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Levi's: the making of a $6bn brand

If ever the fashion industry needed proof of the power of storytelling to sell clothes, then Levi’s is it.

Last week, the US denim giant said it hopes to be valued at $6.2bn (£5.3bn) when it floats on the New York Stock Exchange, after confirming in February its plans to list. The brand expects to raise $587m (£503m) and offer investors nearly 37 million shares at between $14 and $16 each.

Levi’s follows hot on the heels of Farfetch, which floated on the New York Stock Exchange last September, at a value of $5.8bn (£4.47bn). Further high-profile IPOs are expected this year, including Uber and Pinterest.

As a brand, Levi’s has always been more about its future than its past

Nicola Kemp, trends editor at Campaign magazine

But Levi’s, founded in 1853, is a very different business to 11-year-old Farfetch and the other technology-based enterprises. Levi’s is a 166 year-old story of, well, denim – and one that has helped the brand to drive revenues from $4.9bn to $5.6bn (£3.8bn to £4.3bn) last year, prompting its president and chief executive Chip Bergh to declare it an “outstanding year”. A strategy of product diversification, expansion in direct-to-consumer business and a better connection with consumers worldwide was credited with driving this sales increase.

“In an age of near-constant tech-driven hype around IPOs, it seems somewhat incongruous to see such a traditional business as Levi’s bringing itself to the public markets,” says Claire Kennedy, director in the retail practice at consultancy AlixPartners. “But the decision, whilst bold, seems to be underpinned by sound thinking,” she adds, citing Levi’s focus on reaching new geographic markets and demographics by expanding in emerging markets, and developing womenswear and non-jeans ranges. 

“The money raised has been earmarked to support this growth and, while there will be challenges – not least in managing a heavy reliance on wholesale distribution – Levi’s would appear to be doing a solid job of balancing heritage with opportunity for extension.”

Big back story

And therein lies a key component to Levi’s success and differentiator to its competitors: heritage. While Levi’s prepares to float, the US arm of 41-year-old Italian jeans company Diesel filed for chapter 11 bankruptcy protection from creditors earlier this month, blaming falling sales, high rents, theft and cyber-fraud.

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From inventing the blue jean back in 1873 to staying true to its philanthropic values – in 1897 founder Levi Strauss provided the funds for 28 scholarships at the University of California, all of which are still in place today – Levi’s has built a brand based on innovation and social responsibility. It has remained authentic by not only refusing to compromise on these values, but also by using them to grow the brand.

This is bigger than [brand ambassador] Justin Timberlake – this is also about years of living its values for all to see 

Emma Mainoo, brand consultant

“For those simply painting their storefronts with rainbows, they might look to Levi’s, which has been supporting equal rights within its workforce since the 1970s and 1980s,” says brand consultant Emma Mainoo.

“This is bigger than [brand ambassador] Justin Timberlake and the amazing brand experiences it delivers – this is also about years of living its values for all to see.”

“The marketing masterstroke of Levi’s is that, although it’s a brand with brilliant heritage, it has never allowed itself to wallow in nostalgia,” says Nicola Kemp, trends editor at Campaign magazine. “As a brand it has always been more about its future than its past.

“From iconic ads such as “Launderette” [the 1985 campaign for stonewashed jeans] to Flat Eric [a series advertising the Sta-Prest brand], Levi’s has always been creatively bold, but at the same time never defined by a single piece of creative work. The evolving brand has always been bigger than a sum of its creative parts. It has also really evolved how it connects with consumers, from influencer marketing to innovative experiential events.”

Modern history

A 166-year history is testament in itself to success, but the last few years have been particularly important for Levi’s, as it tapped into its heritage and adapted its values of product innovation, pioneering sustainable practices and political engagement to connect with consumers.

The brand has put a lot of effort into defining its values around issues such as guns and the environment 

Neil Saunders, managing director, retail, at GlobalData

“I think Levi’s has kept in touch with fashion trends and consumer preferences – especially of younger consumers – much better than some of its rivals,” says Neil Saunders, managing director, retail, at GlobalData. “This has meant it has retained its relevance, even in a changing market.

“The brand has put a lot of effort into defining its values around issues such as guns and the environment. This clear position has helped it to gain traction with many younger shoppers.”

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In November 2016, Bergh wrote an open letter to customers asking gun owners not to bring firearms into its stores, offices or facilities, and last year the brand pledged its support for gun-violence prevention.

Product power

Product, too, has been integral to Levi’s recent resurgence. First there was the Wedgie jeans of 2016 and then last summer’s ubiquitous T-shirt: a plain white tee with the Levi’s logo across the chest. And, of course, there are the collaborations – with Supreme, Canada Goose, Vetements and ReDone, to name a few. Collectively, these have helped to strengthen Levi’s womenswear business.

It has cracked the womenswear market and diversified its offer [beyond jeans]. It has got its mojo back 

Peter Ruis, now managing director of international at Anthropologie

“When I worked there, it was very much a menswear brand,” recalls Peter Ruis, now managing director of international at Anthropologie – a Levi’s stockists – and former brand director of Levi Strauss across Europe, the Middle East and Africa.

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“It has cracked the womenswear market and diversified its offer [beyond jeans]. It has got its mojo back.” He adds that Anthropologie does not buy in huge volumes, but what it does buy always sells out.

Staying power

Yet Levi’s cannot afford to rest on its laurels.

AlixPartners’ Kennedy points to the brand’s “heavy reliance on wholesale distribution” as a potential challenge. As department stores – most notably House of Fraser and Debenhams in the UK – face an uncertain future, Levi’s will need to rely much more on its direct-to-consumer platforms.

“Continuing to innovate and keeping close contact with consumers via their own stores and online presence will all be critical success factors,” says Kennedy.

Fortunately, “players like Levi’s and Nike both have strong ecommerce platforms”, adds GlobalData’s Saunders. “I also think Levi’s holds its own against some of the fast-fashion brands by emphasising quality and heritage.”

However, some of the factors that have contributed to its success to date could prove challenging further down the road. Saunders cites two reasons for Levi’s recent resurgence. First, denim is back on trend after competition from the athleisure trend in 2015 and 2016. Second, Levi’s push into non-denim categories has provided the brand with growth opportunities.

“[But] fashion is fickle and denim could fall out of favour again, which could damage growth. Levi’s is also still having to compete with non-traditional players such as Lululemon, which is selling increasing quantities of comfortable outerwear. There are also risks to the brand from new entrants and niche players,” he says.

“That said, over the past five or so years, Levi’s has shown that it can weather many of these challenges.”

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The Drapers Verdict

There’s a whole lot of love for Levi’s in the fashion industry. Retailers gush at its product innovation – “It invented jeans! The pocket! The rivet!” – while marketeers hold up its campaigns as a benchmark for its peers.“I envy the team at Levi’s!” said one.

It seems everyone is touched by the heritage, the nostalgia, including – fortunately for Levi’s – the consumer. Here is a brand with a genuine story, told since 1853. A story of innovation and doing good. A story that it has always stuck to, but that it has built on. And this last point is key.

Tastes change, trends come and go, culture evolves. But brand values – when they’re as solid as Levi’s – should not. Levi’s knows what the brand stands for – as does everyone else – and it has been weaving those values into consumer culture from the start. Among all those tech start-ups, it feels like everyone is rooting for the 166-year-old.

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