LEVI STRAUSS NAMES PEPSI-COLA’S MARINEAU AS PRESIDENT AND CEO

Byline: Miles Socha

NEW YORK — Do jeans have anything in common with soda pop?
Philip Marineau, the new president and chief executive officer of Levi Strauss & Co., who joins the $6 billion apparel behemoth from Pepsi-Cola North America, thinks so.
So does Levi’s chairman Robert D. Haas, who is ceding his number one post at the family-owned firm for the first time in more than 15 years, convinced that the 52-year-old Marineau can inject some fizz into a business that’s gone flat.
“Phil is an extraordinary leader,” Haas said Tuesday in announcing Marineau’s appointment. “He has the blend of brand-building and marketing experiences that we were seeking. He has a lot of experience in terms of supply-chain execution, which is something we can use some help with.”
Haas said he will continue as chairman.
Marineau’s appointment ends an eight-month search for a successor to Peter Jacobi, who said in January he would step down as president and chief operating officer after 28 years with the company. At the time, Haas indicated he would not limit his search to the fashion industry.
According to market sources, Paul Charron, chairman and ceo of Liz Claiborne Inc., was considered for the job. Other names bandied about last week during the MAGIC International and WWDMAGIC trade shows in Las Vegas were Mackey MacDonald, VF Corp.’s chairman, president and ceo, and Roger N. Farah, who stepped down last week as ceo of Venator Group Inc.
Asked if he interviewed any of those potential candidates, Haas declined to comment. But he vigorously defended his decision to go to the packaged-goods industry to find a new leader for the world’s largest apparel firm.
“There just are not very many companies in our industry that are of the size, scope, the international dimension or deal with as many market-leading brands as we have,” Haas told WWD during a joint telephone interview with Marineau. . “The degree of complexity here is closer to the experience of people who have led complex international companies.”
Haas acknowledged that “moving into the fashion industry will be a challenge” for Marineau, whose entire career has been in food and beverages. But he described Marineau as “a very quick study” and as someone who “tends to reach out.”
Marineau said he sees parallels between soft drinks and clothing from the consumer’s standpoint.
“People drink beverages that they think reflect their own personality and say something about themselves,” he said. “That’s what I think the fashion business is all about.”
He acknowledged that people choose to drink “Gatorade, Pepsi or Mountain Dew” for “product benefits” such as flavor, caffeine or the ability to quench a thirst.
“Clothing is a much more personal statement,” he said. But he argued that the marketing and selling of the two products are similar.
Marineau, who starts Sept. 27, provided few specifics about his plans for Levi Strauss. But he said he would tackle four key tasks:
Making sure that Levi’s products are “relevant to consumers” and have a “sense of style.”
Communicating the brand messages and marketing of Levi’s, Dockers and Slates products in ways that will reach all consumer segments, “from seven to 70.”
Improving relations with retailers and presentation of the product in stores.
Fully realizing Levi’s cost-saving initiatives. Over the past two years, the company has laid off about 13,000 employees in North America and Europe, shuttering some 26 factories.
Meanwhile, Haas made it clear that Marineau will, after a transition period, become the number one decision maker at the closely held 126-year-old company.
“It will end any speculation about who has the authority to make decisions and who is calling the shots,” Haas said. “This way it’s unambiguous, he’s the leader.”
Haas said in ceding ceo responsibilities he is “doing the best thing for the company…to make sure that the company prospers.”
According to one source familiar with the search, Haas may have initially set out to find a number two executive, but realized he would have to step down to attract anyone of high caliber. The search was conducted by Spencer Stuart.
In a letter to Levi’s employees Tuesday to inform them of the change, Haas confessed that he had not planned to step down as ceo for “a couple of years, but when Phil came across our radar screen, we saw an opportunity we didn’t want to pass up.”
Haas said he plans to continue as chairman and will work with Marineau through a transition period.
“We have a clear plan to help him understand the company and I’ll be working closely beside him as he deepens his knowledge,” Haas said.
But after that, Haas said he plans to focus on “board and shareholder relations”; the Levi Strauss Foundation, the firm’s philanthropic arm, and on “maintaining an environment that makes us an employer of choice.”
He added that the chief operating officer position remains vacant and the company plans to assess whether a successor will be named at a later date.
Marineau started his career at Quaker Oats in 1972 in a sales capacity, rising to president and chief executive officer in 1993. He had a brief tenure as president and chief operating officer of Dean Foods Co., a specialist in nondairy creamers and pickles, before joining Pepsi-Cola North America in 1997, when he was named president and ceo of Pepsi’s $11 billion North American business.
Enumerating Marineau’s accomplishments in his letter to employees, Haas said, “Phil is credited with growing Gatorade, the sports drink, into one of the largest, most profitable beverages in the United States when he was at the Quaker Oats Company.”
Haas also highlighted the fact that Marineau spearheaded the launch of Pepsi One, calling it the “most successful soft-drink launch in 15 years.”
At Levi’s, Marineau faces a big challenge: reversing the fortunes of Levi’s core brand, which has lost sales and market share. According to the most recent statistics compiled by NPD Group, a Port Washington, N.Y.-based market research firm, Levi’s total unit share of the U.S. jeans market as of June dropped to 13.9 percent from 15.3 percent a year ago.
While formidable in five-pocket basics, Levi’s has been slow to adapt to a strong fashion cycle in jeanswear and has seen its market share erode in the face of a batch of sharp competitors, including status brands, hot junior resources and private labels. Hurt by weak demand for Levi’s brand jeans, sales declined last year 13 percent to $6 billion. That was on top of a 4 percent sales decline in 1997.
Over the past year, however, the company has made some sweeping changes, reorganizing its business around consumer segments; launching edgy ad campaigns with a new agency, TBWA Chiat/Day, and quickening the pace at which it introduces new fashion products.
Haas declined to provide sales projections, but indicated volume in 1999 would be less than last year.
“We obviously still have our challenges,” he said. “But we clearly have in place a renewal strategy.”
Asked to identify examples of successful initiatives, Haas cited Levi’s new Engineered Jeans, a radical redesign of the basic five-pocket that was recently introduced at European and American trade fairs. He also pointed to new fall TV spots with the “opt for the original” tagline, and the “improved retail presentation at our flagship stores in San Francisco and London.”
“The seeds of our renewal have been sewn,” Haas said. “It’s really for Phil to nurture them, provide for them, shape them and direct them the most productive way.”
Marineau said he shares Haas’s optimism.
“While sales currently may not be as strong as they have been in the past, the potential for growing the Levi’s brand is tremendous,” he said. “There’s a tremendous amount of equity and goodwill with consumers. I firmly believe that we have great success in front of us.”
Recently, Levi Strauss has shown a willingness to trade information and product among its three global operating units: North and South America, Europe and Asia/Pacific.
For example, it has imported from Europe some of its Sta-Prest products with permanent creases. And the L2 moderate junior brand, while geared for the American market, may be leveraged elsewhere in the world.
“This was a company that tended to be more compartmentalized to the three regions in the world,” Haas said. “We can bring the best in innovation, consumer marketing and retail presentation to consumers around the world.”
Haas said the San Francisco flagship, which houses “the best Levi’s jeans products from around the world,” is emblematic of the company’s direction. “That’s the kind of inspiration we want to cross-fertilize around the company,” he said.
Meanwhile, trendspotters and industry analysts had mixed opinions over Marineau’s appointment.
“It’s an interesting move and probably a good idea to get some experience that isn’t just fashion,” said Jane Rinzler Buckingham, president of Youth Intelligence here. “Youth marketing benefits when it goes across categories.
“It’ll be interesting to see what [Marineau] can do, given Pepsi’s erratic record.”
Janine Lopiano Misdom, a partner at Sputnik Inc., a trend-forecasting and market research firm, said she agreed with Marineau that there are similarities between marketing of soda and selling fashion. She noted the success of Mountain Dew, which catapulted out of obscurity over the past two years thanks to brand marketing that linked it to extreme sports.
She cautioned, however, that the beverage industry tends to “lump everyone into one universe,” whereas the fashion industry is more fragmented.
Lopiano Misdom said Levi’s main challenge is to reclaim its heritage by making an emotional connection with consumers, who tend to cite old Levi’s as their favorite pair.
“The biggest thing missing in the advertising is the personal passion, that intimate connection to that first pair of jeans,” she said. “I think that’s where their success could lie.”
She also noted that Levi’s is coming up against a consumer more interested in pants other than jeans.
“It’s a tough marketplace for denim,” she said. “Cords are really strong and they’re doing awesome things with coated nylon. And sweats and jerseys are making a comeback.”
One retail analyst, who spoke on condition of anonymity, said Levi’s choice of Marineau suggests that “they continue to focus on the brand very separate from the product itself.”
“It indicates how Levi’s thinks about their product,” the source said. “They don’t consider it to be a fashion item. They’re still not looking at how critical the retail apparel market is.”

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