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New Zealand Wool Inside: A Discussion Case Study

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The case study is aimed at discussing the strategic and organizational implications of recent value adding and branding initiatives in New Zealand's strong wool industry with special attention to decisions by a group of farmers. The objective of the case study is to discuss (a) the value of past and current generic promotion campaigns in the wool industry; (b) the viability of recent private value adding and branding campaigns, as well as of the organizations behind such initiatives; (c) the likely impact of the initiatives in the economy of the farmers; (d) if farmers should invest in any of the value adding companies or not (d) if farmers should engage collectively in supporting any of the initiatives, and if so how. This case study can be used in advanced undergrads, graduate and executive classes. © 2011 International Food and Agribusiness Management Association (IFAMA).
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International Food and Agribusiness Management Review
Volume 14, Issue 3, 2011
New Zealand Wool Inside:
A Discussion Case Study
Daniel Confortea Samuel Dunlopb and Elena Garnevskac
a Senior Lecturer Agribusiness, Institute of Food Nutrition and Human Health, Massey University,
Private Bag 11 222, Palmerston North, Manawatu 5451, New Zealand.
b Student, Institute of Food Nutrition and Human Health, Massey University, Private Bag 11 222
Palmerston North, Manawatu 5451, New Zealand.
c Lecturer Agribusiness, Institute of Food Nutrition and Human Health, Massey University, Private Bag 11 222
Palmerston North, Manawatu 5451, New Zealand.
Abstract
The case study is aimed at discussing the strategic and organizational implications of recent
value adding and branding initiatives in New Zealand’s strong wool industry with special at-
tention to decisions by a group of farmers. The objective of the case study is to discuss (a) the
value of past and current generic promotion campaigns in the wool industry; (b) the viability
of recent private value adding and branding campaigns, as well as of the organizations behind
such initiatives; (c) the likely impact of the initiatives in the economy of the farmers; (d) if
farmers should invest in any of the value adding companies or not (d) if farmers should en-
gage collectively in supporting any of the initiatives, and if so how. This case study can be
used in advanced undergrads, graduate and executive classes.
Keywords: New Zealand, wool, ingredients marketing, branding, wool carpets, case study
Corresponding author: Tel: + 64 6 350 69099 Ext. 81415
Email: D.Conforte@massey.ac.nz
S. J. Dunlop: s.j.dunlop@hotmail.com
E. Garnevska: E.Garnevska@massey.ac.nz
IFAMA Agribusiness Case 14.3A
This case was prepared for class discussion rather than to illustrate either effective or ineffective handling of an
agribusiness management situation. The author(s) may have disguised names and other identifying information presented in
the case in order to protect confidentiality. IFAMA prohibits any form of reproduction, storage or transmittal without its
written permission. To request Teaching Notes, order copies or request permission to reproduce, please contact the IFAMA
Business Office.
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Introduction
After two decades of decline in wool prices, New Zealand farmers, disillusioned with many
years of generic wool advertising, recently voted to stop financing industry good promotional
activities. Meanwhile, three companies had started their private value adding and branding
initiatives, aimed mostly at the USA and European carpet and rugs markets. Elders Primary
Wool (EPW) had created a network of alliances with retailers and manufacturers in the USA
to license their Just Shorn wool brand. Wool Services International (WSI) was exporting
scoured wool under several brands. Wool Partners International (WPI), the owner of the
Wools of New Zealand brand, had recently put forward a prospectus inviting farmers to in-
vest in a new wool marketing company with the goal of consolidating 50% of the country’s
strong wool. Although some farmers and industry participants viewed these private marketing
initiatives with optimism and as a sign of vitality in the industry, others thought that the in-
dustry was still too fragmented and that a more unified approach was required. Yet another
view was that farmers had little to contribute to, and gain from, any sort of international
branding and value adding efforts, and that they should focus on what they do best: farming.
It was late spring 2010, and the Wairarapa hills of the Northern New Zealand Island were still
looking green. The Wairarapa Wool Farmers Group had been meeting with representatives
from the three main wool marketing groups to understand more clearly what exactly each one
was proposing and also to assess the capacity of the organizations behind each group. It was a
Saturday late afternoon and WPI was explaining their investment proposal (see a summary of
the prospectus in Exhibit 1). When the meeting was over one farmer expressed the general
spirit.
“There is a shared view that something must be done to revive the wool industry but there is
not a clear consensus about what, if anything, the farmers should do. The wool industry is
more complicated than it seems and it is not clear if any of those branding initiatives out
there will make a difference back at the farms. There are too many issues to consider and this
discussion is far from over.”
At the end of the meeting the farmers divided themselves in three groups; each group was
assigned to study one company and its respective branding value adding and branding initia-
tive. They had agreed to meet again in two weeks when each group would present the pros
and cons of each initiative to the plenary. Then they would decide what was best for the
farmers. Wool farmers in New Zealand were hard working, ingenious and proud, but yet had
been struggling financially for many years. Most were earning as little as NZ$ 12,0001 from
wool per year and many had been carrying substantial debts. They would not give up without
a fight. Sam Poulton, the president of Wairarapa Wool Growers, explained the challenge
ahead.
“The question here is if we should let the market forces decide if these initiatives are good for
us or if we need to step up as a farmer group and take some sort of leadership role. We have
agreed to meet again in two weeks, lock ourselves up and throw away the key until we make a
decision.”
1 US$ 1 = NZ$ 1,33
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New Zealand in the World of Wool
Wool was used for manufacturing apparel and interior textiles such as rugs and carpets.
Based on fiber diameter, wool was classified in three types, fine (<24 micron), medium (25-
32 micron) and strong wool (>32 micron). Fine wool accounted for 36% of total world pro-
duction and was used for apparel manufacturing. Strong wool was used for interior textiles
such as carpets, bedding and upholstery and accounted for 42% of production. Australia was
the largest producer of fine wool with 85% of its production being Merino wool (< 25µm). In
contrast, 90% of New Zealand’s clip was strong. Strong wool was traded either raw (greasy
or clean), as intermediate processed products such as carded and combed wool and yarns, and
also as finished consumer products such as carpets and rugs. New Zealand’s wool clip ac-
counted for 30% of the world’s strong wool output.
The wool industry had traditionally been a major contributor to the New Zealand economy.
Sheep were raised in most of the countries agricultural regions with the main production are-
as being the high countries of Hawkes Bay, Wairarapa and Manawatu/Horowhenua in the
North Island, and Nelson/Marlborough, Canterbury and Otago/Southland in the south island.
New Zealand had 32 million sheep in 2010, down from a high of 70 million in the 1980’s.
Between 1990 and 2010 around 3.5 million hectares of land traditionally used for sheep and
beef production had been converted to dairy, forests or urban development, causing the coun-
try’s wool production to drop by 48% and exports by 34%.
Figure 1. New Zealand’s main sheep production regions.
Source: MAF (2011).
The leading wool producing countries were Australia, China, the Commonwealth of Inde-
pendent States (CIS) and New Zealand. On a clean weight basis Australia was the world’s
largest wool producer followed by China, New Zealand and the Commonwealth of Independ-
ent States (CIS). Together they accounted for 66% of global production (See Exhibit 2 for
data on wool production).
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Australia and New Zealand were the leading exporters of raw wool with 45% and 17% of the
world exports respectively. In terms of imports China had increased its share of global im-
ports considerable between 1990 and 2009 and became the most significant importer of raw
wool accounting for 49% of total world imports. India had also increased its share to 10%
and was the second largest importer (see trade figures in Exhibit 3).
New Zealand’s exports, in value terms, were 77 % raw wool, 12% yarns, and 10% carpets
and rugs; the rest was carded and combed wool and woolen fabrics. In volume terms, 62 % of
raw wool exports were scoured (cleaned) while 33% was exported greasy and the remaining
2% was slipe wool (taken from the hide of the sheep after slaughtering). Over 50% of New
Zealand’s raw and semi processed wool went to Asia while close to a third went to Western
European countries. The single largest export destination was China which took 36% of New
Zealand’s raw wool exports. Other important markets were India, UK and Italy. China and
Australia were considered as two major conversion markets for they imported raw wool, fur-
ther processed it, and on exported. It was estimated that almost 50% of the New Zealand’s
strong wool clip in 2009, in one form or another ended up in the UK and Europe. The UK
consumed in total 55-60 million kg of wool annually and accounted for 11% of NZ’s raw
wool exports. Australia and New Zealand together consumed 20 million kg of New Zealand’s
strong wool, the majority of which went into broadloom carpet. US market consumed ap-
proximately 13 million kg annually, mainly as yarn or finished carpets.
Due to the competition of synthetic fibers, the global wool industry had witnessed decades of
production decline. Between 1990 and 2009 the world’s wool production went down 45%
and global trade down 30%. For the first time in 100 years the production was less than two
million tons in greasy equivalent. While strong wool prices in New Zealand remained largely
stagnant from 1990 through to 2009, input costs such as shearing increased by 30% resulting
in a 60% decline in returns per stock unit for farmers (See Exhibit 4).
The Strong Wool Value System
From its raw initial form to the manufacturing of the final product, wool had to undergo ei-
ther woolen processing or worsted processing. Strong wool, which was primarily used for the
production of tufted carpets, underwent a woolen processing. The main steps in woolen pro-
cessing for tufted carpet manufacturing were scouring, blending, carding, dyeing, spinning
and twisting, and fabric formation or tufting (Exhibit 5). The margins along the chain varied
with the yields obtained from wool, with the cost of each process and with prices (Exhibit 6).
The wool value system in New Zealand (Exhibit 7) started with the more than 12,000 farmers
spread out around the country. Historically farmers would sell their wool through auctions
(See Exhibit 8 for an example of a sales account). In 2009 approximately 40% of wool was
auctioned, 44 % sold directly and 16 % was sold as slipe wool (the wool taken from the hide
of the sheep after slaughtering).
The two major auction brokers were Elders Primary Wool (EPW) with an estimated 42 %
market share and Wool Partners International (WPI) with 32%. Most of the wool sold pri-
vately was purchased by independent wool merchants that cultivated long term relationships
with growers on a regional basis. Some exporters and manufacturers also had procurement
divisions that dealt directly with growers.
The New Zealand exporting sector had been consolidating over the years. In 2010 there were
some 35 exporters; five or six of them controlled 80% of exports. Wool Services Internation-
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al (WSI) was the largest with 30-35% of the market; Masural had a 15-20% share, Brooks-
banks 15-20%, Furhman 10-15%, WG Robinson 10%, and Bloch and Behrens had around 6-
10%.
The two major scourers in the country were Cavalier Wool Scourers with approximately a
60% share of installed capacity and New Zealand Wool Services International (WSI) with 35
%. Wool Services International was the only exporter which had its own scouring facility; the
other exporters outsourced the scouring process. The exporters of yarn had the wool spun lo-
cally on a commission basis. Raw wool and yarn was sold to foreign processors or importers
who then on sold to wool processors or manufacturers.
There two leading carpet manufacturers in New Zealand were Godfrey Hirst and Cavalier
Corporation which together accounted for over 80% of domestic production. Both companies
owned spinning mills from which they met their own yarn requirements. Cavalier Corpora-
tion was also involved in scouring, being a 50% shareholder of Cavalier Wool Scourers. Both
companies sold most of their New Zealand produced carpet on the domestic market. Exhibit
9 presents a description of the leading carpet manufacturers in New Zealand.
Overseas, the organization of the importing business varied by country with the structure of
the industry in each country. Such differences explained why the wool exporters had a differ-
ent organization and used different channels in each country. See Exhibit 10 for a view of
how the exporting process was organized differently to different markets.
The Market for Interior Textiles
Synthetic fibers represented the greatest competition to wool in the carpet and rug industry
accounting for approximately 98 % of consumption in 2009. The major synthetic fibers used
in carpet and rug production were nylon, polypropylene, and polyester. Nylon was used in 65
% of carpets sold in the USA, while polypropylene was used in 30 %. While the consumption
of all textile fibers had increased significantly worldwide, from approximately 15 million
tons in 1960 to 70 million tons in 2009, the consumption of wool had declined since the
1950’s. The share of synthetics fibers increased from 10 % in 1960 to close to 60 % in 2009.
Over the same period wools share declined from 10 % to less than 2 %.
Carpets and rugs made from wool were considered as having some superior attributes than
those made from synthetics. Wool was recognized as having a deep, rich look and feel that
had still not been fully matched by synthetic products. Wool carpets wearing performance
was excellent, if treated properly, and recent research had shown that it was capable of ab-
sorbing and binding air containments such as formaldehyde, sulphur dioxide and nitrogen
dioxide. Wool also had the capacity to absorb large volumes of water which enabled wool
carpets and rugs to modify indoor humidity. In addition, wool was recognized as creating a
superior quality carpet when used in certain textures and styles such as loop pile; it also al-
lowed for more complex color patterns. Wools natural, renewable, and biodegradable nature
was perceived as becoming increasingly important to consumers.
From the consumers perspective there were also some disadvantages associated with wool
carpets and rugs. Wool carpets and rugs required greater care in terms of stain removal and
minimizing piling. They were also more prone to fading if not protected from UV light and
tended to wear down, which could result in bare patches in high wear areas. Another issue
was that the ability of wool products to hold very high volumes of water could made them
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prone to mold and shrinking. This tendency towards shrinking made them unsuited for using
in modular carpets, which were growing in popularity, particularly in the commercial sector.
From the carpet manufacturers perspective there were some disadvantages in using wool.
One issue was that it was more expensive and complex to produce the yarn relative to syn-
thetic fibers because it required more labor and processing steps. It was also more expensive
to dye than synthetic yarn. Another problem was that it had a much lower tensile strength
which limited the speed at which manufacturing equipment could operate. Output could be
twice higher from machines running synthetic yarn than wool. From a price perspective, syn-
thetic fibers had a lower cost than natural fibers such as wool and cotton (See Exhibit 11 con-
sumption and prices of different fibers).
The USA Market for Carpets and Rugs
The USA was the largest market for interior textiles with a total consumption of 1040 mm2
(million square meters) in 2009 and an estimated retail value of US$ 11.69 billion. Wool
products accounted for approximately 2 % of total sales volumes. The USA was also the
largest importer of wool floor coverings (See Exhibit 12). New Zealand strong wool was used
in 45% of all wool carpet consumed in the US.
The USA carpet manufacturing sector was dominated by two companies, Mohawk Industries
and Shaw Industries, which together held a 60% market share. Two medium sized manufac-
turers, Beaulieu and Dixie, accounted for another 20 % of the industry while approximately
25 to30 smaller manufacturers made up the rest. Shaw Industries and Mohawk each had sales
in the range of US$ 4 to 5 billion while Beaulieu’s were around US$ 1 billion. They were
vertically integrated companies with their own synthetic fiber extrusion plants and trucking
fleets. (See Exhibits 13 and 14 for Mohawk financial statement and share price history). Most
of the wool carpets sold in the USA were imported and sold under private brands. Godfrey
Hirst was considered to be the largest provider of wool tufted broadloom carpets in the USA.
The carpet retailers could be divided into three main categories; the large national chains
(20% share), the companies affiliated with buying groups (30% share), and the independent
stores with 50% share. Of the national chains, the largest ones were Lowe’s and Home Depot.
These large chains made companywide buying decisions giving their individual stores no
flexibility as to what they stocked. Wool carpets made up 0.2% of the national chains inven-
tories. Of the companies affiliated with buying groups, CCA Global was the largest one hav-
ing a 65 % market share in this category. These organizations made collective purchases but
the members had some flexibility as to what products they wanted to stock. Lastly, the inde-
pendent retailers had complete control over their stocking and marketing decisions. All retail
organizations would generally carry either Shaw’s or Mohawk brands, but rarely both. They
would complete the rest of the inventory with products from the smaller manufacturers.
The cheapest synthetic carpets had a wholesale price of US$ 11 per lineal meter, with half the
synthetic market priced below US$ 40. In contrast wholesale prices for wool carpets started
at US$ 40 per lineal meter for 50/50 blends and went above US$ 270 for heavy weight 100%
wool. The majority of 100 % wool carpets retailed at between US$ 100 and US$ 140 per lin-
eal meter. At the higher end of the US market the average price for wool carpets was twice of
synthetics.
Some industry participants believed that there was a growing interest in the USA market for
wool carpets and rugs. Consumers’ preferences were moving towards more sophisticated pat-
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terns and textures which were most suited to the properties of wool. The price gap between
wool and synthetic products had been closing in the last decade. An increasing number of
USA consumers would prefer to buy a sustainable, recyclable natural product as long as the
price and other attributes were comparable to the synthetics.
Purchasing decisions vary depending on the market sector. In the case of single family homes
it was most often the home owners who made the decision. When the purchase was for a new
home the builder usually presented the homeowner with a number of floor covering options.
In the case of condominiums and flats the purchasing decision would be made by an interior
designer or facilities management staff. Interior design professionals made decisions for a
very small proportion of the market.
Public Promotion of Wool
The New Zealand Wool Board had been, until 2001, the central body for the funding of wool
R&D and promotion. In 2001, farmers voted for its dissolution. The Wool Board’s assets
were carved out and transferred to new commercial entities. In 2009 the farmers voted to stop
all payments to support industry wide promotion and R&D activities.
The Woolmark (logo in Exhibit 15) was a brand created in 1964 by the International Wool
Secretariat (IWS) to combat the increasing competition of synthetic substitutes in the textile
industries. The International Wool Secretariat was an industry body created and funded in
1937 by New Zealand, Australian and South African wool grower organizations for the pro-
motion of wool worldwide and for conducting technical and marketing research. Other wool
producing countries such as Argentina and Uruguay also joined the IWS. The Woolmark
program included quality assurance standards with specifications according to end products.
There were no fees associated with the license but manufacturers were required to comply
with specifications and provide volume statistics to the IWS. Woolmark was considered a
global brand recognition success story.
New Zealand withdrew from the IWS and its Woolmark program in 1996. It was perceived
that, although it was having a positive effect on fine wool apparel products, it had little im-
pact on interior textiles. The other important concern was that other major strong wool pro-
ducers such as the UK farmers were free-riding the program. New Zealand wool producers,
who at some point were investing between half and one million dollars per week, felt that
they were not seeing enough results for their money. After withdrawing from the IWS, the
NZ Wool Board created Wools of New Zealand to launch and manage a new promotion pro-
gram for the country’s strong wool. The Fernmark logo (Exhibit 15) was then created as New
Zealand’s new wool brand. The new initiative included a quality assurance program covering
all aspects of the supply chain back to the shearing board. It was believed that the quality as-
surance program would increase demand for New Zealand wool and eventually lead to price
premiums. By 2001, 60,000 tons of raw wool was being channeled through the program and
Wools of New Zealand had 249 brand partners in the carpet and rug sector worldwide.
In 2010 the Campaign for Wool (logo in Exhibit 15) was launched by its patron The Prince of
Wales. It was a generic promotion initiative targeted at consumers and retailers and focused
at promoting wool’s natural and sustainable attributes as well as fire safety and durability.
The funding partners were the Woolmark Company, British Wool Marketing Board, New
Zealand Wool, Wools from Norway and International Wool Textiles Organization, and the
National Council for New Zealand Wool Interests Inc. The members of the National Council
for New Zealand Wool Interests Inc. included exporters, scourers, brokers and private mer-
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chants. Amongst the organizations supporting the Campaign for Wool initiative were Elders
Primary Wool, Wool Services International, and WoolFirst (the Federation of New Zealand
Wool Merchants). See Exhibit 16 for how one industry participant described the Campaign
for Wool.
Private Branding Initiatives
Three different groups Elder Primary Wool, Wool Services International, and Wool Part-
ners International, had started their wool branding initiatives after the Wool Board was dis-
continued (see logos in Exhibit 17). Branding ingredients, such as wool, was considered a
highly challenging proposition; even more so if the brands were aimed at creating consumers
recognition. Manufacturers and retailers were not to enthusiastic to carry the wool brand side
by side with their own brand unless the wool brand really made a difference. There were ad-
ditional challenges related to preserving the identity and integrity of the wool from origin to
end product. See Exhibit 18 for how one industry participant explained the challenges faced
when branding wool.
Elders Primary Wool (EPW)
Elders Primary Wool (EPW) was a 50/50 joint venture formed in 2005 between Elders Rural
Holdings Limited and the Primary Wool Cooperative (PWC). The Primary Wool Cooperative
contributed to the joint venture a procurement base of 110,0002 bales of wool per year plus
its storage facilities and transport operations. Elders Rural Holdings Limited had contributed
a sourcing capacity of 50,000 bales, and its wool management, trade and marketing assets
and expertise. EPW was a wool merchant, broker and handler, and offered wool management
services to farmers with wool stores and buyers and field representatives throughout the
country. By 2010 EPW was employing a team of 50 staff and handled 220,000 bales per an-
num. From the five board members, two were representatives from PWC and the remaining
directors and the chairman were from Elders.
The Primary Wool Cooperative was founded in 1972 when 400 growers from the East Coast
region of the North Island came together to form what was known then as the East Coast
Wool Cooperative. In 2001, the cooperative purchased Elders Wools. By 2010 the Primary
Wool Cooperative had a membership of 900 farmers. Farmers’ shareholding in the Primary
Wool Cooperative was based on the volume of wool supplied. A member had to own 1 share,
valued at $1 for every 5kg of wool, with a minimum share holding of $1000. Members were
not obligated to selling their wool through the co-operative. The shareholding entitled them to
receive a rebate of 3 cents per Kg of wool on the brokerage fees which were approximately
17 cents per Kg of wool. Bonus share offerings had been made periodically to increase the
shareholding of the existing members. Shares were of fixed value and could be redeemed
with the approval of the cooperative directors. Voting rights were based on one vote per share
but were capped at 20,000 votes per shareholder. The two largest shareholders held a com-
bined 65% share in 2010. The Primary Wool Co-operative had a board of four directors.
Elders Rural Holdings was originally an Australian owned rural services company that had
started operations in New Zealand in 1903. In 2001, after an acquisition by New Zealand in-
terests, Elders sold its wool interests to the Primary Wool Cooperative. In 2005 Elders en-
tered the mentioned joint venture with Primary Wool Cooperative to form Elders Primary
Wool.
2 1 bale = 180kg
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Branding Initiatives by Elders Primary Wool
EPW had recently launched the Just Shorn wool brand in the USA market. Just Shorn was
targeted at the highest end of the carpet market and aimed to encourage consumers to pay a
premium for high quality carpets and rugs made from New Zealand wool and procured exclu-
sively through EPW. The program included an on-farm accreditation system aimed at provid-
ing the assurance that high quality wool was produced in a responsible way with regards to
environmental and animal welfare issues. A traceability technology developed by
AgResearch was at the core of the Just Shorn quality assurance program. The process in-
volved minute quantities of a phosphorous coated nylon fiber mixed with the wool at the
scouring and blending stage. The phosphorous coating could be detected by an electronic
reader allowing to preserve the identity of the wool along the entire supply chain up down
until the end consumer product. The technology was aimed at assuring the provenance of
wool and at stopping unscrupulous suppliers to free-ride the efforts made in New Zealand.
The major partner in the Just Shorn initiative was the USA based retailer CCA Global Part-
ners. CCA Global Partners was a large co-operative retail group and the largest carpet retailer
in the world. It had seven different retail sectors that operated under several brands such as
the International Design Guild, Prosource, CarpetOne, Floor and Home, and Flooring Ameri-
ca. The Just Shorn branded carpets were distributed through International Design Guild out-
lets which had 120 stores throughout the US. Elders Primary Wool licensed the brand to CCA
Global Partners CCA and through it to International Design Guilds dedicated manufacturers.
Elders Primary Wool invested in brand development and in-store displays while International
Design Guild invested in publications and a website targeted at professionals. Marketing ma-
terials provided emotive images of Kiwi farmers as responsible custodians of land and stock.
In terms of volumes, the expectation at EPW was to supply 7,000 bales of wool in the first
year and 15,000 bales by the third year. The pricing strategy was to start selling yarn at the
market price and then moving up the premium ladder as brand recognition and value in-
creased. The program managers held the view, based on past experiences, that extracting
premiums directly from manufacturers wasn’t possible without a significant commitments
and support from retailers. Communication efforts targeted the interior design consultants and
architects who served high end consumers which perceived carpets as a fashion item and
tended to change carpets every six to seven years. Elders Primary Wool had the yarn pro-
duced in New Zealand and exported to a select number of International Design Guild premi-
um manufacturers such as Fabrica. Any price premiums at the retail end were to be channeled
back from International Design Guild to Elders Primary Wool. Elders Primary Wool would
also supply yarn to hand knotted rug producers in Nepal which had supply agreements with
CCA Global Partners.
Wool Services International (WSI)
Wool Services International (WSI) was a wool exporting company which had started opera-
tions in 1992 to become the leading New Zealand wool exporter. In 2009 WSI had a 32%
wool exports market share (42% of carpet type wools), sales of over NZ$ 150 million and
exported to 30 countries (See in Exhibits 14 and 15 the financials and share prices of WSI).
WSI was publicly listed with 65% of ownership in less than a few hands and the rest held by
management and 3.500 farmers. WSI controlled 50% of New Zealand actual wool scouring.
Wool was procured through auctions, private sales and independent merchants. The gross
export margins would vary between 1.5% and 3%. WSI and all the major wool exporters
were members of the New Zealand Council of Wool Exporters. In the history of the council,
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which was around 100 years, there had never been a default in payment to any one in New
Zealand by any of its members.
Branding Initiatives by Wool Services International (WSI)
WSI had three branding initiatives, Purelana, Glacial, and Redband, all targeted at carpet and
rugs manufacturer. Purelana was a scoured wool brand launched in 2005. Its value proposi-
tion was based on sustainability and on a paper based traceability system from procurement
through to processing and marketing. The program required growers to exclusively supply
WSI for a contracted period of between one and three years. WSI offered two main direct
supply options to farmers, one was a forward contracts based on a forward price of up to
twelve months, and the other was a spot market contract price. The long term supply con-
tracts were intended to create consistency in timing, quantity and quality. Direct supply sys-
tem minimized costs to farmers by reducing handling costs between the farm and the wool
scour, avoiding brokerage charges and marketing fees. Loyal farmers benefited from such
economies.
The Glacial brand was positioned as exceptionally clean and bright scoured wool with a supe-
rior capacity to take dye. The special scouring process was twice as costly as the usual one
and therefore was applied only to the best available wool. Glacial was targeted at manufac-
turers of pure white and pastel shades carpets and rugs. The imaging suggested that producers
for this brand were encouraged to be innovative in stock management practices, pest control
and shearing practices to ensure the quality of the fleece. Although still a small business, it
was considered one of WSI flagship products.
Redband was an initiative aimed at visually differentiating their bales of scoured wool. In-
stead of using the usual brown metal bands to wrap the wool bales WSI changed to a red
band so that they could be identified when their bales were in the shed of their customers to-
gether with bales from other sources. Redband offered quality controlled wool from farm gate
through the WSI scour and all the way to guaranteeing how the wool performed on the cus-
tomer equipment. Although the initiative was started without much expectation, overtime
WSI customers perceived the red ban as a sign of quality assurance.
Wool Partners International (WPI)
Wool Partners International (WPI) was created in 2008 by PGG Wrightson as a wool trading
and marketing company. PGG Wrightson was a publicly listed company with a long history
as a provider of inputs and services to the rural sector in New Zealand. In 2010 PGW had as-
sets of around NZ $ 1.5 billion and revenues of NZ $ 1.1 billion. It was a major wool broker
with a tradition in the farming services business that dated back to the 19th century.
WPI was formed with the idea of becoming 50% owned by PGG Wrightson and 50% by the
farmers through a holding company to be named Wool Growers Holding. The initial public
offering to fund Wool Growers Holding was not successful. PGG Wrightson went ahead with
the plan and transferred to WPI all its strong wool business - a wool procurement team, an
auction management team, an international trading division, a network of wool stores and
quality control facilities spread throughout the country, as well as the exporting company
Bloch and Behrens. In 2008 WPI bought Wools of New Zealand, a wool marketing division,
from Meat and Wool New Zealand.
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In 2010, in a new attempt to bring the farmers on board, WPI issued an investment prospectus
to create Wool Partners Cooperative. The idea was that Wool Partners Cooperative would
acquire most of the wool trading assets of WPI. In November 2010 a prospectus to create
Wool Partners Cooperative was released and the funding campaign started (See in Exhibit 1 a
summary of the WPC investment prospectus).
Branding Initiatives by Wool Partners International (WPI)
WPI had two brands targeted at carpets and rugs manufacturers, Wools of New Zealand and
Laneve. The use of the Wools of New Zealand brand in carpets and rugs required that a min-
imum of 80% total fiber content had to be wool and a minimum of 60% of total fiber had to
be New Zealand wool. The products had to pass performance testing of durability, appear-
ance retention and color fastness. The manufacturers were licensed to use the brand and no
exclusivity was required. Wools of New Zealand had over 100 partners involved in yarn or
carpet production. WPI sources claimed that the brand was carried on 25% of New Zealand
products sold in the USA. Most Wools of New Zealand branded carpets and rugs sold in the
US market were imported from Asia, Europe and the Pacific.
The Laneve brand was to be positioned as an integrity brand, providing assurance to the con-
sumer that the wool was sourced from growers following high standards in terms of animal
welfare and environmental sustainability. A paper based traceability system enabled the wool
to be traced back to the farm. Growers had to comply with given codes of practice about
health, nutrition and safety. The promotion activities were aimed at communicating directly
with manufacturers and retailers and, through advertising in interior design magazine, with
architects and interior designers. An online training program called the Wool College was
aimed at training retail staff to communicate with consumers about the benefits of wool and
the value propositions in the Laneve and Wools of New Zealand brands. The expectation was
that eventually manufacturers would be willing to pay a royalty to use the brand or alterna-
tively pay a price premium for the branded wool.
Decision Time at Wairarapa Wool Growers
In their previous meeting, the Wairarapa farmers had agreed to reconvene to decide if to in-
vest or not in any one of the branding initiatives. The farmers had contrasting views to con-
sider. The most extreme views were, on one side, that farmers should stay away from invest-
ing in the branding of wool and let markets work. One the other side some farmers believed
that they should take total control of the exports of all New Zealand wool to. The middle of
the range options were to invest, with different degrees of commitment, in one or another of
the existing value adding and branding initiatives.
Sam Poulton had organized the farmers in three groups; each group was assigned to present
to the plenary the strengths and weaknesses of each of the wool marketing groups and the re-
spective branding initiatives. After listening to the three presentations, the farmers would
make a decision. Sam was very much focused on the questions they needed to answer. Which
one of these initiatives, if any, was best for the farmers to invest in? Would it be better to just
let the market forces work? Or was it time for farmers to step up and make things happen? If
so, what form of commitment should the farmers be prepared to assume?
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References
Beef and Lamb NZ. 2010a. Wool Statistics. Wellington: Beef and Lamb NZ. Retrieved from
http://www.meatandwool.co.nz/main.cfm?id=259 (accessed on 12/15/2010).
Beef and Lamb NZ. 2010b. Compendium of New Zealand farm facts. Wellington: Beef and
Lamb NZ. http://www.beeflambnz.com/main.cfm?id=261 (accessed on 12/15/2010).
Carter, B., and J. MacGibbon. 2003. Wool a history of New Zealand's wool industry.
Wellington: Ngaio Press.
Daniell, D. 2010. Wool you? Won’t you?
http://www.nzfarmersweekly.co.nz/article/8641.html (accessed on 12/15/2010).
Elders Primary Wool. 2010. About us. Latest news. http://www.eldersprimary.co.nz /
IWTO. 2010. IWTO Market information. Brussels: International Wool Textile Organisation
MAF. 2002. Regulatory Impact Statement: Wool Board Disestablishment.
http://www.maf.govt.nz/mafnet/publications/regulatory-impact-statements/wool-
board-disestablishment.htm (accessed on 12/15/2010).
MAF. 2003. Wool production in NZ. Wellington: Ministry of agriculture and Forestry.
Retrieved from http://www.maf.govt.nz/mafnet/rural-
nz/overview/nzoverview009.htm
(accessed on 12/15/2010).
MAF. 2010. International Trade. Wellington: Ministry of agriculture and Forestry.
http://www.maf.govt.nz/statistics/international-trade/ (accessed on 12/15/2010).
Meat and Wool NZ. 2008. Wool 2008 snapshot. http://www.woolsnz-
partner.com/industry/downloads/wool_wnz_1285.pdf (accessed on 12/15/2010).
National Farmers Federation. (2010). Major Commodities - Wool.
http://www.nff.org.au/commodities-wool.html (accessed on 12/15/2010).
Nicol, A., and C. Saunders. 2009. Meat and wool - Wool production and processing.
http://www.teara.govt.nz/en/meat-and-wool/7 (accessed on 12/15/2010).
NZWSI (2010). News Releases. New Zealand Wool Services International
.http://www.nzwsi.co.nz/market-news-releases.php (accessed on 12/15/2010).
Scoop. 2010a. Starbucks to feature revolutionary “WoJo” fabric.
http://www.scoop.co.nz/stories/BU1010/S00322/starbucks-to-feature-revolutionary-
wojo-fabric.htm (accessed on 12/15/2010).
Scoop. 2010b. WSI invests heavily in Wools future.
http://www.scoop.co.nz/stories/BU1011/S00675/wsi-invests-heavily-in-wools-
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future.htm
(accessed on 12/15/2010).
Wool Equities Ltd. 2009. Keratec. http://www.woolequities.co.nz/keratec.htm (accessed on
12/15/2010).
WPC. 2010. Stronger together: Prospectus and investment statement for Wool Partners Co-
operative Limited. Christchurch: Wool Partners Co-operative.
Wool Producers Australia. 2009. Annual review 2009. Brisbane: Wool Producers Australia.
http://www.woolproducers.com.au/uploads/WoolProducers%20AR%202010.pdf
(accessed on 12/15/2010).
Wools of New Zealand. 2010. Brands. Retrieved from http://www.woolsnz.com/content/en-
US/brands.aspx (accessed on 12/15/2010).
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Appendix
Exhibit 1: Initial Public Offering for the Wool Partners Cooperative
(Summary of the Prospectus)
Highlights:
One share valued at $1.00 per kg of greasy wool produced of which $ 0.20 is payable on application
and the balance to be paid over a four year period.
Shareholders must commit 100% of their wool to the cooperative.
Only shareholders may supply the cooperative.
A wool market development fee of 2% of the value of all wool supplied to the cooperative must be
paid.
Wool partners cooperative will only go ahead if it is able to attract 50% of New Zealand strong wool
production.
Initially the offer was to close on the 30th of November 2010.
Funds raised in the share offering would be used to:
Acquire certain assets of the supply, sales , marketing and corporate divisions of WPI including wools
of New Zealand and Bloch and Behrens but excluding the logistics and handling business of New Zea-
land Wool Handlers
Provide working capital to expand the supply, sales and marketing capability of the business
Acquire and collaborate with other businesses within the wool value chain
Meet costs of issue, transaction and restructuring.
Cost of acquisitions and selected expenses:
100% of Bloch and Behrens: $1,965,000
100% of Wools of New Zealand: $1,237,000
Deferred settlement payment due to WRONZ in relation to Wools of New Zealand ($737,000)
Assets and liabilities of WPI and its subsidiary NZ Wool Handlers which relate to the Supply,
Marketing and Corporate divisions $15,271,000
Has the opportunity to acquire an option to buy NZ Wool Handlers for option price $250,000 by 31st
December 2010 and must be exercised by 30th June 2012 and settled by 30th June 2013.
Preliminary issue expenses: $980,000 made up of:
Advisory, legal and accountancy costs $595,000
Prospectus preparation and delivery $155,000
Communication and marketing costs $190,000
Insurance and ancillary costs $ 40,000
Important points and conditions
A minimum of $13 million must be raised for the cooperative to proceed, which equates to 50% of
New Zealand’s annual strong wool volume.
Only strong wool producers and meat processors producing slipe wool may apply for membership.
A minimum of 500 shares or their Quota shareholding, whichever is greater, is required.
Transfer of shares is at the discretion of the board.
Returns of shares will be in the form of rebates based on volume supplied to WPC. Dividends are pay-
able on the equivalent number of fully paid share held by the member.
Members have one vote per share; if shares are not fully paid up voting will be in proportion to the paid
up shares.
A maximum of 5% voting rights is allowed per shareholder.
The board will consist of between 5 and 7 directors, of which the majority must be grower appointed;
the remainder may be appointed by the board and there must be minimum of two of these directors.
Intention is that premium earned from brands will eventually pay for the market development costs and
that this fee (levy) will no longer be required.
With Bloch and Berhens WPC would be exporting 12% of New Zealand’s strong wool clip.
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Exhibit 2. Wool Production
Figure 2. World and New Zealand sheep populations 1990-2009.
Source: IWTO. 2010.
Figure 3. World and New Zealand wool production (greasy) 1990-2009.
Source: IWTO. 2010.
Figure 4. World and New Zealand wool production (clean equivalent) 1990-2009.
Source: IWTO. 2010.
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Figure 5. World wool production (clean equivalent) 1990-2009: % share of main producers.
Source: IWTO. 2010.
Figure 6. Share of world wool production by micron range (clean equivalent) 1990-2009.
Source: IWTO. 2010.
Exhibit3. Wool Trade
Figure 7. World and New Zealand raw wool exports (actual weight) 1990-2009.
Source: IWTO. 2010.
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Figure 8. World raw wool exports (actual weight)1990-2009: % share of main exporters.
Source: IWTO. 2010.
Figure 9. Export values of New Zealand wool and wool products for year ended March 2010.
Source: MAF
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Figure 10. World raw wool imports (actual weight) 1990-2009: % share of main importers.
Source: IWTO. 2010.
Figure 11. New Zealand raw wool export markets by volume (clean weight equivalent) for
2009.
Source: (Beef and Lamb, 2010a)
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Exhibit 4. Wool Prices and Returns
Figure 12. New Zealand clean wool prices. Source: IWTO (2010).
Figure 13. Trend in average farm real returns and shearing costs per sheep stock unit (SSU).
2004-05 was used as the base year. 2008 values are provisional results. 2009 values are an
estimate.
Source: MAF, 2010b.
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Exhibit 5. Wool Value Adding Processes
Source: University of Waikato, 2010
Wool undergoes either woolen processing or worsted processing). Finer wool that will be
used for woven apparel, carpets and upholstery will go through worsted processing. Strong
wool, which is primarily used for the production of tufted carpets, goes through woolen pro-
cessing. The main steps in woolen processing for tufted carpet manufacturing are scouring,
blending, carding, dyeing, spinning and twisting, and fabric formation (tufting).
Figure 14. Woolen processing flow chart.
Scouring
Scouring is a washing process used to remove the dirt, sweat and grease that has accumulated
in the fleece during the growing season.
Blending and Dyeing
Different batches of wool will often be blended to give the yarn the specific properties that
are desired. Because of the strong absorption characteristics wool can be dyed at a number of
stages. Wool is most commonly dyed after scouring or after spinning and weaving.
Carding
Carding involves combing the wool to remove small particles of vegetable matter (such as
leaves, twigs and seeds) and shorter wool fibres that are undesirable in yarn. It also aligns and
straightens the fibres to form narrow ropes called ‘slivers’. These are gently twisted into
strands that are wound into balls in preparation for spinning.
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Spinning and twisting
The combed wool is spun into a singles yarn, two or more singles yarns will then be twisted
together to form a thicker, stronger yarn which will be used for producing carpets.
Fabric Formation
Tuft carpets are made by stitching the yarn to a backing fabric (tufting). This process creates
loops which are either left as loops or cut, depending on the style of carpet being produced.
An adhesive is than applied to the base of the carpet to seal and lock the wool yarn in place.
Exhibit 6. Wool Processing Yields, Costs, Prices and Margins
The amount of clean wool that could be obtained from greasy wool varies greatly but in New
Zealand on average 1 kg of greasy wool would yields 780g of clean wool after scouring. One
kg of clean wool would yield 0.93 kg of yarn. It is estimated that it takes approximately 1.3-
1.7 kg of clean wool to produce a square meter of broadloom carpet. It takes approximately
1.35 kg of clean wool to produce an average 40 ounce carpet. A medium weight pure wool
carpet (40 ounce) required approximately 4 kg of yarn per lineal meter or an equivalent of 4.3
kg of clean wool. A lineal meter of carpet was 3.66 meters wide. The process of yarn manu-
facturing costs approximately NZ$ 13.50 per kg and the process of tufting around NZ$ 22 per
lineal meter.
The prices of carpets vary mostly with the type of fiber and the weight. In the New Zealand
market, carpets targeted at the low end of the price range such as those made from Polypro-
pylene and light weight solution dyed nylon carpets wholesaled for approximately NZ$ 50
per lineal meter (1 x 3.66 m). Middle range carpets such as medium weight solution dyed ny-
lon, wool blends are priced up to NZ$ 110 and the higher end heavy weight (up to 90 ounces)
pure wool and solution dyed nylon can be priced up to $300 or more. A medium weight pure
wool carpet (40 ounce) will have a wholesale value of approximately $ 120 and retail for
around $ 180.
Wool carpets sit at the higher end of the US market with the wholesale prices starting at US$
40 per lineal meter for 50/50 blends to US$ 270 per lineal meter for heavy weight 100%
wool. The majority of 100 % wool carpets fall between US$ 100 and US$ 140 per lineal me-
ter. In contrast the cheapest synthetic carpets sell for US$ 11 per lineal meter, with half the
synthetic market priced below US$ 40 per lineal meter. The average price for a synthetic car-
pet in the US market was approximately half the price of a wool carpet.
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Exhibit 7. Diagram of the Wool Value System
Figure 15. Flow of wool through the New Zealand Strong wool value chain
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Exhibit 8. Account of Wool Sales Example
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Exhibit 9. New Zealand’s leading carpet manufacturers
Cavalier Corporation was a New Zealand publically listed carpet manufacturer with reve-
nues of NZ$ 247 million and assets of NZ$ 196 million. It specialised in wool carpets and
manufactured about 1 million lineal meters per year. Half of its sales were in New Zealand or
Australia; its main export markets were Canada, USA, North Asia and UK where it targeted
high end residential consumers. Cavalier was a vertically integrated company having interests
in operations throughout the supply chain. It owned Elco Direct which purchased 60,000
bales of wool directly from farmers each year. It also had a 50% share in Cavalier Wool
Scours and two spinning mills with a combined capacity of approximately three million kg of
wool yarn per year. Cavalier management believed that the essential product attributes to
compete successfully in the carpet market were performance, functionality and appearance.
Provenance or the story surrounding the product in terms of history, heritage, ethics and sus-
tainability could influence buying decisions but only if the other attributes were in place. For
that reason Cavalier concentrated its efforts on design and on meeting industry wide grading
standards such as the Australian Carpet Classification Scheme (ACCS) to assure quality irre-
spective of fibre type. Cavalier wasn’t carrying any wool brands on their products.
Godfrey Hirst was a privately owned Australian carpet manufacturer with considerable op-
erations in New Zealand. Most of its production capacity was in Australia where it employed
2000 people. It employed 700 people in New Zealand and had spinning mills in Christchurch,
Lower Hutt and Dannevirke. It had recently sold its scouring facilities to Cavalier who closed
them down. Godfrey’s product range included 100% wool carpets, 80/20 wool rich blends,
50/50 wool blends, 100% nylon and 100% polypropylene. About 50% of its production was
pure wool, 25% were blends and 15-20% pure synthetic. The retail price range of its wool
carpets would vary between as low as $89-99 to a high of $360 (GST included) per lineal me-
tre (12 ft or 3.66 meters wide). It had offices in the UK, USA and Asia. Half of the yarn pro-
duced in New Zealand was exported to Australia; 75% of its carpet production was sold in
Oceania and the rest exported mainly to the UK and the USA. Godfrey Hirst was one of the
largest, if not the largest, supplier of wool and carpets to the American market. Thirty percent
of its wool products sold in the USA were sold to CCA Global. Wool was procured through
independent agents and scouring was contracted out to Cavalier scours. As one of its execu-
tives said “I think at the moment Godfrey Hirst is about the 7th largest manufacturer of car-
pet in the world, but when compared with the big ones we are like a drop in the bucket.”
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Exhibit 10. The organisation of wool exporting to different markets
(view of one industry participant)
“... places likely Nepal and India in particular are low labor cost places and very hands on making rugs, so
you’ll have one person over there who will import a twenty foot container of wool which is about twenty tons.
They will then sell that wool out, half a bale or 200-300 kg to an individual who will take it home and spin it
into the yarn and then bring the yarn back to that person and he’ll pay them for doing that job. He then amal-
gamates all those yarns together and he will sell that yarn to the next stage processor so it can be a very cottage
industry in a place like India. So there could be hundreds or thousands of individuals. Now you go to China,
China still has a lot of low labor cost but they are very mechanized, they do it on scale, so instead of just doing
a few kilos here and there they are buying in thousands of tons and converting thousands of tons into the next
stage of processing. Turkey is mechanized; you would have twenty major players in Turkey. Maybe in China
you could have 40-50 major players. You’d have 50 or so players around UK and Europe that are takers of New
Zealand wool.... So it’s quite convoluted how you get wool in to some of these countries. In Europe basically
you have a combination of agents who act as principals which means they will purchase the wool even though
they say they are agents and on sell it in smaller lots. They’ll buy twenty tons and carve off and sell 2 tons to a
smaller processer here and 5 tons
to somebody else there and then you have the big mills that will import 20
container load
s of wool each month for their own full usage to turn it all the way through to carpeting so you
have all those different types of importing structures. In markets like Iran we can’t sell directly to any carpet
producer. You have to go through an agent who facilitates the business due to cultural and language differences
as well as a major labyrinth of bureaucracy to get around. It depends on which country you are working with,
which model or combination of models suits best. We are using a range of models all the time, in some countries
we are selling directly to the mill, in other places we are selling to a distributor who will buy a box and then
split it off to half a dozen different people, in other markets we have our own agents.”
Exhibit 11. Consumption and prices of different textiles fibers
Figure 16. Percentage share of fiber types making up total world fiber consumption.
Source: Oerlikon. 2010.
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Figure 17. Prices of polyester and wool fibers.
Source: IWTO
Exhibit 12. Imports of floor coverings
Figure 18. Imports of wool floor coverings into the USA.
Source: IWTO
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Exhibit 13. Financial data for selected companies
Table 1. New Zealand Wool Services International financial statements 2000-2009.
Source: NZWSI (2010a) & NZWSI (2010b).
Table 2. Cavalier Corporation financial statements 2000-2009.
Source. Cavalier Corporation Limited (2010a) & Cavalier Corporation Limited (2010b).
Table 3. Mohawk Industries Inc. financial statements 2000-2009.
Source: Mohawke Industries Inc. (2010a) & Mohawke Industries Inc. (2010b).
2011 International Food and Agribusiness Management Association (IFAMA). All rights reserved
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Exhibit 14. Share prices for selected companies
Figure 19. New Zealand Wool Services International ordinary share price
history 2004-2010 (NZ$). Vertical axis is price, horizontal axis is year.
Source: NZSX. 2010a.
Figure 20. Cavalier Corporation Ltd. ordinary share price history
2001-2010(NZ$). Vertical axis is price, horizontal axis is year.
Source: NZSX (2010b).
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Figure 21. Mohawk Industries, Inc. ordinary share price history 2001-2011 (US$). Vertical axis
is price, horizontal axis is year.
Source: NASDAQ (2011).
Exhibit 15. Public wool promotion initiatives
Generic wool promotion brand initiated by the
International Wool Secretariat in 1974 and even-
tually sold to the Woolmark Company
Created by the Wool Board after 1996 to promote
strong wools of New Zealand. In 2001 licensed to
Wool Interiors Ltd and then to Canesis. Sold to
Wool Partners International in 2008.
Generic wool promotion brand initiated by Prince
of Wales and supported by many organisations in
several countries
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Exhibit 16. The Campaign for Wool (as explained by one industry participant)
“What is happening with the Campaign for Wool is that every country and every association, like the Council
of Wool E
xporters are adding funding to it; we have a funding program that is taking off every certificate that is
generated post auction, like all the scours certificates, all the export certificates. There is a royalty fee being
collected off that to do the funding for this and other projects. The carpet manufacturers are funding it, growers
in other countries are funding it, the British wool marketing board are funding it. Now there are growers, but
also the manufacturers and the exporters and the scourers in those countries are contributing funding to it. So
this time even though it’s a generic promotion it is funded by everybody along the pipeline instead of just the
farmers picking up the tabs. So you have got a far better buy in at every level. Now what you get for every dollar
of input you get 10 dollar of kind, by that I mean you get expertise, knowledge, time; companies are prepared to
donate their effort to go to meetings and be part of the organization committee. We do that in company time,
there is no cos
t, there is no charge, we are donating it basically to the campaign. That’s what I mean by ‘in
kind’. This is happening in every area within the industry, instead of just saying we need dollars and we need to
employ people to do this, it’s being done in house by a lot of people and through that you are getting a huge
amount of commitment and a massive amount of buy in, which is why this sort of approach we feel has a far
better chance of success, because you are not just paying outside people to work on your behalf.
Exhibit 17. Private brands and logos
Created by Elders Primary Wool in 2009; target-
ed at high end segments and licensed through
retailers.
Created by Wool Services International to brand
scoured wool and aimed at manufacturers.
Created by Wool Services International to brand
premium scoured wool; aimed at manufacturers
REDBAND
Initiative by Wool Services International to dif-
ferentiate their bales of scoured wool by using red
bands to wrap the wool bales.
Created by Wool Partners International in 2010 to
target high end consumers
Purchased by Wool Partners International in 2008
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Exhibit 18. Challenges in the branding of wool
(as explained by one industry participant)
“...there are two types of selling chains, there is the silo selling chain and there is the vertical mill selling chain.
Vertical mill is where it goes from let’s say a scouring processor or exporter and it is sold to the person who
turns it into the finished product and even has some of their own outlets or has an alliance with places where
they sell it through. For example Cavalier and Godfrey Hirst sell their carpet; they are a vertical mill, they buy
the raw wool, they turn it in to a yarn, they turn it into a carpet and then they sell their carpet out under their
own branding through retail outlets. That is the pathway where you have the opportunity to actually keep your
branding strategy and some possible connection in one way or another all the way through to possibly the retail
end of it. Unfortunately only about ten or 15 % of New Zealand’s wool goes down that pathway. Now the rest of
it goes down the silo pathway and that is where the farmer sells it, someone process it, then sell it to the yarn
maker who takes ownership of it. Once he has paid for it he can do what he likes with it; he turns it into another
form of product, which means he may take our wool and mix it with some UK wool and maybe mix it with syn-
thetics and make a stock yarn or a specification yarn for a specific mill. He then sells that yarn to the next stage
processor who pays him at the time of shipping that product over. So the line is broken again and that is how
about 85% of New Zealand’s wool clip is sold. How do you attach a brand all the way through that pipeline?”
There were also challenges related to extracting and capturing margins and premiums along the value chain.
Another participant explained,
“Most of the efforts to identify and brand the wool don’t carry a margin. It is actually a cost process to do that
these days. You cannot e
xtract from the market place significant margins because of that. It is about consumer
confidence more than anything else. Attaching another brand, to say Cavalier or Godfrey Hirst carpets, which
are marketed under their own brand, is very hard to do unless you have something else that you are prepared to
put in with it to give them a marketing edge. Most of the manufacturers will say that they have spent a lot of
money and time establishing their own imagery and their own branding on their own product. Why should they
take your branding along with it? They want the confidence of your branding up to them but it’s hard to take it
past them to the next stage and extract and additional premium.”
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... The wet samples were weighed (m wet ) and dried at 105 ∘ C for 4 h. WRV was calculated according to Eqn (2). 38 After cooling down in the desiccator the weight of the dried samples was determined (m dry ). ...
... Reductive cleavage of cystine bonds in keratin (1) during dissolution of keratin in calcium chloride-water-ethanol and thioglycolate (CWET) solvent with formation of the corresponding cysteine side chains(2). ...
Article
Full-text available
BACKGROUND Coarse low grade wool holds a share of more than 40% of the worldwide production of 1.2 million tons per year. Wool hair with a diameter above 32.5 μm and recycled wool waste represent an important source of high quality keratin. An efficient and simple shaping procedure to form all‐keratin composites could open a new approach to utilise wool keratin for production of sustainable and biodegradable all‐keratin composite. RESULTS In this work the dissolution and regeneration of wool keratin was studied using a concentrated solution of calcium chloride–water–ethanol as solvent and thioglycolate as reducing agent to open disulphide bonds. Up to 70% of the wool keratin dissolved in the solvent at pH 7, 60 °C. After dilution with water a share of 80% of the total keratin could be obtained as regenerated composite structure while 20% of the protein remains in solution. Based on the model studies, all‐keratin composites were prepared by impregnation of wool with solvent followed by thermal consolidation in a heated press at 60 °C and 2.2–3.3 bar pressure. CONCLUSIONS The new method for production of all‐keratin composites permits production of a protein‐based bio‐composite, which opens new applications for low value coarse wool and recycled wool waste. By use of cheap chemicals and thermal consolidation in standard equipment scale‐up of the technology is expected to be straightforward and commercially feasible, leading to a bio‐based and biodegradable composite material. © 2019 The Authors. Journal of Chemical Technology & Biotechnology published by John Wiley & Sons Ltd on behalf of Society of Chemical Industry.
... This challenging environment narrows or reduces the ability of companies to employ designers. From 2007 to 2012, NZ wool industry reports overlooked the potential role of design to improve the added value, attractiveness, and viability of wool products for export (Faulkner 2012;Conforte et al. 2011;Sheldon 2007). In Sandra Faulkner's Nuffield funded report "Hello New Zealand-This is the Future Speaking" she declared, "we have extraordinary innovation, developers, designers and marketers within our own wool grower ranks. ...
Article
Textile research/industry partnerships have recently gained momentum in New Zealand. This paper makes a preliminary account by focusing on the benefits of the collaboration to Massey University Master of Design postgraduates, companies, and the academics. The students work on a significant problem faced by a company to rejuvenate business or to produce solutions for a particular or a set of problems. The company gains access to new university research and discoveries and faculty members complement their own academic research by securing funds for graduate students. During a one-year period, the students receive a government-funded scholarship and industry mentoring. The aim is to steer success across the textile value chain from economic and environmental perspectives while balancing academic requirements. Typically, the industry-centered design is developed using iterative processes with a strong emphasis on the role of technology, often requiring the acquirement of new software skills to design with industry equipment. The model establishes best practice to share resources and experiences within the thrust of daily industrial life and the demands of a Master of Design degree. This paper aims to gage the benefits of, and challenges in a range of wool-centered collaborative projects from yarn development to sustainable dye to bedding product development to the revitalization of a weaving mill innovative waste to blue sky solutions for a tannery. The research of novel ideas and process innovation leads to enhanced job placement opportunity and new exports.
Article
Knitwear producers in New Zealand are looking for ways to deal with the uncertainties that have arisen due to the COVID-19 pandemic. This research considers the impact of the pandemic and its effects on the development and long-term survival of the knitwear sector. An anonymous online survey was undertaken among New Zealand’s established knitwear manufacturers, with seven taking up the survey. The respondent companies accounted for around half of the total workforce employed in the country’s knitwear sector. The data were analysed using both quantitative and qualitative methods. A SWOT analysis was conducted to place the sector in a global context, identifying necessary measures for future strategic planning. The findings revealed that the supply chain has been disrupted, some businesses have stalled, and the cost of obtaining raw materials has skyrocketed. Due to the impact of the pandemic on the tourism industry, revenues have fallen. As COVID-19 is an ongoing challenge, knitwear manufacturers need to rearrange their supply chains to increase local suppliers and explore new and innovative ways to engage with domestic customers.
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