Levi Strauss & Co (US)

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Levi Strauss & Co, the company which invented the concept of blue jeans, is still weathering the chill wind of changing fashion. During the 1980s and 1990s, Levi's turned streetwear into a fashion statement. By the mid-1990s, the company was chalking up sales of over $7bn. But when change came, it came fast. A move away from denim by core consumers, coupled with a huge increase in the number of rival manufacturers at all price points severely dented performance. Within two years, market share had halved, and profits plunged from over $1bn in 1997 to net losses in 2003. Performance has improved somewhat since then, but Levi Strauss is still under considerable pressure.

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Adbrands Company Profiles provide a detailed analysis of the history and current operations of leading advertisers, agencies and brands worldwide, and include a critical summary which identifies key strengths and weaknesses. Adbrands Account Assignments tracks account management for the world's leading brands and companies, including details of which advertising agency handles which accounts in which countries for major markets. Subscribers may access the following website links:

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Recent stories from Adbrands Weekly Update:

Adbrands Weekly Update 24th Aug 2017: Ads of the Week: "Circles". These days it's probably impossible for any ad to reach the iconic status of some of BBH's classic work for Levi's from the 1980s and 90s, and that once-mighty brand has wrestled with plenty of challenges of its own since then. But current agency FCB's work for Levi's still achieves flashes of sheer brilliance. The ads don't come along very often but they're always worth a look when they do appear, like this lovely new film which manages to celebrate not just denim, but also the joy of dance and the many facets of our multicultural world. Time to get up and get down! 

Adbrands Weekly Update 13th Jul 2017: There was encouraging progress at Levi Strauss, one of the first companies to report 2Q results this quarters. Strongest growth came from women's bottoms - as they call the female jeans segment. This is traditionally one of the company's weaker segments, but it has expanded dramatically over the past two years, This was its 8th consecutive quarter of growth, rising by an impressive 24% to over a $1bn a year for Levi's. Tops did even better with a 39% lift, taking pressure off the traditional hard core of the business in men's jeans and casual pants. Total revenues rose almost 6% to $1.1bn, though net income slipped back as a result of a one-off charge for early extinguishment of some of the company's debt.

Adbrands Weekly Update 4th June 2015: Google announced the launch of an R&D partnership with denim manufacturer Levi Strauss to develop "smart jeans". Named after a 19th century French loom developer, Project Jacquard aims to find ways of weaving electronic threads into fabric in order to instill it with touch and gesture interactivity. Ultimately, wearers could use their clothing as a virtual computer touchpad.

Adbrands Weekly Update 17th Jul 2014: Ads of the Week: "Just Don't Bore Them". A complete change of direction for Levi's, which has dumped the rather arch and arty stance it's maintained in recent years in favour of a more inclusive, less elitist positioning. The debut brand campaign from FCB San Francisco is actually pretty good. It probably won't collect any awards for classic advertising, but it might just persuade you to buy a pair, which is probably more than any of Levi's other recent advertising can claim....

Adbrands Weekly Update 13th Feb 2014: Levi Strauss & Co reported its best results for many years in 2013, though the final figures weren't quite as good as had been hoped because of heavy promotional spending in the final quarter. Revenues for the year to Nov 2013 rose 2% to $4.68bn, while net income jumped 59% to $229m. "This is the first time in five years that we've delivered operating profit and sales growth at the same time," said CEO Chip Bergh, "and it's only the fourth time in 20 years we've done that. We haven't done that in back-to-back years, and that's the goal for 2014."


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Background

Free for all users | see full profile for current activities: In 1853, Bavarian immigrant Levi Strauss arrived in San Francisco to establish a dry goods business similar to one run by his brothers in New York. Many of his customers were would-be prospectors en route to Alaska in search of gold. Hard-wearing clothing was in particular demand, so Strauss began to sell canvas workpants alongside his other lines. In 1872, he was approached by tailor Jacob Davis who had designed a line of tough overalls, held together with copper rivets for extra strength. These "waist overalls" were made from a cotton-based fabric called serge denim, one of the toughest cloths he could find. (The material originated in France in the 1600s and was originally known as "serge de Nimes" after the town where it was made). Davis couldn't afford to apply for the patent himself, so suggested that he and Strauss become partners. These extra-strong trousers were hugely successful, and soon became known by the stock number - 501 - which differentiated them from other clothing. (The other well-known Levi's trademark, the red tab label, wasn't introduced until 1936).

Towards the end of the century, Strauss, now a wealthy man, left the business in the hands of his nephews while he devoted himself to philanthropic works in the city. By the time he died in 1902, his company was one of San Francisco's best-known businesses. With no heirs of his own, the company passed to the children of his sister, Fanny Stern, and it has remained under the control of her descendants ever since. Rivet inventor Jacob Davis's son Simon also came into the business. He designed the company's first children's clothing in 1912, known as Koveralls. This denim playsuit was the first item of Levi Strauss clothing distributed nationally in the US; the company's jeans were not available nationally until the 1950s.

World War II brought international expansion as US army personnel took Levi's denim workwear around the world. As lifestyles changed after the war, denim quickly became leisure wear, referred to as "jeans". In fact, the term was something of a misnomer. Although also used for workwear, jean is a different kind of fabric from denim, cheaper and less durable. Levi's only began to describe its own "waist overalls" as jeans in 1960, following the public habit. Much of the expansion of the next 40 years was overseen by brothers Walter and Peter Haas. In 1954, they launched a range of Denim Family clothing but the huge popularity of jeans, particularly among teenagers, soon gave the material a bad reputation. A 1958 newspaper article reported that "about 90% of American youths wear jeans everywhere except in bed and in church", but it was its association with the new rock 'n roll and "juvenile delinquents" that made the most headlines. In 1959, the company began to export to Europe, and during the 1960s, jeans became the international dress of teenagers. Pre-shrunk jeans were launched in 1963. The company introduced a line of non-denim slacks, under the Sta-Prest brand, in 1964.

In 1971, after more than 100 years as a private company, Levi Strauss & Co went public, but the next few years were not happy ones. The business over-expanded with the funds raised by floatation, buying Koret sportswear, and the Brittannia and Oxford clothing lines. By 1984, Levi Strauss was in trouble. That same year, a new member of the family took over as president. Robert Haas was the founder's great great grandnephew and had formerly been a consultant at McKinsey. He launched a major restructuring of the company, selling off unprofitable lines and closing plants. (Mass-market jeans line Brittania was sold to rival VF Corporation). The following year, the family bought back all the company's public shares in what was then one of the largest leveraged buyouts in the clothing industry.

In the US, Haas supervised the launch of Dockers' khaki pants in 1986. (Europe had to wait until 1994). More importantly, he organised a relaunch of the Levi's brand. In the US, ad agency FCB began a series of acclaimed ads which updated the brand's 1950s' reputation by associating it with cool blues and rock music. In Europe, a new British agency, Bartle Bogle Hegarty, was given responsibility for marketing the brand and began a series of ads which captured the public's imagination for almost 10 years, and pushed a series of old soul hits to the top of the pop charts. The best-known ad, Launderette, featured a good-looking boy stripping off in his local laundromat to wash his 501s, to a soundtrack of Marvin Gaye's I Heard It Through the Grapevine. Sales of 501s in Europe jumped 800% as a result, and a series of follow-ups firmly established Levi's place at the heart of imported American culture.

As sales grew both at home and internationally, Haas turned his attention to Levi's corporate policy. He introduced a series of work-share schemes designed to give employees a voice in the company, instigated a mammoth $850m re-engineering programme at the company's manufacturing plants, and then pushed through a $4.3bn buy-back of employee-owned shares. Slates dress trousers were introduced in 1996, the company's first new product launch for almost ten years (they were later merged into the Dockers range). That year the company celebrated record sales of $7.1bn and a profit of more than $1bn.

However there was trouble in store. By the late 1990s, the brand had become a victim of its own success. Levi's were seen by the new generation of teenagers as "the jeans my Dad wears", and that put them completely out of fashion. The company's share of the fast-expanding denim market plummeted from more than 30% in 1990 to around 14%. Worse still, denim itself was abandoned as uncool in favour of cargo or combat pants. The group's sales dipped in 1997 to $6.9bn, then fell a further 13% the following year to $6bn in 1998. As a result, the company announced the closures of 29 manufacturing centres around the world in 1997 and 1998, shedding 30% of staff. It also sold off most of its retail outlets to licensees, retaining only a new flagship store in New York and the Levi's Online Store. The only good news was a strong performance from Dockers Khakis, which (briefly) became a $1bn brand, while Slates dress trousers came close to generating $500m in the US. In just three years from 1996 to 1999, Levi Strauss' market value shrank from $14bn to about $8bn, while crosstown San Francisco rival Gap blossomed from $7bn to over $40bn.

Reacting late to the fact that a major contributing factor in the fall in sales was the move away from denim, Levi's boosted its marketing of non-denim products to the youth market. In Europe the company introduced Flat Eric, a yellow woolly glove-puppet, as the marketing icon for the Sta-Prest sister brand. The ad had Levi's target market talking about the brand again for the first time in years, and was a return to form for agency Bartle Bogle Hegarty, whose work on the main Levi's account had begun to weaken. Word-of-mouth turned Flat Eric into a cult hero for trendy clubbers, and the puppet became the unlikely artist behind a #1 dance record. Suddenly, Levi's was stylish again, but in a much smaller way than before.

In 2000 the company introduced a new line of "engineered" jeans, a reinvention of the traditional five-pocket Levi's, featuring twisted seams. However new CEO Philip Marineau confirmed that 1999 sales had slumped by a further 14% to $5.14bn. A year later, sales were still falling, although the company claimed to have slowed the rate of decline. In Spring 2002 Levi Strauss said it would close six factories in the US with the loss of 3,300 jobs, or 20% of its workforce. Instead it attempted to save money by contracting out manufacturing into cheaper countries. Later that year, in a major change of strategy, the company announced that it would launch a new jeans line, Levi Strauss Signature, initially sold exclusively through Wal-Mart. Previously the company had actively prohibited discount retailers and supermarkets from selling its products.

However the company was also plagued by accounting concerns. Mid-year, two former employees filed a lawsuit alleging tax and accounting fraud. No evidence of this was uncovered by an investigation of the group's records, although minor errors were found in tax documentation. Later the company was forced to restate financial results for 2001 as well as the third quarter of 2003 after finding that it had made the same tax deduction twice. See full profile for current activities


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