SHANGHAI — Levi Strauss & Co. is embarking on an aggressive expansion in China this year with the launch of a global brand targeting the youthful emerging middle class in the world’s fastest-growing economy.
The brand, named Denizen, is a first for Levi Strauss, the iconic purveyor of Americana that introduced jeans in the U.S. in 1837. It is rolling out in China, Singapore and South Korea with 50 stores by the end of the year, marking the first time the company has started a brand outside the U.S.
Aaron Boey, president of the Asia-Pacific division of Levi Strauss, said during the runway launch here that the China market is crucial for the San Francisco-baseddenim giant.
“It’s extremely important for the entire company and the entire portfolio of brands,” Boey said. “It is the fastest-growing market in the world for us, and it’s a market [in which] we expect to build strong leading positions for our entire portfolio of brands.”
Levi Strauss has been among the most successful foreign apparel brands in China, but it has not been without problems. In 1993, the company stopped manufacturing there because of concerns about human rights, only to return five years later. Since then, Levi’s has opened more than 600 branded stores across the country and has a considerable presence in China’s key retail districts.
The company joins Hermès International in the rush to develop a brand in China. The luxury firm has taken a majority stake in Shanghai-based Shang Xia, which is creating, manufacturing and will sell a collection of clothing, accessories, furniture and other lifestyle products using raw materials from China, as well as artisanal expertise.
China’s muscular economy, which grew 8.7 percent last year, has withstood the global recession better than the U.S., Japan and European countries, and is the target for just about every major brand in the world. China ranked first among global markets with the highest potential for retail development in A.T. Kearney’s ninth annual study of areas ripe for expansion.
Boey said Levi’s new label is aimed at consumers ages 18 to 28, and described them as upwardly mobile young people looking to improve their lives. They are a segment of the population who want to be fashionable but may not be able to afford jeans at the high end of the market.
“Very often, these are young people, the first people within their families to go to college to get a university degree, to come out and get a great job, for instance, very often experiencing a very different lifestyle from that their parents experienced and which they experienced in their years growing up,” he said.
Brand designer Thom Masat said Denizen was focused on reinvention.
“We took our jeans apart and said let’s put this
back together in a new way,” he explained. “Let’s keep it a five-pocket jean, but let’s give it a twist and make it new.”
The design of the jeans will include a broad range, with some styles remaining constant, while others will be replaced every month or six months.
Terence Tsang, senior vice president of Denizen, explained the brand, which will be managed from a headquarters in Hong Kong, is distinct from the Levi’s label.
“We are tailoring to a different group of consumers,” he said. “Different consumers, different price point. The ‘From Levi’s’ is really an assurance of our quality and fit and the style we can provide.”
Tsang characterized the brand’s design as having a more youthful fit and said the difference between Levi’s and Denizen would be obvious to consumers. He projected the jeans will sell for $45 to $55, more affordable than Levi’s, which are seen as out of reach for many young Chinese consumers.
The brand launched with a catwalk fashion show in the chic new boutique hotel The Waterhouse on the shore of Shanghai’s Huangpu River, with a view of the Pudong skyline behind it. But instead of using models or celebrities to endorse the brand, the launch was characterized by its appeal to “regular people.”
The show featured 10 brand ambassadors, dubbed the Denizen 10, who were chosen from among friends and acquaintances of the people involved in the campaign. Among them were bloggers, musicians, journalists and designers from South Korea, China, Singapore and India, who were flown in to take part in the launch. They’ve agreed to participate in a social-media experiment to promote the brand, uploading videos and comments on social-media sites in their respective countries.
Tod Gimbel, senior director of corporate affairs for Levi Strauss in Asia, said the campaign was an experiment for the brand.
“These people are smack dab in the middle of the demographic,” he said. “So they’re real people.”
Gimbel said the launch and the marketing campaigns are separate, but declined to reveal details of what the official marketing for Denizen will look like.
The brand will open stores in China within the month. Levi Strauss aims to develop the store base with an even balance of franchised units and company-owned stores. The spaces are expected to average about 1,000 square feet, roughly the same as Levi’s existing units in China. Shop-in-shops in department stores are likely to showcase the brand as well.
In the second quarter ended May 30, Levi Strauss reported that Asia-Pacific sales hit $178 million, an 8 percent rise compared with the year-ago period that, upon conversion for currency effects, translated into a 2 percent decline. John Anderson, president and chief executive officer, said Japan continued to detract from results in the region, which includes India.
Overall, the second-quarter net loss attributable to the company rose to $14.4 million from $4.1 million in the year-ago period. Included in the bottom-line result was a $16.6 million pretax loss on the early extinguishment of debt. Operating income, exclusive of the debt effect, was up 23.4 percent to $69.2 million from $56.1 million a year ago.
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