Merrell and Patagonia ink licensing agreement to produce Patagonia footwear

Patagonia Inc. and Wolverine World Wide Inc.’s (NYSE: WWW) Merrell footwear brand have entered into a long-term global license agreement to produce Patagonia footwear. The first product line is expected at retail in spring 2007.

Under the terms of the agreement, Merrell will design, manufacture and market performance footwear under the Patagonia name with rights to other Patagonia brands including Water Girl, clothing and swimwear for women, and Lotus Designs, whitewater paddling gear.

Jacques Lavertue, president of Wolverine’s Outdoor Group, told SNEWS® that Patagonia contacted Merrell six weeks ago to gauge the company’s interest. Lavertue was keenly interested.

“We are certainly completely different organizations, but when we sat down together, we saw eye-to-eye on almost everything — distribution, environmental responsibility, designs, colors, marketing…,” Lavertue said.

The traditional environmental sensitivity found at Patagonia headquarters and throughout the company’s product line will be incorporated into the Patagonia footwear line from the start.

According to Lavertue, “We will be dialing in the line over the next couple of weeks, and we will begin immediately to incorporate new manufacturing techniques into footwear that are sustainable and support low-impact production.”

Casey Sheahan, product line director for Lotus and Water Girl, and the person at Patagonia who drove the deal, used to work for Merrell under Lavertue. Sheahan underscored that while Patagonia had been in discussions with quite a number of other footwear manufacturers, and that some were perhaps further along in terms of being labeled “green,” Merrell clearly offered the best package in terms of design and production integrity combined with amazing global distribution.

And not being the greenest of the companies Patagonia looked at only spoke to opportunity for the Patagonia management team.

“Merrell has a great track record of great designs,” Sheahan told SNEWS®. “And frankly, the extension of our company mission statement is to share our environmental credo with others, so in this way, perhaps we can, as a company, influence Wolverine to become more environmentally sensitive.”

Lavertue doesn’t disagree, and is very much looking forward to sharing what his company already knows too.

“The entire Wolverine corporation is behind the environmental initiative and we are looking forward to being able to tap into Patagonia’s research and expertise. At the same time, there are things we can share with them, one of them our Green Dot compliant packaging in Europe,” said Lavertue.

Lavertue told us that the Patagonia footwear line will become a member of 1% For The Planet, giving at least 1 percent of the brand’s annual net revenues to environmental organizations worldwide.

While the Patagonia team will be the distribution gate-keepers for the Patagonia footwear line, Merrell sees great opportunity not only in the existing outdoor specialty channels that Patagonia sells through, but also globally.

“We (Merrell) are distributed in over 135 countries and have powerful relationships around the globe and this is only going to benefit Patagonia,” Lavertue told us. “It is that breadth of global distribution that has allowed us, as a brand, to build critical mass without ever having to compromise our distribution model.”

Added Sheahan, “The big eye-opener for our team was that for as much as 90 percent of the global population the Patagonia footwear line will be their first exposure to the brand.”

While at the onset a separate sales force will be established for the Patagonia footwear line — both companies told us the current sales reps were already fully loaded down with responsibilities — Lavertue told us he could envision a hybrid sales team down the road.

“The most important thing for the brand and for our retail customers is that we have a sales force that can best do the job. We will have a specialized brand management team on the Patagonia side that we will set up within my group,” said Lavertue.

For now, both teams are focused on creating a detailed line plan that will see footwear appearing on retailer shelves in spring of 2007. The line will include a mix of sandals, light hikers and multisport footwear. Both Lavertue and Sheahan told us they will not be chasing the trail running category for now.

Lavertue stressed that this was not a typical licensing agreement. The deal, he said, is very good for both sides, but more importantly, it is structured to support a solid branding effort that will allow Merrell to design a completely new Patagonia footwear line.

In terms of what the footwear line will look like, it will be designed to appear in the Patagonia booth, not Merrell’s, and be merchandised as collections right along with the apparel.

“You will see elements of the clothing — designs, colors, patterns — incorporated into the footwear line,” said Lavertue. “The line will be presented in the same manner as Patagonia’s catalog.”

“My team, their team — everyone is just so excited about the opportunity this presents us. This is a first step in a very long partnership down the road,” Lavertue said.  

SNEWS® View: Patagonia has long coveted adding footwear to extend the brand, suffering through two previous miserable failures when the company tried to go it alone. This time, we’d have to say, the company has it right. If we start playing with numbers, it certainly can’t be lost on Merrell that properly executed, a Patagonia-branded footwear line could realize $100 million to $250 million in sales globally in pretty short order. Better to be the one doing the licensing in that arrangement than the one trying to fend off the market impacts of increased competition. We also know Lavertue very well, and he will treat this brand as his own, underscoring the fact that for both Patagonia and Merrell, this is much more than simply a licensing arrangement. Expect to see the Merrell team wearing a lot of Patagonia, and perhaps even the models in Merrell workbooks and catalogs.