Birkenstock IPO filing warns of knock-offs on Facebook

Birkenstock, the iconic sandal maker founded in 1774, filed its paperwork for an IPO on Tuesday, and warned investors of the risks posed by counterfeit brands who use social media to promote their products.

The footwear company, which was started in Germany and is now based in London, plans to go public on the New York Stock Exchange, under ticker symbol “BIRK.”

Birkenstock has long struggled to protect its intellectual property, as copycats have taken advantage of the brand’s popularity and premium prices to try and undercut the company with cheaper alternatives. In its prospectus, Birkenstock says that some of the competition comes from “private label offerings” from retailers, but there are also “knock-off products” that are stealing its IP and trying to convince people on Facebook and elsewhere on the web that the items are authentic.

“In the past, third parties have established websites to target users on Facebook or other social media platforms with ‘look alike’ websites intended to trick users into believing that they were purchasing Birkenstock products at a steep discount,” the filing said. “Should counterfeit products be successfully sold on e-commerce platforms managed by third parties, our brands and reputation could be damaged.”

Birkenstock doesn’t name Amazon anywhere in the 206-page (plus footnotes) filing, but it does say that it has “refrained, and we may in the future refrain, from using certain third-party websites to distribute our products due to the selling of counterfeit products on such platforms.”

Seven years ago, Birkenstock publicly quit Amazon in the U.S. due to an eruption of counterfeit and unauthorized sales on the site. The company also said at the time that it would no longer allow authorized Birkenstock merchants to sell on Amazon.

“The Amazon marketplace, which operates as an ‘open market,’ creates an environment where we experience unacceptable business practices which we believe jeopardize our brand,” then-Birkenstock USA CEO David Kahan wrote in a memo on July 5, 2016, addressed to “our valued Birkenstock partners.”

Kahan, whose title is now President Americas, went onto say that “policing this activity internally and in partnership with Amazon.com has proven impossible.”

Prior to its departure from Amazon, legions of Chinese sellers had been promoting Birkenstock’s flagship Arizona sandal for $79.99, or $20 below the retail price, according to CNBC’s reporting at the time.

Since 2016, according to the prospectus, Birkenstock has “significantly expanded” its direct-to-consumer efforts in e-commerce in the U.S. For the fiscal year ended Sept. 30, 2022, that channel represented 38% of revenue, the company said, adding that “one of our strategies is to continue to increase the proportion of our revenues from e-commerce.”

Subsequent to the Amazon clash, Birkenstock sold a majority stake in the company to LVMH-backed private equity firm L Catterton in February 2021. After the IPO, L Catterton will continue to own a majority of Birkenstock, according to the filing.

“We see ourselves as the oldest start-up on earth,” the company said in the filing. “We are a brand backed by a family tradition of a quarter of a millennium with the resilience, timeless relevance, and credibility of a multigenerational business.”

Facebook parent Meta is well aware of the efforts taken by counterfeiters on its platform. In 2021, Facebook and luxury brand Gucci filed a joint lawsuit in California, alleging that a user of Facebook’s U.S. sites was using the platform to sell fake Gucci products.

The companies said in a statement that over a million “pieces of content were removed from Facebook and Instagram in the first half of 2020, based on thousands of reports of counterfeit content from brand owners, including Gucci.”

In the six months ended March 31, Birkenstock’s revenue climbed 19% to 644.2 million euros ($693.2 million). Net income over that stretched dropped 45%, largely due to a foreign exchange loss.

WATCH: Birkenstock files for U.S. IPO on NYSE