When Derek Robson, Levi Strauss & Co. business director at BBH, London, says he could spit on his client he's not exaggerating. The agency's office is located directly above the Levi's flagship store on Kingly Street, making it difficult to discern where one ends and the other begins. "We are an extension of them, and they are an extension of us," Robson says. "We have a nutritive relationship." Indeed, their physical proximity extends into the meta realm, with a shared marketing philosophy and brand vision that have been intertwined since 1982, when Levi's signed BBH as its European agency.

But while the agency's track record has been consistent, San Francisco-based Levi's sales have not been.

After suffering corporate tumult, financial woe (it posted financial gains last November - a first in five years) and flirting with cultural extinction, the denim icon has, for the first time since the 1985 rebirth of the 501, simultaneously integrated a new product launch with a cross-platform advertising campaign. Call it the Levi's comeback tour.

The worldwide rollout of the company's Type 1 line of jeans hit in early February, accompanied by three television/cinema spots airing in each of Levi's core markets: Europe, Asia/Australia and North America. The campaign, like the line, draws on Levi's 150-year heritage while managing to put a new spin on the long-established brand.

Levi's has a storied marketing history. A global icon, the company has operated under the mantra of 'brand globally, market locally'. While this approach maintained the brand in Europe, it started to wear thin at home. Despite sexy ads directed by short-form visionaries, Levi's fell victim to a fickle fashion market: the company saw its 19% share of the US denim market fade by nearly 7% between 1997 and 2002 thanks to the vintage denim boom of the late 1990s - driven by well-heeled Japanese denim enthusiasts who were willing to pay exorbitant amounts for a pair of jeans.

Although Levi's at first managed to capitalize on the vintage craze without actually creating any new product, it couldn't hold its lead, especially once fashion warehouses such as Gap got into the game, undercutting the prices of 'It' brands such as Diesel and Ralph Lauren by as much as 300%. Levi's found itself edged out of the $10.5-billion US market.

That fateful year, BBH set up a New York office. While it acquainted itself with Gotham cool, Levi's took Foote Cone Belding, SF, off the Levi's account (FCB still handles the company's Dockers and Slates brands in the US), threw TBWA\Chiat\Day, SF, a rope, and prayed. But despite fantastical spots by emerging directors (such as Traktor and Chris Cunningham), Chiat\Day couldn't pull Levi's back from the brink.

In 1999 the company, eager to reverse its descent, decided to revolutionize from the inside out, installing former Pepsi head Philip Marineau as CEO. By the end of the year Levi's had laid off 30% of its US staff.

Things weren't so hot in Europe, either. Although the cachet of being American helped keep the brand afloat, if not the sales, a lack of product innovation was thwarting the considerable efforts of BBH in London. Still, the brand's reputation didn't suffer in Europe to the extent it did stateside. "When we re-launched 501 in '85," Robson explains, "we convinced successive generations of youth that the 501 was the right look and label, and we created a customer base that was paying for more than [just] a pair of jeans." But although European consumers were indoctrinated at street level through Levi's experiments in fame building - such as affiliations with emerging musicians - by the late '90s they weren't buying any new 501s. On either side of the pond.

Levi's European brand manager Fredrik Carling is disarmingly honest about why Levi's was singing the blues. "It's unfair to expect great results from advertising without product," says the 13-year company veteran. "As a brand we hadn't paid attention to product, and so we didn't give BBH material to develop stories with."

A prime illustration of this was 1998's perplexing "Hamster" commercial - frequently referred to as the 'black spot' in the company's advertising history. The spot, which featured zero product, let alone new product, followed the existence of a rodent named Kevin, who dies suddenly when his wheel breaks. This turned out to be an apt metaphor for that era of the brand.

After that, Levi's assembled a crack team of designers to create the Engineered line of jeans. But when the line was released, supported by such stellar spots as Dom & Nic's "Undressed", Dante Ariola's "Dolls" and Brian Beletic's "Legs", consumer response failed to warm up. Market share continued to dwindle between 2000 and 2001, and by 2002 investor reports were listing the privately held firm's debt at almost $2 billion.

If 1997 was the zenith, 2002 was the nadir. But Levi's was learning from its mistakes and taking steps to remedy the problems. TBWA was a casualty of this new thinking: just as the agency was preparing to roll out its Super Bowl three-spot SuperVote campaign (Mike Mills' "Bull", Chris Cunningham's "Up and Down" and Spike Jonze's "Crazy Legs"), Levi's pulled the plug on the three-year relationship and awarded BBH's New York office the remaining slice of the global marketing business. Though no one is keen to explain why, key factors may have included the stateside failure of the brand's Engineered line, and the fact that a single agency handling the brand made sense.

Levi's has undoubtedly learned some hard lessons in the last seven years. Now it hopes to parlay that wisdom into recapturing the coveted 16-24 demo. It's no accident that the new jeans are archetypal caricatures of the original, and that Levi's regional ad campaigns pay homage to the company's heritage design. BBH's New York CD Thomas Hayo calls it tapping into the subcultural zeitgeist. His view? "Capitalize on heritage, but do it in an innovative way. Selling history alone will not work." Ultimately the aim, while still targeting the youth demographic, is to drive the brand beyond the sheltered POV of suburban mallrats.

To attract urban types and shore up its street cred, Levi's has opened "unbranded" stores in New York and London. The company is also exploring alternatives to traditional advertising, some of which "might not be considered media", Carling concedes, but he feel it's "important in getting consumers to understand the product at the retail level". Experiments include outdoor and interactive shop windows in Europe, where passers-by can use their mobiles to converse with 2D characters; web-driven contests; and aligning the brand with musicians and artists - a tactic that is playing a key role in driving the success of the Type 1 launch.

Historically, Levi's has supported tours, or created stages for lesser-known talent, but more recently, it has aligned with better-known acts [see sidebar below]. "We affiliate ourselves with bands and individuals who have a strong creative bone and are pioneers in their field," says Carling.

Response to both the campaign and the Type 1 line has been positive, Levi's says, although no numbers have been released. Asked when the impact might be felt, Hayo is circumspect. "This campaign is about leading, which is where we want the brand to get back to. Everyone is ready for Levi's to be back. But it won't happen in a couple of months. This is not a sprint, it's a marathon."