Online Extra: The Driving Force behind Diesel

We work for ourselves and design for ourselves, says Renzo Rosso, founder of the denimwear empire

Renzo Rosso, founder and chairman of Italian denim-design emporium Diesel, has built a global brand name by defying the fashion industry's dictates. Starting with Diesel's first ads, in 1991, his irreverent approach has shocked the advertising establishment, won accolades, and inspired a generation of copycats. Diesel was the first to poke fun at the marketing of haute couture, starting with campaigns that pictured fat, unattractive people in Diesel jeans. In 2000, Renzo won an honorary MBA from Italy's CUOA Foundations, which cited Diesel as "one of the entrepreneurial phenomena of the 1990s."

The company's message was aimed at rebellious types -- not fashionistas -- who viewed the world as iconoclast Rosso did. Now, Rosso is getting the last laugh. A designer who puts comfort first and prefers clothes with a well-worn vintage look to glamour, Rosso has watched his faded casualwear become as fashionable as luxury labels like Gucci and Prada, whose image he so studiously rejected. In 2001, the design group's revenues increased 40%, and 2002 saw double-digit growth -- an impressive performance given the global sales slump that has hit luxury goods.

Fashion kingpin Karl Lagerfeld is a customer and partner of Diesel jeans, and recent polls ranked Diesel No. 15 among worldwide luxury brands -- above Lancome, Armani, Bose, Calvin Klein, and Ralph Lauren. Rosso, however, has stuck to his roots in Northern Italy. He lives in a 17th century villa in the center of Bassano del Grappa, where diversions include yoga, soccer, jogging, and snowboarding. He also dabbles in winemaking on Diesel Farm near Vicenza, which produces "Rosso di Rosso" and "Bianca di Rosso." And in his spare time, he skippers a 31-meter vintage yacht called "Lady May," which he spent six years restoring.

A casually dressed Rosso, 47, who still owns 100% of Diesel, spoke with BusinessWeek Rome Bureau Chief Gail Edmondson at the company's headquarters in rural Molvena, one hour northeast of Verona. Edited excerpts of their conversation follow:

Q: What's the philosophy behind your provocative advertisements, which sometimes seem absurd or pointless?

A: We try to do things that are right for the moment we are living in. Whatever is happening in the world changes the politics and strategy of Diesel's communication. Our advertising is ironic or humorous -- it's not product advertising. It's the message that's important -- a common, shared way of seeing things. We inside Diesel are the first consumers of our advertising. We make ad campaigns for our own amusement -- that's why they succeed.

Q: Your ads are very creative and win awards, but they aren't widely seen. You even did a series of TV spots, but they didn't appear on any mainstream channel. Why?

A: Oh, television is too popular. It doesn't make sense to spend a lot of money to place ads on television when you are only talking to 5% of the audience. We used those spots on MTV and at the cinema because you can select the films your ads are shown with. That way you have an idea that you are reaching the right audience.

Q: What kind of growth will Diesel post for 2002?

A: The numbers are among the best in the fashion industry. Revenue growth is in the double-digits. But after September 11, it's arrogant to say, "Wow, I'm big and have huge profits." The consumer doesn't want to hear that. Anyone who says that now appears stupid. So we won't post our sales numbers. We don't want to boast. It's sufficient to say we are doing very well -- basta.

Q: So you'll never release the official sales and profit figures for 2002?

A: They will be available to the public by the chamber of commerce in August. You can find out the figures then. But it's not the numbers that I want everyone paying attention to.

Q: Diesel's revenues grew by 40% in 2001. Is there a risk of your luxury image becoming diluted or overexposed?

A: I could explode the volume of revenues easily. But we are controlling growth. We've shrunk from 10,000 non-Diesel retail outlets to 5,500 as we expanded our own shops around the world. At the same time we increased price and quality.

Diesel is the only example of a casualwear or sportswear company that became a luxury brand. We sell jeans from $100 to $300 a pair. Even when we entered the U.S. market with a pricetag of $89, people thought we were crazy and overpriced. The market changed.

Q: How do you keep Diesel's designs cutting-edge?

A: I have 10 new designers with a fresh young mentality. They are new kids with interesting things to propose. They don't know 1968, which influenced me. We mix the new generation with our experience.

Q: How do you manage the talent at Diesel?

A: I keep everyone off-balance. It's fantastic for driving creativity. The Diesel team has incredible passion. We work for ourselves and design for ourselves. When I see a new watch in our collection, I go crazy. I want one of everything. I wear only my products -- from underwear to socks, boots, clothing, and watches. Creativity isn't something you can study or pay for. I read 150 magazines a month. It's a lot of information.

Q: Even Karl Lagerfeld wears Diesel jeans and sends you his designs to produce, using Diesel fabric, technology, and manufacturers. Is there a risk of becoming too fashionable -- and therefore part of the fashion conformism that you originally rejected?

A: Lagerfeld came to Diesel thanks to a recognition of the production knowhow and technology we have. He acknowledged that we make beautiful clothing that is high quality. That made me very happy.

Q: And you aren't tempted to see your company become much larger?

A: Doing $200 million a year more in sales isn't more satisfaction. If you sell more, you have to lower prices and enlarge distribution. With quantity, one is never happy. Our priority is even higher quality.

Q: So you aren't interested in going public?

A: People are always pushing you for fantastic numbers. I'd rather work without the pressure for numbers. You only have one life. The real product at Diesel is satisfaction. My satisfaction at Diesel is being a pioneer.

Do you get it -- or do you think I'm crazy?

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