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Chip Bergh: American-Made Jeans Would Cost $150

Questions about politics, executives’ salaries and offshoring stole the focus away from Levi Strauss & Co.’s (LS&Co.) virtual shareholder meeting Wednesday. Despite the company recently reaching some of its best financial achievements to-date, shareholders were interested in hearing from president and CEO Chip Bergh on charged topics surrounding the heritage denim brand.

As LS&Co. has long been vocal in its political leanings, Bergh was asked whether the company contributes donations to political campaigns. Bergh’s response was an emphatic “no.”

“This is pretty straightforward,” he said. “We do not have a political action committee and to my knowledge, I don’t think we have ever had one, and we do not make any political donations to any politician or political party.”

The statement follows Bergh’s appearance on a new business-focused series on CNN’s streaming service, CNN+, when he addressed his reasons for taking a stance on hot-button issues. Hosted by former CNN anchor Poppy Harlow—who interviewed Bergh last April regarding Georgia’s voting laws—“Boss Files” looks at business leaders in various industries and showcases the personal and professional challenges they’ve overcome.

Recent “hot-button issues” include pandemic-related school closures, which former LS&Co. brand president Jennifer Sey claimed were the reason for her resignation. Since the beginning of the pandemic in 2020, Sey had been a vocal opponent of the U.S. public school closure mandate, and wrote op-eds, appeared on local news shows and organized rallies in support of keeping schools open. LS&Co., on the other hand, allegedly didn’t agree, which she said created tensions that ultimately led to her removal.

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The company is also a champion of stricter gun laws, and in 2019, Bergh drafted a letter signed by 200 CEOs asking the Senate for stricter gun control. Additionally, the company is a strong supporter of voters’ rights, and was recently one of six companies profiled in a corporate civic playbook for initiatives increasing voter turnout.

“CEO compensation” was another area of focus during the Q&A portion of the shareholders’ meeting. The question follows the company’s first-ever diversity and inclusion report published earlier this month showing an increase in diverse representation. At the same time, it didn’t find systemic pay differences across gender and ethnicity.

During the meeting, LS&Co. chair Bob Eckert said executive compensation, including Bergh’s, is determined “based on what’s competitive in the marketplace for similar companies.” He added that much of Bergh’s compensation—about 88 percent—is at-risk, meaning it’s commission-based.

“Chip and the management team do well when you the owners do well,” he said. “We believe that our compensation policies and programs for leaders and employees are appropriately balanced, reinforcing both short-term and long-term results.”

The question of offshoring also came up during the shareholders’ meeting, when a caller asked why the company “doesn’t manufacture in the U.S. anymore.”

In fact, LS&Co. still manufactures a small portion of its product in the U.S., which Bergh said is “mostly exported” and that the company has not manufactured at scale in the U.S. since the ’90s. Doing so, he said, would drive up the cost of a pair of jeans to around $150, which the American consumer isn’t prepared to pay.

“Americans would be paying five times what they currently pay for a pair of jeans,” he said. “It would probably put us out of business.”

Instead, the company has “significantly reduced” manufacturing in China, which now represents about 3 percent of its total global production. It’s gaining a larger local manufacturing share with its recently acquired Beyond Yoga, which is able to continue manufacturing in the U.S. because of its small size.

Bergh added that LS&Co. sources a “fair amount of product” from the Western hemisphere and owns two factories in Poland and South Africa.

Inflation was another hot topic at the meeting. Despite raising prices, Bergh said Levi Strauss still “represents exceptional value.”

“There’s no question that we’re starting to see the impact of inflation, particularly at the gas pumps and in the grocery store,” Bergh said. “I don’t want to suggest that we have our heads in the sand, but we remain very constructive about the current health of the consumer and the outlook for the consumer.”

The brand increased prices by 5 percent in Q2 2021, which accounted for a gross margin increase of about one point. After earning a record $5.8 billion in revenue in 2021, the company’s future looks bright.

“The Levi’s brand in particular is incredibly strong right now,” Bergh said. “We are the leader in [a] resurgent denim category, and clearly have pricing power and a globally diverse business model. And so, we’re confident as we look to the future.”

Though animal rights organization People for the Ethical Treatment of Animals (PETA) was prepared to pressure Bergh on what it called a “bluff” on animal welfare, the question wasn’t addressed during the meeting. PETA has stated that Levi’s sale of jeans with leather patches doesn’t support its position as a sustainable and ethical brand.

The organization has long urged Levi’s to use vegan materials. In 2019, it purchased the minimum number of shares of LS&Co. required to submit shareholder resolutions and secure speaking rights at annual meetings.

Levi’s has previously responded to the organization’s concerns by stating that leather comprises “a small fraction” of raw materials it uses, and that it strives to source all materials responsibly, and derive materials “in line with international animal welfare standards.”