Everyone has a Levi’s story and Chip Bergh is no exception.
The president and chief executive officer of Levi Strauss & Co. related that after graduating from college he joined the Army, and on a break, he traveled to Germany on a Eurorail pass. He spent the night in a youth hostel and like most young people, washed his Levi’s jeans by wearing them in the shower. He took his wallet out of his pocket and laid it on the windowsill and hung his jeans up to dry before heading off to bed.
Bergh woke with a start, realizing that he’d left his wallet in the shower and raced back into the bathroom. “The wallet was there, but the Levi’s were gone,” he said. “Levi’s were as good as cash back then,” and the older they were, the more valuable they became.
The brand traces its roots to 1853 when Levi Strauss, a Bavarian immigrant, traveled west during the Gold Rush and quickly realized that the miners and railroad laborers needed pants that could stand up to the rigors of their work. So he created the patented, riveted blue jean. “It was America’s original start-up,” Bergh said.
The brand spent decades in a growth mode and in fiscal 2016 hit $4.6 billion in revenue. It is carried in 110 countries, operates 2,900 owned or franchised stores and is carried in 50,000 retailers worldwide.
The Levi’s brand accounts for 85 percent of sales, Dockers is 10 percent and smaller brands make up the remainder. Overall, wholesale represents 72 percent of sales while direct-to-consumer is the remaining 28 percent.
In the U.S., most of the business is wholesale, but in Europe, the mix is about evenly split between wholesale and retail, and in Asia, it’s more heavily retail.
And prices are significantly different as well. In the U.S., most Levi’s products sell for under $40, while in Europe and Asia, it’s closer to $90. The product over there is considered more upscale and aspirational while the U.S. market has been challenged by the struggles at wholesale.
From the Sixties to the Nineties, the company was “on fire,” and “we were America, back when America was a good thing around the world. And we really were an American icon. Literally, we would walk into a country and plant the Levi’s flag and the brand was just so aspirational that people would flock to the stores,” Bergh said.
Its peak year was 1996 when sales hit just over $7 billion, but what happened next was “pretty ugly. There was massive shareholder destruction,” and Levi’s sales fell to around $4 billion, where it remained for the next decade.
The brand had lost sight of its consumer and had accumulated a “massive amount of debt,” Bergh continued. It was focused on paying off the interest on that debt rather than innovating and by the early Aughts was hit by a “near-death experience,” and was “within days” of going bankrupt.
Bergh, who had spent 28 years at Procter & Gamble was approached in late 2010 about coming on board to run the company and “saw it as a noble cause. This is one of the greatest brands in the world, but it was a company that just could not get its act together,” he said. “We had lost our relevance.”
So Bergh took the job and rolled up his sleeves, talking and listening to employees and doing a deep dive into the company’s strengths and weaknesses. He found that 80 percent of profits were made on 20 percent of its products such as the 501 jean. Ditto for the markets in which the company was selling.
Bergh knew the company needed to continue to “drive our core business — that’s where we make most of our money,” but such an unbalanced portfolio would make it hard for the brand to grow. Levi’s was undeveloped in women’s wear as well as tops — “Conventional apparel wisdom is four tops for every bottom, we’re the exact opposite.” — and needed to become an omnichannel player. “When we’re in control of our own destiny, it makes a big difference,” he said.
Levi’s also needed to pay down its debt, which it accomplished by improving operations and investing that money back into the business. “We’ve got to have one foot firmly planted in our history and the other foot moving very deliberately forward with innovation,” he said.
He also took a close look at the advertising, which had morphed into something dark and depressing. “Levi’s is a positive brand, a democratic brand,” he said. “Consumers love us for our inclusiveness and approachability with a little bit of rebellion.”
So taking the lessons he learned working on products such as Folgers coffee and Jif peanut butter, Bergh charged his team to come up with something more inclusive. He personally conducted “in-homes,” or visits with consumers around the world, to ask how they interacted with their Levi’s. And what one woman in India responded became the centerpiece of new campaign. “You wear other jeans, but you live in Levi’s,” he related.
In addition to the Live in Levi’s marketing initiative, the brand sought to reestablish itself at the center of culture, so decided to think outside the box and sponsor a football stadium outside its home in the San Francisco Bay area. Although the association may seem a big unusual at first glance, Bergh said it speaks to the brand’s connection to sports, entertainment, concerts and other events that are dear to the hearts of its customers.
Levi’s also invested in an innovation center in San Francisco — the brand had a smaller location in Turkey — and worked to attract the best high-tech minds in the Silicon Valley to join its team. “Innovation is what is going to drive us for the next 164 years,” he said.
One product that will soon reach market is a trucker jacket — a product that is celebrating its 50th anniversary this year — that can control an iPhone. “This is our foray into connected apparel,” Bergh said.
Additionally, although many rang the death knell for denim as the ath-leisure trend took hold, especially for women, Levi’s decided to fight back. The company asked consumers why they’d prefer to wear yoga tights to jeans when going out to dinner and they responded that they were simply more comfortable.
So Levi’s relaunched its women’s business in 2015, offering jeans with stretch and flex, and it has grown 40 percent in that time. The women’s success has been aided in part by the addition of virtual stylists that help customers choose the right fit and style for their body type.
“For a woman, buying a pair of jeans is the third most-stressful apparel item they’re going to buy,” he said, after bras and bathing suits.
While offering innovative product remains at the core of the Levi’s business, Bergh said the company is also working to ensure “profits through principles.” The brand has a responsibility to ensure workers are treated fairly around the world and created a Worker Well-being program that supports financial empowerment, health and family well-being for all the people who create its product.
Bergh said the program has “touched 100,000 workers” so far and the goal is to get to 80 percent by 2020.
In answer to a question from the audience, Bergh addressed the phenomenon of Re/Done, a business that bought vintage Levi’s products, retailored them, relabeled them and sold them online at prices that could be as high as $300.
When Levi’s first got wind of the business, its first instinct was to file a lawsuit and shut it down. But James Curleigh, the Levi’s president, suggested the brand partner with Re/Done instead. So Levi’s licensed Re/Done and even helps it source product.
“How many brands can you think of where consumers will pay more for product when it’s 50 years old than they will when it’s brand new,” Bergh asked. “It speaks to the power of the brand.”