Chip Bergh | Consumer Obsession

Good afternoon everyone.

Thank you for joining us.

I’m Reed Romine, a Second Year Daytime MBA at Fuqua

and today I have the unique honor and privilege

of introducing Chip Bergh,

the President and CEO of Levi Strauss & Co.

(applause)

After graduating from Lafayete College

Chip served for four years as a US Army Officer.

Followed by a 28 year career at Procter & Gamble.

During his time at P&G, Chip’s leadership was vital

to the success of many iconic brands

including the creation of Swiffer,

and the turn around of Old Spice.

Chip also led the integration of Gillete in 2005,

and ran that division for over six years.

Chip joined Levi Strauss as CEO in 2011.

Since then Levi’s has experienced significant growth

and a financial turnaround.

Some of Levi’s biggest successes under Chip’s leadership

include revamping their women’s denim line,

expanding their direct-to-consumer sales via online

and company owned retail stores,

acquiring the naming rights to

the San Francisco 49ers football stadium,

and just last year, returning Levi’s to the public market.

As CEO, Chip has also served as a leader in raising

awareness for corporate sustainability,

gun safety and immigration reform.

Last Spring, Fortune Magazine recognized Chip as

one of the world’s greatest leaders.

We’re extremely fortunate to have Chip here with us today.

Please join me in extending

a warm Fuqua welcome to Chip Bergh.

(applause)

– Thank you.

It’s great to be here.

– Well, it’s wonderful to have you here

so, I’m going to jump in and I’m going to start with

a little bit of history here,

and then we’ll work up to the stint at Levi Strauss.

So, it was mentioned that you have a military background,

and that as I understand it,

you put yourself through college through the ROTC Program

and then entered in to the military for four years.

So, as you think about who you are today,

what did you bring from that experience

in the military that you think has helped

you as a leader in all the things you’ve done

subsequently in your career?

– Yeah that’s a great question.

Actually, this morning I had the privilege

of meeting Coach K, and I was on his podcast

and he also has military background.

He went to West Point.

I like to say I went to a real school.

But then he served five years,

I served four years in the Army

and we were talking before the podcast

just about how impactful that military career was.

And I have said many many times,

I don’t think I would be where I am today

if I hadn’t served our country for four years.

Part of it is this notion of service,

and serving your country,

and I served during the Cold War, it was 1979 to 1983.

Most of that time I lived in West Germany,

because the wall was still up and there was

still an East Germany.

And, my unit actually patrolled the border twice a year.

But, it formed who I am as a leader,

and many of the leadership characteristics and traits

that I still have today came from my days in the military.

A lot about servant leadership,

putting your people before you.

Never asking people to do something that you

yourself wouldn’t do yourself.

The whole notion of character and honor is just such

an important part of who I am and how I lead.

I am humble,

I don’t believe I’m the smartest light bulb in the room.

I know I’m not the smartest light bulb in this room.

– [Bill] Is it okay to claim that you’re humble?

– Okay, fair, fair.

(audience laughs)

But, what you see is what you get with me

and that’s part of how I lead.

So, it had a very significant impact

and I also don’t think I would have wound up at P&G

if I hadn’t spent four years in the military.

So it’s a big part of who I am.

I have two older boys and when both of them

went to college I tried to convince them

to enroll in ROTC.

They would have nothing to do with it.

That’s okay, they would have nothing to do with

wearing Levi’s back then either,

we can talk about that later.

– Okay.

So you mentioned then you have

the opportunity to go to P&G

and as you look at P&G over the years

it’s been a breeding ground for many great leaders

who’ve gone on to do wonderful things.

And so, as you think about your experience at P&G,

what do you bring from that experience

that you think has really helped you

in your current stint with Levi Strauss?

– Yeah, I’d like to say,

when you get to be our age, because we’re both

about the same age kind of early 60’s.

When you get to be our age and you look back on your career

I am just an aggregation of all the different

experiences that I have had.

I’ve worked on big brands, small brands, local brands,

global brands, growing brands, declining brands,

profitable brands, unprofitable brands,

number one brands, number three brands.

I mean, I’ve really worked on a huge range

of different types of brands.

And those different experiences have made me

kind of who I am today.

I started in brand management, which got renamed marketing,

which I think was a mistake,

but I started in brand management and worked my way

through the ranks into jeanral management.

I still remember you know, I joined from the military.

Most of my peer group, most of the people

in my class if you will,

were graduates from great business schools.

I did not go to business school.

My business school was P&G.

And I was entering from the Army,

so it was very very intimidating

and I still remember the day I started,

thinking to myself, if I can just make it to brand manager,

I’m going to be okay.

And that’s like, typically about four years.

I made it to brand manager in three and a half years.

I had a great career.

As a marketer, as a brand guy, which is what I really am.

I am a brand guy.

I am a marketer at heart.

I learned all about the importance of really just

studying the consumer and understanding consumer behavior

and how to motivate and persuade a consumer

to want to buy your brand.

And that has been a big part of what I’ve done

through my career and it was something that gave

me confidence as I went into this new job,

I figured if we could fix the Levi’s brand

we could fix the company.

But, you know, I learned about being disciplined,

financial discipline and how to run a business

in a financially disciplined way.

How to take calculated risks.

How to build a team.

It’s such an important thing that I learned

and you know, Procter was such a magnet for great talent

back in the day, especially when I was a brand manager

or marketing director.

Bringing in this great talent every single year

and trying to coach and guide and develop people

and that’s probably one of the things that has stayed

with me more than anything.

At the end of the day, the higher you go

in an organization, the less real work you do.

My job is about capital allocation,

people allocation, resource allocation at this point.

And about inspiring and coaching,

motivating an organization.

That was a big thing that I learned at P&G too.

– And the biggest thing you felt like you had to change

as you shifted from P&G to Levi’s?

– Well, nothing prepares you to be a CEO

than being a CEO.

You know I thought I was ready, and I thought

I would have it all figured out on day one

and I’ve made mistakes along the way.

And you learn as you go, but…

The track record of people going from packaged goods

into apparel at the CEO level is really bad actually.

It’s pretty poor.

I think the batting average is close to zero.

So I knew that,

I know that I had to go into it with an appreciation

and understanding that there was a lot that I was

going to have to learn.

Actually, the apparel business is more like selling fruit

than it is packaged goods because every season

half of our product line goes away,

and a new half comes in.

It ages.

Because of fashion and fashion trends.

And so, I had to learn about the complexity of the business.

The apparel business is way more complex

than the Gillette business.

And, or any of that packaged good products that I’d

had in my career background.

But one thing was the same, and that was the consumer.

This notion of being consumer-obsessed and really

trying to understand the consumer and what will

I figured if we could unlock that,

we could unlock the path to success on Levi’s.

But I knew going into the job that the odds were

pretty much stacked against me.

And I was determined to demonstrate that with the right

kind of nose and sniffing the right direction

that we could get this business turned around.

– Okay, so, that’s a good segue to the reality that

you faced when you stepped in the door,

which was a business in decline which,

in some ways was a tragedy because the Levi’s brand,

maybe people in this room don’t know it,

you may be part of the lost jeanration,

in fact, could I just see how many of you

own a pair of Levi’s jeans?

– Oh my!

– Oh, all right!

– Awesome!

– Okay. We’re off to a good start here.

– Made my day!

That was like an 80% market share I think!

(audience laughs)

– That is excellent.

So, you should understand then, that the Levi’s brand

is truly one of the most iconic brands in American history.

And so, but you entered in when the brand was in disrepair.

And, so I’m curious, what do you think the brand stood for

at the moment you took over, and what do you think it

stands for now, given a history where it stood for

things like freedom, independence, sometimes rebellion.

So what is the brand?

– So I will come back to that, but let me,

I want to back up one step and talk a little bit about

why I decided to join, because the fact that the business

was in decline and a bit of a mess,

was part of the reason that I was very attracted to it.

So, 28 years at P&G, I was running the Gillette business

which was P&G’s second biggest, most profitable business.

We’d acquired Gillette in 2005, I was the Procter guy

dropped in to do it.

$57 billion acquisition, still today the largest

acquisition in packaged goods.

And, when I got the call for this opportunity at Levi’s,

I started doing my homework,

and Levi’s peaked in the mid 90’s,

1996 at 7.1 billion dollars in sales.

In 1996 we were bigger than Nike.

They were 6 and a half billion.

We went from 7.1 billion dollars in sales

to 4.1 billion dollars in sales in five years.

Wrong direction right?

And, massive shareholder value destruction,

and then for the next decade it just kind of bumped along.

So, I was not quite mid 50’s, early 50’s at the time.

I was pretty sure I wasn’t going to be CEO of P&G,

because Bob McDonald was the CEO,

he was four years older than me.

If he had a good run then I’d be too old to be the next CEO.

So, when I started doing the homework on Levi’s,

this looked like such an opportunity.

You get to, when you get to your fifties,

you start thinking about “What’s my legacy going to be?”

“What’s the impact?

“What’s the story of my career, of my life?”

And, I grew up in Levi’s.

And I like to say everybody has a Levi’s story.

I remember, I grew up outside of New York City,

I remember asking my Mom before I started seventh grade

to drive me about three towns over

so that I could buy a pair of Levi’s for seventh grade.

Because I wasn’t going to be that kid not showing up in

seventh grade without wearing a pair of Levi’s.

When I left for college I brought

three pairs of jeans with me,

they were all Levi’s, and two pairs of corduroys.

That’s it.

And, I like to say, I missed Woodstock.

I don’t know about you, did you miss Woodstock?

(Bill laughs)

I missed Woodstock.

I was a little bit too young for Woodstock,

but we liked to say, if you were at Woodstock,

you were wearing Levi’s unless you were naked.

(audience laughs)

And, you know, so when the Berlin Wall came down,

it was Levi’s.

And so, as I thought about,

and then I started talking to friends,

and say “hey, do you wear Levi’s?”

My friends would say, “God, I grew up in Levi’s!”

Some remember your first date you know,

first job, I wore my Levi’s

and then I’d ask, when was the last time you bought

a pair of Levi’s and you’d get this blank stare

and geez, I dunno maybe its been 20 years or something.

So, and I also had two, I have two boys that are men really.

They’re 36 and 32 now, but back then they were kind of

college age and just out of college.

And they never owned a pair of Levi’s

when they were teenagers.

It was not even in their consideration set.

They wore Gap, American Eagle, 7 For All Mankind,

I mean, but, never wore a pair of Levi’s.

So it was pretty clear to me that here was one of

America’s greatest brands, one of the most iconic brands

arguably in the world that had just completely lost it’s way

and that is what attracted me.

The opportunity to leave a legacy.

To turn around this amazing icon,

make that brand great, and turn the company around.

And Levi’s was at the time, and still is about 85%

of the company’s business,

so if we could get Levi’s back on track

the company would turn around.

And that, fundamentally, is what we did.

And it was all about really understanding

how to put the brand back at the center of culture.

This brand,

so I’ll tell you, can I tell you my Levi’s story?

Aside from my Mom, taking me a couple towns over.

When I was in the army, 21 years old,

very first vacation, military leave I ever took,

I went on a Eurail Pass trip through the Nordics.

So, Denmark, Sweden, Norway, Finland.

And staying in youth hostels and camping.

And, how many of you have done that before?

The way you do that, you’ve got the backpack

you get to the youth hostel to wash your clothes,

you hop in the shower with the bar soap,

wash yourself down, rinse everything out,

hang it up to dry.

So I went into this youth hostel bathroom,

took the wallet out of my pants,

put it on the windowsill,

jumped in the shower, washed myself down,

rinsed the jeans out, hung the jeans up,

hung the tee shirt up.

I went to bed, and I woke up in the morning

and I was like …

I left my wallet in the bathroom.

I ran into the bathroom,

the wallet was there, the Levi’s were gone.

(audience laughs)

absolutely true story.

True story.

That is the kind of brand that this brand was

back in the 1980’s.

And, so, what we managed to do over the last

five or six years is make the brand like that again.

Not an easy thing to do.

I was telling you earlier, when I joined the company,

our average male consumer in the US was 47 years old.

They were old guys like us.

No young people were wearing Levi’s.

And so, part of the trick has been to attract

the young consumer without losing old guys like us.

And we’ve managed to do that, and that is a very hard thing

to do from a marketing standpoint.

I also did it at Old Spice too, separate story.

But, we’ve managed to do it by putting the brand back

at the center of culture and some of the things,

you know, Levi’s Stadium was part of that,

our advertising campaign which is all about Live in Levi’s,

which really plays to this idea that,

you wear other jeans, or you might own other jeans,

but you live in Levi’s.

There are stories in your Levi’s from your life.

And that basically has been the idea.

And then we’ve done,

the team has done an amazing job activating around that.

– So when you talk about the team, one of the things

that you discovered when you came into the job

was that maybe the team wasn’t up to the task,

the team at hand.

– Yup

– As I understand it, that, of your eleven direct reports

after 18 months you only had two,

two of those direct reports,

and the other people had moved on.

This is a challenge, as you have to revitalize a business

where the people aren’t always up to that task.

So how, how do you tackle that kind of change?

I mean, what, what allows you to move forward

in terms of your responsibility to this iconic

company relative to your responsibility to these

people that are working for you?

– Yeah, so, it’s a really good question.

When I joined, I expected or knew that I was probably

going to have to let a couple of people go.

You know the old saying,

the team that got us here is probably not

going to be the team that gets us there.

And if you want to change the culture,

the fastest way to change the culture,

is to change the people.

And when I came in, it was clear a couple of people

needed to go and I dealt with that pretty quickly.

And then some people self selected out.

I intentionally raised the bar, I set very high expectations

I’m a pretty fair boss I think, you can ask Kelly.

But I’m also, I set expectations and am pretty demanding.

I had a huge sense of urgency that we needed to

get on with this task of fixing the company

and getting the company back in shape.

And, I was actually really blessed.

I was able to build a team with people,

some of the folks on my team have deep apparel experience,

some came from outside of apparel.

We really had a good blend of different experiences,

people who had a lot of experience globally as well.

And the team kind of gelled and came together

and at the end of the day it’s really the team that has

delivered the results.

But, two of them have left recently, both for CEO jobs.

And I think that’s a huge thing.

So one left a little bit more than a year ago,

and he’s GEO of Gibson Guitars,

and the other one is leaving kind of right now as we speak

and he’s going back to South Africa,

which is where he’s from.

He hasn’t lived in South Africa in more than 20 years.

He’s lived all over the world,

and he’s been with us for about seven years.

He’s going back to be CEO of Woolworths,

which is not the Woolworths here in the US,

it’s Woolworths in South Africa,

it’s the largest retail chain in South Africa.

So, it’s actually, it’s kind of neat to see some folks

on my team move onto bigger and better responsibilities.

– So in that transition, what was the hardest part about

building trust with the team that you were developing,

and creating this sense of common purpose and urgency around

the task at hand, and what did you do to make that happen?

– Yeah, there were, it wasn’t really linear.

There were parallel streams of work going on

those first nine months, or six to nine months.

So one was on the people front,

one was on the strategy, and one was kind of,

well to get to the strategy,

diagnosing what are our real issues?

So, on the people front, I dealt with the people that

clearly weren’t going to be players long term

quickly and early on and brought new people in.

Other people had a little bit more runway

to prove themselves or else,

and then on diagnosing, you know we really need to get

a strategy in place, one of the first things I did

when I got there was, I sent six questions out

to the top 60 leaders in the company,

and asked them “what three things do you think must change?”

“What things do we have to keep?”

“What’s the one thing you hope I will do?”

“What’s the one thing you’re afraid I might do?”

“What advice do you have for me?”

and I don’t remember the sixth one.

But I sent it out to the top 60 people in the company

and then I sat down with each one of them for an hour

and I thought it would take awhile before the picture

became clear, but the feedback was, first of all,

I don’t think anybody had ever asked them the question,

but then, secondly, just the opportunity for them to

share with me directly what they thought was wrong

with the company, and where they thought we had the biggest

opportunities was just this,

you know, it opened them up

and I thought it was going to take

40 or 50 of these interviews

for the picture to be clear.

It was clear after about 12 interviews,

what was core for us, what needed to change,

and how to get on with it quickly.

So that was a piece of it, and then we did a lot of just

breaking the company apart analytically,

trying to understand, you know,

where do we make money?

Where are we burning money?

Where do we have high shares?

Where do we have low shares?

Where are we growing?

Where are we declining?

And I just kept slicing and dicing the business

to understand where we had opportunities

and out of those pieces of work came our strategy

which we rolled out about nine months after I got there

and we’re still executing against the same key

strategic choices that we put in place eight years ago.

– So I’m going to shift to a conversation more about values

and some of the things that you’ve done to live up

to the values that you have,

the values that the company has,

but I’m curious about how you pick the things

that you choose to take a public stand on.

So for example, you led an effort to try to bring

the CEO community together to send a message on the need

for gun safety when we weren’t seeing any kind of

legislative action on this front,

and so you could understand if the CEO of Dicks,

who was involved, was in this fight,

because it’s his business.

Or the CEO of Walmart, because it’s their business.

But, what does gun safety have to do with Levi Strauss?

Why did you pick that area to make a difference?

– So, first thing I would say is, it is one of the most

important jobs of the office of CEO at Levi Strauss,

this is not about me, this is about the role of the CEO

at this company.

We have, we’ve been around for 167 years just about,

and we have a long history of giving back

and making a difference in society.

The very first year that Levi Strauss, the man himself,

made money, he donated a percentage of his profits to

a local orphanage and without boring you all

and an entire history lesson, but when we had factories here

in the South and Southeast, we desegregated our factories

10 years before it was the law of the land.

We were one of the very first companies to offer healthcare

benefits to same sex partners back in the late 80’s.

We were very early, you know the AIDS epidemic started

in San Francisco, we’re based in San Francisco,

when that epidemic started the CEO stood in the lobby

handing out pamphlets to our employees

about the AIDS epidemic.

And then we boosted our healthcare benefits for anyone

who was diagnosed with AIDS.

We pulled funding from the Boy Scouts when they banned

gay troop leaders back in the 90’s.

And got over 100,000 letters and emails saying,

“I’m never buying Levi’s again”,

and the company did not waiver.

So it is part of who we are.

And the values of the company is part of what

attracted me to the company,

they resonate with me,

they’re aligned with my personal values.

We, our headquarters is in one of the toughest labor markets

in the country, if not the world, in San Francisco.

If you’re in HR, Finance, Marketing, Public Relations,

Communications, I could go down every functional list, IT,

if you’re in one of those functions,

your skill set’s fungible.

With all of Silicon Valley.

Unless you’re a designer or maybe a merchant

where your skills are very very apparel specific,

you can go anywhere.

And it’s a buyers market if you will.

And, so, part of what allows us to attract and retain

great talent is the values of our company.

So, it is who we are.

So we have, over the last couple of years

we have been very vocal about immigration

and immigration rights.

Levi Strauss was an immigrant himself.

This company, this country has benefited from immigration

for centuries and banning or making it difficult for

people to immigrate to this country is going to

result in an economic impact to the country,

and will make us ultimately uncompetitive over time.

And so we believe very strongly in it, we need it,

from a labor standpoint.

So we took a position on that, literally a week after

Trump became President, when he put the

immigration ban in place.

We’ve signed amicus briefs,

we’ve been very very active there.

Gun violence prevention, we got involved in that

in part because it is one of the biggest

social issues of our day and it really impacts young people.

I’ve got my grown boys,

but I also have an 11-year-old daughter

who is in fifth grade, she goes to school in San Francisco.

She practices lockdown drills more than they

practice earthquake drills.

For fifth grade parents night, she had to write something

to leave to her parents on her desk,

and it was a template kind of format that they had to follow

she had to talk about the three things

that she worries about most.

Number one, climate change

Number two, being shot and killed at school

and not being able to say goodbye to her parents.

Number three, the earth being hit by an asteroid.

(audience laughs)

I don’t know where that one came from.

But, it does go to show you,

and if you talk to any Gen Z’ers,

and there might be some even in the room.

If you talk to any Gen Z’ers, they believe my jeanration,

our jeanration, has left them with a lot of problems.

Whether it’s climate change, sustainability,

you know, global warning, or gun violence

here in this country, and I feel that we have

an obligation to do something about it.

And Congress has been deadlocked on this issue.

The vast majority of Americans believe that there should be

stricter laws in place to mitigate or reduce the

risk of mass violence.

And so, we sent a letter to the House of Representatives

in January encouraging them to pass H.R.8,

which was universal background checks,

and that passed.

In a bipartisan way, it was not a Republican/Democrat thing,

it had a vast overwhelming amount of support.

Went over to the Senate and the Senate version of that bill

was sitting on Mitch McConnell’s desk,

coming back from the break after the summer,

it’s still unfortunately sitting there.

But we penned a letter to Senator McConnell

and everybody else in the Senate saying

you’ve got to pass this legislation.

We went from four signatures in the letter in January

to 140 signatures in the letter in September.

We actually kept the letter alive online

and had over 240 signatures.

So we were at the tip of the spear,

you know, I stuck my neck out,

I had death threats, I had unmarked police in front

of my house for a couple of weeks.

I stuck my neck out, we stuck our neck out,

we don’t have a dog in the hunt, but we are

an iconic American brand and we believe

when we lend our voice to something,

when we lead, others follow.

And I really do believe that this is one of the

biggest issues of the day in this country.

Something needs to be done about it.

Congress isn’t doing anything about it,

so business leaders have to step in

and lend their voice to this to make our communities,

our schools, our places of worship, safe again.

That’s really what it’s all about.

– So, in addition to being consistent with

the companies values and the tradition of

living up to those values,

you’ve made the business case which is,

you’re not going to be able to track the talent

unless the people feel like they’d like to work

for your company.

In having said that, what about on the customer front,

so do you pay a price?

You know we have a faculty member here who has a theory

that all brands are going to evolve to either be

blue brands or red brands,

on the employment front you’re operating in a blue state,

so, but are you becoming a “blue brand” from a

consumer point of view?

– Well, there was an article in the Wall Street Journal

that made that allegation.

I like to think we are one of the most democratic brands

in the country and in the world.

We have a huge market share here in the US

and I don’t think it skews left or right,

to be honest with you.

I don’t, I’ve got some data on that,

but we want this brand to be accessible.

Our stand on gun violence is not trying,

we’re not trying to repeal the Second Amendment.

I mean I, I’ve served our country.

I served in the military.

I took an oath to

defend the Constitution of the United States.

I believe in the Constitution, and I believe in the

freedoms here in the US.

So, it’s not about that.

It’s about making our communities, our schools,

our places of worship, places where people congregate

safe again.

Actually, after we took this stand

our business continued to grow.

Globally and here in the US.

So, there’s no evidence of it

negatively impacting our business,

I do get hate mail, and I get mail from consumers saying

“I’m out, I’m not buying your brand ever again.”

It happens.

But, we’re also getting people coming to the brand

for the first time because of our stand.

At the end of the day, I like to say

history is going to judge whether this was

the right call or the wrong call.

When the company took the stand on the Boy Scouts,

like I said, they got 130,000 pieces of mail

saying I’m out, I’m not buying your stuff anymore.

We look back at that now with the benefit of history

between us and the event and say,

that was a no brainer.

Look at the Boy Scouts now,

they’ve dropped the word boy.

They’ve embraced gay troop leaders,

and it looks like history has proven our position

to be right and I am willing to be judged by history

five years, 10 years, 15 years down the road.

And I think it’s going to prove that this stand

was the right thing to do.

– So, it clearly takes courage, given not everyone is going

to agree with you and they may be quite vocal

or quite vicious in how they express those views.

So you led this effort around trying to get the business

community to encourage Congress

to take action on gun violence.

There were people who chose not to sign.

And so, for example, allegedly,

Mark Zuckerberg really agreed with what was being proposed

in the letter but didn’t want to put Facebook more

in the spotlight and therefore attract trouble.

Is that fair for him to take that position?

– I think every CEO in every company has to

really assess what’s the right thing for their business,

their company and their stakeholders.

There were a number of people, including personal friends,

CEO’s of other companies who I know really well,

who decided to opt out of it.

And each one of them had their reasons for doing it,

and you know, I had to respect their point of view.

We also got people weighing in,

and agreeing to sign the letter, who six months earlier

didn’t want to have anything to do with it.

They had turned a corner and had come around on it.

So, you know, people who work in highly regulated industries

people who work in businesses that are under

the government spotlight right now,

I think were trying to avoid doing anything that would

intensify that spotlight, which probably explains

Zuckerberg’s position if that really was where he was,

but you know, I respect them for their decisions.

I know how hard it is to be a CEO,

and I know how hard it is to get people on board

on taking a contentious issue.

This went through several iterations with our board

before we decided to take a stand.

I mean, you have to bring everybody along,

and it’s not something,

it was amazing, we did get some CEO’s to almost

agree on the spot, but others were like,

I’ve got to go back, I’ve got to work it with my board.

Totally get that.

– So, I mentioned earlier that a couple weeks ago,

the Edelman Trust Barometer results came out,

and for those of you in the audience, the news was not good.

According to the Trust Barometer,

56% of the jeanral population believes that

business is harmful to society.

And so, your thesis is that the business community

has a responsibility to step up,

and do even more than perhaps we’ve done in the past,

because of the breakdown of institutions and kind of

a willingness to try to advance a common good

in a very polarized world.

So, I mentioned that statistic,

but then there are two other statistics

that I want you to help me understand how these can coexist.

56% people think business is bad.

It’s a force for bad in the world.

But 73% of employees think that their job is a platform

to improve the world.

And 66% of consumers say that they make choices

trying to improve the world we live in.

So what’s the disconnect?

I mean it looks like if you’re an employee,

if you’re a customer,

you’re trying to use business

as a force to improve the world,

but somehow people aren’t buying it.

Where are we going wrong?

– Yeah I think that business, you know,

the Edelman Trust Barometer which just rolled out

two weeks ago in Davos.

I suspect part of what’s underneath it,

and I wasn’t there so I haven’t seen the data,

but I suspect part of what’s underneath that

is when you look at, just take this country,

look at the issues we are facing in this country.

Whether it’s income disparity,

you know, access to quality education,

particularly in the inner cities,

look at the polarization in this country,

between Liberals and Conservatives.

And a growing polarization.

And a lot of people will say

it’s companies that have driven this.

Taken jobs, shipped them overseas.

You know, you’ve driven this income disparity.

My guess is that’s a big part of what’s underneath it.

I do think, as I said before, that particularly in a world

where institutions and governments are pulling away

from the responsibilities that they have to the societies,

the countries where they are,

that there’s a huge vacuum that needs to be filled.

And I’ve always believed that companies exist

more than just to make a profit

to return money to shareholders.

That we are all about the stakeholders that we support.

Stakeholders from employees and retirees,

all the way through to the people,

the communities where we live and where we operate.

And if we do a really good job at that,

we can bridge a lot of these divides.

And, I would say, in our company

a lot of people join Levi’s and stay with Levi’s

because our values are a big part of who they are

it’s very closely aligned to their values,

and that’s why they’re there.

Our values are a competitive advantage

in a marketplace like San Francisco.

The last point about consumers starting to buy brands

that closely align with their values,

there is definitely a trend in that direction.

I mean, I would say, 10 years,

and I’ve been doing this for 40 plus years now.

10 years ago we would talk about sustainability

and doing things that are going to be good

for Planet Earth and consumers, pfft.

They didn’t buy it, not in this country.

In some parts of Europe, yes.

But not in this country.

Today, consumers, they will buy,

the line I like to use is,

they want value and values.

They will buy into a brands values as long as

it’s a good value.

And so, who we are as a company,

and who Levi’s is as a brand,

is very very important and I think part of the reason

why we’ve won with young consumers,

is our brand values resonate with the young consumer.

– Okay.

So I’m going to ask one more question, and then I’m going to

turn it over to the audience

to allow you all to ask questions.

And, so the question is the following, which is,

you’ve said that on your tombstone it’s likely to read,

you’re the guy who says “I don’t wash my jeans.”

That just went totally viral when you made that statement.

– Yes it did.

– So do you feel like, is this a challenge that you’re

trying to come up with something where you can

rewrite that epitaph in some way,

instead of the guy who didn’t wash his jeans?

– No, no no no, no.

So the backstory on that thing,

it happened at a fortune sustainability conference

and we had actually done a life cycle analysis

of a pair of jeans to understand a pair of jeans’ carbon

imprint in the world.

And a big part of it was understanding water consumption.

So, jeans are made from cotton.

Cotton consumes a hell of a lot of water.

So, a lot of the water is consumed up front

growing the cotton, then, the cotton gets spun into yarn

and made into fabric, and then eventually made

into a pair of jeans.

So, the amount of water that we actually control,

that’s within our control in the manufacturing

of a pair of jeans, is less than 4% of all the water

that that jean will consume over a period of time.

Half of it is consumer habit.

And in this country, we have a really bad habit

we wear something, doesn’t matter what it is,

and we immediately throw it into the wash.

Now the average wash frequency of a pair of jeans

is every 1.2 wearings in the United States.

In China it’s about 10.

So, I made this comment, really I went on stage

not thinking I was going to make this comment,

it just kind of came out of my head,

but I was wearing one of my favorite pair of jeans

it’s true for this pair of jeans too,

that they had never seen the inside of a washing machine.

Now, it doesn’t mean that I don’t wash them.

(audience laughs)

It just means I don’t put them into a washing machine.

But, the headline was, “Levi CEO doesn’t wash his jeans”,

and literally in the first month I think we had

eighty billion impressions on that quote.

And that’s why I said it’s going to be on my tombstone.

But it also kind of sparked a debate

that has always been raging with “denim heads.”

So, there might be a denim head or two in this room,

people that just really are into denim.

They’ll pay a premium for great denim.

Real denim heads will not put their jeans

in a washing machine.

They’ll hand wash it, they’ll spot scrub it,

spot clean it.

But, putting a fabric into a washing machine

destroys the fabric over time.

And, even worse, God forbid you put it into the drier.

But it’s also not good for sustainability reasons,

so when my jeans get really gross I hop,

I do what I did in the Youth Hostel.

I hop in the shower, I wash them down with some,

a little bit of shampoo or body wash or something,

and a scrub brush,

rinse them out and hang them up to dry.

And that is the best way to take care of a pair of jeans.

– And no one’s stealing them now.

– Nobody is stealing them now.

Because I’m doing it in my own bathroom.

(audience laughs).

– Okay, well thank you for being so thoughtful

about what it means to be a leader of consequence

and also with a sense of humor.

So, questions from the audience.

One here.

– [Male] Hey Chip, thanks for being here.

Two, one tough question then hopefully one easier one.

The first one, you talked about how the company

is pretty used to taking stands on all kinds of issues,

when you decide it’s time to do that, say on gun violence,

how do you engage all the various stakeholders,

that are necessary, be they the board,

members of your C-suite, customers, whoever,

second, if you could just comment on

Bill’s jeanral aesthetic with the tie and the jeans

and that whole thing?

(audience laughs and cheers)

Just any of your thoughts, really appreciated.

(audience applauses)

– And let me guess, the second question is the hard one.

(Bill laughs)

ah, I think he looks great,

he’s wearing a pair of Levi’s, what’s wrong with that?

The fact that they’re his Levi’s from 25 years ago

I think is more cool right?

So that’s a true sustainability story.

– [Male] That it is.

– Um, you know, the first question though in all seriousness

it was a lot of work to get everybody on board

with the position that we wound up taking.

And part of the conversation also is,

you know, you can’t take a stand on everything.

So, you have to be strategic and really thoughtful

about where you’re going to kind of put your

stake in the ground.

And that was a big part of the conversation is,

you know what else might be coming down the road

that might be appropriate for us as a company

to be weighing in on?

But, we have multiple repetitions with the board,

we have the corporate social responsibility committee

of the board and we presented to the committee

a couple of times, and truth be told,

the board actually made the program stronger.

So the board did its job.

We went in saying, this is going to be a one year program

we’re going to financially support a bunch of

non-profit organizations that are empowering

youth voices in this issue.

And the board basically said,

if you’re going to be in it, you got to be in it

for more than a year.

Go in for four years, make it a million dollars

that you’re committing to in this,

and do it in a thoughtful strategic way

so that we really do make a difference.

So, they were the biggest stakeholder group,

you know, and I know, even our own employees,

not everybody is on board with this, and I respect that.

I really do.

I get asked, we do a Town Hall, we call it “Chips and Beer”,

we really serve beer, and we do it kind of late

in the afternoon in the middle of the week,

and people come in and we fill up a room about this size,

and it’s open mic.

Anybody can ask me anything.

And, you know, part of having an inclusive organization,

and really valuing diversity and inclusion,

is giving people a voice.

Even people who disagree with that point of view

in Liberal left-leaning San Francisco,

we’ve got employees who own guns, who don’t really think

that this is the position that we should be staking,

and I’ll listen to them.

I’ll respect their point of view.

And so, but it is about stakeholder engagement

and getting people on board.

I talked to a couple of customers, but not everybody

because they don’t get to vote on it.

But I did talk to a couple of the bigger ones.

I talked to Doug McMillan at Walmart because he, you know,

he obviously has, sells weapons and stuff.

And, you know, tragically they had their incident

back in August and I talked to him

right after that too.

And now they’re taking action unilaterally.

And they do have a dog in the hunt right?

It’s a big part of their business,

it’s the number one ammunition seller

and weapons seller in the country.

Does that answer your question?

– [Male] Yep

– Great.

Did I dodge the Bill question well enough?

– I thought that answer was awesome.

– Well thank you.

– [Female] Thanks Chip, I have a question really

around the consumer behavior piece,

for a while we’ve seen consumers push back on brands

to try and integrate their values into them,

and now I think, particularly in apparel

we’re starting to see companies come back and ask

the question of how can they influence consumer

behavior to really be more sustainable.

Beyond just redesigning their products.

So, I’m curious to know what you think the biggest

tools and opportunities are for brands to be influential?

– So I think this may be one of our biggest opportunities.

In my early days I used to juxtaposition us vs fast fashion.

When I first joined the company, the companies that were

winning in apparel were H&M, Zara, Uniglo,

and today more and more consumers are rejecting them

because they realize, you buy a cheap tee shirt,

or a cheap blouse or a cheap something,

you wear it three times and then it’s going in the landfill.

We are the opposite of fast fashion.

We are slow fashion.

And I think where the consumer is heading, is right

to our strong point, which is buy fewer items,

make them last longer, make them be very very versatile,

so you can dress them up, dress them down.

And you can own them for a long time.

One of our top selling items right now

is the trucker jacket,

I mean, it grew by almost 50% last year.

A, you can personalize it and customize it,

you can put on patches and pins and all kinds of cool stuff,

but B, people know that you can wear that thing

for the next 25 years and hand it down to your kids

or your grandchildren.

And, your daughter tried to steal yours this morning

you told me and so, and I think that’s where apparel

is going to head.

I think consumers more and more are going to be

recycling their clothes.

So, “thrifting” is really hot right now with teenagers,

they’ll go to a thrift store, they’ll buy something,

and then they’ll sell it online on thredUP or one of

the thrift sites,

and you’re going to see much more of a

circular economy in apparel,

which is going to be really good for the industry.

One of the great things about our brand,

is nothing legitimizes the power of a brand more

than being able to charge a premium for an old

vintage item. We sell vintage trucker jackets

in some of our stores for $250, $300,

when you can buy a brand new one for $99.

So what does that say about the strength of the brand?

So, a lot of these trends and dynamics really

play to our advantage.

We’re also, we’re working on sustainable fibers,

we’ve got a line coming out with cottonized hemp,

that blends hemp in with cottom.

Hemp is a much more sustainable fiber.

We’re doing a lot of cool stuff like that,

but at the end of the day,

figuring out how to get consumers to buy less

but make that a business opportunity for us,

is the biggest unlock I think we’ve got going forward.

Like I said, my 11-year-old daughter,

climate change, global warming

is the biggest issue on her mind.

Clothes going into the landfill are much worse

for climate change than all the chemicals being used

in the apparel industry.

And so if we can keep clothes out of going into

the landfill by encouraging people to buy fewer products,

great product that never goes out of style,

that you can wear for a long long time,

you dress it up, dress it down.

That’s us.

That sets us up to win.

(applause)

Thanks.

– [Male] Hi Chip, thank you for being here today

so, I know that you recently appointed a new

artificial intelligence officer,

– Yes I did

– And my question is

what’s your vision about analytics at Levi’s?

– Yeah, thanks for asking.

I’m on a mission to digitize this company and embrace

kind of the fourth industrial revolution.

So, it actually started, we now finish our jeans

using lasers instead of chemicals and people sanding

and scrubbing so when you buy a pair of jeans,

if you buy a pair of jeans that look like

it’s three years old or five years old,

already broken in, kind of faded,

and maybe some whisker marks and stuff.

That historically was done with chemicals

and manual labor.

Which is why our products are produced in other

parts of the world because the labor here

is really expensive.

We’ve now figured out how to do it with lasers.

And, digital disruption.

So we’re trying to embrace digital disruption.

We have massive quantities of data that we do nothing with.

And what really got me onto the AI, machine learning,

you know, that as an opportunity, was Stitch Fix,

which is also in San Francisco.

Their business model, anybody use Stitch Fix in the room?

Or know about it?

Okay so basically you fill out a questionnaire

which takes like 25 minutes to fill out,

and then they will begin shipping you on a monthly basis,

a box of clothes, you keep what you like,

you return what you don’t, and over time the algorithm

gets really smart about you.

And their success rate, their hit rate goes up.

They have more data scientists than they have merchants.

And they’re an apparel company.

With about a hundred data scientists.

We have way more data than Stitch Fix does.

And when I started on this mission,

we had eight data scientists.

Eight.

And they were all working in e-commerce.

Making our e-commerce site smarter.

So we have an enormous opportunity

to really leverage the data that we’ve got,

to turn it into deep insights about our business

that will help us do things like,

let me tell you where the opportunities are.

Every time you walk into a store,

that store has an assortment.

We can get smarter about what that assortment is

based on who’s going into that store.

So we can actually get down to a very granular level,

what the consumer profile is that’s walking into

that store and then assort that store

for that consumer profile.

It might be completely different than a store

that’s four blocks away.

Because it’s a different consumer walking into that store.

We used to do a lot of this with gut instinct,

you know, the store manager says,

well this is who my consumer is.

Now we’ve got data to be able to do that.

That’ll increase our sales on a store-by-store basis.

We can change our assortments, get tighter assortments,

reduce inventory, pricing, promotion, markdown.

All these areas are areas where we have data,

that we’ve never been able to turn into insights

that we could action to drive our business ahead.

This industry is way behind other industries

when it comes to data, analytics,

advanced analytics, and AI.

This industry historically has been run by

the seat of the pants.

You know, the loudest voice in the room,

the best designer would carry the day.

We’ve been trying to become much more data driven,

just given my P&G background,

but now we’re going to put it on steroids with AI.

So we hired Katia Walsh, who’s a PhD, data scientist,

she came from Vodafone.

We’re building up this organization.

This year we’re going to prove its benefit

and we’ll scale it as it goes.

But I’m really excited about it and I think

it’s going to be a huge unlock for us

and we’re way ahead of most apparel companies in this.

– [Male] Thanks Chip.

My question is related to career management.

So you worked in Procter & Gamble for 28 years,

some people recommend that you should change jobs

to get a diverse set of experience,

so in your opinion, what should be the guiding principle

for managing one’s career?

– Yes, I, that’s a great question.

I still mentor a lot of people who’ve worked for me

through the years.

I was blessed working at P&G, I’ll say that

straight up front.

I thought about leaving a couple of times,

but at every opportunity where I felt like I had

kind of, learned what I was doing in the job that I was in,

Procter came along with the next opportunity for me,

and I always felt like they were just one step ahead

of putting another great assignment in front of me

that would keep me growing and keep me challenged,

and keep me motivated, and so you know I thought

about leaving Procter once or twice

during that 28 year career,

but I had amazing opportunities along the way.

Like I said, big brands, small brands, I lived overseas,

I lived and worked in Singapore.

I ran P&G’s business in Southeast Asia which was

life changing I mean, an incredible experience.

And so, again I am who I am, in part because of all

the different experiences I had at P&G.

It was such a big country with so many different brands

in so many different countries and regions where

we did business, that I could get that variety

of experiences without ever having to leave the company.

I was blessed because of that.

I had a lot of great experiences.

So, I don’t think there’s a right or wrong answer.

The advice that I give to some of my mentees is

take your career in three to five year increments,

set a long term goal, I’m very goal driven.

So set a long term goal, what do you want to be

when you grow up kind of thing,

but then take it in smaller three to five year increments

and chart your way to where you want to get to.

And recognize that it’s probably not going to be

a linear, direct, you know, climbing the ladder is

no longer relevant.

It’s not going to be linear and direct.

The world that you’re entering when you leave school

is going to be very different than the world 25 or 30 years

from now, just like the world today is very different.

When I started marketing here in the US,

there were three television channels,

and you know, think of all the media today right?

Most of the relevant media for our target consumer

isn’t even on television.

So the world’s going to change dramatically.

So be open to your career taking lots of bobs

and weaves along the way.

But it’s all about, are you getting the experiences

that are going to make you who you want to be

in the future?

Because it is about the experiences and the people

that you’re working with that make you

who you are over time.

– [Male] Thank you so much Chip,

really appreciate you being here.

– Thank you.

It was awesome, thank you all very much.