Merino Wool: A NEW Approach To That Old Aussie Icon

Australia, with its excellent sheep country and myriad of supportive farming communities, is fundamentally suited to producing high quality merino fibre. BUT, wool producers are in decline and many small communities are feeling the impact.

Have we adapted our thinking?

Yes, some of us. Peter Vandeleur of New Merino – a supply chain system – is a wool broker with a new approach, leading the way to what could be a sustainable bend in the road for this icon industry. BUT, old ways of thinking change slowly.

Sustainability Thinking In Europe, UK And US

Peter has recently returned from a five week trip meeting with brand owners, retailers and spinners in the US and Europe and he spent several days at the Winter Outdoor Retail trade shows in Salt Lake City and Munich.

The Modern ‘Supply Chain’ Approach

In the US and in Europe Peter found a strong emphasis on sustainability and recycling. Literature on the ispo Sustainability Awards states:

“Sustainable production and operation has become an important issue throughout the sporting goods industry. The presentation of the second ispo Eco Responsibility Awards not only focused on the ecological aspects of the products, the jury also examined the sustainability of the overall manufacturing concept…logistics, production, eco-compatibility, application, company culture, and CSR.”

A New Approach Needed In Australia??

Given the American and European aversion to mulesing (removal of wool-bearing skin from merino rear ends to prevent flystrike) PETA’s boycotting of brands using wool from mulesed sheep, PLUS the desire NOT to contribute to landfill, Peter’s view is that we must develop a new business model for Australian merino that:

• Eliminates politics and waste
• Encourages commercial creativity
• Focuses on demand building through competitive performance
• Fosters the development of a modern and highly efficient supply chain
• Anticipates the demands of the next generation of consumers
• Supports retailers as commercial partners
• Moves away from the commodity mentality and positions merino as a specialist fibre that will command pricing at profitable levels
• Uses Australian growers money to promote Australian wool
• Separates R&D from marketing
• Acknowledges changing market conditions and moves to rapidly accommodate them

The Current Situation In The Wool Industry

The Australian wool industry is lead by a bureaucracy, known as Australian Wool Innovation (AWI), funded by compulsory levies paid by woolgrowers.

*There was a lot of frustration about AWI mentioned to Peter almost everywhere he went. Wool is under severe competitive price pressure from other fibres. The two AWI staff members who assisted him in Europe and the ex-AWI staff member who assisted in UK were very knowledgeable, well connected and very supportive of Peter’s fact-finding and marketing mission. Their help was much appreciated. However Peter believes that whilst there are some good people on the ground in AWI there is a problem with the structure of the organisation.

*Peter finds there is a strong move by retailers toward traceability of the sourcing of the products they are selling, originally triggered by issues in the cotton industry in underdeveloped countries, a move now spreading to textiles generally.

*Consumers are increasingly aware of the environment, as seen with Prince Charles’ views on using recyclable fleece to avoid land fill, and retailers constantly trying to gain an edge to satisfy consumer demand.

*Wool is losing ground in traditional menswear. Polyester / viscose is providing severe competition at the price conscious end of the market.

*Wool seems to have largely disappeared from women’s wear.

*Merino continues to gain strength in the next to skin / sport / performance wear sector. Peter was astounded at just how many brands and companies were promoting merino (not Australian merino). This is definitely a strong sector where the unique properties of wool are appreciated and promoted.

*The Woolmark logo is almost invisible (but it was certainly on a small proportion of men’s suits in London department stores). There has been a dramatic decline
in the number of Woolmark licensees in the US and Europe (Peter cannot comment on Asia) over the last few years – he fails to see how the
strategy of selling licenses can be made to work as they are not seen as having value.

*Supply chains in wool are long and convoluted. Pressure is on to have lead times between the decisions by brands and product delivery very short.

*Retailers are lacking confidence as a result of the GFC and as a result delay purchasing decisions.

*Australia is definitely losing out to South America, South Africa and New Zealand because of the mulesing issue. Some brands actually nominate that they draw their supplies from Patagonia, South Africa or New Zealand to avoid being associated with Australia. European spinners are under pressure find a solution to this issue. As a
result, one has now started promoting a brand called Cape Wool (South Africa).

*It would seem ‘green washing’ is occurring in the area of non-mulesed wool supply. There is great concern amongst US retailers about the way the mulesing issue has been handled in Australia.

The American Position

Here’s a letter from the American Apparel & Footwear Association (AAFA) written 31 March 2010 to our Minister for Agriculture, Tony Burke, cc Minister for Trade, Simon Crean and Ambassadors Kim Beazley and Ron Kirk.

Dear Minister:
We write to you as U.S. trade associations representing apparel and retail industries and U.S. apparel retail companies and brands that account for the vast majority of wool apparel manufactured, imported, and sold in the United States. As major users of Australian wool, we are keenly interested in the state of the Australian wool industry and its continued competitiveness and viability as a supplier. Therefore, it is with growing alarm that we send this letter to express our concern and frustration with the Australian wool industry, and particularly its marketing and research arm, Australian Wool Innovation (AWI), regarding efforts to address the mulesing issue.

As you know, six years ago, U.S. apparel retailers and brands were the targets of a campaign by the People for the Ethical Treatment of Animals (PETA) to boycott Australian wool. PETA’s aim was to eliminate the practice in the wool industry of mulesing merino lambs as a preventative measure against potentially fatal infestation by blow-fly maggots. In response, AWI issued a declaration of commitments on behalf of the wool industry in 2005, which promised to replace the practice of mulesing with a commercially-viable alternative by the end of 2010. For nearly four years, AWI and the Australian Veterinary Association (AVA) provided our associations and companies with quarterly updates on the progress and resources committed toward reaching that goal.

It appeared the Australian industry was well on the way to replacing surgical mulesing by the 2010 target date, and over the longer term to institute an effective genetics program to breed bare-breech sheep. Then unexpectedly, AWI announced in July 2009 that it was effectively abandoning the statement of commitments – promises that we had relied upon. This move came several months after AWI installed a new board of directors. Since then, there appears to be growing political dissention within the leadership of AWI, culminating with the recent resignation of Brenda McGahan as CEO, the third change in that position in as many years.

American retailers and brands take corporate social responsibility and ethical sourcing matters very seriously. At the same time, we understand that mulesing is a complex issue, and that finding an alternative would require a reasonable period of time to address. Thus, AWI’s decision to abandon the declaration and its internal problems this late in the game has left us in a very difficult position. Our companies cannot afford to put our credibility and brands at risk over disagreements regarding the propriety and effectiveness of particular animal-husbandry techniques, particularly at a time when apparel made from competing fabrics is on the rise in the U.S. market.

As a result, many companies in North America and Europe have directed their suppliers to use non-mulesed wool, or are actively seeking sources of non-mulesed wool including from outside Australia. However, it is unclear whether the amount of non¬mulesed or ceased mulesed wool, especially in the fine-gauge categories, is sufficient to meet market demand, particularly when information is not even reported on the mulesing status of a substantial amount of the wool sold through the Australian Wool Exchange (AWEX).

Given the seriousness of this situation and to ensure that Australia will continue to be a viable and key supplier of wool to the U.S. market, we feel the time has come to communicate our concerns directly to the Australian Government. In order to overcome the impasse in which we find ourselves, we request that the Australian Government use its influence to encourage its wool industry to:

1 Improve communications with their customers – North American and European apparel retailers and brands;
2 Engage PETA in a good faith effort to address the mulesing issue with a focus on what is and is not working;
3 Lay out a roadmap for resolving the mulesing issue, with specific steps and timeframes, and to communicate their progress in meeting those goals to their customers in North America and Europe; and
4 Encourage the listing and certification of all wool sold on the AWEX as mulesed, ceased-mulesed, or non-mulesed to provide effective traceability for retailers and brands.

We would also appreciate your assistance in communicating these points to the various groups representing the wool industry in Australia and to the appropriate state government officials responsible for regulating the industry.

With the Australian wool industry facing huge challenges, including increased competition from alternative fibres (e.g., cashmere, performance synthetics, and fine-gauge blends), weak consumer demand, and a resulting precipitous decline in the overall size of the flock, we feel strongly that the industry must address the mulesing issue head-on. As we are now well into 2010, the original deadline under the declaration of commitments, we believe time is of the essence.

We look forward to hearing back from you on this important issue and appreciate any assistance you can provide.

Yours Faithfully,

American Apparel & Footwear Association (AAFA) Ann Taylor Stores Corp. Gap Inc.
Liz Claiborne Inc. Macy’s, Inc. National Retail Federation (NRF) Nordstrom, Inc. Phillips-Van Heusen Corporation Perry Ellis International Retail Industry Leaders Association (RILA) Wool Working Group USA-ITA – U.S. Association of Importers of Textiles and Apparel VF Corporation Warnaco, Inc.

Peter believes there has to be a solution somewhere and welcomes comments.