TO THE
UNITED STATES INTERNATIONAL TRADE'COMMISSION
WASHINGTON, D.C.
REFERENCE TA-201-18
NONRUBBER FOOTWEAR
STATEMENTS BY:
BROOKS SHOE MANUFACTURING COMPANY, INC
«
131 FACTORY STREET
HANOVER, PA
(717)
December 21, 1976
17331
632-1755
Gentlemen:
My name is Jerome Turner, and I am Vice President
of manufacturing for Brooks Shoe Manufacturing Company,
Inc. of Hanover, Pennsylvania, and President of Turner
Shoe Company of Aguadilla, Puerto Rico.
Brooks Shoe Company has been making athletic shoes
in the United States since 1914 and has long been a leader
and innovator in this field.
We sell a full range of sport shoes at all price
levels. We supply 30% of major league baseball players
with their shoes; Runner's World magazine has classified
our training shoe as the second best in the world; and
two world records were broken in 1976 by athletes wearing
our track spikes. At the same time, we are in direct
competition with Adidas, Puma, Nike (Blue Ribbon Sports),
as well as many lesser known imported brands of athletic
shoes.
I am writing you because the U.S. shoe manufacturers
need help. The U.S. manufacturers of athletic shoes need
help.
In recent years it has proven more and more difficult
to continue manufacturing shoes in the United States because
of the increased foreign competition.
- 2 -
What has happened to the U.S. athletic shoe
industry during the past ten years is no different than
the conventional street shoe industry.
Shoe factories
have always sought low wage areas because of the high
labor content of shoes.
Historically the U.S. shoe
business moved from the major metropolitan areas of
Boston, New York, Philadelphia, etc., to the rural areas
of the Northeast» to avoid higher wages.
In later years,
the migration was to the southeastern states.
The European entry into the U.S. athletic shoe
market began in the mid 1950's and was effected primarily
because of the then prevailing lower costs in Europe.
I
toured European shoe factories in the early 1960's and
saw the sharp differential in wages between France, Germany,
and the U.S.
I came quickly to the conclusion that we
could not compete with them on the basis of price, as we
were too expensive.
To remain competitive, an associate and I opened
a factory in Puerto Rico.
Many of the U.S. firms were
forced to close in the following ten year period.
This
trend continued until President Nixon devalued the dollar
four years ago, and the U.S. industry again became
competitive.
Unfortunately, many of the firms making
athletic shoes had already been severely damaged, as
foreign firms such as Adidas and Puma had fully entrenched
- 3 -
themselves in the U.S. market.
But, at least the U.S.
firms were now on equal footing and the importers had to
find.ways of regaining their price advantage. Adidas and
|
i
[
other importers to the U.S. to stay competitive, switched
j.
much of their manufacturing to the Orient.
With this background, I would like to get into
i
the main contents of the paper to see how the domestic
firms have fared against the ever increasing foreign
competition.
|
(.
|
^
ATHLETIC SHOES ARE NOT A SEPARATE INDUSTRY
Athletic shoe manufacturing is'part of the general
ive
U.S. shoe business. It is not a separate and distinct
industry involving special construction.
j
l
It is different in that the market it serves is for
process
the sport's participant, but the basic manufacturing
g.
is the exact same as any conventional shoe manufacturin
»
The typical shoe manufacturer seeks to serve a specific
work
market, whether it be growing girls, nurses' oxfords,
The manufacturer tries to design his manuto
facturing capabilities and marketing efforts to cater
oxfords, etc.
his specific market.
erent
The marketing of athletic shoes with attachments is .very diff
from the marketing of street shoes. The customers are
s and
sporting goods stores and through them, athletic team
The sporting goods business, being distinct
,
from the shoe business, has its own separate trade show
marketing organizations, and publications.
athletes.
All shoe manufacturing equipment is the same, whether
ed
it be for * athletic shoes, or street shoes. I have tour*
the
over thirty European and fifty U.S. shoe factories in
past ten years. The equipment and the skills are the
The only thing that differentiates the athletic
shoe industry in the factory itself, is the attaching
es,
department, where the baseball spikes, ice skate blad
same.
r
•,
- 5 -
C
football cleats, and track spikes, are attached. This
is the smallest department in the shoe factory and
typically less than 2% of the entire work force is involved. There are also fewer skills involved in the
attaching department, than elsewhere in the factory itself
The lasts and patterns are different for athletic
shoes and must be designed for each individual sport.
This is true for any shoe manufacturer. He must make
special lasts aftd patterns for the individual market he
is serving. Our lasts and patterns are less complicated
in design than those of the high fashion shoe business,
and once a proper last is designed, normally it will not
change for years.
^
Gary Dietrich, president of Vanco, represent the
Adidas 1 U.S. distributors, states that the technology and
not exist in
skills needed to make athletic shoes does
7.
the general shoe manufacturing industry. Phillip Knight,
president of Blue Ribbon Sports, makes the same statement.
We do not find this to be true.
Two years ago Brooks entered the jogging shoe
market. In this short span of time we have been named
the No. 2 ranked training shoe in the world by Runner's
i/
Our total additional capital investment
.
zine
Maga
d
Worl
to make this "special shoe" was approximately $15,000
for patterns and equipment.
There is not a shoe company
in Taiwan, Korea, U.S. or Germany making cement process
I/
2/
3/
See Appendix 1 - Runner's World 2nd Annual Shoe Issue
October, 1976
Vanco - page 5
Testimony by Blue Ribbon Sports - page 8
V
shoes (the most common shoe construction) that is not
capable of duplicating this shoe with a minimal of capital
investment and when I say duplicate, I mean that from a
d
functional and styling standpoint the ultimate user woul
r
be as satisfied with this product as he is with any othe
quality athletic shoe made.
Entry into these specialty areas is, unfortunately,
too easy. In Europe, Adidas has taken many street shoe
»
manufacturing facilities and converted them into athletic
yDuring
the Viet Nam War, the Brooks factory converted
60% of its production into combat boots and dress oxfords
for military use. Neither had ever been produced in our
plant before. The ease of changing manufacturing from
shoes.
C' ;
'
ic
one type of item to another has always been characterist
of the shoe industry. Another example is both Brown Shoe
'
ty"
and Wolverine World Wide entered the jogging shoe "special
r
area after making only street shoes. The reason for thei
entry was the general decline in the normal street shoe
V
business.
Mr. Gary Dietrich, representing the four U.S.
I/
/'What
on:
distributors of Adidas, states in his conclusi
n,
are commonly called 'athletic 1 shoes in this investigatio
in fact, constitute the products of two separate and
2yConversation, Mr. Lopez, President of Hungaria Shoe
Company, Orleans, France
3/
Vanco - page 36
Vanco
page 14
distinct industries --one involving shoes of special
construction, specifically designed for athletic use,
and the other involving low value casual shoes, which
simulate the "look" of athletic shoes as special construction, but which lack the features enabling them to
be commercially interchanged for the purpose of use in
V
the serious athletic activity. If there are two types
of "athletic shoes", this differentiation is not based
*
on cost. There is one type of shoe which definitely can
be used only in sports participation. The U.S. Bureau
of Census agrees with this; and, in their reporting
instructions they define athletic shoes as follows:
"athletic shoe - all shoes designed specifically for
athletic wear include golf shoes, football shoes, skate
shoes, and track shoes, etc.; report all shoes with
cleats as athletic shoes."
These are the only shoes
which show up as "athletic shoes" in their figure on
U.S. athletic shoe production.
The second type of "athletic shoe" are those without
cleats, such as tennis shoes, jogging shoes, and basketball
They may be used as athletic shoes but also may be
**
*
'used', and usually are, for street or "casual'wear. Because'
of their duality of purpose, they are not counted by the
shoes.
U.S. Bureau of Census as athletic shoes.
This is the
correct treatment in my opinion.
5/ The testimony and appendices of Vanco before the U.S
International Trade Commission on Dec. 7, 1976 will
be referred to as Vanco thru this report.
Adidas 1 distributor, Vanco's own selling policy
is consistent with this approach. Vanco has a line of
shoes for the sporting goods store which includes all the
shoes they distribute, but their line for sale to the
6/
retail shoe stores is different. Generally speaking,
the shoe retailer buys the Adidas tennis, basketball,
and training shoes from Vanco. He does not buy the baseball, track and. soccer shoes, and the cleated shoes.
Vanco states that the difference between the two
types of athletic shoes is essentially measured by price.
Mr. Dietrich 1 states, "You cannot have a specially designed
athletic shoe for less than $6.00 to $7.00 at a foreign
unit value, no matter where it is produced today."
c
With this in mind, we now look to Vanco's Adidas
pricing policy for three cleated shoes, or shoes of
the Apollo track shoe, the RBI
"special construction"
baseball shoe, and the Junior multi-purpose shoe.
We
2
note the following:
1
ESTIMATED
FOB PRICE
DUTY
INCLUDED
LESS DUTY
FREIGHT,
HANDLING
& INS. OF
50C PER PR;
ESTIMATED
FOREIGN
VALUE
VANCO SELLING
PRICE
LESS 1/3
1975-1976
EST COST
$9.35
$2.35
$7.00
$1.10
$5.90
2.10
6.25
1.03
5.22
RBI
8.35
JUNIOR
6.40
1.60
4.80
.90
3.90
APOLLO
1.
2.
Formula derives from Vanco page 12.
Formula derives from Vanco page 34.
<5/ Appendix
retail shoe price list.
All three shoes, at $5.90, $5.22 and $3.90 respectively,
/'
contradict Mr. Dietrich's statement as all three are below
$6.00.
These three models of special construction also seem
to contradict Mr. Dietrich's continued statement, "Imports
of athletic shoes of special construction are generally high
in cost and neither have had, nor could have a depressing
effect on the prices of like or directly competitive products
made in the U.S\"
Gentlemen, these three models previously discussed are
only an example of imported shoes that have both a depressing
effect on our prices and are directly competitive with products
made in the U.S.A.
'
In a recent survey of our top 200 accounts, we find
that 50% or better are carrying the Adidas Junior or the
i/
Puma equivalent model, rather than the domestic equivalent.
ADIDAS CATALOGUE DESCRIPTION
Best value in Adidas track
The Apollo - Model #5110
shoes. Smooth nylon uppers, outside toe and heel counter,
padded .tongue, flexible foot-form nylon sole. Adidas
screw-in spike system. Price $9.30. Sizes 5 to adult 13.
RBI - Model #7927 - The lowest priced Adidas baseball shoe
- for the young player. Uppers of rugged nylon web, with
reinforced heel counter and extended toe protection.
Cushioned heel area, long wearing plastic rubber sole
with metal cleats. Price $8.35. Sizes 5 to adult 12.
(•
The Junior - Model #1541 - The lowest price Adidas shoe
for the young soccer player. Uppers of rugged nylon
web and reinforced heel counter and broad toe protection.
Cushioned heel area, durable wear-resistant multi-cleated
rubber sole. Price $6.40. Sizes 1 to adult 12.
8/ Survey made October, 1976
- 10 -
^
Our model #236 that competes with the Adidas Apollo sells
for 55£ per pair more and does not have as many selling
features. Puma has introduced a new model this fall at
<
|
$9.00, which is superior to the Adidas Apollo selling at
$9.35. In addition, our model £236 is one of the least profitable
in our line.
We are the largest of only two U.S. makers
of track spike shoes.
We will be forced to discontinue
within 24 months against this type of
this product line
»
competition.
The Adidas model RBI competes with our model 1178.
Our #178 sells for $9.00 versus the RBI at $8.35.
Again,
we see very direct and very difficult competition.
The Apollo, RBI, and Junior represent Adidas 1 lowest
\
price track, baseball, and multi-purpose shoes in their
line. If the Adidas line is like most manufacturers,
the lowest price points tend to be the biggest selling
items. All three of these Adidas models are made in Taiwan.
It should be stressed that these shoes are made in adult
sizes and can definitely be considered imports of athletic
shoes of special construction.
r
u
THE ATHLETIC FOOTWEAR CATEGORY
Adidas acknowledges that the term "athletic footwear"
g
is an ambiguous one. While the Bureau of Census reportin
instructions are restricted to cleated shoes, the information gathered on imports of athletic shoes is broader
in
and includes many types of shoes that are not counted
A basic question is whether there is
really a well defined industry, or are athletic shoes
simply part of the over-all shoe industry.
The Bureau of Census defines an industry as follows:
U.S. production.
t
"An industry is generally defined as a group of establishments, producing a single product or a more or less
closely related group of products. The product grouping
from which industry classifications are derived, are
y
based on such considerations as whether they are typicall
produced by the same establishment, similarities of
manufacturing process, types of materials used, types
of customers, and the like. The resulting group must
be significant in terms of number, value added by the
manufacturing, value of shipments, and the number of
, employees."
We find that because of the great variety and types
of athletic shoes, they are made in a variety of types
at factories and are distributed in different ways.
V,
n
Golf shoes are made primarily Goodyear Welt, or injectio
mold construction by dress shoe manufacturers and are
- 12
, and
distributed to sporting goods stores,, shoe stores
shoe
golf pro shops. Ice skates are made primarily by
cess
manufacturers making injection mold or cement pro
and
and are sold to sporting goods stores, ice rinks,
Baseball, football, track shoes, and
ions and
soccer shoes are made with a variety of construct
. Bowling
are distributed primarily to sporting goods stores
and
shoes are made injection mold, cement, Littleway,
department stores.
Goodyear Welt construction.
They are sold to bowling
alleys and sporting goods stores.
The manufacturing processes used to make this
^
the shoe
wide variety of types of shoes, vary as widely as
re is
business itself. There is no common thread. The
es every
also great diversity among producers. No one mak
ly capable
type of "athletic shoe". But, most are technical
The materials used in the various athletic
one in
shoes are available to and generally used by any
attachthe shoe industry, the only exception being the
of doing so.
specific
ments to the shoe necessary to help it perform its
ck spike,
sport function, i.e. the baseball cleat, the tra
' the ice skate blade, etc.
It is only the attaching of
g of athletic
these items that differentiates the manufacturin
it is
shoes from other shoes. If we are an industry,
market.
through the common thread of our customers, or our
y are
The customers all have one thing in common. The
all participating in athletics.
g
If we try to include basketball, tennis and joggin
lose the
shoes into this athletic category, or group, we
- 13
two common threads that we have.
Basketball, jogging and
tennis shoes do not have an attachment, but equally
important the ultimate consumers are -not the same.
The
original group of consumers all participate in athletics,
because the cleats limited the potential use of the shoe.
In the case of tennis, jogging, and basketball shoes, it
is doubtful that even with the growth in the athletic shoe
look that the majority of these shoes are used for sports
itself.
The trend of wearing basketball and tennis shoes for
leisure wear has been popular for the past twenty years.
What has changed is that people have upgraded the image.
Instead of wearing canvas sneakers, they now wear leather
or nylon tennis and jogging shoes.
.
what constitutes an
in
consider
A last point to
«
industry is its significance in terms of numbers, value
added by manufacturing, value of shipments, and the number
of employees.
The domestic athletic shoe industry, according
to the Bureau of Census, constitutes less than 2% of total
domestic production in 1975 (7,917,000 pairs of 413,080,000).
When one compares the combined athletic shoe imports and
*
-domestic production and compares it with the domestic and
imported all non-rubber footwear production, we see the
following:
1975
Athletic Shoes
U. S.
Imports
7,917
11,831
18,748
* U.S. Bureau of Census
*
All Non-Rubber Footwear
413,080
U. S.
286,414
Imports
699,490
.
- 14
The total figures of athletic shoes represent about
se,
2.7% of the total U.S. shoe consumption. We are, of cour
mixing apples and oranges, in that imported athletic shoe
figures include jogging, basketball and training shoes.
No matter how it is looked upon, athletic shoes make up
a very small part of the entire shoe industry and should
be included in the general category of shoes.
C
r
~ 15
DAMAGED
THE ATPILETIC SHOE INDUSTRY HAS BEEN
an athletic shoe
If you take the approach that there is
ed intthe past
industry, the question is how have we far
tion and its refew years. "When viewing domestic produc
orts are taking a
lationship to imports, we find that imp
The domestic mancontinuously larger share of the market.
^ and was the result
ufacturers 1 only brief upturn was in 197
»
1973 5 which gave
of the currency revaluations in February,
itive price relief
the U. S. athletic shoe makers the compet
Japan, referred to
from imports from the Common Market and
earlier.
Puma quickly adjusted
Multi-national companies like Adidas and
panies began switching
to the increased competition. Both com
wan.
increasing amounts of production to Tai
production dropped
From 1970 to 1975? U. S. athletic shoe
e steadily increased
1255. From 1971 to 1976 the imports hav
orts for 1976
Imp
.
68$
to
39$
rom
-.f
ket
mar
the
of
re
their sha
No
iod for 1975
per
e
tim
e
sam
the
of
ad
ahe
$
219
g
nin
are run
ance of 1976, the
bal
the
for
do
ers
duc
pro
S.
U.
t
wha
matter
reased greatly.
inc
e
hav
ll
sti
l
wil
ket
mar
the
of
%
import
Imports for
*
% of
Consumption of
U.S. Production of
Market
es
Sho
ic
let
Ath
es
Sho
ic
let
; Ath
n/a
n/a
9*0
1970
39-1
1971
1972
1973
197H1975
1976
8A
8.7
8.8
9.8
7-9
n/a
5A
6.2
6.2
8.3
16.8
25-8
1+1.6
M-1.3
^5.8
68.0
n/a
production figures by
S.
U.
the
ed
lud
exc
e
hav
we
e
not
ase
Ple
y will not
the Bureau of Census for 1976 because the
*U.S. Bureau of Census fiaures
............... ._......._..._.._..._...._....... ...........___
- 16 -
be meaningful until the final year's figures are in. The
original 1975 Bureau of Census Report of Production of 11. if
million pairs was revised downward by 3»5 million pair or a
revision.
The Bureau of Census also states in its publication, "Relationship between M31A (monthly) and MA-31A (annual) series for
Shoes and Slippers--"
The actual data reported by establishments canvassed
in the annual, but not in the monthly survey will
differ by varying amounts from the summation of monthly estimates for such establishments. While this
is the major reason for the difference between the monthly and annual surveys, other factors often are signiFor example, companies included in both monthly
and annual surveys, occasionally report annual figures
which include revisions to the figures reported monthly."
ficant.
Vanco sees evidence pointing to a healthy, growing domestic
industry citing the entry of Brown Shoe and Wolvering into
They failed to state that the street
shoe industry in 1975 was devastated by imports and recession and the firms were seeking any new field to penetrate.
the jogging shoe market.
They also state the following: "The Charles Easton (actually
Eaton) Company, a well-known producer of leather tennis shoes,
commenced the production of quality track shoes in the fall
of 1975 and that Brooks Shoe Manufacturing has recently commenced production of competitively priced baseball and distance running shoes".
- 17 -
pany introTwo corrections are in order. The Charles Eaton Com
to be
duced a quality training shoe in the fall of 1976
into manuproduced by Brooks Shoe Company, hence no new.entry
n making
facturing. Secondly, Brooks Shoe Company has bee
years and
competitively priced baseball shoes for over sixty
ll shoes in
had been the second largest manufacturer of baseba
the United Sta»tes.
letic IndusThey further state that "only last month Hyde Ath
ording to
tries purchased Indianhead Shoe Company, which acc
injection
press reports will produce 1,000 pair per day of
head has
molded all-purpose footwear". The facts are Indian
s'
ember 15,
been producing athletic shoes since 19^6; and on Nov
y been
1976, they declared bankruptcy. They had previousl
ded footwear
making 1,000 pair of shoes a day of injection mol
e bought
for Hyde. Upon institution of the bankruptcy, Hyd
ion mold
the production assets to continue making the inject
and another
shoes. The remaining assets are being liquidated,
one bites the dust.
has been
They continue that another'concern, New Balance,
ance in three
- increasing capacity. The fact is that New Bal
es a day
years has increased production from 1?0 pair of sho
icant.
to 500 pair a day. They are too small to be signif
f'
(\^
closings in
What they didn't cite were the following factory
NH; Wilson
the past twelve months: Indianhead, Manchester,
Shoe Company,
Sporting Goods Shoe Factory, Milwaukee, WI; Braun
- 18 r, PA, factory.
ve
no
Ha
y,
an
mp
Co
oe
Sh
ks
oo
Br
d
an
Parsons, KS;
itability of the
of
pr
e
th
e
iz
as
ph
em
en
th
to
s
ue
Adidas contin
inaccuracy as it
me
sa
e
th
in
ry
st
du
in
oe
sh
ic
et
domestic athl
.
reports the health of the industry
n a 20% sales growth
ow
sh
s
ha
ry
st
du
In
ic
et
hl
At
de
Hy
They state
ation factor.
fl
in
e
th
of
n
io
nt
me
a
t
ou
th
wi
in two years,
7,000 to $788,000 with$7
of
th
ow
gr
gs
in
rn
ea
an
to
t
They poin
s the lowest the firm
wa
e
ur
fig
00
7,0
$7
e
th
at
th
g
out notin
n or eight years.
had ever made in the past seve
*
, no shoes made in
st
li
e
ic
pr
?
73
19
6,
y
ar
nu
Ja
In- Vanco's
^+, two models were listed.
197
1,
st
gu
Au
On
d.
te
lis
re
Taiwan we
the categories
ly
on
d
ze
aly
an
we
e,
gu
lo
ta
ca
In January 1, 1976,
and multi-stud shoes and
e,
ur
is
le
d
an
g
in
in
tra
ll,
ba
of base
found the following:
ted are made in Taiwan.
Baseball Spikes - 5 of 13 models lis
ted were made in Taiwan.
Multi-Stud Shoes - 5 of 1J models lis
models were made in Taiwan.
Training: & Leisure Shoes - 11 of ^1
listed are made in
ls
de
mo
e
th
of
%
29
s
ea
ar
e
re
th
e
In thes
Taiwan.
the Commission
to
ed
li
pp
su
n
io
at
rm
fo
in
s
o'
nc
Not included in Va
sold in the U. S. by
s
oe
sh
as
id
Ad
of
ge
ta
en
rc
pe
e
th
were
downward trend from
e
th
ow
sh
d
di
ey
Th
.
in
ig
or
of
y
countr
growth from Taiwan.
r
ei
th
on
t
en
mm
co
no
de
ma
t
bu
Europe
t are made in Taiwan:
lis
ice
pr
76
19
1,
.
Jan
o's
nc
Va
in
s
del
The following mo
+8, 19+9
Multi Studs - 154-1, 19+3 5 19+7, 19
- 792^, 7932, 7927, 7933, 793>+
Baseball
19
-CONCLUSION
rers of
In conclusion, we do not see the manufactu
ry, but part of
athletic shoes functioning as a true indust
see that the comthe overall shoe import problem. We do
uing to quickly
panies manufacturing athletic shoes contin
ths, we have seen
fall by the wayside... The past twelve mon
prior period.
more athletic factory closings than in any
the U.S. market,
Athletic shoes of all types are entering
out of business.
depressing prices, and driving factories
reasing rate
The situation is worsening at an ever inc
in athletic shoes.
nt out
In this statement I have attempted to poi
producers by
the damage caused the U.S. Athletic Shoe
also to express
imports over the last several years, and
e by importers
my viewpoint in regards to statements mad
t your organization
of athletic shoes. I hope in so doing tha
ief through quotas
will give the United States producers rel
and high duties.
c