On Holding AG (ONON): 5 FORCES Analysis [Nov-2025 Updated]

You're looking for the real story behind the hype at On Holding AG as we hit late 2025, so let's cut straight to the competitive landscape using Porter's Five Forces. Honestly, the picture is one of high-octane growth-projected at least 34% for FY 2025-but it's a fight. While the company's 65.7% gross margin suggests it's winning pricing battles against suppliers, the rivalry with giants like Nike and Adidas is fierce, and the threat from fast-followers like Hoka is real. The key takeaway is how their 41% Direct-to-Consumer (DTC) penetration is building a moat against customer power, but you need to see the full breakdown below to map the near-term risks to that premium valuation.

On Holding AG (ONON) - Porter's Five Forces: Bargaining power of suppliers

You're looking at the supply side of On Holding AG's business, and honestly, the picture suggests that while concentration exists, the company's premium brand strength gives it the upper hand right now. On Holding AG doesn't manufacture its own products; it relies entirely on third-party suppliers and contract manufacturers for its shoes, apparel, and accessories. That reliance is a key lever for suppliers, but we need to look at the specifics.

We know that in 2024, a very small group-specifically, five key suppliers-produced roughly 70% of On Holding AG's products. That's a high concentration, which typically means those few partners have significant leverage. Furthermore, the manufacturing base for footwear is heavily concentrated in Vietnam, which is a major global hub, but this geographic concentration also introduces potential single-point-of-failure risks if local conditions shift.

Still, the financial results tell a compelling story about On Holding AG's ability to command pricing. Check out the margin performance; it really speaks to the brand's pricing power outweighing input cost pressures from those concentrated suppliers.

That 65.7% gross margin achieved in Q3 2025-an expansion of 510 basis points year-over-year-is huge. It suggests that On Holding AG can pass on higher input costs, or that its operational efficiencies are so strong they are absorbing those costs while maintaining premium pricing. This is a critical buffer against supplier demands.

The other factor here is specialization. For performance footwear, there's a limited number of specialized third-party manufacturers capable of handling the complex, innovative designs On Holding AG brings to market, like the low-component upper construction on some of its top-tier running shoes. This specialization creates a barrier to switching suppliers, which normally favors the supplier, but On's scale and premium positioning seem to mitigate that threat for now.

Here are the key dynamics influencing the bargaining power of On Holding AG's suppliers:

• Five suppliers account for roughly 70% of 2024 product volume.
• Footwear production is heavily centralized in Vietnam.
• High Q3 2025 gross margin of 65.7% shows pricing leverage.
• Limited pool of specialized performance footwear manufacturers exists.
• On Holding AG relies on third-party contract manufacturing entirely.

Finance: draft a sensitivity analysis on input cost changes against the 62.5% full-year margin guidance by next Tuesday.

On Holding AG (ONON) - Porter's Five Forces: Bargaining power of customers

You're looking at On Holding AG's customer power, and honestly, the data suggests customers have less leverage than you might think, largely because the brand has successfully positioned itself at the premium end of the market. This strong brand loyalty and premium positioning directly support the high prices On Holding AG commands. For instance, in Q2 2025, the gross profit margin hit 61.5%, and the outlook for the full year 2025 gross profit margin was raised to around 62.5%. This margin strength, compared to competitors like Nike projected at 43% and Adidas near 40% for 2025, shows On Holding AG's ability to maintain pricing power.

The shift in sales mix is key here. Direct-to-Consumer (DTC) sales are becoming a larger piece of the pie, which naturally lowers the bargaining power of large retail intermediaries. For the first quarter of 2025, DTC accounted for 38.1% of total net sales. This channel is growing rapidly; DTC net sales grew 45.3% in Q1 2025, and Q2 2025 saw DTC sales surge 47.2%. This DTC channel growth reduces reliance on powerful wholesalers, giving On Holding AG more control over its final price realization and customer relationship.

The proprietary nature of the core technology also locks customers in, raising their effective switching costs. On Holding AG leverages its innovative CloudTec® cushioning technology, which offers 82% energy return and is 35% lighter construction than industry averages, justifying the premium price points, which generally range between $150 and $230. This technological differentiation means customers are buying into a specific performance benefit, not just a commodity shoe.

Here's a quick look at how the channel mix and profitability metrics are shaping up as of the latest reports:

The overall picture for customer bargaining power is one of diminishing influence, supported by brand equity and channel strategy:

• Premium positioning supports prices above competitors.
• DTC sales share is growing, reaching 38.1% in Q1 2025.
• DTC channel growth was 47.2% in Q2 2025.
• CloudTec technology creates a proprietary value proposition.
• Gross margin resilience shows pricing power absorption.

On Holding AG (ONON) - Porter's Five Forces: Competitive rivalry

You're analyzing the competitive landscape for On Holding AG, and honestly, the rivalry in performance footwear is where the rubber meets the road. It's not a friendly jog; it's a sprint against established giants.

The intensity of competitive rivalry is high, driven by the presence of industry behemoths like Nike and Adidas. These players have massive scale, deep R&D budgets, and established global distribution. To put their scale in perspective, as of late 2024, Nike led the global running shoe market with an estimated share between 22-26%, while Adidas held approximately 18-22%. On Holding AG, by comparison, captures about 2% of the global athletic footwear market. Still, On Holding AG is demonstrating serious momentum, evidenced by its latest full-year 2025 guidance.

On Holding AG is rapidly gaining traction, particularly in the performance running segment, which is the core of its brand identity. The company projects its Fiscal Year 2025 constant currency revenue growth to be at least 34% year-over-year. This aggressive growth contrasts sharply with some established players; for instance, Nike's Fiscal 2025 revenues were actually forecast to fall by over 10%. This suggests On Holding AG is successfully taking share, even if its absolute market share remains small.

The competitive pressure isn't just from the top two; other specialized brands are also expanding aggressively. Competitors like Hoka are pushing hard in the premium running shoe lines. Hoka, for example, reported $1.8 billion in revenue back in 2024, and holds around 10% share among running-specific footwear. This means On Holding AG is fighting a multi-front war against both legacy powerhouses and well-funded disruptors.

Here's a quick look at how On Holding AG stacked up against key rivals in a specific recent sales period, which helps illustrate the day-to-day battle for consumer dollars:

This data shows On Holding AG is firmly in the top tier of performance-focused brands, but still behind the revenue figures of adidas and Nike in that snapshot.

The rivalry is also playing out on product quality and margin. On Holding AG has demonstrated pricing power, with its Trailing Twelve Month (TTM) gross margin sitting at 60.6%, which outpaced Nike's gross margin of 42.7% in the same period. This suggests that while the rivalry is intense, On Holding AG's premium positioning is holding up. You need to watch how they maintain this margin while competitors like Hoka continue to innovate with maximalist cushioning and lightweight designs.

Key competitive dynamics shaping the rivalry include:

• Maintaining high gross profit margin, reported around 60.5-61.0% for FY 2025 guidance.
• Aggressive expansion in the Direct-to-Consumer (DTC) channel, which saw sales surge 54.3% in constant currency for Q2 2025.
• Leveraging high-profile athlete partnerships, such as with Roger Federer, to reinforce performance credibility.
• The need to counter innovation lags seen by competitors, as Nike was noted to have a lag in innovation.

Finance: draft a sensitivity analysis on the impact of a 5% margin compression due to competitive pricing pressure by next Tuesday.

On Holding AG (ONON) - Porter's Five Forces: Threat of substitutes

The threat of substitutes for On Holding AG remains a significant factor, particularly in the premium performance running category where brand loyalty can be fluid. You see this pressure most clearly when looking at direct, high-performance rivals.

High-performance running shoes from competing brands like Hoka are a direct substitute. These brands are aggressively capturing mindshare and shelf space. For instance, Hoka, a key rival, posted full-year sales of $2.233 billion for its fiscal year ending March 31, 2025. This direct competition forces On Holding AG to continuously innovate and maintain premium pricing power, which it has managed well, evidenced by its Q3 2025 Net Sales reaching CHF 794.4 million. Still, the battle for the dedicated runner is constant.

We can map out the competitive landscape of direct substitutes based on recent performance data:

General athleisure footwear serves as a lower-cost, less-specialized substitute. While On Holding AG successfully commands premium pricing, the broader market sentiment suggests some consumers are becoming more cost-conscious. Reports indicate that consumers are leaning toward value-driven purchases, which strains demand across the apparel and footwear industry generally. This means that for casual wear, a less-technical, cheaper shoe can easily substitute for a high-performance model if the consumer prioritizes price over specialized running features.

However, On Holding AG is actively dampening this threat by diversifying revenue streams. Apparel and accessory expansion diversifies revenue away from shoe-only substitutes. Look at the growth in these categories:

• Apparel net sales in Q2 2025 grew 67.5% year-over-year to CHF 36.7 million.
• Apparel net sales in Q1 2025 increased 93.1% year-over-year to CHF 38.1 million.
• Accessories net sales in Q1 2025 grew 99.2%.

This successful category scaling means a larger portion of revenue is less directly exposed to substitution within the core running shoe market. The Direct-to-Consumer (DTC) channel, which supports superior profitability, accounted for 38.1% of total net sales in Q1 2025.

Innovative product differentiation, specifically the proprietary Helion superfoam, is a critical factor that helps maintain the premium positioning against substitutes. On Holding AG leverages technological innovation, including the Helion superfoam, to engineer its products. This focus on proprietary technology aims to create a performance gap that lower-cost or less-innovative substitutes cannot easily close, justifying the higher price point for the core running audience. The company's gross profit margin expanded to 65.7% in Q3 2025, up from 60.6% in the prior year period, suggesting consumers are willing to pay for this differentiation.

On Holding AG (ONON) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for a new player trying to muscle in on On Holding AG's turf. Honestly, the hurdles are substantial, built up over years of focused investment and strategic alignment. A newcomer can't just show up with a decent shoe; they need deep pockets and a long-term vision.

Significant capital is required for global brand building and marketing. While On Holding AG is raising its full-year 2025 reported net sales guidance to CHF 2.98 billion, achieving that scale demands massive, sustained marketing spend to cut through the noise. This isn't just about digital ads; it's about building a premium perception that supports a higher price point, which On Holding AG has successfully done, as it has the most expensive running shoes in the industry on average.

High barrier of entry due to the need for advanced, proprietary footwear technology. On Holding AG has built a defensible moat around its innovation engine. They hold 38 patents related to their cushioning and construction systems. While their 2023 R&D investment was $16.5 million, replicating core tech like CloudTec®, which delivers 82% energy return, requires similar, sustained, and specialized investment that a startup likely can't match immediately.

Established distribution network (DTC and key wholesale) is defintely hard to replicate. On Holding AG has successfully scaled a multi-channel approach, giving them broad market access while maintaining premium control. Look at the Q2 2025 numbers; the sheer volume moving through both streams shows a mature, hard-to-match infrastructure.

The DTC channel saw sales advance 47.2% year-over-year in Q1 2025, and the company has a long-term ambition for its own retail share to exceed 10%+ of net sales. A new entrant would need to secure similar shelf space with major retailers while simultaneously building out a global e-commerce network spanning 28 countries.

Roger Federer's association provides instant global credibility and brand awareness. This isn't just a typical endorsement; it's a deep, strategic alignment. Federer's 3% stake in On Holding AG was valued at approximately $500 million as of Q2 2025. That level of personal investment and association with a scandal-free icon immediately confers a level of premium credibility and trust that new brands simply cannot buy off the shelf. This association helps On Holding AG maintain its premium positioning, which supports its targeted full-year 2025 gross profit margin of around 62.5%.

The barriers to entry are therefore high due to:

• The need for hundreds of millions in marketing capital.
• Proprietary technology protected by 38 patents.
• A dual distribution system with DTC at 41.1% of Q2 2025 sales.
• The established, high-value association with Roger Federer.