we never looked back because if customers get loyal to a shoe, they're going to stay with you.

Brooks is part of Berkshire Hathaway. What does Warren Buffett think of this $4 billion growth strategy?

Weber: We could be criticized as not aggressive enough. But Berkshire's fine with that because we are building our brand with our customers and not chasing volume and trying to get a big lifestyle hit. We've always run Brooks, so it looks a little sleepy from the outside, but it's built to last. If we were going public, we'd probably try to grow faster.

Jim, How can Dan build on your nearly quarter-century leading Brooks?

Weber: I am very proud of this transition because we have a guy who was able to develop himself after coming here as a tech rep after being a schoolteacher. We took very seriously the question that the C-suite and board asked me every year, 'What happens if you get hit by a bus?' CEO succession is hugely risky, and we make sure to attract great people, retain them, and so on. He had the ambition to be a CEO, so we created opportunities for him by exposing him to aspects of the company he wasn't versed in. Dan and I are going to stay close, and I will continue to advise Brooks.

This story was originally featured on Fortune.com