With $1 billion in sales and a stable of players that includes No. 1-ranked Iga Swiatek and young American star Ben Shelton, the surging Swiss running shoe company wants to become a tennis powerhouse. But first, they need a sneaker.
By Matt Craig, Forbes Staff
Months after signing a head-to-toe, multimillion-dollar endorsement deal with Swiss running shoe brand On, world No. 1 tennis player Iga Świątek took the courts in New York this week to defend her U.S. Open title wearing a pair of Asics Gel Resolution 9 sneakers. In what was meant to be the year of On’s big push into tennis, a design challenge started the rollout on the wrong foot.
It’s a rare unforced error for a brand that counts Roger Federer as an investor and creative partner. Since its founding in 2010, On has gone from scrappy startup to a $10 billion public company based on its ability to put the technology of elite performance shoes onto the feet of people who want to run something—from marathons to tech companies to errands. It surpassed $1 billion in sales last year, and recently raised its guidance for 2023 sales to $2 billion. Tennis represents On’s ambition to become something even bigger, a true global sportswear brand capable of competing across different categories like Nike, which reported revenue of $46.7 billion in 2022, and Adidas, with $23.7 billion in revenue last year.
Co-CEO Marc Mauer says that On had been eyeing tennis for possible expansion even before Federer joined the company in 2019, in part because of the crossover between performance and lifestyle products. But the emphasis on off-court shoes and apparel before mastering its competition line is a reversal of On’s normal performance-first ethos. “The strategy was supposed to be different,” says Mauer. “But it turns out creating a professional tennis shoe is extremely hard.”
This is a relatively new problem for On, which, since its founding, has been focused on the very specific forward motion of running. (Federer, for instance, was a fan of its running shoes for years before joining the company.) But the same design elements that give On shoes their signature look and feel, such as foam pods in the outsole, simply don’t provide enough lateral stability for the 360-degree movement in tennis. So the company worked closely with Federer during the pandemic to design a professional tennis shoe from scratch, which he debuted in 2021. The style wasn’t widely sold until early 2023, and On declined to provide its sales numbers.
Zachary Thomas, a certified podiatrist who runs the court shoe review YouTube channel FootDoctorZach, notes that the same reasons that the Roger Pro was perfect for Federer may be why it’s not good for Świątek, let alone the average recreational tennis player. Its bottom-light construction and stiff foams are perfect for someone who can glide gracefully across a court like Federer but might not maintain balance as well for someone who slides into shots like Świątek. And the flat tread on the bottom, which gives a player maximum contact with the court, means the shoe wears out quickly. That’s not a problem for pros with replacement pairs at hand but could pose a challenge for casual players at the $200 price point.
“It looks like the exact same shape as Roger Federer’s foot, so obviously they made that last for him and then said let’s just pump it out,” Thomas says. “It’s perfect to be used three or four times, and then that’s it, done, it’s almost useless.”
Świątek and American Ben Shelton, the two pros On signed as ambassadors in early 2023 after Federer’s retirement announcement last year, have been similarly engaged in designing their own equipment. At ages 22 and 20, respectively, they’re seen as foundational pillars for what On’s tennis brand will eventually become. While Świątek has continued to test and tinker throughout the summer, Shelton settled on a personalized version of Ons by midyear. “They never put any pressure on me to be in On shoes or On clothes right away if I wasn’t comfortable competing in them,” he says. “Now we’ve been able to make a shoe that I really like.”
Mauer believes that shoe is an example of the process working as designed. Insights gained from Federer, Świątek and Shelton have given the company what it needs for its soon-to-launch Roger Clubhouse Pro and eventually the Roger Pro 2, which Mauer says will cater to the everyday tennis player.
For now, the company can afford to be patient. On expects its top-line revenue to grow 44% this year, with its direct-to-consumer business outpacing wholesale, indicating customer demand remains strong. After its second-quarter results were released, the company’s stock dipped 13% to around $30 per share on the fear that earnings had slowed in consecutive quarters. But Ashley Owens, who covers On as an equity research associate at KeyBanc Capital Markets, says “the reaction feels a little bit overblown.” A similar dip occurred after first-quarter results were released, she says, only for the stock to recover within a month or two.
According to Owens, the losses primarily come from foreign currency exchange between the dollar and a strong Swiss franc, and she believes there is positive momentum among similar brands like Deckers, which owns the buzzy maximalist running shoe brand Hoka, and Lululemon, which is four times as large as On and grew its revenue by 24% in the first quarter of the year. Owens set her target price for On’s stock at $42, and believes the company has substantial room for growth just within its core running business.
“All the fundamentals are still intact,” Owens says. “This is a running company first and foremost—that’s where their focus will continue to be.”
Maybe so, but On’s biggest windfall came when customers began wearing their running shoes for everyday use. The company expects to follow a similar blueprint for tennis, Mauer says, citing the estimated $9 billion global tennis equipment market, of which products related to elite competition are only a small fraction. Many people may not even recognize the tennis roots of hugely popular products like Adidas’ Stan Smith sneakers or Reebok’s Club C. And of course there is the granddaddy of all tennis apparel brands, Lacoste, which was founded in 1933 by French tennis legend René Lacoste. On’s goal will be to blur the lines between sport and lifestyle.
The key to that strategy will be the United States, where On now does two-thirds of its total sales. Britt Olsen, On’s general manager of the Americas, says that much of the company’s marketing efforts will involve encouraging new people to play tennis and then adopt the gear into daily life. The week before the U.S. Open, the company hosted an event in Brooklyn promoting tennis participation with Federer, Świątek and Shelton. “Tennis has to succeed here if we want to have a successful global tennis brand,” says Olsen.
It’s a big reason why both Mauer and co-CEO Martin Hoffman attended last year’s U.S. Open to personally court Shelton, part of a class of promising young Americans vying to end the country’s 20-year men’s Grand Slam drought. Were he to win, with his infectious smile and an army of social media followers in tow, it’s easy to see how both player and brand could become household names in tennis.
“I think that On is one of the greatest brands in terms of storytelling,” Shelton says. “I want to do big things off the court as well as on the court. I think On does a great job giving me an opportunity to do both.”
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