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Joyce Groote, of Holeys.
Joyce Groote, of Holeys.

Report on Small Business magazine

Can this woman beat Crocs? Add to ...

Joyce Groote holds up a plaid-lined ankle boot. From a few feet away, it could pass for fashionista fare, the plaid a cheeky accent underneath a pair of designer denims. Touch it, though, and the surface has the familiar sticky smoothness of those ubiquitous foam clogs, stashed in millions of mudrooms and favourites of everyone from TV chef Mario Batali to ex-president George W. Bush. The material has also been fashioned into sandals, heels and rain boots, but Groote, president and CEO of Holeys, insists that no other company has yet made an ankle boot. Certainly not Crocs.

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The mention of the company causes interesting changes in Groote's classically beautiful face. Her jaw sets, her eyes deaden. A 52-year-old woman of polite, reserved charm, she visibly stiffens. She even puts down the shoe she's been toying with, as if to free her hands for a skirmish. Crocs, you see, is the evil empire to the more than a dozen much smaller foam-clog makers like Holeys – which claims to be No. 2 (though, admittedly, a distant second) in the world. And Groote has a unique reason for rancour. Her Richmond, B.C.-based company has been selling foam clogs just as long as Crocs; in fact, both firms originally marketed similar shoes under different brands.

Yet, within four years, Colorado-based Crocs grew into the second-largest footwear manufacturer in the U.S., more than 100 times Holeys' size, and became synonymous with the category. What's more, Crocs has used its wealth to repeatedly sue its rivals, claiming to hold patents that make everyone else's clogs illegal knockoffs. The fact that rulings have gone substantially against them at each step along the way only reaffirms its competitors' conviction that the intellectual property in question is, well, a crock.

On this hot mid-June day, Groote would rather talk about Holeys' recent reinvention after the runaway clog bandwagon slowed to a crawl. It has been a bumpy ride. From 2004, when Groote took over, the company's revenues grew exponentially – $60,000; $600,000; $3-million; $11-million; $17-million. These kinds of annual growth rates derail many start-ups, as demand vastly outstrips supply and there's never enough time to plan ahead. “You don't see them, but there are a number of scars on this body,” she says, leaning forward confidingly and offering an exhausted smile.

By 2007, however, controlling growth stopped being a problem. Inventories piled up. And all the Croc haters triumphantly announced the end of an abominably ugly fad. Holeys, Crocs and others suddenly had to rethink their businesses amid a rapidly deteriorating economy. The fruit of that process at Holeys started to appear last summer–new product lines, a new distribution model and a tighter focus on a few consumer niches, all under a new brand (until last year, the company was called Holey Soles). In fact, Groote says her now much-smaller company is no longer about footwear but about the proprietary foam, and the many innovative products it can make out of that material.

Groote doesn't pretend that the strategy will make up for dwindling sales. But for companies that thrived off the craze, the new directions will determine who – if anyone – can turn a footwear fad into an enduring business.

Shoes invented in Canada

The genesis of the foam clog is murky. The most widely cited story sets its roots in Canada in 2000, when Finproject NA, a Quebec City manufacturer of industrial foams used in everything from tricycle tires to swimming-pool accessories, commissioned an Italian designer to develop foam shoes for spas. In the spring of 2002, several sharp-eyed entrepreneurs–three Colorado golfing pals, as well as a Vancouver psychologist named Anne Rosenberg – independently saw an opportunity to distribute the clogs.

“It was the perfect material for footwear,” says Groote: resistant to bacteria, washable, buoyant, feather-light and very comfortable. “The world loved and hated the shoes all at the same time.” In early 2004, Groote was approached by Rosenberg, her next-door neighbour, for help in growing the business, and a loan. Groote at first seemed an odd choice. A geneticist by training, she was the former president of Ottawa-based industry association BioteCanada. After she famously got pied in the face by an activist protesting genetically modified foods, Groote decided she'd had enough controversy, and moved to the West Coast. She and her husband, Rick Walter, had their eyes on a Vancouver business. When that fell through, she started consulting and raising money for local biotech start-ups.

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