Since Bob Mullaney came aboard RG Barry Brands as CEO in late 2017, the business has doubled in size. Not bad, considering a pandemic, record inflation, and other headwinds that have made significant growth in this industry a tall order. Still, he felt the 77-year-old company, based in Columbus, OH, could have done much more in the past few years to grow its portfolio of Dearfoams, Baggallini, and new sustainability-based brand Planet A. Then there were the possible acquisitions that he saw as perfect fits with potential for exponential growth that weren’t pursued. Mullaney saw a couple as “no-brainers” that he believed RG Barry Brands was uniquely qualified to manage. “We would have extracted value pretty quickly,” he says.
Alas, private equity owners Mill Road Capital and Blackstone didn’t pursue such deals. The owners were hesitant to make large or risky investments in what was a very unpredictable M&A environment, especially during and post-pandemic. Something had to give.
“We were in year eight to 10 of ownership by Blackstone Capital and Mill Road Capital, and while they were good partners, that’s a little long in the tooth in the private equity world,” Mullaney says. “We needed greater investment for another five- to seven-year growth run, but the board wasn’t strategically aligned on the future of the company in a way the team and myself deserved. We were just on different wavelengths.”
Mullaney likens the situation to a homeowner who’s around 55 years old with a couple of kids in college and decides to hold off on putting a new stone patio in the backyard or replacing the roof because they might move soon. “They’re not willing to make that level of investment, because they might not be living there in five years, which I understand,” he says. But Mullaney and his team aren’t planning to move anytime soon. They’re all in on taking RG Barry Brands to the next stage of growth. “We firmly believe we should grow four to six times in the next five years,” he says. “We have the team to do so as well as strong brands that deserve investment from marketing, branding, and product development standpoints.” There was also the danger that stagnation could cause good employees to seek growth opportunities elsewhere. “You can’t just stand still,” Mullaney says. “Our company needs investment in our existing portfolio as well as to acquire more brands.”
Enter Marubeni Growth Capital US (MGCU). The investment firm, a subsidiary of Japanese-based Marubeni Corporation, acquired RG Barry Brands in June. Mullaney believes this is exactly the type of consumer-focused investment platform the company needs—and deserves. One that will invest in expansion internally, through acquisitions, and international expansion. “They’re well-capitalized with a market cap of $35 to $40 billion and annual revenue of $60 million,” he says, adding that they are 8.3 percent owned by Berkshire Hathaway. “They’re looking for market diversification, and we’re a platform for that. That’s why we’re so excited.” Circling back to the homeowner analogy, Mullaney says, “It wasn’t a case of selling the house at its highest value, but if you don’t fix the roof, the house is going to be worth even less when you want to sell.” He adds, “It’s the right move for us. We want the team to stay in place to grow this business. Stagnating is not an option, because you’ll get run over.”
Take the growth opportunities for Dearfoams, for example. Mullaney sees huge potential for expansion into lifestyle categories beyond slippers in today’s easy on/off, casual slip-on world. “Organically, Dearfoams has tremendous potential because consumers just want comfortable shoes, and now it’s a matter of making sure we have the resources to make them,” he says. Investment in product innovation and marketing had already begun under previous ownership, including a seven-figure campaign on the Hallmark Channel earlier this year. It helps, Mullaney says, that Dearfoams is a trusted, best-price-value brand. “That’s why we’re able to sell three to four times the most slippers of any brand annually across a range of leading retailers. Consumers know what they’re getting.”
Mullaney has an early read on the brand’s broader potential, thanks to the recent launch of Fireside by Dearfoams. The upscale slippers line, featuring 100 percent Australian sheepskin, has been a hit. The product is solid; now it’s about getting the word out. “We’re not trying to be Ugg, but we do a great job making boots and slippers priced under $100, and the comfort and quality is outstanding,” he says. “We’re going to market Fireside more as well as expand the product range and distribution. There’s a huge opportunity there.”
Planet A presents another growth opportunity, as Mullaney believes the brand’s sustainability platform aligns with a growing consumer desire to purchase brands that harm the planet as little as possible. Planet A’s eco-friendly hook is that it’s not recycling-based. Rather, its premise is regenerative materials. Namely, its propriety biodegradable foam, Regnr8, a biodegradable plastic material that offers similar durability and comfort to traditional plastics without the afterlife pollution. Regnr8 technology is added to petroleum-based resin, the foundation of plastic, allowing naturally occurring microorganisms to consume the polymer matrix and convert it to compost and bio-gas. Accelerated biodegradation means less waste and pollution. Thus, a healthier planet.
“We believe one of the biggest issues in our industry right now is that way too much footwear ends up in landfills,” Mullaney says. “Planet A addresses the end-of-life issues of products. While we appreciate recycling, we think that concept is broken. Most recycled plastics eventually end up in landfills, on trails, in oceans, in the food supply, whereas the plastic from our shoes won’t.”
Adding to Planet A’s allure are durability and an attractive price point. Unlike sustainable brands that fall short on durability and require a lot of green to go green, the debut Solo slide lasts as long as traditional plastic-based foams and retails for $35. “Consumers may respect better ecological solutions, but they won’t buy them if performance isn’t up to standards or it breaks the bank,” Mullaney says. Hence, the reason he is chomping at the bit to take Planet A from concept to full launch mode. That’s on the docket for the first board meeting under the new ownership next month. The plan is to expand the line beginning in Fall ’25.
All in all, Mullaney’s team is reenergized and ready to take RG Barry Brands to “four to six times the size in five to seven years.” The ducks are lining up, along with what he believes is a macro shift among consumers seeking quality heritage brands. The focus on fast fashion at the lowest possible price will run its course. “We’re at an unbelievable crossroads of consumer behavior changing and the marketplace beginning to respond to it,” Mullaney says. “People are getting tired of buying junk that quickly winds up in landfills. And now RG Barry Brands is better prepared to capitalize on this tremendous opportunity—if we play it right.”
Is it fair to say that the new ownership has given you a green light to do what you’ve been wanting to do for a long time?
Absolutely. We’ll now be able to make strategic investments in Dearfoams, Baggallini, and Planet A that spans marketing and product development. We’re not going to hold back anymore. No question, footwear is our biggest growth opportunity. What’s more, Japanese companies typically have a much longer view of the world, and that inspires us. And, short term, as long as we have a strong plan and buy in, we expect to see growth pretty quickly.
Are the acquisition pickings still ripe?
There’s a chance to get more ambitious and acquire brands that are doing $100 to $200 million. It’s about the right fit. Some might be bigger, some might be on a downswing but the brand still possesses great potential. It’s about timing and being well managed. On that note, I think the industry has under appreciated innovation and consumer concentricity. What they want and need is easy on/off, comfortable, casual styles. Skechers has seized upon that formula. For a time in the comfort space no one talked about them, but now they do. Skechers has taken the comfort industry’s lunch. No one likes to hear that, but they really are hitting on those key trends. They’ve innovated. And like previous comfort classics—Rockport’s Prowalker and Easy Spirit’s Traveltime—they’re essentially athletic shoes. There has always been this undertow of significant franchise comfort shoes rooted in athletic design.
What types of brands are you looking to acquire?
Footwear is the first area of focus, but we’ll look at adjacent accessories categories like another handbag business and possibly loungewear. With footwear, it’s lifestyle brands that have great awareness that maybe need to be fixed. Something beyond our expertise or product range, stronger marketing or shoemaking capabilities, international distribution would all be pluses. We’re looking for ways to supplement our business that benefits both sides. I probably have 10-plus potential companies on my desk right now. There are one or two that we’re cautiously optimistic on, but it’s not like we’re desperate.
It has to complement the existing portfolio?
Yes, and we want to elevate the portfolio overall. In three years, our goal is to rename our company Responsible Growth Brands, a double entendre on our acronym. By then, we expect to have significantly elevated Dearfoams and Baggallini. We will offer consumer solutions that will still be great value-based choices. We’ll also have fully launched Planet A. And we hope to have three to four acquisitions under our belt. So anything that falls into the thought process of Responsible Growth Brands gives you a peak behind the curtain of what we’re planning.
How has your day-to-day job changed since the acquisition?
I’m now focusing more on expansion into a multi-brand platform. We’ve built a great team, and they’re going to be more independent in those divisions. I’m not going to be as hands-on in that regard, like I was with the creation of Fireside by Dearfoams. I need to be making sure our multi-brand platform is running smoothly so the team has the resources they need to achieve our plan.
To paraphrase Tom Petty, the waiting was the hardest part?
Only the last two years were really frustrating. Before that, we were cranking. I came in as a small minority owner initially believing it was an awesome opportunity for growth, and we doubled in size. In fact, we’re twice the size with greater profit and with less customers overall. Not a lot of companies can say that they grew two times in the past five to seven years. That’s been exciting. Plus, I still believe in our model and what we’re doing. I believe great growth potential still lies ahead. And I don’t believe if I went somewhere else that the grass would necessarily be greener. We have great brands and distribution, we’re nimble, we’re well capitalized…you have to work really hard to get all that. There’s a lot of goodness here already firmly in place to attain much greater growth.
Just how did you achieve greater sales and profits with less customers?
The reevaluation of our supply chain as a result of the pandemic probably helped us more than anything in that regard. Even though the whole industry was a mess, I believe challenges are opportunities. Meaning, for us, we had to reevaluate our price points. We had a huge backlog of orders as slipper sales were off the charts, but we couldn’t get all of them shipped. So we became more strategic about our distribution. We had to get smarter and leaner. We decided what businesses to support and what ones to not. That helped us overall, and we did more sales with less customers. Basically, we focused on strategic partnerships and not on transactional relationships. That shift started in 2022. We also started selling better made, higher-prices goods, like Fireside by Dearfoams.
That was a risky decision, no?
It was very risky, but our data showed us that it was the right decision. It’s only risky if you don’t know that the consumer will buy those products. But our intelligence and research told us to do it, and it worked better than we ever imagined. Part of our mantra is being consumer-driven and data-informed. That’s why I’m so excited by AI, which is going to be aggregating data that we currently work really hard at doing ourselves much faster and better. Back when I was earning my MBA, while working for Timberland, I did consumer research at the Downtown Crossing in Boston by asking mothers who made the purchase decisions on children’s footwear. That was literally done by hand. And then when I went to run ShoeBuy later on, it was amazing to have all that data available at clicks. We were aggregating every single decision shoppers on the site made. AI is going to aggregate social listening, search data, consumer purchasing…if you train it well enough, it’s going to be mind-boggling in terms of making data-informed decisions.
You have a positive outlook on retail in general, whereas a lot of people in our industry don’t. What gives?
Inflation and high interest rates impacts on discretionary income are real. We can’t stay at a two percent inflation without lowering interest rates. That’s putting a lot of burden on people making less than $150,000 a year. Fortunately for us, our distribution is solid. Consumers trust retailers that are doing well. Where Dearfoams is positioned as a brand, for example, is good. It’s a great name at an accessible price. Fireside is too—100-percent genuine shearling lined product priced at $59.99. I’ll put that quality up against any brand. And Planet A is going to be a great brand. Our Regnr8 concept is a much better alternative to recycled materials and other bio-based ones that fall short on performance and durability, as well as often costs a lot more. While it’d be great if corn stalk midsoles would be equal to the performance characteristics of Hoka, it hasn’t been proven possible yet. And customers aren’t going to sacrifice performance. Even if you did, you might not be fixing the problem because the alternative is often far more expensive. Thus, it won’t hit the masses. The goal of planet A is to impact millions of pairs versus being a nice talked about sustainable brand that wealthy people wear as a badge of honor. If a recycled shoe costs $200 or more, you’re not really fixing the problem. It has to be more accessible.
Is the presidential election impacting your business?
Short-term, there’s a September/October pause. But I don’t believe Ukraine and Israel wars are weighty issues to U.S. consumers. Those stories will remain in the news, but I don’t think it’s having much purchase behavior impact, whereas high inflation is. The longer impact of this election is how it affects sourcing and free trade. We’re significantly in China, but we’re also sourcing in a lot of places. Even so, the reality Vietnam, Cambodia, and other countries often costs more and the quality is lower. People need to understand that there are trade-offs to moving sourcing. For example, you don’t know what any new trade agreements will be, and you can move elsewhere but it doesn’t mean you’ll get what you want. When I was with Rockport 15 years ago, we were making shoes in India. If that country was a meaningful alternative, wouldn’t it have happened by now? All that aside, the biggest issue is inflation. If you’re paying a seven percent mortgage rate, there’s less discretionary income. It’s why Crocs and Skechers are doing so well of late—both are at very accessible price points. Classic athletic businesses, like Adidas Samba, is an accessible price point, too. Even Birkenstock is relatively affordable.
So the glass is half full?
I’m optimistic based on our position. For starters, we’re in the comfort market, and I don’t see that trend changing any time soon. The fundamental consumer behavior of seeking comfortable, easy on/off, accessible, unpretentious footwear applies to us, as well as Baggallini, which has become a top 10 brand. Crocs, Skechers, Birkenstock, Hoka, and Ugg all have similar comfort cues. I don’t see three-inch pumps or dress ballet flats coming back strong. I wouldn’t be as optimistic if we were in those markets. I also believe we’re in the right distribution channels. I like our accessible price points, and I like our company size that makes us nimble. We just have to prepare for any challenges and, again, advanced data will tells us that and helps us prepare. We beat competitors because our product is better, and that’s attributable to our team, data analytics, and making product that’s spot on. We’re selling through and making retailers money.
What keeps you in this industry?
I’ve no desire to leave. If you take anything away from our conversation, I hope you hear how excited I am about consumer behavior and marketplace dynamics. I geek out on all of that. I love being able to serve consumer segments. I love working on trusted brands that offer authentic solutions for consumers. I get excited every day doing that. When I hear, for example, a customer say how much they love their Fireside slippers, that never gets old. It means we did our job right, and there was a lot that went into that. There was an unmet market need and we delivered. The mom who couldn’t afford Ugg but wants superior quality and what we call affordable luxury. That’s rewarding and fun. I’m never going to retire. You can ask me in 30 years.
I’ll hold you to it.
It doesn’t get old overcoming challenges and creating solutions. It’s related to my love of sports; I’ve always been competitive. I love building a team, creating synergies, finding that latent demand in the market, creating a product, and solving a consumer problem. The competition that all entails is incredible. I guess with bigger companies, you can get further from all that. It becomes more of a bureaucracy. But if I’m only in the boardroom and not doing our core fundamental job, I think the company we’ll lose touch with our consumer. I’d probably jump ship and start a new brand. But I prefer to have a head start, which is why I came to RG Barry—it had a lot of greatness already in place.
What do you love most about your job?
Our team. We’re building a growing business and, most importantly, we’re doing that because we have a first-class team. We’re also building a strong culture, which is also fun to do. The best days for RG Barry Brands are ahead of us. I expect our transition to new ownership to go smoothly and then we’ll be off to the races.
