Levi Strauss Aims to Revive Its Past Glory
Yves Saint Laurent once said: “I wish I had invented blue jeans. They have expression, modesty, sex appeal, simplicity — all I hope for in my clothes.”
One brand that is quite literally synonymous with jeans is Levi’s. Founder Levi Strauss patented the blue jeans in 1873 but the brand itself was established in 1853, and today its jeans can be found in over 2,800 stores in 110 countries.
Although long enjoying iconic status, it has been difficult for Levi’s to consistently stay relevant and be at the center of culture. It was 1996 when Levi Strauss reached its peak year, amassing $7.1 billion of global sales — even bigger than Nike, which booked $6.5 billion in sales that year.
Entering 2001, the denim maker saw its sales plummet to $4.1 billion — which for the next decade became the norm.
“We lost our mojo, stopped innovating, and weren’t investing in the brand and organization,” said Chip Bergh, Levi’s chief executive since 2011. “We saw massive shareholder destruction, the company almost went bankrupt in the early 2000s.”
The challenge today is that customers in its biggest markets, the United States and Europe, are not out spending on retail. And Bergh sees that over the past decade, denim and apparel in general has been on the decline.
The denim category is incredibly competitive and very fragmented. Levi’s competes with large, global multinational companies like VF, producer of Lee and Wrangler, and large global vertical retailers such as Gap, Uniqlo and H&M. It also faces a sea of local competitors in each market.
The biggest challenge is to become relevant with the core 18- to 25-year-old market as the company once was in the past.
Globally, and especially in Indonesia, Levi’s has invested plenty in its social media campaign.
“Our main strategy is to manage what is in our control. We can’t manage the economy, but we can control our innovation program, the new products that we launch, the way we connect with our consumers and how we spend our money to build our brand and business,” Bergh said.
“Do our customers find the product they are looking for, do they get the kind of service they deserve, and do they walk out of the store or buy our products, as that’s what it’s really all about.
“That’s how we’ve been able to grow successfully and profitably over the past two years, despite a challenging market. We got it two years in a row — the first time we’ve done that in a decade.
“Now lets see how we do that three, four and five years in a row. If we do that we can generate a lot of cash that we can invest back in the business and make this company great again,” he added.
Aside from building the right executive team, Bergh also launched a massive restructure program in March last year. The idea was to free up $175 to $200 million from overlaps and inefficiencies which would be invested to grow the business, especially on e-commerce.
“We built an innovation center two blocks away from our office, and now 80 percent of our product line is coming from that innovation center,” Bergh said. “It’s to get the designers and merchants a sandbox for them to play and create. It’s a creative industry and we never had that.”
One thing’s for sure: Levi’s is not going to drop its prices.
“We are never going to be the cheapest pair of jeans in a market and we are never going to be able to compete with a local player who doesn’t have the same standards of manufacturing, which is central to who we are,” Bergh said. “We’ve got our values which is the reason for us being around all this time.”
Bergh admitted that although Indonesia is not a significant market for Levi’s for the time being, the potential is enormous.
Heavily concentrated in the Americas and Europe, naturally Levi’s wants to grow its business in Asia, which currently accounts for around 25 percent of the company’s revenue.
Source: The Jakarta Globe