International Business: ITALY

FULL STEAM AHEAD FOR DIESEL

Will its pricey jeans and outrageous ads succeed in the U.S.?

Sumo wrestlers kissing. A row of chimpanzees giving the fascist salute. Inflatable naked dolls at a board meeting with a hugely obese CEO. Parents advised that "teaching kids to kill helps them deal directly with reality." When it comes to outrageous advertising, Italy's Renzo Rosso wrote the book. "At first people thought we were crazy, but to make good ads you've got to take risks," says Rosso, the chief of Europe's hottest marketer of blue jeans.

Clearly the 41-year-old Rosso is on to something with his campaign, which pushes to the outer limits the offbeat approach of early ads by fellow-Italian apparel maker Benetton. From just $9 million in sales in 1985, Diesel last year sold $350 million worth of jeans, sweat shirts, and T-shirts, while profits reached $35 million. The jeans come in models from skin-tight designs to flares. European teens love the ads and the apparel, which is reminiscent of the 1960s and commands high prices: Jeans start at $89.

SHOWCASE. Rosso wants to use the same formula to push up annual U.S. sales from $15 million now to $100 million by 1999. Diesel apparel is already available in chains like Macy's, but Rosso plans to widen distribution by opening some 100 directly owned Diesel stores in the next four years. In March, the first Diesel megastore in the U.S., a cavernous two-story showcase replete with a coffee bar and full-time deejay, was inaugurated on New York's Lexington Avenue. The grand opening included miniskirted models dancing in the windows and an all-night party for 2,000 people.

Rosso says the store is ringing up sales of $30,000 daily, and he plans openings in San Francisco and Miami next year. But skeptics are already wondering how far Diesel can go in the U.S. The spectacular Manhattan store, situated near Bloomingdale's, "gets an A for visual design," says Alan Millstein, a fashion consultant and editor of the Fashion Network Report. "But the merchandise is a disaster. Europeans don't understand the American market." Millstein says Diesel jeans and apparel may sell in rich New York but won't find a market in middle America, where moderately priced apparel from Gap and Urban Outfitters sells briskly. And Levi Strauss & Co. is into retail, too: One Manhattan store is opposite Diesel. Diesel executives are not concerned, saying their shoppers want a total fashion look, not basic apparel.

Diesel's ad tactics could be a problem. Its prankish campaigns have not always had the desired effect among politically correct or puritanical Americans. Three years ago the company had to withdraw from the U.S. a series of satirical ads that applauded smoking and gun ownership with slogans such as: "145 cigarettes a day will give you that sexy cough and win you new friends." But marketing director Maurizio Marchiori, who concocts the ads in-house, still defends that 1993 campaign, maintaining that "you're never going to get smokers to quit by telling them off, so you might as well make fun of them."

Although the smoking ads are history, Diesel is still running unorthodox advertising on MTV and in publications such as Wired, Rolling Stone, Vibe, Details, and the gay magazine Out. In the long term, say industry insiders, Diesel might have to tone down its campaigns as it goes after a broader market. "That will never happen," objects Rosso, who says his ads reflect the essence of Diesel's irreverent youth culture. At the Molvena headquarters the average age of employees is 25, executives sport shoulder-length hair and a three-day stubble, and the design staff holds its meetings at the in-house coffee bar. "The Diesel style is my lifestyle" says Rosso, who rides to work on a Ducati Monster motorcycle and listens to heavy metal music.

A native of the nearby farming town of Brugine, Rosso joined Diesel's parent company as a lowly supervisor in the 1970s. Diesel then was a tiny producer of sportswear for other labels. Working his way to the top, in 1985 Rosso bought out the old owners and rebuilt the Diesel brand from scratch. As Diesel's sole owner, Rosso has certainly come a long way from his humble origins. Now he has to prove his mix of off-the-wall marketing and hip fashion is a formula for the long haul.By Silvia Sansoni in MolvenaReturn to top