How Reef Turned Its Business Around to Become No. 1 in the Surf Category
It’s a tale of two brands.
In October 2018, the Reef brand was sold by VF Corp. to private equity firm Charlesbank Capital Partners LLC after sales stagnated.
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At the time of the deal, FN reported that Carlsbad, Calif.-based Reef would operate as part of The Rockport Group, which only months before had been acquired out of bankruptcy by Charlesbank.
Both were distressed brands with potential. But where Rockport has struggled in recent years, Reef is flourishing, more than doubling its business size since 2019, when Mike Jensen (a footwear veteran with previous roles at DC Shoes and Asics) came on board as president.
And as of June 2023, Reef was the No. 1 sandal in the surf/action category, according to market research firm ActionWatch.
Rockport, meanwhile filed for bankruptcy in June and was acquired at auction this week by Authentic Brands Group.
Jensen told FN last week that the two business have been operating independently the past few years, with separate financials, sharing only a few back-end functions that are now being redistributed.
That separation may have been a saving grace.
But the brand’s turnaround is also the result of a well-orchestrated strategy by Jensen and his team that began by broadening Reef’s scope beyond its traditional beach wear.
“What we encountered [in 2019] was a brand that was pretty narrowly focused — surfing and beach obsessed, maybe to a fault,” he said. “What we believed was that the brand had a lot of permission to transcend to a much, much broader consumer.”
He recalled that on day one, the team established six key points to drive “high-quality, long-term, sustainable growth.” Some related to retail channels, while others focused on category opportunities such as women’s. “The team was really looking for that clarity of direction and purpose. [In the beginning], you’re just trying to get people going in one direction.”
Jensen said the company also devoted time to high-quality consumer research to learn more about its customers, and from there, established a precise brand strategy and playbook. “We knew where we were going to play and how we were going to win, and the team really rallied around it,” said the exec.
Another important move was to push its product engine into high gear. While others brands pulled back in recent years amid supply chain meyham, Jensen said Reef over-invested in product development, including staffing up with more design talent and line builders. “We’ve built an incredible portfolio of fresh new products at a time when others are still trying to get caught up from COVID,” he said. “We kept developing and creating and doing new and fresh all the way through the pandemic.”
He credits that, in part, to being private-equity owned, which gives Reef the freedom to be entrepreneurial and take steps that might be perceived as too risky at a public company.
As a result, Jensen said, the brand is growing in every wholesale channel in which it does business, including surf specialty, sporting goods, department stores and family footwear chains. In fact, in surf specialty, Reef has a 66 percent market share for women’s sandals, and a 58 percent market share overall, according to ActionWatch.
Over the past few years, Reef, which turns 40 next year, has made a concerted effort to boost its standing in that channel, said Jensen. However, its overall distribution plan hasn’t changed drastically from 2019. “We didn’t need to go find a bunch of new partners,” Jensen explained. “We needed to more strategically do business in the channels we were already operating in.” That included sharpening its segmentation and timing for the different retailers.
Additionally, the brand’s own e-commerce site is its No. 1 growth driver. “It’s seven times bigger than it was when we walked in the door,” said Jensen.
To continue to bolster its direct-to-consumer connections, Reef opened its first pop-up shop in June, in a space along the Pacific Coast Highway in Encinitas, Calif., that will become permanent at the end of this year.
Jensen said the brick-and-mortar store isn’t the start of a large retail rollout — but rather a helpful test space just 15 minutes from its headquarters in Carlsbad. “We watch the way the consumers behave, test new concepts and ideas in real time,” he said. “The results of it have been really cool. We’re seeing it play out sort of exactly the way we thought.”
He noted that one early learning is that customers — both men and women — are responding to color more than Reef’s product designers expected. The brand is also testing more product categories in the Encinitas shop, including exclusively launching the Lay Day sneaker in two styles — the Lay Day Dawn and Lay Day Seas — before its official launch on Reef.com in September.
The leather women’s sneakers have an easy on, easy off design and feature a concealed heel to give wearers a lift, while also maintaining a casual, comfortable vibe. They retail for $90.
Jensen said he’s working to ensure that Reef branches out to new customers without alienating the surfers and other core consumer it has cultivated over the years — and he’s confident in his strategy. “Reef is just one of those really sticky brands with consumers,” he said. “I think we have a ton of permission to do new things that aren’t just surfing and beach related.”
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