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good afternoon everyone welcome to this special LinkedIn LIVE edition of our show marketing matters I'm Barbara Khan
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the Patty and JH Baker professor of marketing and I'm joined by my co-host America spred the Whitney M Young Junior
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professor of marketing and the brand identity theorist hello Americas hi Barber it's great to be here I'm so
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excited because you know one of the things we do is talk about super iconic Brands the brands that basically stay
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culturally relevant and that people get excited over and so what have we got today it's going to be so exciting on
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this very special live session yeah we're excited to have another brand guy here with us in the studio today and I'd
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like to introduce chip Berg who's the former president and CEO of Levi Strauss
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and Company where he served from September 2011 to January 2024 welcome chip hello Barbara Americus thank you
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very much for uh invi me to join you today excellent yeah it's really excited
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and we're thrilled to be hosting our featured guest here on the show today and later on we'll be taking live
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questions from everyone watching online so make sure to put your questions in the comments section and let's talk a
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little bit about chip because he's had such an incredible care Absol yes he has
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led many iconic Brands during his 45y year career spanning the US Asia and Europe he spent 28 years at PNG and
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Proctor and Gamble in the roles of increasing scope and complexity in brand management General management and
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executive leadership among the many accomplishments he led the creation and launch of Swiffer he oversaw the
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turnaround of Old Spice isn't that one of your favorite Brands absolutely and
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he was the first PNG executive to lead the iconic Gillette blades and razor business globally following png's 57
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billion acquisition of Gillette in 200 F but at Levi Strauss chip has been credited with leading the company's
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story turnaround and using his platform to take bold social stances so Chip after all these years what made you
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decide to retire now well um I'm 66 and it's been a great run and um you know I think uh
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leadership changes at the top you know 10 years 12 years 13 years 14 years as a CEO is probably the right amount of time
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I I have the energy and um stamina I think that I could have done this job for another four or five years probably
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but you know I've been in the job for 11 for 12 and a half years and we had an
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amazing successor who I brought into the company and um Michelle GS who was the former CEO of Kohl's and she was ready
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and I'm totally convinced that she is going to take the company to the next level so it was time to move on and and
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you know I've been out of the job I it was it was two months exactly yesterday and wow that's pretty fresh I
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know it's it's fresh um but I can honestly say I've been really really
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busy um I miss all of my colleagues I miss the fun of being at work but um I don't really miss the job because I know
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it's in really really good hands with Michelle oh that's pretty exciting okay
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so let's go back to the beginning how did you first get involved with Levis and what did the brand mean to you then
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yeah okay so um wind back the hands of time to sometime in the 2010s I was running Gillette um you know
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a big Global business was about seven and a half billion and all of the men male grooming brands of PNG including
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Old Spice um so it was about a 7.5 billion dollar Global business and I was actually in China at a leadership team
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meeting I had my whole leadership team over in China and I got a call from a head hunter who I knew uh and I had
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gotten several calls for other CEO opportunities and she said I think I've got something you might be interested in
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ey roll right you know um and I was like okay what is it and she said what do you
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think about Levis and the words out of my mouth were oh wow it was a completely different
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reaction than any of the other calls that i' had gotten for a CEO opportunity and you know what flooded
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through my mind were two things one some of the Vivid memories I had as a kid my
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brand experiences with Levis and and we can talk about that um and then the other thing is you know I travel all
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over the world in in my prior job and I lived in Asia for seven years um and everywhere I went you saw Levis and Levi
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stores and um you know I thought at the time that this was probably a 10 billion
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dollar business and it wasn't until I started really digging into what was going on at L that I discovered it was
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you know about a $4 billion business at the time and um so anyway so um I do like to say everybody has a Levi story I
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started doing homework on the company um and uh you know the bottom line was the
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company peaked in 1996 at 7 .1 billion in sales and then the next 5 years saw massive shareholder value destruction as
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revenues deteriorated from 7.1 to uh about4 billion doar and then the next decade the
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2000s the company just kind of bumped along between four and 4.2 4.3 billion dollar in in revenues I have two grown
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boys who today are uh 41 and uh 36 when they were teenagers they never had owned
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a pair of Levis it wasn't even in their consideration set so I went back to kind
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of my days as a kid when I was going into seventh grade I asked my mom to drive three Towns over so I could get a
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pair of Levis to go to Middle School right because only the cool kids were Levis right that's knows cool kids Co
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kids cool kids kids and I'm a brand guy and so my whole hypothesis was if we
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could make the brand what it was when I was a kid that would turn the brand around and
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that would turn the company around because the brand is 85% of the company's Revenue so the going in
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hypothesis was the fundamental issue here is a branding issue and if we can make the brand cool again put it back at
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the center of culture have it resonate with youth with young people again um that that would turn the business around
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well let's talk about that so that's a pretty that's one thing to say it's
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quite another thing to actually do so you want to make the brand cool like what was your first instinct how do you
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make a brand cool well there there were a bunch of other kind of fundamental issues with the company the first thing
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was we had to start marketing the brand again so during the dark days you know as the company's revenues tumbled um we
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had piled up a mountain of debt um so we were $4 billion in revenues uh earning about uh $300
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million before tax profits and our our um debt level was over $2 billion our our debt ratio was 5 to1 we
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were one notch above junk bond status um that's what's brought down a lot of retailers and and you know and at
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the end of the day the balance the strength of the balance sheet is everything and our balance sheet was a
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constraint we were actually spending more money on interest payments when I joined than we were in marketing in
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advertising the brand globally globally right and so the first you know so to put the brand back at the center
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of culture we had to start marketing it again and to start marketing it again we
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had to clean up our balance sheet so there there were steps that we needed to take in order to set the conditions for
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success to rebuild the brand so then let me just dig in on that a little because
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what you're saying is you're under this massive amount of debt and your solution
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is to spend more money right yeah so and so what do I need to do to spend more money I need to pay down the debt to
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free up all that interest interest expense that we were spending to invest that back in the brand building and so
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that's fundamentally what we did I mean the company weird things perverse things
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not weird perverse things happen to companies that don't grow for 15 years we got
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fat we had you know vice presidents not managing any people we became like a bank and and you know when people aren't
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getting their bonus every year um the only way you move ahead financially is to get promoted so the only way to get
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promoted is surround yourself with poor performing people so that you look good and and so there were lots of
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organizational issues and um anyway uh uh we were fat and there was clearly an opportunity to restructure the company
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simplify things and um free up a lot of cash to pay down the debt and then begin
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investing back in the brand and so we did that we went through a big restructure in 2013 or so uh and in 2014
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we really started to seriously invest back in marketing we also had to fix the marketing that was another thing but um
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we can talk about that too well let's do that let's because that this is
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marketing matters and what we really want marting does matter the brand here really did matter thanks for that non we
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appreciate that now so that's interesting the first thing you did did you had to be you had to do control you
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had to do restraint you had to get you know cut the fat out of the system BR discipline back Financial discipline you
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know and yeah brought 28 years of PNG marketing discipline too so and that's a
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conservative brand it's an open-minded brand but it is also conservative Back
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to Basics kind of idea and and we took marketing at Levis Back to Basics Back to Basics we were going to test our
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advertising we were going to prove that it was going to work we were going to put money behind it we were going to run
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heavy up tests if the heavy up tests worked we were going to expand the heavy up tests and that's part of how we built
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it over the the ensuing couple of years okay so that was the first year that's
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what you were doing and then you started taking money and investing in BR so the
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first thing is make sure you manage your costs and your debt the second thing is
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don't let that not let you invest in a brand because you can imagine both kinds
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of things either you spend too too much and you're a mess so then you've got to
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rain it in but then you can't be raining things in so much that you don't
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continue we were spending money in marketing we were just not spending it well and spending it on things that were
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growing the business so redirecting what we were spending into things that were going to work yeah yeah I I'm want to
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unpack that just a little bit Barbara chip so you said this there were there was this period in time where kind of
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things went dark um and the brand sort of lost its cultural relevance and so we have to start now cut cost and this I
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really invest in brand because brand is an asset just like you were saying chip so when when you when those eyes awoken
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to like okay we have to become culturally relevant again what what was your what was your TR what did you look
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at at the difference in culture across that time period that says okay now we need to kind of fit into this
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conversation this new cultural conversation what were the trends what were the things that were different that
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were from the earlier times where the brand was really built strong in that cultural relevance where there are
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things you could see where it's like we need to kind of be in these spaces or
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having these types of conversations how did that look yeah I mean I went back you know you would all do the same thing
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any really good marketer we go back but but we about all kinds of things but you know actually doing this
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the best the best way to try to figure out your way forward is go back to what worked in the past right so you know
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pull out the historical reel look at the advertising that worked to build the business to build the brand from the 70s
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and 80s and 90s and what were the what were the big things that this brand did that worked really well and there were
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some insights there music was really important uh not being too serious about ourselves was really important some of
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our best advertising had a little bit of a nod and a wink to it was really important it was about younger people
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there was a little bit of sexual attraction or sexual attension if you want to call it that that always works
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in advertising and so um uh and then we had some very very iconic um campaigns that we ran during the hey days um the
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501 blues is a very very famous campaign it was music and it was all about product and um and so our advertising
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when I joined the company was it was dark it was almost like film Noir it was it was almost too intellectually
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interesting stimulating and it wasn't really connecting with the consumer so
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let me just before you continue on that just that's how did they go so far wrong
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if they had such a rich Legacy how did they get to the point where you had to undo it I I you
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know I think when you when you're really really successful you start resting on
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your Laural and and and not just from a marketing standpoint I think this was true companywide you kind of begin to
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believe your own press reports and and think that when you're successful nothing will go wrong and um you know
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when we were 7.1 billion in sales you know one of the things that caused us to decline to 4 billion over a couple of
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years we lost our biggest customer and um and it was Hubris at the end of the day and I think huis is kind
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of the the kiss of death to an organization and um and it's one of the things over the 12 years that I was
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there you got it you know when you wake up in the morning if you're not the fastest one running somebody's going to
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get you yeah right so Art of War and um and so this notion of really continuing to stay hungry continuing to stay humble
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and you know not believe in your own press reports forever um I think was really really important but there was a
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degree of arrogance or huus to our marketing and it was kind of intellectually really interesting and I
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could see how they got to it but if you go back to the principles of what the marketing was that really connected with
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consumers in our best days it was missing all of it there wasn't you know there wasn't it wasn't music it wasn't
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dance it wasn't culture it wasn't really culturally relevant and um and so that
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was key to it um I also I had this big Insight one of the things I love to do especially in the early days and we can
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talk about some of the other things I did during the early days but but in you know I big Global business I was out in
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the markets and traveling to the markets and one of the things I love to do is consumer research when I'm in a market
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right and a consumer inome or a consumer shop along and there are a lot of people
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who say Ah that's qualitative you're never going to learn anything doing that
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but when you do one or two every market and you're doing 20 markets a year 25
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markets a year right that adds up and at some point you begin to get a gut feel but I think it was my first trip in this
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job um to India and I was in Bangalore and we had recruited I was going to do an inhome with a a young woman 27 28
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years old she had been specifically recruited because she was a denim head she owned lots of denim such a thing
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that's an identity oh yeah heads the denim heads are out there and they're
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out there and you know who you are um uh but uh she was a denim head and she owned like uh about 10 nine eight nine
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10 pairs of of jeans and so she was recruited specifically for that reason she didn't know who I was or why we were
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there but she um figured it out that we were talking about denim but anyway you know when you do these in homes it's an
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hour and I had my it was myself the country manager we had a translator although this woman spoke perfect
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English turns out she went to University in the UK um and uh we had somebody from
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the research firm as well and and uh you know you start really wide tell me about
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yourself and how do you spend your time where do you work blah blah you start really really wide and then over the
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course of the next 40 or 45 minutes you kind of zoom into Denim and start talking about Denim and what brands do
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you buy and why do you buy them and da and then in the last 10 minutes or so I was like can we can we see your jeans
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and she's like yeah come on in and she brought us into her bedroom opened up
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her wardrobe pulled out the jeans the the facilitator asked if she could lay them out on the bed we had her
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specifically lay out Levis as the last two and then we went kind of one by one what do you wear these for and she had
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like all the premium Brands he clearly you know was a very very well-traveled um individual
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well she had you know Hudson she had paig she had a lot of the premium Brands guest and uh uh and we went one by one
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like what do you wear these for what do you wear these for and the last two were
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Levis so we got down to the second to last pair and she said well these are my go-to jeans you know when I'm meeting my
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girlfriends for a cup of coffee in the mall in the mall this is what I'll wear
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if I'm going out shopping on a Saturday these are my go-to casual jeans it's
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like okay what about these s gets a little wispy and she says well to be honest I don't even wear those jeans
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anymore because they don't fit me but those are the genes that I have when I
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went to University and she said all my memories of University Are In Those Jeans oh wow and then she said I get
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goosebumps every time I tell this she said you wear other jeans but you live in Levis o and I was like that's it that
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is the idea I've been saying all along everybody's got a Levi story and it is
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about living your life in Levis and and that became the selling idea behind our advertising and it's now 10 years later
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and we are still using that line that's incredible I love that idea chip because
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I think that sometimes we start chasing these hardcore quantitative types of surveys because they feel like they're
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really Val valid and objective and we've got a number here's an average of
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something or whatever but what I love about what you're talking about is that
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sort of like go out into the into the wild like Jane Goodall you're out in the
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jungle and you have to study these people because I don't think that insight about I live in these Levis
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jeans would have come out in a Ser yeah or that I'm not going to throw those
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jeans away because they're they've got the memories of college or university
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power that's brand that that is that speaks to the power that this brand has
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so once you had that big Insight did you then test it before you went out with it
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yeah we developed that so I switched agencies because the other agency refused to move off of
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um off of the prior idea and I had asked them for an alternate campaign um and I
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knew this agency well because they worked on one of my Brands when I was at PNG and I knew the team pretty well and
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they just refused and so why did they refuse that's I think they were really
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committed to it and they thought it was the right decision yeah they thought it was right even though it wasn't moving
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the needle on the business and I just asked for an alternate campaign I didn't
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say I was going to run the alternate you know so anyway so we had this idea now live in Levis and we went to a new
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agency and they developed advertising to it we tested it it tested great we put it on air we tested it in a heavy up
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heavy up Market we were spending about four and a half% of revenues in marketing at that point I'm a cpg guy
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where 15% was kind of like the norm I was like oh my God what an opportunity here and you know we're now spending in
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the neighborhood of seven or S and a half% of Revenue and I still think there's opportunity for us but the the
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heavy ups were working and we just kept putting more money behind it so let's
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just switch gears a little bit because the couple things we want to talk about one of the things that's I am a
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Storyteller I warned you no no I'm happy to hear these stories that was that the
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what we want to hear but I'm also curious because I know Levis and you've
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embraced social issues um and so one of the things is rebuilding the brand the other thing and we've talked about this
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a lot what's the role of a brand in purpose driven marketing and social issues um important issues like voting
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lgbtqia plus equality immigration how do you I mean those are polarizing issues how do you decide what to embrace and
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what not yeah so um first of all the first thing I will say is this is not about me this is about the power of the
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platform and the role of CEO at at P at at Levis and um and part of the reason the board wanted an internal successor
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was that they understand how we process all this and how we decide what issues we're going to stand for and which ones
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were not many many of the issues that we've taken stands on predate me so lgbtq we we've been doing this for a
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long long time and our brand is very very tightly associated with it and it is part of who we are um uh others are
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new though and um you know so take a stand on ending gun violence in the US specifically is a relatively new issue
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for us and and and we had a very thorough uh process to vet it number one and to to work it with our board of
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directors because there's a governance role that they've got to play here to
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make sure that we don't do something stupid and um and so let's take ending
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gun violence as an example um how did we get into to it we have 250 or so at the time this was 2016 we have
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roughly 250 stores or so in the United States and our store managers came to me saying we're concerned people are
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walking into our stores brandishing a gun in open car in open carry states right and they were like we've got a
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company policy you can't bring a gun to work you can't bring a weapon to work
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and and when somebody walks in with a gun you don't know if they're a good or
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bad guy and you you worry about the safety of your own employees and other customers in the store and so this was
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right before the election in 2016 and we were kind of we went to school on what have other retailers done and there were
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a couple like Starbucks and Target who had already kind of been the tip of the spear on this one to some extent and and
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their approach was to publicly just put out a notice don't bring a gun into our
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and they took some blowback for it anyway we we were going to hold off until after the
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election until a gun went off in one of our stores jeez so a guy was in the dressing room oh dear had a gun in his
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pocket and when he took his pants off he the gun went off literally shot himself
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in the foot so but you know it could have been an employee it could have been you or me or one of our kids right it
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could have been you know some innocent bystander and that was it that that was the straw that broke the camels back so
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we put this letter out that had already been pre-written and cleared with the board um that you know please don't
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bring a weapon into our store and of course there was huge blowback um I had unmarked police in front of my dear
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house for a while I had death threats um but uh but it was the right thing to do
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and so that got us into this debate and then um then the Parkland shooting happened in 2018 and um and I was like
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look we're already in for this let's go big or go home because this is now an issue that youth were
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mobilizing behind and the Parkland youth in particular if you remember back after
00:24:46
that they were mobilized and it's like let's let's Empower them and so again
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working with the board you know we were going to do a one-year program the board
00:24:57
was like no if we're going to do this we're going to do it big go big or go
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home and so we committed to a fouryear we created a special fund of a million doll to fund these most mostly youth
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organizations we also worked with gord's you know Gabby gord's organization which
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is really committed to ending gun violence in this country and the Sandy Hook promise um so other organizations
00:25:21
as well that are committed to to changing the legislation we're not about repealing the Second Amendment or
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anything else this is about Common Sense legislation that would reduce the risk of gun violence in this country that is
00:25:34
broadly supported by weapon owners by the way um and um and it has been something that we've been committed to
00:25:42
now for more than four years and we're going on I think year six or seven now
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and uh we played a role um when the legislation passed Congress uh about a year or year and a half ago we mobilized
00:25:55
the business Community I got 500 plus CEOs to sign a letter to Congress to pass that legislation and I've been told
00:26:03
the business Community played a role in getting that legisl it's the first meaningful gun legislation in over 10
00:26:09
years the last thing I will say about this again I'm a Storyteller sorry it's
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great we know that this is one of the biggest issues with young people in this country it's second to climate change
00:26:21
you know think about the kids that go to school they're practicing lockdown drills my daughter went to Elementary
00:26:27
Middle School in San Francisco they practice lockdown drills more than they practice earthquake
00:26:33
drills and and it's a reality that you know now almost 60% of um almost 60% of
00:26:41
adults know somebody who has been affected by gun violence so it's touching everybody so what I I just want
00:26:47
to summarize what I'm hearing you say so you haven't taken on a lot of issues you
00:26:51
don't take on the flavor of the month issue but you take on an issue like lgbtq in the beginning that's really
00:26:58
really true to your brand the second issue was true to your retail environment and then you go big or go
00:27:04
home I mean so then once you go into it you double down on it exactly and so if there's negative m i mean I imagine
00:27:11
everything you're saying sounds really positive to me but if there is some negative you're willing to take that
00:27:16
tradeoff because it's been very thoughtful and you're going to go into it with very wellth thought out reasons
00:27:23
and there is that true I mean that that and you summ summarized it better than I
00:27:27
told the story actually but that that's exactly right and in fact I have said
00:27:32
one of the biggest challenges we have is we are known for taking these stands so
00:27:36
we get hit up for everything right can you help us with this can you help us with that and and if you if you stand
00:27:42
for everything you stand for nothing so you it is strategic and it is about the Halo that it that it provides over the
00:27:50
brand and it has to be consistent with the brand and you know when you talk to people about Levis they will say Levis
00:27:57
is a it it is a strong brand it is a brand that is about using its authentic voice it is all about empowering people
00:28:04
and so that's why voting rights democracy all of that is really really important when the Berlin Wall came down
00:28:11
the kids on the wall were all wearing Levis that's he took a picture of that
00:28:16
yeah somebody did somebody did it's a very famous picture it's a famous picture I love that point sh because I
00:28:21
want to build on that a little bit and take it in a little bit of a slightly different direction one of the things
00:28:25
that is a theory about why you get involved in purpose-driven marketing is because not only does it signal
00:28:31
something to the the marketplace of consumers it also signals something to people you would attract as human Talent
00:28:37
can you speak on on that definitely I mean when I joined the company one of the things I did is I went on a
00:28:42
listening tour and I asked the top 60 people in the company six questions what are the three things that have to change
00:28:48
you know turnaround what are the three things that have to change what are the three things you think we have to keep
00:28:54
what's the one thing you hope I will do what's the one thing you're afraid I
00:28:57
might do what's the one piece of advice you have for me and I always forget the
00:29:00
sixth question and those are five pretty good questions I hope someone's writing
00:29:05
them down five great questions I sent them to the every same questions to everybody and then I met with the top 60
00:29:12
for about an hour and I thought it would take 40 interviews to come up with a clear picture no it was very very clear
00:29:18
early on but one of the things we had to keep were our values interesting this was people joined the company and people
00:29:26
through the worst period of time in the company's history stay with the company
00:29:31
because of who we are and what we stand for so the purpose of the company which we talk about is profits through
00:29:37
principles um you know not being afraid to take a stand on important social issues that we exist and this goes all
00:29:43
the way back to Levi Strauss himself the founder we're in business to do them
00:29:49
more than just make a buck for the shareholder we are in business to be a force for good in the world I love
00:29:54
hearing this this is so this fantastic you do kind of bring tears to our eyes this kind of thing is great uh so let me
00:30:02
shift gears one more time before we go to our questions from our audience and ask you about so you were talking about
00:30:08
2016 you know that was a really polarizing time a lot of this issues were coming up and Brands were grappling
00:30:14
with that and you gave us in my mind a very strong strategy for how to deal with it and what to what's noise and
00:30:20
what's signal and what your Brand's going to mean but right after 2016 you
00:30:24
might remember 2020 came and yes kind of do remember that so like you know leading a brand
00:30:33
during uncertainty like that and we were talking about that previously you don't
00:30:37
know from one year to the next how to deal with that how do you do that from a leadership position deal with all this
00:30:43
uncertainty that the pandemic help Ed you so I I will say you know as as a CEO CEO for 12 and a half years the last
00:30:52
four or five years were so much harder than the first five or six years years even you know first five or six years I
00:30:59
was dealing with a broken business and doing a turnaround but the uncertainty that the pandemic caused um it changed
00:31:07
me as a leader and I I think leadership has fundamentally changed as a result of
00:31:11
the pandemic too you know when you're zooming into somebody's home and they're
00:31:15
sitting at the kitchen table with their 5-year-old pulling on their sleeves because they can't get on iPad to zoom
00:31:22
into school I developed a completely different sense of empathy and and a sense of responsibility for every single
00:31:31
person in the company and so when the pandemic happened um you know funny story uh uh the day before we went into
00:31:41
lockdown we were talking about testing remote work for three days straight globally and I was getting push back
00:31:50
from the it organization because they weren't sure if we would break the it pipes if everybody stayed home and
00:31:56
worked remotely and the next day we were all locked down wow wow and um a little
00:32:00
bit of luck and skill well no we had no idea if it was going to work so better to be lucky than good is what I would
00:32:07
say but um but uh yeah I mean all of our stores closed you know I look back um we
00:32:15
went into lockdown I think it was March 20th and uh we thought it would be till the end of March we thought it was going
00:32:21
to be two weeks and we had stores closed for 6 weeks 8 weeks 10 weeks 12 weeks depending on the part of the world but
00:32:29
one we we declared a couple of things very very early on principle based number one we're going to put our
00:32:35
employees first the safety of our employees especially our Frontline employees we had 3200 stores globally
00:32:42
was going to be first and foremost that we weren't going to jeopardize health
00:32:46
and in fact we rolled out um health care benefits to our part-time workers during
00:32:53
here in the US specifically because around most other parts of the world they're taking care of but here in the
00:32:58
US hourly workers are not and so we put a safety net in place um second um we we
00:33:07
did have to lay people off during the pandemic because the business we normally did call it one a. half billion
00:33:14
dollar a quarter that first quarter when we went into lockdown we did 500 less than $500 million of Revenue and that
00:33:24
was all the two and a half or three weeks before we before we went into lockdown we did basically nothing the
00:33:30
rest of the the rest of the quarter a little bit e-commerce business but that was it MH and we didn't know if this was
00:33:36
going to last for another two weeks or another two years and so we had a billion dollars of cash we went from
00:33:43
being really dead heavy to we had a lot of cash on our balance sheet and I was like that's enough for about a year
00:33:51
let's go get another half billion dollars and we went and got more got more cash on the balance sheet
00:33:57
immediately cuz we didn't know mhm and um so it was a terrifying it was the first time in my career I didn't have a
00:34:04
forecast we had high medium and low that's all we that's that's how scenarios that's how we were running the
00:34:10
business through the pandemic but um but the other thing we did we said um we wanted to exit the pandemic stronger and
00:34:18
we said we wanted the brands to exit the pandemic stronger and so the the team this was not my idea most of the good
00:34:27
successes that we've had by the way were not my idea um I've been I've been
00:34:33
blessed with a with really a great team and uh but the team came up with this idea of doing a 501 concert series
00:34:43
streamed from the living room of different artists right and at 5:01 p.m. every day reinforced brand to reinforced
00:34:53
the brand it was the 501 concert series we were going to do it for 30 days it was such a success we extended it and I
00:35:00
think we did it for about three months dur during most of the lockdown really and some amazing things happened but but
00:35:08
people were connecting with the brand online with these music series and it was just it was magic so the creativity
00:35:16
that came out during the pandemic was something that I just wanted to bottle up and say let's not lose this well you
00:35:22
know there's theory about that to be most creative you need constraint I 100% and in fact in our
00:35:29
Innovation program we use sustainability as a constraint like all of all of our all of our Innovation is wrapped around
00:35:38
sustainability how do we reduce the use of water in manufacturing how do we get rid of the chem the harsh chemicals in
00:35:44
our supply chain and when we land on Solutions we then open source them to our competitors because it's like this
00:35:52
isn't going to be a compe you know we use less water it's not a competitive
00:35:55
Advantage nobody cares right right but if we all use a lot less water that's
00:35:59
going to be really good for planet planet Earth right and so we've open sourced these things that's that's
00:36:05
that's a great marketing strategy in my opinion that's very good so we're almost
00:36:10
ready to ask other people questions but I do want to ask like what do you think was the highlight of so you talked about
00:36:16
difficult Years starting and then you know the pandemic if you had to look back what would you say was some of the
00:36:23
things you're the most proud of or the highlight of your Reign the first would
00:36:27
probably be my team and even as I've transitioned the leadership now over to
00:36:32
Michelle most of my team is still in place and and I think that's speaks to the quality of the succession with
00:36:37
Michelle and really setting her up for Success um and and really not just my executive team but but pretty broadly um
00:36:46
because it is at the end of the day a CEO you're making the Strategic calls you're making Capital allocation
00:36:52
decisions and you're making people decisions and so it really is about the team and and that's probably the thing
00:36:58
I'm most proud of but you know we took this company and this brand that was very very broken the brand today by all
00:37:04
metrics is stronger than it's ever been um and in fact when we were working on
00:37:09
succession the board was like just go find another U we're real happy with you
00:37:13
just go find another you and I was like no we don't need another me we need somebody with a different skill set the
00:37:19
brand is now broke the the brand that was broken is now F it's strong it's
00:37:24
strong you know strongest it's ever been right we're now now becoming a retailer
00:37:29
45% of our revenues roughly is in our own direct to Consumer business it was 20% when I joined we need somebody who's
00:37:37
got really strong retail and digital chops and that's what we went out and we
00:37:43
got we hired Michelle Goss who was CEO of Kohl's she joined the company as president she kind of took a step
00:37:50
backwards in her career to come and learn the business learn the company learn the
00:37:55
brand form her agenda while she's still not in the chair so that day one when
00:38:01
she got in the chair she's ready to go and so succession is also something I'm
00:38:05
really proud of and then probably the third thing is we took the company public back in 2019 2019 and um why did
00:38:14
you do that yeah there are a lot of people who were like why would you take a company public um and actually we went
00:38:21
public is dual class so the family still has voting controls so in some ways we have the benefits of being private
00:38:28
but we so why did we go public and it's a good question number one we're in
00:38:32
fifth and sixth generation and now even Seventh Generation shareholders in in the family okay so it's been a long time
00:38:39
since Levi Strauss and when you do the math every generation owns fewer and fewer shares because they all have kids
00:38:47
and they're splitting them right so right today our single largest shareholder holds about 18 family
00:38:52
shareholder holds about 18% prior to the IPO and um you know you play that forward in a in
00:39:01
another generation or two the largest shareholder will hold 2% so number one it's a question of how do you govern a
00:39:06
company when the largest shareholder is 2% it's kind of hard right um it's
00:39:11
already difficult because we already have about 100 family members and then when you add in their trust and other
00:39:16
legal entities a lot more than that uh two is uh some family members wanted liquidity and three I firmly believe
00:39:24
that being a public company we will never have a 15year stretch of underperformance because the public
00:39:29
investors won't stand for it it will make us a better company more strategic
00:39:35
more disciplined and that kind of underperformance for an extended period of time would never happen as a public
00:39:40
company it's pretty interesting that's amazing all right well I guess now we've
00:39:45
gone right up to the time it's to hear from our wonderful audience um and if
00:39:49
you have any burning questions for chip as you can hear he's pretty well he thinks pretty clearly he's a very strong
00:39:55
and and admirable leader I mean I've been very impressed so drop um your comments in the comment section below
00:40:02
and we'll do the best we'll do our best to address them and ask them up chip so
00:40:06
let's start out with the first question here um given the challenges we're
00:40:10
seeing in the retail industry now today with big retailers shutting down or going bankrupt how would you begin to
00:40:18
approach reshaping the industry what do you think needs to change and what I thought was pretty interesting just to
00:40:24
put build on this is you said you were moving from a brand to a retailer I mean that's that's a pretty interesting
00:40:29
statement the brand is still really important to be clear but um you know one of the Strategic choices we made 12
00:40:36
and a half years or yeah 12 and a half years ago right right after I became CEO we made three big strategic choices to
00:40:44
turn the company around to drive our profitable core to expand for more we were underdeveloped in women's we were
00:40:50
underdeveloped in tops there were lots of places within our portfolio where we had meaningful Room to Grow
00:40:55
International was underdeveloped so that was expand for more and the third Big Choice was to become a leading
00:41:01
worldclass Omni Channel retailer um and that was driven by walking through department stores mostly here in the US
00:41:11
but also around the world where I'd walk in I won't name names but you walk in
00:41:17
and see the Levis padn it looked like a nuclear bomb went off there and and like
00:41:22
I'm a brand guy that's our brand are you kidding me that's how you're treating us
00:41:27
right and in our own store we can control the consumer experience we can give them an experience we can give them
00:41:34
a differentiated assortment and we also get the benefit of having that onetoone relationship so DTC really became
00:41:42
strategic for us 12 and a half years ago and we've gone from 20% of revenues to
00:41:46
45% of revenues on a revenue base that's 40% bigger so it's been really Central
00:41:52
to the turnaround and I do think you know there's a big question what's the
00:41:57
the role of department stores in today's world right you know Macy's got an
00:42:00
activist in their stock Nordstrom's trying to go private again I mean right there is kind of we're not even talking
00:42:06
about JCP and ser we're not yeah and JC Penney had to go private um you know so
00:42:12
there there's real challenges in departments and and to be clear they're
00:42:16
all customers and we I I love them all and they they play a very important role from a distribution footprint standpoint
00:42:23
for us but um but the the being nibbled away at from all edges right you've got
00:42:30
Amazon and the you know the online retailers you've got the off pricers you've got the club stores and then
00:42:38
you've got vertical retail for a lot of the brands that they've got in their
00:42:42
stores and if you want to buy Levis what's the point of going to Le to Macy's if you can go to a Levi
00:42:48
store well the point is if you're buying Levis and 10 other things Macy's may be
00:42:53
a good stop right but so that I and I'm picking on Macy's that's unfair there is
00:42:59
kind of we're hopeful about Tony spring I I'm very I'm Tony's amazing and I'm
00:43:03
hopeful I'm hopeful for all of these customers and they do play an important
00:43:07
strategic role for the company and for we don't reach that many places with 275
00:43:13
stores in the United States we need that wholesale distribution and we need that
00:43:18
Chopper in wholesale so it is but it is clearly for us our strategic priority is
00:43:25
you know to continue to double down we had an investor day almost two years ago and we said we want to get it to 55% of
00:43:32
our Revenue so that is so let me ask you uh and then I'll get back to their questions I just want to build on this
00:43:37
for a second so you're you're believing in physical retail as well as Omni
00:43:41
Channel retail and what a lot of people are saying is that physical retail is changing to experiential um in fact Tony
00:43:49
Springs has said that he's going to bring retail theater into Macy's so do
00:43:54
you have a a a stance on that on what that means customer experience I yes I I and I agree with it um I do think there
00:44:02
has to be a differentiated reason for why a consumer would walk into a Levi store versus ordering it online from
00:44:07
Amazon it's a lot easier to just order it online from Amazon and have it show
00:44:10
up on your doorstep and it is about things that you can get done in the Levi store that you can't get done online uh
00:44:17
it's about a differentiated assortment but we've got tailor shops in almost all
00:44:21
of our Mainline doors where you can buy a trucker jacket and then you can personalize it you can customize so that
00:44:27
it is yours and and and that is a little bit of retail theater but it's also an
00:44:33
experience they'll also by the way bring in your old jeans and if you've got you
00:44:36
know holes or rips or you want to tailor it a little bit differently our tailor are amazing and they will do that you
00:44:42
know what that is to me that's the Genius Bar in apple it it's our version
00:44:47
of The Genius Bar and we've talked about it that way it is exactly that and and
00:44:51
it gives the consumer a reason to come in I mean there have been sororities that have held parties at the at the the
00:44:57
at the tailor shop I mean there are um but it it provides that theater and that that opportunity for personalization and
00:45:05
customization but beyond that you have to have the service I think the assortment needs to be somehow
00:45:11
differentiated as well so our Mainline stores T tend to have higher tier products than what you would find in
00:45:17
most wholesale customers um more tops you know a different mix of men's and women's so all of that you know help
00:45:25
brings people in the store it brings into the store but it also helps build the brand I mean it is a big brand
00:45:30
building thing for us too so a question that we got from our audience is how has
00:45:35
Levi started to leverage emerging Technologies such as AI virtual reality augmented reality yeah and um and I
00:45:43
would say we jumped on the AI data science stuff before gen AI um uh uh pretty early and um we've we've had hits
00:45:56
and misses I guess is what I would say we built a pretty decent sized organization over a relatively short
00:46:02
period of time um and have had some successes and in using um AI in particular for um assortment planning uh
00:46:12
uh uh demand and Supply matching things like that um a lot of back office use as
00:46:18
well and using bots in back office to kind of speed the processing of a lot of transactional type data um the Gen AI
00:46:27
stuff we've we've had multiple experiments going on um some have worked some haven't it's I I would say it's
00:46:35
still early days um we have we have made Investments during my time uh some of which I wish I could kind of take back
00:46:45
honestly because I think we got I think we got you know we fell in love with the
00:46:49
idea faster than you know and again my middle name is discipline and we were a little bit undisciplined I think in
00:46:56
going after chasing a lot of the potential Big Ideas here we invested a lot in trying to completely automate our
00:47:05
supply planning and and I would say that was not successful and we spent a lot of
00:47:10
money on it and um uh so instead of testing small and kind of scaling as we should have done uh we we got we fell in
00:47:20
love with the idea faster than the idea proved itself interesting and and we wound up you know making some mistakes
00:47:26
along Way live and learn um I do think you know if if you're if you're running a business and
00:47:33
you're not experimenting with this stuff and getting experience right you know
00:47:37
you're missing the boat on something because this is this is clearly where the puck is going and and I think the
00:47:43
real challenge is where do you begin testing it and getting experience with it and is it with consumer facing
00:47:51
activities supply chain related activities marketing related you know a lot of companies are using using it for
00:47:57
media and media planning and things like that and I I think you have to be really
00:48:01
really thoughtful about where and how you get started we had we got a few questions that are kind of pedestrian
00:48:08
I'll say but it's kind of interesting one of them came in is like what's the
00:48:12
right way to wash jeans oh that's that's the reason is because I'm going to my
00:48:18
grave I said at a sustainability conference it was one of the first conferences I did this was probably like
00:48:23
2012 or 23 and denim heads back to Denim heads they will tell you never put a pair of
00:48:31
jeans in the washing machine and we did a life cycle analysis of a pair of jeans and jeans consume a
00:48:38
lot of water 50% of the water that it consumes are in your washing machine and mine um and we here in the United States
00:48:48
tend to wash our jeans almost every single time we wear them right which is really wrong and we wash them in the
00:48:54
washing machine which is really wrong and so I famously said and and this I still get on my news feed it gets picked
00:49:02
up like every week every week I was misquoted what I what I said was you you don't need to wash your jeans in in a
00:49:13
washing machine um I said these what I actually said was these genes have never seen the inside of a washing machine the
00:49:21
headline the next day was Levi CEO never washes his jeans but seriously the way I wash my
00:49:28
jeans and this is also you know found its way around the world I I either hand you know kind of spot clean them if I
00:49:35
spill some spaghetti sauce or something I I'll spot clean them and if they get
00:49:40
really really gross I'll wash them the way I did when I used to backpack around
00:49:45
Europe which is hop in the shower oh you wear them hop in the shower soap them down rinse them off take them out take
00:49:53
them off now now the headline is going to be you take show goes into shower fully dressed trust me trust me there is
00:50:00
a YouTube video on this there is a YouTube video on this uh somebody some reporter tested it and and
00:50:09
actually that but all seriousness you know products made out of cotton um some some might have some stretch and have a
00:50:17
little bit of polyester or something but the fibers in Cotton get destroyed in a
00:50:21
washing machine and so if you want to really especially especially if you buy quality denim like really good quality
00:50:28
denim you just don't want to throw them in a washing machine you're going to
00:50:31
destroy them much faster than they would last otherwise if really took care of them and by the way it's better for
00:50:37
planet Earth yeah right who knew this is going to be our best question really cap I told you I was a
00:50:47
Storyteller well I have one more question and then we're gonna have to end this has been just amazing but this
00:50:53
is I'm curious that a lot of things we'll teach this is my question question
00:50:56
but a lot of things we'll teach in marketing is new marketing is not about customer acquisition getting everybody
00:51:01
on the planet to buy a new pair of jeans but it's to go deeper into your customer
00:51:06
base and send them more which sell them more which suggests that you move off of
00:51:11
jeans into other kinds of product categories or rather Services you cross sell and you build out your portfolio
00:51:17
that way do you have a feeling about that as a philosophy yeah well last time I checked we don't have 100% market
00:51:23
share so the first opportunity that we've got is to continue to build market
00:51:27
share and um you know I do think we live in a world where there is overc consumption and I think that is going to
00:51:33
change I think the sustainability thing and young consumers being really concerned about planet Earth and they
00:51:40
know when they buy something from Fast fashion and wear it three times and throw it in the in the garbage it winds
00:51:46
up in the landfill and this is not good for planet Earth I think consumers are going to buy fewer things that are more
00:51:51
versatile that are better quality that are going to last longer if that plays right to our sweets spot that's what
00:51:58
we're all about quality never goes out of style and um so I do think over time
00:52:04
you know our aspiration and Michelle is taking this to the next level her ambition is to drive this brand to be a
00:52:11
denim Lifestyle brand and that's a pretty big house to live under we got to get it right you know first on men's and
00:52:18
women's bottoms then men's and women's tops but where it goes from there um you
00:52:22
know remain remains but thinking about other revenue streams is really really important um and in today's world you
00:52:29
know we're we're testing uh Levis secondhand. comom where people can buy
00:52:34
secondhand Levis wow so um you know all of these could be yeah it's a science
00:52:39
project right now it's really really small but it could be you know another Revenue stream down the road for us okay
00:52:45
we got one last question that we got to hit because people are really interested
00:52:48
in this can you talk about vintage and resale with regard to Levis there are a lot of people who are now into thrifting
00:52:56
and second hand what's your take on I have no data to back this up but we're
00:53:00
the number one brand in thrift stores because people love the hunt and and and vintage is something I've got a
00:53:07
15-year-old daughter and she's really into it and um and vintage is something
00:53:12
that authenticates the value of this brand oh interesting think about it yeah you'll pay $250 for a 25-year-old
00:53:20
trucker jacket that you could buy brand new for $150 you'll pay a premium for
00:53:27
something that's 25 years old it says the value of this brand and so um we are
00:53:33
really big in th stores and that's why we started up this secondhand um online
00:53:38
business but it it also it does authenticate the power of this brand and the fact that people want to hunt for
00:53:46
something that is 20 or 25 years old that there's added value in that yeah yeah well that that's incredible yeah
00:53:54
you got one more question or well I mean it's a sociological IAL exercise it's
00:53:57
it's your your point chip about the brand being so nostalgically powerful and iconic it's just one of these things
00:54:03
in human nature that says you know I want to seek out those things that that have this sort of value that's
00:54:08
associated with it and you're willing to hunt I like the experience piece right
00:54:12
because sociological right I mean exactly exactly very very cool well that brings us to the end of today's LIVE
00:54:19
edition of marketing matters thank you so much for being here chip it's really
00:54:23
been inspirational it's been so much fun thanks a lot thank you we'd also like to
00:54:28
thank our producers Deion Simkins Dana cash Aaron Tran and our knowledge at Wharton team and we thank you to
00:54:34
everyone who tuned in to contribute to this live engaging conversation be sure to follow us on LinkedIn And subscribe
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