By Jon Chesto

4/29/2014

Within days after an American won the Boston Marathon, another patriotic milestone coincidentally was reached in the running community. And this one has the potential for a much bigger economic ripple effect.

On Friday, four days after Meb Keflezighi became the first U.S. citizen to win the Marathon in three decades, the news had reached Massachusetts: The Department of Defense will start requiring recruits to buy running shoes that are made here in America.

This is a huge victory for Boston-based New Balance and its numerous suppliers throughout New England. About one-quarter of the running shoes New Balance sells in North America carry “made in the USA” labels — but the midsoles to even those shoes had always been made overseas. To address this, New Balance in 2012 bought an injection-molding machine known as the IMEVA that allows the company to manufacture midsoles here. That machine, located in the company’s Brighton plant, can crank out midsoles for a model known as the 950 that meets military specs. (The uppers, meanwhile, would be made at one of New Balance's other New England plants.)

New Balance made this investment with the hopes that its lobbying efforts in Washington would pay off. Advocates in Congress such as Rep. Niki Tsongas of Lowell and Rep. Mike Michaud of Maine — New Balance has factories in both of their districts — led the charge to push legislation that would require the Department of Defense to honor the Berry Amendment for running-shoe purchases. Defense officials have bypassed this 1940s-era requirement — which mandates purchases for military recruits from domestic factories whenever possible — for years when it came to running shoes. Among other things, Defense officials argued that Berry couldn’t apply to running shoes because there were no companies in the U.S. that had a way to make all the shoes' components here.

That, of course, is starting to change. Matt LeBretton, New Balance’s vice president of public affairs, tells me he expects New Balance will now be selling Berry-compliant shoes to the military as soon as early 2015. The company could be ready more quickly, he says, but New Balance needs to wait for DoD to “wear test” the shoes.

It’s hard to know what this means in terms of additional revenue or jobs for New Balance, but it’s almost guaranteed that there will be some of both. LeBretton estimates that the military voucher system in place now for running shoes costs about $15 million a year. He says if all of that work went to one company like, say, New Balance, that would equal at least 200 new jobs, to make nearly 250,000 pairs a year.

It's not all necessarily going to go to New Balance's 1,350-person manufacturing workforce, though. Wolverine Worldwide — a Michigan manufacturer that owns the Lexington-based Saucony and Stride Rite brands — would be ready to sell Berry-compliant shoes soon as well. Tsongas’ office says at least five other companies have begun the process.

Part of the difficulty in measuring the impact comes from the fact that DoD is not mandating a big contract, one that would entail a centralized procurement of running shoes. Instead, the transition will be a little more open-ended. As Berry-compliant shoes hit the market for a particular shoe type category, like “motion control” or “stability,” only those shoes will be available for purchase using the DoD’s onetime cash allowance. (LeBretton says this allowance is currently in the $80 to $85 range.) If no Berry-compliant shoe exists for a particular shoe category, other shoes made overseas will continue to be offered to recruits.

LeBretton says this won’t necessarily be a huge windfall for New Balance. There will be a profit margin on these shoes, he says, but it won’t be as high as shoes sold commercially. The real benefit is the positive impact on New Balance’s supply chain: The steady flow of extra work will help ensure these smaller manufacturers stick around for the long haul. Some will even be adding jobs. The rubber outsoles would be made by Quabaug Corp. in North Brookfield, for example, and the laces would be made by Rhode Island Textile in Pawtucket, R.I. Bixby International in Newburyport would make reinforcement straps, and Uretek in New Haven would make a coating used to reinforce parts of the shoes.

In her April 25 letter to Tsongas, Acting Deputy Secretary of Defense Christine Fox writes that DoD is making this switch because the agency has become aware of several footwear companies that have the capability to manufacture Berry-compliant shoes in the near future. Defense officials, Fox writes, are interested in having their recruits buy domestically made athletic shoes to the maximum extent practical. But she does point out that the DoD is stopping short of requiring a central procurement and stockpiling of running shoes, because of the upfront cost to implement and sustain such an effort.

This has been a prolonged quest for New Balance, one that’s lasted at least since 2007 when the company acquired a small clothing firm that had been doing some defense work. But succeeding in business is often its own endurance test: The finish line may seem far away at times, but persistence eventually can pay off.

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