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Not By Jeans Alone The Story of LevisThe Beginnings of Levi Strauss The discovery of gold at Sutter's Mill in 1848 set off a flood of immigrants to California. Before the precious metal was unearthed, there were 14,000 citizens living in the state. Within four years, a state census found over 223,856 new residents within its borders (Paul, p. 25). Of that increase, 68 percent were American and 32 percent were either from Latin America or Eastern Europe.

Gardner Boulmay, a student at Babson College and editor of the Babson Free Press, prepared this case with the assistance of David Wylie, Director of Case Development, under the supervision of ProfessorLarry Moss, Babson College, as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright by Gardner Boulmay and Babson College 1997

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One of those Eastern European immigrants was a Bavarian Jew by the name of Oscar Levi Strauss. Strauss, unlike his fellow immigrants, had already spent some time in America. He came to New York in 1847 to join his two half-brothers' dry goods store. While selling everything from table clothes to sewing needles, Strauss was intoxicated with news of the California Gold Rush. He set sail for San Francisco, the self-proclaimed El Dorado of the West, in 1853. The journey took three months and upon his arrival, Strauss met his sister Fanny and brother-in-law David Stern. Stern had just established another dry goods store in town, and Strauss, realizing the opportunity to sell merchandise to gold-hungry fortune seekers, quickly joined the business as a partner. Both he and Stern worked feverishly to supply the thousands of would-be miners arriving every week. The store carried everything, from table linens to men's and women's undergarments. After a few years, Strauss' business savvy was obvious and the store grew into Levi Strauss & Company (LS&CO.), one of the largest wholesalers in San Francisco. Among the store's thousands of items, one product would become its most important: denim. Denim - So Much More Than Cotton The history of denim has become something of a legend in the fashion industry. Once used to fashion tents and wagon covers, denim has become the most popular material in the world for both men's and women's pants (Exhibit 1). The first denim was produced in the city of Nimes, France before 1700the term denim was derived from the French expression "serge de Nimes." At the time, denim was made from wool and, as folklore had it, was cut to make the sails for Genovese ships. The sailors, who appreciated the material's strength and comfort, began to make pantsnow called "genes"out of it. Shortly after 1700, denim producers began making the fabric from cotton rather than wool. The switch made the fabric stronger and that strength was its real commercial value. "The hard twist of the blue threads, and the density of threads per square inchas much as seventy warps and fifty fills per inchimparted strength to the fabric" (Cray, p. 32-33). The result was a nine ounce materiallater dubbed Double X denim by LS&CO.which, at the time, was the heaviest in the world. Denim's strength and softness was noted by many, but except for the Genovese sailors in the eighteenth century, no one ever considered making clothing from them. The first to do so Jacob W. Davis, a tailor from Reno, Nevada. The Inventor Born a Russian Jew named Jacob Youphes, Davis set out for the New World in 1854 at the age of twenty-three. After a month-long sea voyage, he arrived in San Francisco not as a fortune-seeker but a businessman. Unfortunately, all of Davis' business ventures failed rather quickly. After accumulating a mountain of debt, he settled down with his wife in Reno, Nevada working as a tailorhis trade by2

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apprenticeship. At the time, miners traveling around the area needed dry goods so Davis began making tents, wagon covers, and blankets using an off-white, denim-like cloth he ordered from LS&CO. The cloth, called duck at the time, was the same as denim except for its off-white color. The Invention Is Born In December 1870, the wife of a lumberjack came to Davis requesting a special pair of pants. The pants, she said, needed to be rugged enough to stand up to the harsh conditions her husbandand every other workingman in the Westencountered. He agreed noting that many workingmen claimed their pants did not wear well; "[t]eamsters, surveyors, miners and long complained that their garments cam apart, especially where the pockets were sewn to the pants" (Cray, p. 18). So, Davis decided to fashion the pants using the duck material he purchased from LS&CO. After the pants were sewn together, Davis began to wonder how he could prevent them from tearing at the pockets. "[T]he thought struck me to fasten the pockets withrivets," he said. He promptly sold the pants but "did not make a big thing of it" (Cray, p. 18-19). The pants worked extremely wellthanks to the rivets and materialand, on word of mouth alone, Davis was asked to make four more in January, ten more in February, and twelve more in March. During this period, he changed over to LS&CO.'s Double X blue denim because it was slightly more comfortable. Within eighteen months, he had sold over two hundred pairs of the pants and his line of credit with Levi Strauss & Co. had grown to $350 (Cray, p. 20). Patenting the Success Once Davis realized the simple act of placing copper rivets in the pockets made the pants perfect for workingmen, he knew they needed patent protection. At the time, however, he did not have the $68 patent fee to file the application. Rather than abandon the idea, Davis searched for a venture capitalist willing to put up the money. On July 2, 1872, Davis drafted a letter to Levi Strauss, someone he believed might be interested in the riveted pants. In the letter, Davis spelled out a proposal for a patent application and garment distribution partnership between himself and LS&CO. The following is an excerpt from the letter: "The secratt of them Pents is the Rivits that I put in those Pockets and I found the demand so large that I cannot make up fast enough. I charge for the Duck $3.00 and the Blue $2.50 a pear. My nabors are getting yealouse of these success and unless I secure it by Patent Papers it will soon become a general thing. Everybody will make them up and thare will be no more money in it. "Tharefore Gentleman, I wish to make you a Proposition that you should take out the Latters Patent in my name as I am the inventor of it, the expense of it will be about $68, all complit and for these $68 I will give you half the right to sell all such clothing Rivited according to the Patent, for all the Pacific States and Teroterious, the balince of the United States and half of the Pacific Coast I resarve for myself."

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After receiving the letter, Strauss inquired what his wholesaling operation's margins were on workingmen's clothes. Ordinarily, his company would charge $9 or $10 per dozen while Davisworking out of his homecould get $36 just by adding a few rivets to the pants (Cray, p. 21). Obviously, Strauss realized, the deal would be a winner since his company could recoup the $68 fee with just a few dozen sales. With that in mind, he and Davis signed a contract effectively binding entrepreneur and inventor. By August 8, 1872, Strauss' attorneys had drafted the patent papers and sent them to Washington. Federal examiners initially rejected the proposal because it infringed on existing patents that used rivets in Civil War combat boot construction. Finally, however, on May 20, 1873, after ten months and three amendments to the initial proposal, examiners granted patent number 139,121 to "Jacob W. Davis, of Reno, Nevada, Assignor to himself and Levi Strauss & Company, of San Francisco, California" for an "[i]mprovement in fastening pocket-openings" (Exhibit 2). The patent hinged on the use of rivets in clothinga real innovation in garment designand it gave LS&CO. the protection it needed to launch one of the most successful commercialization plans in business history: the Levi's 501. Demand Was Never an Issue Appropriating the value generated by the invention to LS&CO. was not difficult because the company combined its two distinct capabilities, innovationinventing the riveted clothing and reputationthe Levi's brand name (Kay, p. 101). As Harry Cobrin pointed out in his book The Men's Clothing Industry (1970), "Strauss' success was immediate, and 'Levi's' became the national name for his cut of pants" (p. 41). But Levi's were not just successful with miners, they became an icon for American culture; they "became as popular in the West as the lasso and Colt revolver" (Feldman, p. 64). This longterm popularity occurred because the company continued to manage its distinct capability of reputation; By doing so, LS&CO. was able to achieve a sustainable competitive advantage in the riveted clothing industry even after its patent had expired. The commercialization of Levi's could be divided into three phases. During the first phase, from 1870 until 1890, the company establishing its brand name by protecting its patent rights and standardizing its manufacturing inputs. From 1890the last year of patent protection for Davis and Straussuntil the early 1950's, LS&CO. defined its brand name. The third phase lasted from the mid-1950's through the late-1970's during which time the company adjusted its brand name better to reflect changing social values. Only with all three phases could the once small San Francisco dry goods store of LS&CO. sell two-and-a-half billion pairs of jeans becoming the largest clothing manufacturer in the world. Establishing the Brand - 1870 to 1890 Before 1873, riveted pants were not associated with any particular brand name as Davis only sold traveling laborers and, on two occasions, store owners. Although word spread quickly that Davis' invention was a marvelous improvement on current workman's pants, he made no effort to solicit any orders for fear of replication. For instance, immediately after he wrote Strauss

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proposing a business venture and joint patent application, he added the words "patent applied for" to his label to scare away would-be imitators (Cray, p. 22). After Davis received his patent and assigned it to himself and LS&CO., Strauss began in earnest to establish a reputable brand name. First, he asked Davis to close down his small, oneman production facility in Reno and moved to San Francisco to oversee the company's production system in April 1873. Next, after seeing preliminary sales boom, Strauss built a small manufacturing plant within his wholesaling store on 14-16 Battery Street (Exhibit 3). Within seven months, LS&CO. had produced over 21,000 pairs of jeans for $43,510 in revenue. Noticing the success of LS&CO., competitors began copying the riveted pants. In September 1873, A.B. Elfelt "began producing similar riveted clothing," and Kan Lun "started making riveted pants in a San Jose loft." LS&CO. responded quickly with lawsuits against both producers claiming its patent was infringed upon. The company won both cases and Elfelt and Lun were forced to close down (Cray, p. 24). Other cases of unlawful replication continued but the company aggressively protected its patent rights with successful lawsuits. With the infringing manufacturers forced to stop their manufacturing, LS&CO. was one step away from establishing a brand name. Before trying to increase brand awareness through trademarks and patents, Strauss knew his jeans needed to be more consistent in terms of quality and style. He therefore centralized his manufacturing plants, hired only well-trained female seamstresses, and standardized his raw material inputs. Ensuring all of the materials used to make the jeans were of the highest quality was an integral part of Strauss' plan. One of the steps taken to ensure this consistency occurred in December 1875 when Strauss purchased the Mission and Pacific Woolen Mills. The mills were the largest producers fabrics in the West at the time and eventually became the sole supplier of the lining used in the jeans. This move gave him the control he needed to ensure that a consistent flow of quality fabrics went into his manufacturing process. LS&CO. also established a long-term relationship with the New England mill of Amoskeag to assure a consistent supply of denim. This move allowed the shade of blue used to be standardized throughout the company's products (Kay, p. 31). The copper rivets used to strengthen the jeans and the yellow-orange thread used to sew the denim together (Downer, p. 128) also contributed to standardizing the product. Each rivet carried the letters "LS&CO. S.F." and was quickly trademarked, while the thread became a standard throughout the blue jeans industry. Once Strauss was sure that no one could use his invention by infringing on his patent and that his manufacturing system produced a uniform, high-quality product using skilled labor, he began to establish the brand name Levi's. He first assigned a lot number to each of the riveted products his company sold. 501 was assigned to "the top-of-the-line, linen sewn, cooper-riveted, nine ounce denim waist [jeans]" (Downey, p. 117). That lot number designation has stayed with the brand ever since (Cray, p. 37). Like the rivets used in production, LS&CO. also received a trademark for the 501 number.

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In 1875, LS&CO. began to use a "distinctive double arc of stitching" on the pockets of its jeans to differentiate them from other workingman's pants (Downey, p.141). The stitch has been one of the company's most famous and widely recognizable trademarks. As such, LS&CO. requested and received the oldest clothing trademark still in existence today (Downey, p. 143). Next, Strauss needed a wayin trademark formto convey to consumers the legendary strength of his jeans. In 1886, someone suggested the company affix a leather patch to the rear of the pants that carried the now famous "Two Horse Brand" drawing (Exhibits 4 and 5). The patch would forever identify the jeans as Levi's and associate them with strength and durability just as Strauss had intended. Again, to ensure protection from imitators, LS&CO. trademarked the patch and drawing. Throughout the first phase of Levi's commercialization, LS&CO. had been expanding its product line to include denim jackets, blouses, vests, coats, and jumpers. The expansion took place as consumers began to recognize the Levi's brand name as an established manufacturer of riveted denim garments. For example, in 1874 the company saw 70,500 pairs of jeans, vests, coats, jumpers, and blouses produced for $148,471. During the following two years, sales figures jumped 14 percent per year (Cray, p. 25). By 1878, over 100,000 garments were being sold and by 1880, LS&CO. had $2.4 million in sales revenue from its riveted denim products. Clearly, consumers were enjoying LS&CO.'s newly established brand name. Defining the Brand - 1890 to 1950 Exactly seventeen years after being issued, the patent giving LS&CO. the exclusive rights to riveted denim clothing expired and became public domain. Immediately, manufacturer after manufacturer began producing riveted jeans and other clothing. Having relied on consistent product quality and word-of-mouth among miners, farmer, and lumberjacks to promote its jeans, LS&CO. now had to promote actively the brand to consumers. The first advertisements ever placed by LS&CO. were targeted towards "working men in general." Since Strauss was a workingman for many years and knew the particular hardships they faced, he wanted to show his appreciation and respect for the hard-working men of the West. He also knew that this group of consumers needed the durability of the jeans. "These goods are specially adapted for the use of FARMERS, MECHANICS,MINERS, AND WORKING MEN in general. They are manufactured of the Best Material, and in a Superior Manner. A trial will convince everybody of this fact. USE NO OTHER, AND INQUIRE FOR THESE GOOD ONLY;" "For Men Who Toil;" "CUT FULL, HONOSTLY MADE;" "They're made out West to lead the best and suit their wearers well;"

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(See Exhibits 6 and 7 for examples of visual advertisements.) Slogans like the ones below perpetuated this image of Levi's as a quality brand of durable pants. "It's No Use, They Can't Be Ripped;" "WITH STRENGTH AND EASE, THEY ALWAYS PLEASE;" "Two Horse Overalls are sold to men of every trade, are guaranteed to be the best of any others made, there's honost worth and longest wear in every pair we sell;" These advertisements directly associated words like "quality, strength, and ruggedness" with Levi's. In addition, the trademarked "Two Horse Brand" logo continued to perpetuate the image of quality construction and indestructible material. Up to that point, Levi's were exclusively sold in the western states and territories of the United States. It was no surprise since the brand had been defined as the pants of the western workingman. However, after a devastating earthquake hit San Francisco in 1906, LS&CO. was given the opportunity to build a much larger manufacturing facility with the capability of producing enough riveted clothing to supply the entire nation. The company took it with the idea of seeing how far the newly defined brand name could sell. To start the expansion, LS&CO. contributed heavily to a 1915 San Francisco exposition celebrating the "city's phoenix-like rise from the devastation of the 1906 earthquake" (Downey, p. 225). There, retailers, producers, and buyers from around the world watched in amazement as the company's manufacturing plant was opened to the public. To promote sales, advertisers created "cunning brochures for visitors[which,] folded up, resembl[ing] a tiny pair of [jeans]" (Downey, p. 227). Further, the company unified its marketing efforts to promote its products' quality and durability through associations with cowboys and the western genre. The result of this production and marketing blitzbased on the more clearly defined Levi's brand namewas a tremendous surge in sales from 1916 to the late 1920's, when figures averaged $4 million per year. Although LS&CO. had clearly defined its brand name by saying who its customers were and why they liked its jeansbecause of their strength and quality constructionthe company still was not finished stressing its most valuable reputational attribute: quality construction. To do so, a series of trademarked "EVERY PAIR GUARANTEED" tags were placed on each pair of Levi's made starting in the 1940's. The tag proudly proclaimed: "This is a pair of Levi's, They are the original jeans, Every pair satisfaction guaranteed." To this day, the tag still reminds consumers of the company's undying belief in quality. With the company's consistent references to Levi's quality construction, ruggedness, strength, and durabilitycombined with overtones of the western work ethic embodied in the cowboythe stage was set for the brand to become the symbol of a social revolution.

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Adjusting the Brand - 1950 to 1980 If the past eighty years had seemed turbulent for LS&CO. with its founding, growth, devastation, and rebirth, the next thirty would seem violent. Between a generation fighting with its parents over rock and roll and a nation being torn apart by the Vietnam War, American societyas well as the worldwas being restructured in radical ways. Social movements became a matter of life and death at times, and political statements were made with everything; from clothing to hairstyles, the simplest things began to carry tremendous value. One of the most prominent features of this changing landscape was Levi's jeans. James Byron Dean, at age twenty-three, was an average actor in 1952 and an American legend just three years later. In two of the most successful movies of the decade, Dean starred in East of Eden and Rebel without a Cause. His character in both movies "seemed to embody the yearning and fears of American teen-agers. [He] seemed to articulate the frustration of youthful dreams by an adult world that measured success in terms of affluence" (Cray, p. 124-125). Not surprisingly, he did it all wearing Levi's 501 jeans. Following his death in a tragic highway accident in 1955, the young star became an immediate legend. Posters, magazines, and newspapers all carried photos of himand his Levi's. At the same time Dean was becoming a success, Marlon Brando burst into the spotlight playing a similar, rebellious character. In 1954, Brando starred in The Wild Ones. The movie was a success, and together Dean and Brando shaped an extremely attractive Levi's image for America's youth to grab hold of. This new, "anti-establishment" brand definition settled rather quickly on the company's riveted jeans (Cray, p. 126). It is important to note, however, that unlike what happened ten years later, this adjustment in the Levi's brand name was not provoked nor appreciated by the company. One LS&CO. executive said, "in the middle 1950's we [LS&CO.] got this flakthe American Institute of Men's and Boy's Wearstarted going after blue jeans" (Cray, p. 126). This shift in the brand's image was good for business though. Sales increased to $34 million a year by 1956 and the San Francisco company (Cray, 130). Still, jeans were considered "bargain-basement" garments which, although comfortable and durable, were still unfashionable. It would not be until the mid-1960s that they became a fashionable way to make a political statement. The event which sparked Levi's final brand image-shift from a rough, cheap pair of pants to a fashionable item of clothing occurred in October of 1964 at the University of California at Berkley. Jack Weinberg was arrested for soliciting funds for racial equality. Once whisked away to a police car, other students joined in pursuit and began a demonstration to prevent the arrest (Cray, p. 149). Socially, what the students demanded was a sense of individualism and personal freedom. Levi's, long a symbol of the individualism, strength, and ruggedness of the West as established by LS&CO., became their uniform. Another large wave of social unrest was sparked on college campuses by America's involvement in the Vietnam War. The issue did not just divide the United States, it came to divide many other Western countries. Students in Mexico, Holland, Sweden, and France all

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joined in similar protests, and there, like here, their symbol of solidarity was a pair of Levi's (Cray, p. 149). Like the first brand image adjustment in the 1950's, sales throughout the 1960's skyrocketed. In 1963, sales were $54 million; three years later, that figure had tripled to $152 million. However, contrary to the previous brand image shift, LS&CO. now latched onto and actively associated itself with it. For instance, the company began pumping thousands of dollars into radio advertising on popular college stations in an attempt to ensure cement its hold on jeans purchases. Further, LS&CO.'s Marketing Director hired famous 1960's bands such as Jefferson Airplane and Sopwith Camel to perform under the Levi's label. Finally, in 1966, Levi's launched its first ever television commercials targeting the energy of the youth during the period (Cray, p. 150). This intentional corporate change in marketing strategy was critical in terms of bringing Levi's into the fashion landscape. "Prior to that time, advertising was very straightforward, stressing utilitarian themes. Robinson [the Marketing Director for LS&CO. at the time]linked the company to the fun and excitement of the period" (Cray, p. 150). The result was two hundred million pairs of Levi's sold in 1967 (Schlager, p. 74). Since the final shift in the brand's image, LS&CO. has sold over one billion pairs of Levi's. Today, they are considered a versatile, rugged, and comfortable pair of pants which canand shouldbe worn by nearly everyone. The reason the brand is so appealing to consumers today is because Levi's have bee associated with a large number of American genres, everything from hard working miners, to social revolutionaries. Yet, the name Levi's has always been associated with one product attribute: quality. People know the pants only get more comfortable with age and can be worn forever. "You can wear them until they disintegrate," said a one time salesman of the brand (Boulmay, interview). Discussing the social impact of Levi's on American culture, Richard Martin, the Curator of The Costume Institute at The Metropolitan Museum of Art said: "Levi's jeans are more than the politics and sociology which have caused their extraordinary popularity. They embody the irreconcilable riddle of the modern world. They are both wonderfully ordinary and wondrously extraordinary; they are common and they are original and exceptional. They declare a body politic and they express one's individuality. Levi's jeans are the most satisfying and meaningful clothes of our time." Whether a symbol of our nation's birth, a testament to the hard work which made it great, or the political ideals expressed in our heritage, Levi's mean so much to so many. The world around, the word Levi's means America. The financial success of LS&CO. would have been impossible if the company had not pursued its three distinct phases of commercialization establishing, defining, and adjusting the brandto match the markets ever changing demands.

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Exhibit 1

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Exhibit 2

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Exhibit 3

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Exhibit 4

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Exhibit 5

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Exhibit 6

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Exhibit 7

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Bibliography Boulmay, Grant. Personal Interview. 22 March 1997. Cobrin, Harry. The Men's Clothing Industry: Colonial Through Modern Times. New York: Fairchild Publications, 1970. Cray, Ed. Levi's. Boston: Houghton Mifflin Company, 1978. Downey, Lynn. This Is a Pair of Levi's JeansThe Official History of the Levi's Brand. San Francisco: Levi Strauss & Co. Publishing, 1995. Feldman, Egal. Fit For Men: A Study of New York's Clothing Trade. Washington D.C.: Public Affairs Press, 1960. Knopf, Alfred. The Shirley Letters. New York: Borzor, 1949. Paul, Rodman. California Gold: The Beginning of Mining in the Far West. Cambridge: Harvard University Press, 1947. Schlager, Neil. How Products Are Made: Volume I. Detroit: Gale Research, 1994.

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