Mktg - Levi's India Plans

Levi Strauss plans to vacate the middle of the price spectrum and double spending on marketing, as it tries to fend off growing competition in a slowing retail market, head of the denim giant’s Indian arm said.

The Levi’s brand will be re-engineered and see value additions to make it more fashionable and pricier to boost it into the premium segment while Levi Strauss Signature, its value offering, will see a cut in prices, managing director Shumone Jaya Chatterjee said. Levi, he remarked, is reacting aggressively to a slowdown by spending more instead of cutting costs.

“Market leaders like Levi’s have the ability to shift the demand curve through experience and image-building. While those like Signature, that targets the standard value segment, compete by increasing scale and broadening the distribution channel, it is the mid-priced brands—which can’t do either—that get squeezed out of the market.”

The Levi’s brand will see a price increase of about 15%—prices will go up from Rs 2,200 to Rs 2,400-2, 500, on average—while Levi Strauss Signature will cost some 10% less, starting at Rs 900 instead of Rs 1,000. The company last increased prices in the second half of 2007. “In the past few months, total input costs on products have gone up by 10-11% due to high cotton prices, among other factors,” Mr Chatterjee said.

The organised denim market in India is estimated at 20-million units per annum, of which the value segment makes up 10-million units and the mid-priced and premium segments the rest. The launch of new products and higher marketing spends are also on the agenda as Levi adapts to the adverse market conditions. In the next six months, the company will roll out its high-fashion, high-end brand Levi Rivet nationally. Also waiting in the wings are women’s innerwear and Levi’s Kids. Spending on advertisements will double by the year-end as the image-building drive gains momentum and the first Levi’s campaign for men will be launched in October, with the company announcing a brand ambassador.

“While in the first half of the year television advertising accounted for 20% of the marketing budget, it should go up to 40% by the year-end since by then Levi’s will not be tied down by retail expansion. The increase in ad spends is also because we are stronger in both the segments now and consider it a must to advertise during a slowdown.” Besides online advertising, the company will focus on television to target children for their upcoming kidswear brand.

Furthermore, the retail footprint is being expanded, with the number of Levi stores going up from 175 to 215, Dockers stores from and 38 to 50. The super-premium Rivet will also be taken national in the next six months. In two years, the company has launched just one Rivet store in Bangalore, but now, with several luxury malls coming up, it says it has finally found the right addresses for these stores. A dozen Rivet stores are due to be opened up in five cities in the next six months