Once upon a time, a new television advertisment for a pair of Levi's 501 jeans would have been an event in itself.

Successive instalments of a high-profile European campaign between the late 1980s and early 1990s virtually guaranteed column inches in the press and chart success for the soundtracks resurrected for the 60-second, modern-day fairytales.

According to some estimates, Levi's accounted for one in every four pairs of jeans sold in Europe during the heyday of the iconic 501 advertising campaigns.

But the 501 fairytale ended as rival brands proved better at connecting with the youth cultures of the 1990s.

This week, Levi's is attempting to stage a comeback for the 501 brand, placing the style at the centre of an advertising campaign for the first time since 1997.

But the company, which is part of the San Francisco-based Levi Strauss & Co clothing group, has its work cut out if it is to deliver the kind of kiss of life that might befit the plot of one its ads.

Perhaps surprisingly, the new TV advertising campaign, which has just been screened in 10 European countries, eschews the edgy photography and "dangerous" grooves employed by most ads aimed at young people. Instead, the new commercial is a scene lifted almost verbatim from a scene in Shakespeare's romantic comedy Midsummer Night's Dream. The musical accompaniment is provided by Mendelsohn.

The ad, set in contemporary LA rather than a sylvan glade, shows how a pair of low-slung loose-fit 501s are enough to make the heroine Titania fall in love with the hero Bottom.

Whether the campaign can make consumers fall back in love with the 501 brand will be debated within the marketing community. Some commentators say that Levi's is unlikely ever to repeat the dizzy achievements sparked by the legendary ad in 1985, which was made by UK agency Bartle Bogle Hegarty and featured model Nick Kamen stripping down to his white boxer shorts in a launderette so that he could wash his 501s.

"Levi's dominance of its category was quite exceptional," says Nick Barham, planning director of advertising agency Karmarama and author of Disconnected,a book on contemporary youth culture. "But they were beneficiaries of a unique confluence of trends: 1950s retro-American was in fashion, the baby-boomer generation had made jeans mainstream and there wasn't much in the way of fashion available for men. So the advertising which beautifully crystallised these trends was pushing at an open door."

The door began to close when the relatively narrow cut of a pair of 501s was overshadowed by the baggier style of trouser endorsed by newer urban youth cultures.

Seven straight years of decline have seen sales plummet by 42 per cent - down from a peak of $7.1bn in 1996 - to $4.1bn in 2003. Levi's, which is privately owned by the Haas family following a 1985 leveraged buyout, has responded with new brands such as the "Sta-Prest" pre-creased range and the "Engineered" twisted-style range.

Kenny Wilson, Levi's European brand president, acknowledges that Levi's fortunes have been intertwined with its advertising to an extent perhaps unique in the corporate world. "In the past, we have seen a direct correlation between advertising and what we sell. It makes the brand top-of-mind, and there is no doubt that our sales responsiveness to advertising makes our campaigns one of the most efficient around."

But, as Mr Wilson points out, no matter how iconic and in touch with the zeitgeist a company's advertising might be, it cannot turn a business round on its own. "It's the final coat of paint if you like - the most visible manifestation of the company," he says. "But like a final coat of paint, it can only work if what lies behind it has been thoroughly prepared."

The new ad campaign is the final piece of a swift corporate makeover carried out by Mr Wilson and Paul Mason, president of Levi Strauss Europe, over the the past 18 months. There have been the well-publicised job cuts as Levi's reduced its worldwide workforce by 23 per cent - from 12,300 employees in November 2003 to fewer than 9,500.

But, at the same time, the company has been transformed from a manufacturing wholesaler reliant on one product - the 501, which accounted for half its sales - to a fast-moving fashion brand with a constantly changing product portfolio.

"The design of the 501 was tweaked every decade or so to keep it up to date. Volume was supplemented by the introduction of perhaps 20 or 30 new product lines a year," says Mr Wilson. "Now we have, in effect, a new collection every two months, and we are designing perhaps 750 new styles a year."

This has meant segmenting its market and re-engineering practically every aspect of the business. "It has involved a major cultural change. We have shorter production runs - so we have had to examine our supply chain and approach to manufacturing."

Early indicators are that the strategy is beginning to stem the freefall in sales. Turnover for the past three quarters are slightly up and evidence of the company's comeback may be apparent in its annual results, due to be released later this week.

But Mr Barnham warns that things are very different from the 501's heyday. "Men, in particular, are more confident. They have more choices, more sources of fashion advice. The ads are much smaller and more intimate - so it is unlikely that Levi's will have the cultural and hence commercial dominance it once enjoyed."