Diesel SpA History

Company Perspectives:

Beginning as a company focused on making quality clothing, Diesel has become part of youth culture worldwide. It can legitimately claim to be the first brand to believe truly in the global village and to embrace it with open arms.

Company History:

Based in the small village of Molvena in the north of Italy, Diesel SpA is one of Europe's top manufacturers of designer jeans and other apparel, including the upscale DieselStyleLab brand, the extreme sports-inspired 55-DSL sportswear line, and Diesel Kids children's clothing. Diesel also licenses its brand for a number of accessory products, including eyewear, manufactured by Italy's Safilo; shoes and other footwear by Global Brand Marketing USA; luggage and other leather goods by Principe, in Italy; and perfumes and cosmetics, under the Diesel Plus Plus and Zero Plus labels, manufactured by Germany's Marbert. Diesel's irreverent advertising campaigns have driven its strong implantation in more than 10,000 chain and department stores in more than 80 countries worldwide--the company insists on maintaining essentially identical marketing and branding activities across its global market. Diesel also has been building up a network of company-owned and franchised Diesel retail stores, which feature its jeans and the DieselStyleLab labels. By 2001, the company operated nearly 150 retail stores. The expansion of its retail operations indicated the long-private Diesel might go public early in the new century. Diesel, led by founder Renzo Rosso, posted L 640 billion in revenues in 2000.

Designer Crop of the 1970s

Renzo Rosso was born in 1955 in Brugine, in northeastern Italy, where his family operated a small farm. Rosso's talent for business was evident early on, however. At the age of ten, Rosso began breeding rabbits--starting with a single rabbit given to him as a gift. Rosso's rabbit farm quickly counted more than 100 rabbits, giving him his first taste for fast-growing profits. Rosso's distaste for schoolwork, however, left him with modest plans for his future, as he told Interview: 'My dream as a kid was just to be a little more than a simple workman.'

At the age of 15, however, Rosso heard of the opening of a new textile manufacturing school. 'I didn't like to study,' Rosso told Interview, 'and the rumor was that at this new school that had just opened--the first fashion school in Italy--it would be very easy to graduate.' Rosso did graduate and at the same time discovered a flair for fashion design. At the age of 20, Rosso began designing his own clothes; then, in 1975, he joined a local textiles company, Moltex, led by Adriano Goldschmied, that specialized in producing trousers. Rosso's position as production manager was quickly placed in doubt when Goldschmied sought to dismiss Rosso. Instead, Rosso convinced Goldschmied to keep him on, reducing his salary and placing him on a commission. 'This gave me an incredible incentive,' Rosso told Interview, 'The company completely turned around, and not long after I said to him, `Thank you very much, now it's time for me to move on.'

Rosso proposed that he and Goldschmied form a partnership based around the promotion of new designer labels. Goldschmied agreed, selling Rosso 40 percent of the new company, called the Genius Group, which was launched in 1978. The Genius Group was responsible for creating a number of successful brand names, including Goldie, Ten Big Boys, Martin Guy, and Katherine Hamnett, and, of course, Rosso's own Diesel jeans brand.

Rosso had chosen the Diesel brand name especially for its international appeal. Pronounced more or less the same all over the world, the Diesel name fitted in with Rosso's concept of a single global market segmented not along national borders but along age and lifestyle lines. Rosso also was eager to test his own ideas of style. By 1979, he had created his first full menswear collection around the Diesel name; the company's first international sales came in 1981. The following year, the group opened a factory outlet store for its designs.

Rosso's involvement with the Diesel brand remained entirely hands-on. In 1984, he debuted a new line, Diesel Kids, extending the company's jean-based fashions to cover the entire range of youth markets. Sensing the potential of the Diesel brand, Rosso bought out Goldschmied and the other Genius Group partners in 1985. By then, sales of Diesel-branded clothing amounted to about $5 million per year.

Campaigning for Global Recognition in the 1990s

With 100 percent control of his company and brand, Rosso set out to develop a new way of creating fashion. Diesel began hiring a new generation of design staff--all hand-chosen by Rosso himself--bringing in young design school graduates from across the world and giving them the mandate to ignore what the rest of the world's fashion community was doing and instead create clothing to reflect their own, and Rosso's, personalities. Designers were encouraged to allow free reign to their creativity--and ultimately to design the clothing they themselves would want to wear. In addition, Rosso instituted a new sort of 'research trip.' Designers were required to travel at least two times a year, were given complete freedom and an unlimited budget to choose their destinations, and in turn were invested with the mission to return to the company's headquarters with the inspiration to create the next season's line of Diesel clothing.

Such unorthodox design methods quickly helped the company develop a reputation for offbeat, even avant-garde design, and proved immensely appealing to the company's core European youth market. The debut of the company's Diesel Female collection in 1989 further expanded the company's target markets. Until then, the company's sales had remained for the most part within Italy; Rosso now determined to spread the company internationally, boosting its presence to some 40 countries, with sales topping $130 million, by the start of the decade. The company also attempted to enter the U.S. market, turning to a U.S.-based manufacturer, Russ Togs, to handle its distribution.

The year 1991 represented a hallmark in the company's history. In that year, Diesel hired Stockholm, Sweden-based advertising firm DDB Paradiset to help it fashion a new, global advertising campaign. Developed in conjunction with Diesel's own in-house creative team, the Paradiset campaign had as its objective to roll out a single advertising image to all of the Italian firm's international markets. The resulting advertising campaign, a mix of social and political commentary with a heavy sauce of black humor, catapulted Diesel to the world's attention. In an era that had seen such controversial advertising campaigns as those of Benetton and Calvin Klein, the new Diesel ads took 'in-your-face' to new extremes. An example of the Diesel campaign was a print ad featuring a teenager with a gun and the tagline: 'If they never learn to blast the brains out of their neighbors what kind of damn FUTURE has this COUNTRY of ours got?'

As one industry observer remarked: 'With one ad, Diesel got a whole new presence in the market. They went for the jugular, and any time an advertiser does that, it's bound to upset some people.' The more upset their parents became, the more eagerly the company's target youth market bought the Diesel line. Just as the world market for jeans began to see dozens of new competitors, Diesel had managed to make itself one of the most well-known jeans makers, and this despite prices that started at $99 per pair and ranged up to $200 per pair.

If the company managed to impose itself on the European market, where it became one of the top-selling jeans labels during the 1990s, it was less successful in the United States. The financial collapse of Russ Togs at the start of the decade cut severely into the company's growth in that market. Despite the advertising campaign's success at attracting attention to the company's products, finding Diesel jeans and clothing remained difficult for many customers until the middle of the decade. Nonetheless, the company succeeded in placing its line in such prestigious locations as Bloomingdale's and Barney's New York and quickly built up a cult image.

After discovering the pleasures of snowboarding, Rosso was inspired to launch the company into a new category of clothing. The company debuted its new brand, 55-DSL, in 1994. Although initially meant to develop clothing for the extreme sports market, the label quickly encompassed a wide range of sportswear bearing the Diesel name and style. The company also began a licensing program to place its name and logo on a variety of items. The company's first license was granted to Italy's Safilo, which launched its Diesel Shades line in 1994. Safilo managed to capture Diesel's flair for irony, with such model names as Porn Star, Nose Job, and Atomic Sun. The sunglasses became a quick success, prompting the company to develop other licensed products, such as a line of Diesel perfumes and fragrances manufactured by Germany's Marbett, and then extending to footwear, luggage, and, in a license granted in 1999, watches made by Fossil.

Retail Empire in the 21st Century

After relying on chain stores and department stores for its sales, Diesel turned toward building its own retail empire. The company opened its first 14,000-square-foot flagship store in New York City in 1996. The following year saw a second store, opened in London's Covent Garden. The company quickly built up its retail operations, topping 25 stores by 1998. By the end of 2000, the company operated more than 120 company-owned or franchised Diesel stores in 80 countries. The company's strong growth&mdash it topped the L 500 billion mark by mid-decade--increasingly brought Diesel and Rosso to the attention of the world's business community. In 1997, Renzo Rosso's success was crowned with Ernst & Young's Entrepreneur of the Year award.

1975:Renzo Rosso joins textile firm Moltex.

1978:Rosso helps found Genius Group.

1979:Diesel brand is launched.

1981:International sales begins.

1982:Factory outlet store is opened.

1984:Diesel Kids line is launched.

1985:Rosso acquires full control of Diesel.

1989:Diesel Female is launched.

1991:International advertising campaign begins.

1994:55-DSL brand is launched; license for Diesel eyewear is acquired.

1996:First retail store is opened.

1998:DieselStyleLab label is launched.

2000:Staff International is acquired.

2001:Company expands to Spain and Portugal.

Declines in the jeans market toward the end of the 1990s led Diesel to begin looking for ways to expand its range of clothing. The company debuted a new line of upscale, more fashion-conscious clothing under the label DieselStyleLab. The company took care to separate its new line, which was nonetheless sold in its retail stores and in-store boutiques, from its youth-market Diesel line--seen as a necessary move to preserve the company's trendsetter status among its core youth market.

Diesel confirmed its ambitions to move deeper into the upscale category when it acquired Staff International in April 2000. That company, which had been manufacturing Diesel's DieselStyleLab, also owned several luxury-class brands, as well as the licenses for such upscale labels as Red Label, by British designer Vivienne Westwood, and Martin Margiela. Although Staff International had been near bankruptcy before the Diesel purchase, it represented a step toward Rosso's avowed goal of becoming a key player in the luxury goods market, while nonetheless sticking to the company's core casual wear segment.

The company continued to boost its name recognition and sales through its irreverent advertising. In 2000, the company prepared to launch the career of a 'fake' celebrity, building a global advertising campaign around its sponsorship of an unknown Polish singer--complete with CD release, tabloid hype, and fan club. Diesel nevertheless remained down-to-earth in its business growth, mapping out a new expansion program, with the possibility of the company making a public listing to finance an aggressive expansion drive. In February 2001, the company targeted the Spanish and Portuguese markets for further growth, replacing its third-party distributor with its own domestic subsidiaries, with plans to expand its retail operations in both countries. Successfully steering the twists and turns of trendiness, Diesel expected to continue to clothe and inspire its customers through the 21st century.

Principal Subsidiaries: Staff International.

Principal Competitors: Giorgio Armani S.p.A.; Benetton Group S.p.A.; Bill Blass Ltd.; Calvin Klein, Inc.; Donna Karan International Inc.; Esprit Europe AG; Gianni Versace SpA; Guess, Inc.; Hugo Boss AG; Levi Strauss & Co.; Naf Naf S.A.; OshKosh B'Gosh, Inc.; Polo Ralph Lauren Corporation; Tommy Hilfiger Corporation; Groupe Zannier.

Further Reading:

• Blanchard, Tamsin, 'Jeans Genius,' Independent, April 23, 1996, p. 14.
• Campbell, Lisa, 'Diesel Fights to Keep Cult Image,' Marketing, September 10, 1998.
• 'Diesel May Go Public to Finance Expansion,' Financial Times, July 28, 1998.
• Goldfarb, Brad, 'We Take You to the Leader,' Interview, November 1, 1998.
• Horovitz, Bruce, 'Fuming over Diesel's Shocking Ads,' Newsday, May 24, 1993, p. 31.
• Rickey, Melanie, 'Diesel's Driving Force,' Independent, July 29, 1998, p. 8.

Source: International Directory of Company Histories, Vol. 40. St. James Press, 2001.