Description You will be turning in a one-to-two-page summary of your ideas as proof of your prepara ...
Description You will be turning in a one-to-two-page summary of your ideas as proof of your preparation. Read the case and write a one to two page summary about it.Summarize the main ideas of the case.These Questions don't need to be answered but they are some ideas on what to summarize on. Discuss the changes that have occurred in the jeans market over the past twodecades. What factors have been driving these changes? (at the time of the case) 2. Analyze the competitive position of Levi Strauss & Co. and the Levi’s brand specifically. Include their image and why have they been successful. What challenges does the Levi’s brand face in trying to compete in the denim jeans market? 3. Discuss the pros and cons of Levi Strauss selling a brand of jeans through Wal- Mart. What factors must be considered in making this decision? 4. What recommendation would you make to Phil Marineau regarding whether Levi Strauss & Co. should distribute a product line through Wal-Mart? Support your recommendation. Discuss the challenges LSCO will face in implementing a decision to sell its jeans through Wal-Mart? 5. LSCO’s new CEO has stated that he wants the company to reach $7 billion in revenue by 2020. Do you think this is a realistic growth target for the company? Discuss the growth options LSCO might pursue to reach this target. UNFORMATTED ATTACHMENT PREVIEW For the exclusive use of C. Zakaria, 2025. UV2962 Rev. Oct. 12, 2010 LEVI’S AT WAL-MART? Introduction In early 2002, Phil Marineau, CEO of Levi Strauss & Co., was thinking about whether he should direct his company to sell its product in the world’s largest retail store, Wal-Mart. Levi Strauss had posted a decrease in sales for the past five years, and Marineau was eager to stem the decline. Since joining the company in 1999, Marineau had embarked on an aggressive plan to turn the company around by implementing new business strategies that included shuttering 16 North American manufacturing plants and moving the production to cheaper offshore sources. In the marketing area, Marineau had worked to revive the brand image by launching a series of new advertisements and product placements to broaden the appeal beyond the 15-to-19-year-old segment. Marineau and his management team sensed that the Levi’s brand was being challenged at all points along the spectrum. The high-end segment was dominated by trendy brands such as Tommy Hilfiger, Calvin Klein, Ralph Lauren Polo, and Diesel. In the middle segment, Levi Strauss competed with vertically integrated retailers such as the Gap, American Eagle Outfitters, and Abercrombie & Fitch. Meanwhile, retailers such as Wal-Mart, Target, JCPenney, and Sears had built their own private-label brands, offering comparable designs at significantly reduced prices. With Levi’s selling in several chain and department stores, the company often found itself being used as a loss leader , with Levi’s heavily discounted to the end consumer. Now Marineau and his management team had to decide whether to sell Levi’s in Wal-Mart and, if so, what approach to use. The company had maintained a 10-year relationship with Wal-Mart during the 1980s and 1990s by selling them a value brand called Britannia. Wal-Mart stopped dealing with Levi Strauss in 1994, however, after a dispute in Canada, when Levi Strauss executives refused to maintain a supply of Levi’s Orange Tab jeans in Wal-Mart’s newly purchased Canadian stores (previously Woolco stores).1 With sales of Britannia dropping drastically thereafter, Levi Strauss sold the Britannia brand to a competitor, VF Corporation, in the mid-1990s. 1 Louis Trager, “Wal-Mart, Levi’s in Battle Over Jeans,” Los Angeles Daily News, September 9, 1994, B2. This case was prepared by Jordan Mitchell under the supervision of Paul W. Farris, Landmark Communications Professor of Business Administration, and Ervin Shames, Instructor. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright ? 2005 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to sales@dardebusinesspublishing.com. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -2- UV2962 As of early 2002, Levi Strauss was considering rekindling the Wal-Mart relationship by offering it a new value brand. Marineau and his management team had one central question: How should the brand be developed to preserve sales with existing customers in other channels? “There are 50 million pairs of jeans sold in discount stores,” Marineau said, “and we are in the business of making pants. We would be crazy not to be looking at other Levi’s brands that could be sold in those channels.”2 Apparel and Jeans Market in the United States Approximately 569 million pairs of all types of jeans were sold in the United States in 2001, throughout all consumer segments, which represented an increase of 2.7% over 2000.3 Total jeans sales were estimated to be $11.7 billion4 out of a total apparel market of $166 billion. The apparel market had been steadily growing since 1998, but experienced its first decline in 2001, dropping 5.7% in dollars from the prior year.5 As an expert tracking the apparel industry stated, “2002 will be a very interesting year for the apparel industry and will see a slow road to recovery. Certain categories and consumer segments are expected to see slight increases, while most categories are expected to remain flat or decline in dollar sales.”6 Exhibit 1 shows the market size of the entire apparel market and the breakdown of apparel sales by retail channel. Within the apparel market, several categories of pants existed with casual pants, dress pants, and jeans being the largest. During the late 1990s, jean sales had leveled off as consumers’ tastes shifted to khaki, cargo, and other types of techno-fabric pants. By 2001, however, denim sales were rising as consumers migrated back to jeans. They were attracted by several innovations in fabric and in style. The jeans market was expected to grow by 2% to 3% in 2002. The average price for a pair of jeans hovered around the $20 mark for both men and women, with over 40% being sold (either as original or marked-down price) below $20.7 The average price of jeans had dropped over the previous 10 years due to the proliferation of offpricing and private-label brands. One study by Cotton Incorporated showed that none of the top19 brands of jeans in both the women’s and men’s segments was able to increase its brand premium when compared to the average price of jeans in an eight-year period. In the men’s jeans segment, 11 of the 19 brands lost their premiums, and in the women’s segment, 14 of the 19 brands lost their premiums over the market’s average.8 The same study suggested the following to avoid losing price premiums: 2 Sarah Butler, “Levi’s Rules Out Red Tab Sales to Value Sector,” Drapers Record, March 30, 2002, 3. VF Corporation annual report, 2001. 4 VF Corporation annual report, 2003. 5 “Reports 2001 U.S. Apparel Industry Down for First Time in Three Years,” April 29, 2002, http://www.fashionworld.com (accessed March 3, 2005). 6 “Reports 2001 U.S. Apparel Industry Down for First Time in Three Years.” 7 Scott Malone, “Retail Revolution—Levi’s Considers Selling to Wal-Mart as Sales Slump,” Women’s Wear Daily, January 17, 2002, 1. 8 “Does Branding Combat Price Deflation?” Cotton Incorporated, Winter 2003, http://www.cottoninc.com /TextileConsumer/TextileConsumerVolume31/?Pg=2 (accessed February 2, 2010). 3 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -3- UV2962 One [solution] is for a brand to resist diluting its premium through discounting or marketing in too many different retail channels. Once consumers see a brand offered simultaneously at different channels, such as department stores and mass merchants, the ability to maintain a positive brand premium may be fatally compromised. A better strategy is to introduce a different brand name, perhaps affiliated with the original brand, but with enough independent brand identity so that consumers and retailers can differentiate products. Without differentiation, apparel products will compete largely on the basis of price. Another strategy for preserving brand premium focuses on emphasizing the non-price attributes of the brand. Attributes such as packaging, labeling, and customer service can enhance a brand image without compromising the brand’s retail price.9 The largest and fastest-growing retail channel for jeans and apparel was the mass merchants channel made up of Wal-Mart, Target, Kmart, and several other smaller retailers. In January 2002, Kmart filed for bankruptcy protection after a soft holiday season and intense competition left it in a precarious financial situation.10 An industry analyst talked about the increasingly blurred lines separating the channels: Retailers will be challenged in 2002 with the need to distinguish themselves from one another. With the melding of channels, department, chain, specialty, and mass merchant, retailers are looking for more of the same with similar merchandise. This allows the consumer to be able to switch channels for apparel shopping and seek the value experience, and find fashion value at lower prices. Department and specialty stores will really need to work hard to make themselves what they once were: special and different.11 Jeans Consumers Jeans were garments worn in a variety of settings—by people as diverse as manual laborers and models on the haute couture catwalks in London, Paris, and Milan. Denim jeans were considered truly egalitarian. As one academic wrote, “Jeans have the ability to conceal class distinction. When a person wears blue jeans—be it President Bill Clinton or a truck driver—the viewer is nebulous about the beholder’s status.”12 Styles varied as much as settings. Jeans were inextricably linked with music, given that certain styles of jeans were often part of a group’s costume—tight black jeans were an essential wardrobe item for Goth dressers, no-nonsense straight-leg blue jeans were worn by country and western musicians, and oversized, baggy styles were adopted by hip-hop artists. In younger age 9 “Does Branding Combat Price Deflation?” “VF Corp. sees no material impact from Kmart,” Reuters, January 22, 2002. 11 “Reports 2001 U.S. Apparel Industry Down for First Time in Three Years,” April 29, 2002. 12 C. Magocsi, “The Gentrification of Blue Jeans,” University of Toronto, http://www.chass.utoronto.ca /history/material_culture/cynth/index.html (accessed February 2, 2010). 10 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -4- UV2962 groups such as 15- to-19-year-olds, it was normal to own between five and eight pairs of jeans of a variety of brands. Men and women over 35 had between three and five pairs of two to three brands.13 In general, men and women over 35 spent half as much on jeans each year as members of the 15-to-19-year-old group. The over-35 group purchased fewer pairs per year, and they spent less on these purchases. The 15-to-19-year-old set purchased the more expensive brand names, while consumers over 35 preferred inexpensive brands and the availability of larger sizes and private labels. Levi Strauss & Co. History Levi Strauss was born in Buttenheim, Bavaria (modern-day Germany), in 1829, and moved to the United States in the 1847. After initially teaming up with his two half-brothers to run a dry goods business in New York, he relocated to San Francisco and started his own dry goods business in 1853. Nineteen years later, Strauss received a letter from Jacob Davis proposing that the two of them apply for a patent on a new invention: riveted denim pants. On May 20, 1873, the two men received U.S. patent no. 139,121 for men’s riveted work pants and immediately started producing what were at that time called “waist overalls.” They soon realized that they were filling an important niche with their sturdy, durable garment. By around 1890, “lot number 501” was being used to designate the copper-riveted overalls later known as jeans. After the death of Levi Strauss in 1902, family members continued to run the business and developed Koveralls, one-piece play suits for children, in 1912, and Freedom-Alls, one-piece work suits for women. Around this time, the company established a relationship with Cone Mills to supply denim for key products—a relationship that still existed in 2002. During the Great Depression of the 1930s, Levi Strauss avoided layoffs by giving workers shorter workweeks or assigning nonmanufacturing activities such as maintenance and improvement of the facilities to employees. Near the end of the decade, Levi’s jeans were popularized by actor John Wayne’s appearance in the movie Stagecoach—the jeans were a vital component of his wardrobe—and they became a common sight at dude ranches throughout the country. In the 1940s, Levi Strauss & Co. took the leadership position on social issues by being one of the first companies in the United States to promote integrated factories, with individuals from several cultures working side by side. The company also advertised in a number of languages to reach the burgeoning immigrant market within the United States. Levi’s took another marketing turn in the 1950s, when teenagers became the central focus in advertising for the brand. With movies such as The Wild One, featuring Marlon Brando in Levi’s 501 jeans, the brand became associated with the rebellious “Beat Generation,” the precursor of the 1960s countercultural revolution. Levi’s jeans were becoming branded with the key attributes of rebellion and originality. (The “Right for School” campaign, however, drew responses to the contrary.) When Marilyn Monroe appeared in Levi’s jeans in a photo shoot, the brand became sexier and appealing an alternative to skirts and other types of pants for women. 13 “Does Branding Combat Price Deflation?” This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -5- UV2962 The company worked to expand the Levi’s brand by moving into product lines such as Lighter Blues, Denim Family, and Casuals, the latter of which was adapted to meet the style of the 1960s with polyester blends and greater color variety. Levi’s expanded into international markets in the 1950s. In 1969, the brand received further recognition through a famous photograph of the jeans being worn at the legendary Woodstock music festival. The company set up a European division in 1965 and during the next decade expanded throughout the world and into Asia, with Japan becoming the first Asian affiliate in 1971. The company’s ability to create relevant and “cool” products for the teenage set as well as its progressive working conditions—such as being the first to offer benefits to the unmarried partners of their employees and one of the first companies to offer support to AIDS victims— made Levi Strauss a heralded and well-respected Fortune 500 enterprise. By the 1980s, the company had several diverse interests ranging from dress-suit production to owning part of a hat manufacturer. In 1984, the company went through a major refocusing when it shed many of its noncore subsidiaries and based its marketing efforts on its star product—501 Levi’s. The timing was ideal—the company rode the wave of Bruce Springsteen’s multiplatinum album “Born in the USA,” the cover of which showed Springsteen’s backside clad in a trusty pair of 501s. The refocusing effort led by Strauss descendent Robert Haas put the company back on track as a profitable and focused organization. Seeing an opportunity to open up a new segment in the pants market, the company launched Dockers pants in 1986, as a casual alternative to dress pants and jeans. The success of Dockers was unabated. From its launch in 1986 to 2002, when Dockers introduced a line of pants for women, the overall brand grew to over $1 billion in annual sales.14 The company decided to offer styles for the discerning young consumer and launched its Silvertab jeans in 1988. By 1996, Levi Strauss was at the top of its game—it had built a truly global brand with efforts such as “Clayman,” the company’s first global commercial, and its iconic 501 jeans continued to grow. The company had become the world’s largest apparel manufacturer, with sales reaching a record $7.1 billion. Exhibit 2 shows a sample of Levi Strauss & Co.’s historical advertising images. Levi Strauss & Co.: 1997 to 2002 Coming off a record year of sales in 1996, the company’s sales began to decline from $7.1 billion and net income of $465 million in 1996, to $5.1 billion and net income of $5 million in 1999. By the close of the 2001 fiscal year, the company’s sales had eroded further to $4.3 billion. During the same period, Levi Strauss restored net income to $151 million. The company was carrying debt of $2 billion, with some of the notes being graded as one category 14 Levi Strauss annual report, 2002. This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -6- UV2962 away from junk status as of early 2002.15 Exhibit 3 shows financial highlights from 1997 through 2001. Levi’s brand market share in men’s and women’s jeans fell from 18.7% in 1997 to 12.1% in early 2002.16 In the men’s jeans market, the company’s mainstay category, the brand held 48% market share in 1990, but had decreased to approximately 20% by 2002.17 Levi Strauss’s decline was attributed to several factors, such as increased competition in both the high- and low-end segments of the market. On the high end, image-conscious consumers were reaching for designer brands such as Tommy Hilfiger, Ralph Lauren Polo, and Calvin Klein. Other smaller premium brands such as Miss Sixty, Diesel, and Guess were all gaining momentum by offering fashion-forward designs, finishes, fabrics, and fits. On the opposite end of the spectrum, major retailers such as JCPenney, Sears, Wal-Mart, Target, and Kmart were all realizing major market-share gains offering private-label jeans at under $20 a pair. Competing head-to-head in the same price category with Levi’s jeans were vertical retailers such as the Gap, American Eagle Outfitters, Abercrombie & Fitch, J. Crew, and Eddie Bauer. These vertically integrated specialty stores controlled all aspects of product design, store design, and store operation. The Gap even had an in-house advertising department. These chains were credited with offering a consistent image across all formats and having the advantage of placing products directly in the stores instead of having to sell to independently owned retailers. After being criticized for not being up to date with the shop-within-shop concept, the company invested heavily in education to learn more about in-store merchandising. One outcome was more than a dozen stores owned and operated by Levi Strauss & Co. in high-profile locations such as New York City. The company had a total of 3,300 retail customers at more than 20,000 locations. Observers felt that the Levi’s brand was caught in the middle. Priced between $30 and $50 a pair, the jeans did not offer the same image or design as the high-end brands or the complete wardrobe selection of the vertically integrated retailers. Also, they did not offer the inexpensive alternatives found through private labels. To offer the lower price points, pundits suggested that the company eliminate its costly overhead of maintaining its North Americanbased production sources. In 1997, the company started closing its North American production facilities and further developed offshore sources of production with third parties in Asia, the Caribbean basin, and Latin America.18 While it provided lower cost per unit, the company struggled to cover the costs of its restructuring charges for both manufacturing and non15 Levi Strauss annual report, 2002. Louise Lee, “Why Levi’s Still Look Faded,” Business Week, July 22, 2002. 17 Ralph T. King Jr., “Infighting Rises, Productivity Falls, Employees Miss Piecework System,” Wall Street Journal, May 20, 1998. Note: The 2002 share derives from a case writer estimate. 18 The company had used offshore suppliers since the 1980s and had created a groundbreaking Supplier Code of Conduct in 1991. 16 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -7- UV2962 manufacturing staff. From 1996, the company reduced headcount by 33%, moving from a worldwide total of over 25,000 employees to 16,700 by the end of the 2001 fiscal year.19 In 1999 Robert Haas stepped down from the CEO post, handing control over to the second nonfamily leader in the company’s history—Phil Marineau. Marineau had over 25 years of experience in consumer packaged goods companies, working for 23 years and later holding the president and COO positions at Quaker Oats. There, he was credited with leading the global growth of Gatorade. Later, Marineau worked for a short time at Dean Foods and then moved to Pepsi-Cola North America for two years before being recruited to head Levi Strauss & Co. Levi’s Product Lines In 2002, Levi’s brand represented 74% of the company’s worldwide sales and 65% of sales in the Americas, with the remaining 9% derived from the Dockers brand and other smaller offshoots.20 The brand comprised several product lines for men and women (see Table 1). Industry observers frequently talked about Levi’s product lines being arranged in a pyramid, with fashion-forward designs such as Levi’s Vintage Line, Levi’s Red, and Levi’s Premium at the top, followed in order by Levi’s Engineered Jeans, Levi’s Silvertab, and Levi’s Red Tab. The product lines at the top of the pyramid were intended to create a halo effect on the overall brand, enhancing its image and fashion relevance. The company did not allow all its retailers access to higher-image brands. For examples JCPenney was not offered Levi’s Vintage or Levi’s Red, but was instead presented with the full range of Levi’s Red Tab and Silvertab products. Each product line had a target consumer—the higher-end brands were aimed at trendconscious buyers in the 15- to 24-year-old range, whereas the Levi’s Red Tab line had jeans suitable for more than 10 to 12 different body shapes and styles that included straight-leg, relaxed, baggy, boot cut, and slim. The company used the combination of fit, fabric, and finish as key differentiators for its target consumer and price point. Prices for Levi’s Red Tab line had historically been double the price of the average jean. In the past five years, the average price paid at retail for Levi’s jeans had been dropping, and was approximately 1.5 to 1.75 times the market average.21 19 Levi Strauss annual report, 2001. Levi Strauss annual report, 2002. 21 Case writer estimates. 20 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. UV2962 -8Table 1. Levi’s product lines.22 Product line Description Distribution Channel Retail Price Point Levi’s Vintage Clothing and Levi’s Red Small group of premium tops and bottoms that were based on key heritage styles with premium fabrics. High-end specialty stores Independent shops Bottoms: over $100 Levi’s Engineered Jeans Group of tops and bottoms that were engineered for special mobility Specialty stores Independent shops Original Levi’s stores Bottoms: between $50 and $80 Levi’s Premium Red Tab Variations of Levi’s Red Tab products with changes to fabrics and finishes Specialty stores Independent shops Original Levi’s stores Bottoms: between $50 and $100 Levi’s Red Tab Levi’s Silvertab The core of the Levi’s brand including the classic 501 button-fly jean, as well as a series of models from the 505 through 579, featuring slim, baggy, straight-leg, boot-cut and superlow fits. The line also included tops and jackets. Urban-inspired denim fits and technofabrics such as slick cotton and nylonblends Department stores Chain stores Independent shops Original Levi’s stores Department stores Chain stores Original Levi’s stores Bottoms: between $30 and $50 Bottoms: between $25 and $50 Other Levi’s products Included all other products such as additional tops, jackets, outwear and licensed products such as hats, bags, belts, socks, underwear, and footwear Department stores Chain stores Independent shops Original Levi’s stores All price ranges depending on product category Source: Created by case writer. Levi Strauss & Co. was constantly releasing new products that fell somewhere within the pyramid structure. For example, a refreshed design of Levi’s 501 jeans was in process with a release date planned for 2003. Also scheduled to hit stores in 2003 was Levi’s Type 1, a new product line, which accentuated the trademark Arcuate23 stitching design. Levi’s new product releases had mixed results. For example, the release of Levi’s Engineered Jeans in 2000 was highly successful in Europe and Asia but failed to prove viable in the United States. The design direction for Levi’s Engineered Jeans was to start from zero and recreate a new jeans blueprint. The result of the new design was a reconstructed and reengineered jean that had a twisted and bent pant leg for greater mobility. Fashion commentators believed that it was a breakthrough and soon many top-end brands such as G-Star and Diesel began their own designs based loosely on the Levi’s pattern for Engineered Jeans. Despite this success with high-end brands, however, consumers of U.S. jeans did not adopt the innovation en masse. 22 Compiled by case writer based on information at retail locations and Levi Strauss annual report, 2001. Arcuate was the name given by Levi Strauss to the Levi’s trademarked “V-like” stitching on the back pockets of a pair of Levi’s jeans. 23 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -9- UV2962 Advertising and Promotion The Levi’s brand was rated as the number-one apparel brand for brand awareness and brand retention.24 U.S. advertising and marketing for the Levi’s brand in 2002 was estimated at $139 million. This budget included outlays for television advertising, billboard, print, and other media events and sponsorships.25 By comparison, Nike, a company more than double the size of Levi Strauss & Co., invested $998.2 million (10.5% in revenues) in advertising in 2001, and $974.1 million (10.8% of revenues) in 2000.26 As part of an integrated marketing approach, the company frequently promoted music and theatrical productions in exchange for brand advertising at the venue as well as product placement on the artists. Sponsored artists included tours by Lauryn Hill, Massive Attack, Jamiroquai, Christina Aguilera, Mariah Carey, De La Soul, Ben Folds Five, and the White Stripes. It used star talent such as Christina Aguilera and Mariah Carey in coordination with the release of Levi’s Superlow jeans. For 2002, the brand was planning to tie in product with the World Cup soccer event in Korea by sponsoring Korean soccer star Song Chong Gug.27 To augment traditional approaches, the Levi’s brand also worked to get product placement on television shows, feature films, music videos, and on the pages of top fashion magazines. Channels of Distribution Jeans channels could be grouped into six main categories within the U.S. denim landscape: 1. Chain and department stores such as JCPenney, Macy’s, Sears, May Department Stores Co., and Kohl’s 2. Image department stores such as Bloomingdale’s, Nordstrom, Neiman Marcus, and Saks International 3. Independent shops or “jeaneries” 4. Specialty stores such as the Gap, Old Navy, Abercrombie & Fitch, American Eagle Outfitters, and Original Levi’s Stores (the only one of these to stock Levi’s) 5. Mass merchants such as Wal-Mart, Target, and Kmart 6. Off-price channels such as Costco, Levi’s Outlets, and TJ Maxx 24 Levi Strauss annual report, 2002. Note: Brand retention was defined as the percentage of all past-12-month purchasers who planned on buying the brand in the future. 25 The 2001 annual report indicated approximately 7% of sales was spent on various media. This figure was derived by multiplying 7.4% times $4.1 billion in sales times 65% domestic sales times 74% of domestic sales for Levi’s brand. 26 Nike, Inc., annual report, 2002. 27 Levi Strauss annual report, 2001. This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. UV2962 -10- The mass channel sold an estimated 31% of all jeans in the United States.28 The breakdown of total jean sales and Levi’s brand sales by channel is shown in Tables 2 and 3. Table 2. Jean sales in the United States by channel (percent). Mass Specialty Chain Department stores Other Total 31 23 18 16 12 100 Data source: Levi Strauss annual report, 2001. Table 3. Levi’s brand sales in the United States by channel (percent). Chain and department stores Independent Specialty Image department stores Mass Other Total 58 8 3 2 0 29 100 Data source: Levi Strauss annual report, 2001. The Levi’s brand was not present in the mass merchant channel in the United States. The single largest customer for Levi’s brand sales was JCPenney, which accounted for over 10% of the company’s overall sales.29 In 2002, along with JCPenney, the top 10 customers in alphabetical order were Costco, Casual Male Retail Group (formerly Designs, Inc.), Dillard’s, Federated Department Stores (owners of Macy’s and Bloomingdales), Goody’s, JCPenney, Kohl’s, May Department Stores Co., the Mervyn’s unit of Target Corporation, and Sears.30 Competition Given the fragmented nature of the fashion industry and the jeans market, the Levi’s brand competed across a wide spectrum of brands. Competitors chose to either fight for market share based on price or sought consumers willing to pay a premium for image, design, fit, and finish. The first category was dominated by mass-market private labels from Wal-Mart, Target, Kmart, Sears, JCPenney, and Macy’s. The second category was rife with examples from high28 Levi Strauss annual report, 2001. Levi Strauss annual report, 2001. 30 Levi Strauss annual report, 2001. 29 This document is authorized for use only by Christina Zakaria in Marketing 494 Fall 2025 taught by Joe Belch, San Diego State University from Aug 2025 to Dec 2025. For the exclusive use of C. Zakaria, 2025. -11- UV2962 end brands such as Ralph Lauren Polo, Calvin Klein, and Guess, through to fashion-forward styles such as Fubu, L.E.I., Mudd, and Diesel. One consistent competitor in the last 50 years had been Wrangler and Lee Jeans, both of which were owned by VF Corporation. VF Corporation: Wrangler, Lee, and Rustler VF Corporation, established in 1899, produced and marketed a large portfolio of brands including outdoor names such as JanSport, The North Face, and Eastpak as well as intimates labels such as Vanity Fair, Vassarette, and Bestform. VF’s largest customer was Wal-Mart, which made up 15.1% of VF’s total sales in 2001 and 14.8% of VF’s sales in 2000.31 Total advertising for all VF brands was $244 million (4.4% of sales) in 2001, $252 million (4.4% of sales) in 2000, and $258 million (4.6% of sales) in 1999.32 VF Corporation jeanswear brands included Riders, Chic, Britannia, and Rustler, and a number of product-line
