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Beyond the Bale : September 2016
54 MARKET INTELLIGENCE Shifts in global economic circumstances in the past 20 years have been spectacular. From the wool industry’s perspective, the rise of China as an economic powerhouse and new member of the World Trade Organization (WTO) has gradually translated to a quantum shift in global textile processing. Between 1990 and 2010 most of the early stage processing (scouring and topmaking) that existed in countries like Australia, Germany, France, UK and Japan either closed or in most cases relocated to China. Processing stages further up the supply chain including spinning, weaving and knitting have also followed this journey to the middle kingdom and now it seems we need to prepare for the next textile processing hub to emerge. Most markets that AWI and its subsidiary The Woolmark Company (TWC) operate in have been affected to varying levels by this change and we have had to remain extremely nimble to ensure we resource each global office with the right staff with the best skill sets to address each market’s needs and opportunities. The challenge has been to get the right balance between marketing and technical innovation in each individual market. In the Eastern Hemisphere, our Tokyo office is a good example of how TWC has adapted to the changing needs of the Japanese market. Traditionally a giant in early stage processing of greasy wool, Japan used to buy more than 30% of Australia’s raw wool from auction in the 1980s. Today Japan remains a producer of high-end finished garments, however much of the early stage processed product (top, yarn and fabric) is now sourced from lower conversion cost markets including China, Taiwan and more recently Vietnam and Cambodia. Whilst TWC still provides technical processing and product innovation support in Japan and regard it as high priority, much of our focus and the way we now resource our Tokyo office has shifted towards the highly discerning consumer aspect of the Japanese market in the form of marketing and promotion of wool at a retail level. Given Japan remains one of the largest wearers of wool per head of population this seemed an obvious evolutionary next step. Our team in India has a more balanced weighting between technical supply chain support and marketing with the latter increasing dramatically in the past five years as we look to engage the rapidly growing middle to high income brackets. In China our resource balance is also quite even between manufacturing and marketing. They take nearly 80% of our raw wool from auction and process it there. Whilst around 50% of that wool then leaves China in processed form for offshore retail markets, the other 50% is consumed within China. On this basis our office in Shanghai has both a highly talented technical support force and a passionate and highly experienced marketing team. One of the bigger challenges our frontline teams face is the education of markets and breaking down preconceptions about wool. Unlike some of the more traditional wool consuming markets like Italy, UK, Germany, US and Japan that have a long history of wearing and understanding wool, a number of the rapidly growing economies in the Eastern Hemisphere are less familiar with the fibre, its story and its benefits. This finds our teams running educational workshops with manufacturers, fashion brands and their retail staff on the natural benefits of wool including moisture and odour management, fire resistance and biodegradability. There is also a good deal of time spent ‘myth busting’ about the uses of wool, explaining that wool doesn’t just keep people warm, and promoting the advantages of wearing wool in more tropical and humid climates, as a well as its high level offering in next to skin base layers and sportswear. Doing away with the ‘itchy scratchy’ image is a big focus and the team are making good headway. The good news is that wool is well positioned right now to align with a growing movement in consumer behavior. ‘Lifestyles of Health and Sustainability’ or ‘LOHAS’ is an acronym that you are likely to hear more of in the near future. It refers to a consumer who is looking for a better work- life balance with a focus on personal health, and a healthy planet to pass on to their children. This includes aspects of sports and outdoor as well as natural and sustainable products and practices. Needless to say, wool lends itself very well to this. AWI’s new three-year Strategic Plan recognises this is a key target growth area for wool going forward and our teams are working with an increasing number of high- end sports and retail brands and supply chain manufacturers who are new to wool. This includes traditional cotton and acrylic users who are under increasing pressure from consumers for garments made with functional, natural fibres with a minimal environmental impact. That said, TWC has not turned its back on high-end fashion. In fact fashion in both womenswear and menswear remains a priority for all our staff and we continue to position the wool fibre towards the top of the fashion triangle in both formal and casualwear. Continuing our series of feature articles written for Beyond the Bale by industry experts, in this edition John Roberts, AWI’s General Manager for the Eastern Hemisphere provides his perspective on trends in the region’s manufacturing and consumer markets, and the implications for the international offices of AWI’s subsidiary, The Woolmark Company. ADAPTING TO CHANGING MARKETS John Roberts, AWI General Manager – Eastern Hemisphere
In the Shops - September 2016