Can strong wool recreate the success of merino products like Allbirds?

by Tina Morrison / 06 December, 2017

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Merino sheep on Central Otago’s Lindis Peaks Station.

The country's major merino marketer aims to repeat its success with “unloved” strong wool by selling direct to manufacturers around the world. 

Sheep farming was once New Zealand’s most important agricultural industry and wool the country’s most valuable export. But with strong-wool prices in the doldrums, it’s been costing farmers more to shear their sheep than they can get from selling the wool, and the fibre has fallen to 19th among New Zealand’s commodity exports.

Not all wool is equal, of course, and buyers can’t get enough soft, fine merino, with prices being pushed ever higher, commanding six times the price of strong wool. Demand is outstripping supply, which has prompted concern from big users such as outdoor clothing company Icebreaker and shoemaker Allbirds that they may not be able to source enough wool in the future.

Icebreaker expects its sale to US apparel giant VF Corporation, announced in November, to accelerate growth plans and it has just inked a 10-year $100 million contract with merino woolgrowers through the New Zealand Merino Company for local wool supply. It’s the longest contract secured for the fibre and has been described as “the stuff of fairy tales” for an industry historically characterised by volatility and uncertainty.

Much of the credit for merino wool’s elevation can be attributed to the efforts of New Zealand Merino, formed by farmers frustrated that their high-quality fibre was being devalued by its sale as a low-value commodity at auction.

John Brakenridge has been a driving force behind the rise of merino. His older brother Brian was the merino sheep farmer behind the first prototype for Icebreaker and John has led New Zealand Merino since its inception in 1994.

New Zealand Merino’s John Brakenridge.

Sidestepping auctions

Over the past two decades, New Zealand Merino has succeeded in converting the wool into a premium product by setting up direct supply contracts between the farmers and end users of the fibre around the world. They range from local brands such as Icebreaker to Italian luxury fabric manufacturer Reda and UK knitwear company John Smedley.

As well as providing more stability and certainty for farmers and manufacturers, New Zealand Merino has helped craft a story around wool production, enabling a merino jersey to be linked back to farms with high animal welfare and environmental standards. These days, the grower-owned organisation controls about 73% of New Zealand’s $120 million merino wool clip. More than 70% of that wool is sold through contracts.

Now Brakenridge wants to turn his attention to New Zealand’s strong-wool clip, much of which is still sold through the auction process, where its fortunes are determined by the ebb and flow of global commodity markets.

Wool fibre is measured by its diameter, in microns. Fine, soft merino wool is about 18 microns and is typically used for clothing, whereas strong or coarse wool of 30-plus microns is typically used for carpets and upholstery. The local strong-wool industry has just ended its worst season since the global financial crisis, after China, a manufacturing powerhouse that’s the largest buyer of the fibre, switched its preference away from strong wool and towards fine wool, which led to unsold bales being stockpiled around the country.

“You should never waste a good crisis,” says Brakenridge, although he adds that the wool industry’s crisis actually emerged a few decades ago with the arrival of synthetics, which the industry failed to identify, get in front of and adjust to.

With the success of merino behind it, New Zealand Merino signed a deal in February last year through the Ministry for Primary Industries’ (MPI) Primary Growth Partnership (PGP) programme to boost the prospects for strong wool using the same techniques that worked for merino. The PGP scheme is the ministry’s flagship investment programme aimed at improving the value, productivity, profitability and sustainability of the country’s primary industries.

Icebreaker clothing.

Icebreaker clothing.

Funding over seven years

The Wool Unleashed programme will see MPI and the industry each contribute $11.05 million of funding over seven years to try to lift strong wool out of the commodity cycle, with potential economic benefits to the country of as much as $335 million by 2025.

“We’re in something of a fortunate position because we’ve built up the platform of merino, which was exactly the same,” says Brakenridge.

So far, New Zealand Merino has signed forward contracts for strong-wool supply with US-based wool carpet company The Dixie Group, Netherlands-based Best Wool Carpets, UK-based Brockway Carpets, Australian-based Prestige Carpets and Danish slipper manufacturer Glerups, at significant premiums to the market price.

Brakenridge says the recent global trend away from synthetics and towards natural sustainable fibres means the time is ripe for the type of wool promotion it’s offering, and it expects to be able to sign more big deals with leading manufacturers in the future.

As well as securing new contracts for wool supply, New Zealand Merino’s PGP project is working to improve farm environmental and animal welfare practices, scoping uses for wool and investing in research and development, with the expectation farmers will reap the benefits through a premium wool price.

Allbirds footwear.

A great opportunity

Brakenridge says it’s a time of great opportunity to be launching new wool products, noting Allbirds has managed to build one of the most successful online shoe companies in the world in less time and for less money than would have been possible with a bricks-and-mortar brand.

In an ideal world, Brakenridge would like New Zealand to ditch the trader mentality that sees wool being sold at auction, where the transaction is focused just on price and subject to the boom-and-bust volatility of commodity markets.

Unlike in a traditional wool-seller’s office, where there’s a small team at a trading desk, his staff includes a contingent from liberal arts backgrounds including anthropology, digital storytelling and environmental science.

“The message is instead of just saying, here’s this wool, come and buy it at an auction as it’s sort of disposed of, you wrap the IP [intellectual property], you wrap the backstory, you help people tell the story up the other way, and that’s what we’re working on,” he says.

“To us, the future is a far more deliberate placement of our wool and development of long-term markets, and that wool sets the playing field and isn’t trying to play catch-up with synthetics the whole time.”

This article was first published in the December 2, 2017 issue of the New Zealand Listener.

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