Dansko stepping up its U.S. footprint

An overpowering smell of fresh leather and the words printed on stacks of cardboard boxes containing Dansko shoes inside the company's West Grove distribution warehouse are jarring to the senses.

Made in China, most of the boxes say, or Made in Italy. None say Made in U.S.A., but that's not to say Dansko, the 22-year-old Chester County company that made stapled clogs popular across the country, hasn't tried.

The impressions are all the more striking because just a short stroll away stands a headquarters building that projects a company with a capitalist conscience. Visitors are greeted by an indoor wall of plants hydrated by a waterfall of recycled rainwater and other accoutrements of a business driven by more than just low-cost, high-profit mathematics. The Dansko nerve center has LEED Gold certification, a stamp of environmental approval.

Much about Dansko L.L.C. and its founders, Mandy Cabot and husband Peter Kjellerup, reflects a business vision fixed on a broad horizon: Employee stock ownership is part of the privately held company's mix, as is a "B" corporate structure that rewards decisions that consider more than profit.

Yet like countless footwear companies over the last two decades as the nation hemorrhaged its shoe-manufacturing footprint overseas, Dansko has failed to achieve perhaps the most symbolic goal of a company attuned to its place in the economic ecosystem. It has not found a way to make in America the shoes it sells to Americans.

That may be about to change, with Dansko completing a plan for a new line of shoes to be manufactured from molds in a stateside factory as early as next year.

Currently, 80 percent of Dansko's bulbous clogs and other ergonomically designed shoes are assembled in China and 20 percent in Italy - an equation the company is eager to recalculate.

If all goes well, Dansko hopes to manufacture a new clog from recyclable material in Arkansas in 2013. A nonrecyclable version called Avalon Pippa debuted this spring in stores. It is made in China.

If successful, the company - founded in 1990 from the tack shop of its founders' West Marlborough Township equestrian farm - will have reached a milestone that could allow for further domestic manufacturing of shoes in its growing collections, top executives said.

"We don't want to be 80 percent in China," Cabot, president and chief executive officer, said in a series of long interviews at Dansko headquarters, where more than 170 employees work, and near a giant distribution center under construction. "Our goal is to spread out our risk and our global presence as we start to expand our sales in other parts of the world."

"The ultimate goal in my mind is to have something that is made in America, 100 percent recyclable, that performs on all the support and ride attributes that we need to have labeled Dansko products," Cabot said.

It may seem odd that the recyclable clog's forerunner, the Pippa, is made in China. The reason, however, illustrates just how little footwear manufacturing is left in America, and why it is hard to stitch it back into the nation's economic fabric.

"We're making it in China because they're up to speed and ready to go with it," Cabot said of the factory churning out the virgin-polymer-based Pippa on sale now in neon bright colors.

China is the leading producer of footwear in the world, ahead of No. 2 Vietnam, and is chock-full of factories and trained cobblers as a result.

Since the 1980s, footwear manufacturers have flocked to such nations for labor so inexpensive that, even with import tariffs imposed by the United States, the shoes can be sold at prices consumers will pay, and generate profits that companies crave.

Dansko is among them, having learned that domestic manufacturing is no easy task, and finding that the rising cost of the euro was making it hard to keep all its manufacturing in Europe, even though Europe is what made it famous to begin with.

Cabot and Kjellerup stumbled upon stapled clogs on a trip to his native Denmark. Thinking they were perfect for the farm, they brought batches to Chester County and sold them one pair at a time.

Word spread, demand grew, and the couple struck a deal with a Danish manufacturer to introduce them to the U.S. market under the brand name Dansko.

The company was born in 1990. In 1995, despite the cachet and craftsmanship associated with having the clogs and other so-called "Euro comfort" shoes made in Europe, Dansko commissioned a factory in Maine to assemble the clogs. It imported the outsoles from Italy, used U.S. leathers, and employed the technical expertise of Danish technicians, Cabot said.

"Being made in the U.S. was a really great thing, and we would have loved to continue there," she said. "But after about 18 months of manufacturing in Maine, there was so much attrition in the workers and workforce up there that we simply couldn't continue."

Dansko had set up shop in Maine as other shoe manufacturers had pulled up stakes from the Northeast for foreign shores. It was hard to find and keep talent; the industry was vanishing.

"We had two technical people from Denmark over here, and they kept getting really bad results," Kjellerup said. "Half the shoes, we couldn't sell because the quality was so bad."

The next year, Dansko left Maine, and its Danish manufacturing partner instead expanded production to a small town in Poland. There was enough of a shoemaking industry there that the factory was up to speed in no time.

"They put the machinery in, and within three to six months they were full running, they had worked out all the bugs," Kjellerup said. "Within six months, we had perfect shoes come out of there, no problem.

"After banging our head for 12 months over here," he said, "we went to Poland, and it went just like that."

Dansko parted ways with its contract manufacturer several years ago, reengineered its clogs, and began manufacturing them through contracts with factories in Brazil in 2006, Italy in 2007, and China in 2008. (Brazil is no longer in the mix.)

Dansko says its migration to China and its retention of operations in Italy stem from its desire to use high-quality materials and skilled workers so that its clogs, for one, last seven to 10 years. Its shoes also must be durable enough - and constructed at costs efficient enough - to command U.S. prices that are far from bargain-basement: roughly $120 to $135 for clogs; $115 to $140 for sandals; up to $235 for boots.

"We're not moderately priced; we are expensive," Cabot said. "We're best-in-class for what we do. We're not the most expensive shoes on the planet; surely we're not that. But we're not driven by the least expensive prices we can get and trying to squeeze out the highest profit."

Why start with a molded shoe in the United States? Labor costs are lower than they would be with a 54-component leather shoe.

The Avalon line is a baby step. Even if it proves viable, do not expect Dansko to make leather shoes stateside soon.

Even if the company were to offer U.S. workers wages similar to what it pays in Italy - $18 to $20 an hour - its founders say there would remain the fundamental issue of where to find people with the expertise, or the desire, to take those jobs, given how shoemaking as an industry has been decimated.

"It's really about there's no knowledge - no knowledge, no support structure," Kjellerup said. "Because if you had that, I think America could be competitive in manufacturing."

Last year, Dansko sold more than 2.5 million pairs of shoes. It continues to grow in what it calls a socially responsible way. And, for now, it remains focused on a biodegradable molded clog that would say "Made in U.S.A."

"It's a wonderful thing to have a shoe company with roots here in Pennsylvania . . . expanded first to the U.S., then to the Far East and South America . . . and then, with the ultimate goal of coming back," Cabot said. "We're not quite there yet."