Levi's Adds Signature

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Not long after Phil Marineau took the CEO post at Levi Strauss & Co. in 1999, Wal-Mart called to inquire about getting fitted with the Red Tab line of jeans, which includes icon styles such as the 501.

But Mr. Marineau, who had worked well with the retail behemoth as president-CEO of Pepsi-Cola North America, turned Wal-Mart down.

"A lot of retailers were interested in Red Tab but we didn't want to take Red Tab down," said Gregg Hammann, who headed the project through its July launch as Levi Strauss senior VP-chief U.S. customer-service executive.

Nevertheless, Levi Strauss, reeling from declining sales, undertook an extensive consumer-research effort and, just like 150 years ago in days of the Gold Rush when Levi's were invented, it was a eureka moment. The company's research discovered a consumer segment that would like to buy an average of 2.5 pairs of pants per year at discount stores, but didn't buy that many because they couldn't find them. That's when Levi's realized it would make sense to develop a "signature" brand for the discount market.

"We found an opportunity in the marketplace we could not see before," Mr. Hammann said. Better yet, those consumers had only a small percentage of overlap with customers of Levi's core brands such as Red Tab and Silver Tab sold in department and specialty stores, he said.

About that time, Levi's held talks with Wal-Mart, as well as rivals Target, Kmart and Costco. But it was Wal-Mart's ability to build brands that sealed the deal, Mr. Hammann said . "I do believe they help build brand. There's no under-the-table stuff. You see the lay of the land up front," he said.

At one point, Levi Strauss showed clothing prototypes, and Wal-Mart executives made suggestions on colors and fit, such as making the lines on plaid tops thinner, and adding a medium size with a long length, said Mr. Hammann, who has since left Levi's.

All the work on Signature was carried out with the secrecy of a CIA operation, executives involved in the process said. Dominic Whittles, longtime lead account director at Interpublic Group of Cos.' Foote, Cone & Belding Worldwide, San Francisco,was summoned-alone-to Levi's headquarters.

FCB, which lost the core Levi Strauss business in 1997 after 67 years, had held on with Levi Strauss brands Dockers and Slates. "We thought it was over," said one executive familiar with the situation. Instead, the agency scored the assignment in part because Levi's wanted to separate Signature from its three core jeans brands, handled by Bartle Bogle Hegarty, New York.

The brand, launched with men's, women's, children's tops, bottoms and denim jackets , was launched with no traditional media, except mentions in Wal-Mart's newspaper ad supplements. The main push was in-store displays and ads on Wal-Mart TV.

NEITHER WAL-MART nor Levi Strauss has offered specifics on how Signature sales have fared during the back-to-school season, although Mr. Marineau indicated that without the line, sales for the quarter wouldn't have risen. Overall, Levi's sales have fallen for six consecutive years, dropping from a $7.1 billion peak in 1996 to $4.14 billion in 2002.

Levi's spokesman Jeff Beckman said a study of Levi's and Dockers sales in stores near a Wal-Mart and about eight miles from a Wal-Mart found no cannibalization at higher-end stores. But he noted that early in the season, some of Levi's regular retail chains were placing low orders. Those increased, he said, once Levi's and Dockers began registering strong sales.

Still, some analysts have their own evaluations of the launch's success. "It's not a unique product. And it's a product priced $6 to $8 higher than anyone else," said Harry Bernard of San Francisco consultant Colton Bernard.

Levi's has begun to roll out the line to overseas markets and next year plans expansion into other U.S. discount chains beyond Wal-Mart, Mr. Beckman said.

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