Levi’s prove an oldie is a money-spinning goodie
Other businesses could learn important lessons about endurance from a very old company that keeps getting stronger
Shares that soar in value on the first day of trading. A hot IPO that gets the stock market excited, and ambitious plans for expansion. Is it the latest whizzy app to list on the Nasdaq? Or a fintech unicorn raising a couple of billion in Berlin or London?
Not exactly. In fact, that is a description of the return to the market of Levi Strauss, a company that is 166 years old, and which makes mid-market practical blue trousers.
Amid the latest twists in the Brexit saga, the Fed’s decision to shelve interest rate rises for this year, and the latest terrible figures out of the eurozone, by far the most interesting thing to happen on the markets this week was the floatation of Levi’s.
After more than a century and a half, the company is going from strength to strength. There are important lessons in that for other businesses. Such as? Be robust, stick to what you know, and keep your roots in a particular place.
There are not many brands as strong as Levi’s in the world – but the few that endure can create value not just over decades but over centuries.
There was no shortage of excitement when shares in Levi Strauss started trading in New York on Thursday morning. The shares jumped more than 30% on their debut, valuing the company at $8.7bn as investors took a shine to the power of its brand, its plans for further expansion, and the strength of its position in the market.
As it happened, it was not the first time the company had listed its share. But then this is a business that has been around for a heck of a long time.
The original Levi Strauss was a Bavarian immigrant who moved to California and went into business in 1853 selling stuff to gold prospectors. One of his customers, Jacob Davis, had figured out a way of making work trousers last longer by placing metal rivets at key stress points. Levi’s hard-wearing jeans were patented by the two men, and the business was born.
It has witnessed plenty of ups and downs since then. One wave of post-war expansion led to a float in 1971, and its 501s were huge in the 1980s. But then it went into decline, was taken private again by the Haas family, descendants of the founder, then slowly revived to the point where it was relisted in 2019.
In lots of ways, Levi’s survival is a mystery. In the textbooks at Harvard Business School, they wouldn’t rate the business very highly. After all, it is not as if the product is terribly complicated, nor is there any shortage of competition. The barriers to entry are minimal, fashions change at lightning speed, it has no technology that can’t be easily copied, and it is stranded in the middle of the market, neither as cheap as the chain store alternatives or as prestigious as the latest designer brand. As my teenage daughter might put it, it’s all a bit meh.
Yet despite all that, the company powers forward. So what can other businesses learn from the enduring strength of Levi’s? Here are three good places to start.
First, be robust. Levi’s has had many setbacks, but it has managed to survive them all. From 1996 to 2010, its sales almost halved as fashions changed, and it missed out on the move to baggier, hip-hop jeans. It was one of the worst periods in its history, with factory closures and retrenchment.
But it didn’t sell out, or ditch its main products. It simply battened down the hatches and waited for the market to come back to it. And, of course, eventually it did.
Second, stick to what you know. Levi’s has diversified into tops, and some different kinds of trousers, and it also has its own retail outlets. But that is about it. There aren’t pizzas or hotels re-badged with the Levi’s brand.
By and large, it has stuck to the one thing it is good at – making practical, tough trousers – and relied on that simple, rugged product to carry it through.
Very few companies are good at more than one thing, and it is often better not to try.
Know your place
Third, keep in touch with your roots. Up until World War 2, Levi’s had virtually no sales east of the Mississippi. But in the 1950s, jeans turned into a global fashion, their popularity spread by western movies and rock ‘n roll. Through that, however, the company and its brand remained rooted in the American West.
One look at a pair, and you know what they are about. In fact, it doesn’t matter where the company happens to come from, brands with a strong sense of place, and confidence in their own authenticity, survive. Marketing committees can try to fake that, and sometimes succeed, but it works a lot better if it is real.
There are only a few brands as old as Levi’s out there. The Cambridge University Press dates back 1534, Twinings tea to 1706, Moet & Chandon to 1743 and Colgate to 1806. What they all have in common is incredible powers of endurance, and they get stronger with every decade that passes. They won’t do well every year, and they will suffer lots of setbacks. But the few that make it will generate a vast amount of wealth over a very long time.
– © Telegraph Media Group Limited