The rise and fall of Havaianas - Brazil's national flip-flop brand

Once a cheap pair of sandals for Brazilian workers, Havaianas has overcome many ups and downs to become a global fashion brand.

Easily seen at the beach, poolside, on the street or even at the bar, Havaianas flip-flops are "a quintessential Brazilian symbol," according to Liel Miranda, who will be CEO of Alpargatas - which owns the Havaianas brand - from February 2024.

Today, Havaianas is sold in some 130 countries, making it the big brother of the flip-flop industry. But sales are not going well. And the journey of the brand itself has had its ups and downs.

Brazil's 'national' sandals

Alpargatas created Havaianas in 1962, inspired by traditional Japanese Zori sandals, which had fabric straps and woven straw soles. The company improved them to rubber straps and a more modern style. The name Havaianas comes from the Portuguese word for “Hawaiian,” in honor of the tropical island.

Traditional Japanese Zori sandals (left) were the inspiration for rubber flip-flops. Photo: Havaianas

The slippers were originally aimed at poor Brazilian plantation workers. Just two years after their launch, most workers in the country owned a pair of Havaianas. They were sold straight from vintage Volkswagen Kombi vans across Brazil. The slippers were met with enthusiastic applause wherever they appeared.

In fact, Alpargatas invented the rubber flip-flop and patented it in 1966. The original slippers only came in two colors: blue and white, but a manufacturing error in 1969 resulted in a batch of green. And the defective color was popular, so Havaianas seized the opportunity and produced more colors, such as brown, yellow, and black.

In 1980, Havaianas became a “national” product when the government officially recognized them as an intrinsic part of Brazilian culture, and included them in the list of basic goods (along with rice and beans) to control inflation. At this point, millions of pairs of Havaianas were sold each year in Brazil.

But by the early 1990s, the Havaianas craze was waning. Brazil’s economy was improving and people had more money to spend. Ironically, this led consumers to abandon the “cheap” Havaianas, which were considered the preserve of maids and factory workers.

As a result, Havaianas sales dropped 35% in 1993, to 65 million pairs. Alpargatas' management was forced to change. They realized that Havaianas needed a marketing push to reposition the brand as a fashion product, shedding its poor-people image.

In 1999, the brand officially entered the fashion world after appearing in the show of French designer Jean Paul Gaultier. Soon after, Havaianas began collaborating with a number of major brands and designers to launch new colors and styles. The Havaianas product line grew from 2 to more than 25 models. While the popular models were retained, the high-end models, which cost 5 to 6 times more, were packaged like shoe boxes.

Soon, Brazilian and international celebrities were wearing the new, more colorful and more expensive Havaianas. After a six-year turnaround, sales increased from 65 million pairs in 1993 to 105 million pairs in 1999.

Go out into the world

By 2007, the Brazilian market was saturated, with Havaianas selling 850 pairs for every 1,000 people. And despite strong sales growth in 65 countries, there was no clear international expansion strategy. So in 2008, CEO Marcio Luiz Simoes Utsch decided to turn Havaianas into Brazil’s first truly global brand.

This required expanding the business in Europe, the US and Asia, where the culture and climate are different from Brazil, so customers would choose to buy flip-flops, while there were already some comfortable footwear styles from competitors such as Crocs, Rip Curl and Quicksilver.

The Havaianas Slim model with a slimmer silhouette and thinner straps for women was launched in 2006. Photo: Havaianas

Marcio himself lacked any precedent for turning an emerging market brand into an international one. At the time, global brands typically came from the US, Western Europe or Japan. Havaianas ultimately tweaked three aspects: design, marketing and manufacturing-distribution.

Design-wise, the company introduced new closed-toe sandals for colder climates, ankle-strap sandals, and even pairs with real diamonds for fashion shows. At the same time, to refresh the brand, they added socks, handbags, and soft, washable shoes.

In marketing, they built on the image of Havaianas as simple, bright, and fun. The approach was allowed to be tweaked in each market. In France, for example, sales increased when the importer positioned the product in the same league as Lacoste and Jean Paul Gaultier. In the US, Havaianas was marketed as a luxury item, limited to chains like Saks Fifth Avenue.

To keep the message consistent, the company manages operations itself rather than working through local importers and distributors, except in Europe, where it has five offices but 18 distribution partners. They also realized that sales would decline if the sandals weren't "Made in Brazil."

So the company opened a new factory in the southeast of the country. At this stage, the price of a pair of flip-flops ranged from $16 to $200. The wide price range was intended to appeal to different customer segments. But the cheapest remained at $16 to differentiate Havaianas from the lower end of the market.

"Turning Havaianas into a global brand is a triumph of classic marketing planning and techniques, where diligence and creativity go hand in hand with constant innovation," marketing professor Dominique Turpin, formerly of IMD Business School (Switzerland), commented on the Financial Times.

As a result, by 2011, Havaianas were sold in more than 80 countries, helping Alpargatas achieve total sales of 2.6 billion Brazilian reals (about $540,000 at current exchange rates), up from 1.7 billion reals ($350,000) in 2008.

Notably, the internationalization strategy did not distract Alpargatas from its domestic customers. The company continued to pay special attention to the Brazilian market, which also served as a test bed for new products. One example is the tote bag, which was first launched in Brazil and elsewhere a year later.

In addition, Havaianas’ international recognition has also had a positive impact at home, making domestic consumers proud of the brand. As a result, Havaianas accounted for nearly 85% of the Brazilian market share in 2012. By 2015, Alpargatas had changed hands, when its parent company, Camargo Correa, sold it to J&F Investimentos for 2.7 billion reais ($718 million).

But after two years, J&F sold Alpargatas to Itaúsa and Cambuhy - companies owned by the Moreira Salles family - for 3.5 billion reais ($1.1 billion). During the period of continuous ownership changes, Havaianas continued to grow until Covid-19.

Havaianas slippers on display at New York Fashion Week 2018. Photo: Havaianas

Despite Brazil’s economic crisis, Havaianas posted a record 6% sales increase in 2020. Alpargatas CEO Roberto Funari said the success was due to its ability to adapt quickly at the start of the pandemic. It was also helped by the trend for casual fashion, affordable prices and a strong connection with consumers.

By 2021, Havaianas sold a record 260 million pairs of sandals, up 30 million pairs from 2020. Alpargatas reported revenue of 3.94 billion reais (nearly $810 million), up 25.6%, with 91% of total revenue generated by Havaianas.

In December 2021, the company announced the acquisition of the US brand Rothy's for $475 million, which analysts praised as a complement to the Havaianas product portfolio. That same year, the company restructured its international operations, focusing heavily on strategic regions including the US, Europe, and Asia-Pacific.

Weakened after the epidemic

In 2022, a new period of turmoil began, with 247 million pairs sold, down 5%. Revenue still increased by 6% but net profit fell by 23.1%. "In 2022, our performance was disappointing. Cost and operational challenges put pressure on financial results that were not as expected," commented CEO Roberto Funari.

Roberto Funari left after a year of losses and board member Luiz Fernando Edmond took over as interim CEO from April 2023. Under the new management, the company embarked on a restructuring, but has yet to reach break-even.

By the third quarter of 2023, Alpargatas had posted losses for four consecutive quarters and faced criticism from analysts and shareholders. By the end of November, the company's market capitalization was 6.4 billion reais, down 43.3% from the same period in 2022.

According to analysts, the current difficulties are due to Alpargatas' strategy being misguided under the previous leadership, leading to poor organizational structure and failed investments. Over the past four years, the company has focused resources on expanding capacity, leading to increased inventories and significant cash outflows.

Moreover, they continue to struggle with rising raw material prices. Management is trying to cut product lines to reduce losses and says that there are positive signs. However, there are still critics who say that the company culture has changed to be more pragmatic and that there are job cuts.

In mid-December 2023, Alpargatas announced that it would appoint Liel Miranda as its new CEO. He will officially take the hot seat from February 2024 to continue the transformation process "focused on simplification and efficiency" that Luiz Fernando Edmond is implementing. "I am very excited about this new challenge," Miranda commented.

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