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Industry Navigates Organic Cotton Boom

With global retail sales of organic cotton topping $1 billion last year, companies in the supply chain are searching for the best way to maintain sales momentum and deal with climate change, high oil prices and savvy consumers.

PACIFIC GROVE, Calif. — With global retail sales of organic cotton topping $1 billion last year, companies in the supply chain are searching for the best way to maintain sales momentum and deal with climate change, high oil prices and savvy consumers.

More than 300 players in the category — from farmers in India and spinners in Japan to clothing designers in Canada and retailers such as Nordstrom, Wal-Mart and South Africa’s Woolworths — convened here last week to brainstorm on the intricacies of their challenges.

The conference, sponsored by Organic Exchange, a Berkeley, Calif.-based nonprofit trade group funded by some 200 members including Topshop and Gap, opened amid a report that global retail sales for organic cotton products increased 85 percent to $1.1 billion last year, up from $583 million in 2005. Sales are projected to grow to $1.9 billion by the end of this year, and to $3.5 billion next year, $4.5 billion in 2009 and $6.8 billion in 2010.

The top five users of organic cotton were Wal-Mart for the second straight year, Nike, Woolworths, Coop Switzerland and Germany’s C&A. The quintet accounted for half the world’s consumption of organic cotton.

Organic Exchange said the amount of organic cotton produced globally rose 53 percent to 57,931 metric tons, or 265,517 bales, last year from 2005. Turkey, India, China, Syria and Peru were the biggest producers of the 24 countries that grow organic cotton.

Buoyed by future prospects, speakers and guests discussed how to create sustainable design and “slow fashion,” or clothes that are made of quality materials and are intended to last years without succumbing to wear and tear or seasonal trends.

The participants stayed in a hotel — designed in the natural, early 20th-century style of the Arts and Crafts era — on Asilomar State Beach outside of Monterey, Calif., where rooms lacked telephones, TVs and Internet access. Although acknowledging long-term challenges to manufacturing and sourcing, such as high oil prices, poor agricultural conditions affected by climate change and the scarcity of water to farm cotton, they didn’t seem fazed by the cooling retail environment that might curb consumers’ appetites for paying a premium for organic cotton.

The lack of discussion of such issues frustrated Ivy Choi, design director for Canaren, a casualwear manufacturer based in Toronto, because the first question retailers ask her is how much a product costs. “I have to be commercial,” Choi said.

Cost was also a factor dictating whether companies such as Ann Taylor should jump on the organic cotton bandwagon. Another issue is style, said Tiffany Simms, a representative for New York’s Alpha Logica, which produces promotional bags for other companies.

“There’s frustration in making it fashion-forward and giving it an edge,” she said.

Lynda Grose, a former designer at Esprit and sustainable fabric design instructor at California College of the Arts in San Francisco, said it is important to get ideas out.

“The very new ideas tend to be done by new companies and small companies that have less to risk,” she said.

Joan Mudget, vice president of supply chain in Nordstrom’s private label business, said the Seattle-based retailer set a goal to allocate as organic 20 percent of the cotton it uses. Nordstrom recently created two women’s brands that are based on sustainable fabrics: the athletic line Zella and the sportswear brand Stem, sold in the store’s t.b.d. department.

To overcome concerns regarding price, lead time and quality, Nordstrom implemented contracts in January with cotton merchants, yarn spinners, fabric weavers and cut-and-sew factories. For instance, a contract with a cotton merchant outlined future deliveries and a deal with a spinner guaranteed the purchase of textiles from that particular cotton merchant.

“What this did was it guaranteed the price,” Mudget said. “It guaranteed the certification. Anybody could pull from it and it helped with the lead time.”

At Wal-Mart, sustainability is a means for the $345 billion retailer to run a more efficient, competitive business. In addition to shrinking the size of its business cards by half to save paper, Wal-Mart asked several textile suppliers to keep a scorecard detailing points such as the amount of fuel used to manufacture fabrics, waste water treatment and requirements to machine wash or dry-clean garments. Wal-Mart hopes to eventually apply the scorecard system to about 800 suppliers next year, said Kim Brandner, senior manager for sustainable textiles at the Bentonville, Ark.-based retailer.

The scorecards underline a growing need for transparency in sustainable business. For instance, Made-By was founded in the Netherlands in 2004 to identify brands that use environmentally friendly materials and factories with good working conditions.

“Consumers are going to get a lot more savvy about where their products come from,” said Sarah Severn, Nike’s director of corporate responsibility, noting that, as more consumers buy online, they also will use the Internet to research the merchandise’s provenance.

Smarter consumers respond to smarter marketing. Renée L’Abbé, creative strategist for product design consultancy Creative Research Unit in Vancouver, identified four types of “green” shoppers: the trend-focused, celebrity-obsessed consumer; the consumer interested in wellness products; the aware consumer who votes with her dollars, and the gadget-loving consumer who values technology and innovation. The ramifications of appealing to this quartet are that the green products must be as fashionable as possible, evoke luxury and show how they are responsibly made.

“Maybe not all green consumers are ethical consumers, but maybe they are choosing consciously,” she said.

To aid such customers, Ian Yolles, a vice president at Portland, Ore.-based outdoor clothier Nau, said each product in its four branded stores comes with a card that customers can scan at a kiosk to learn about the fabrics’ origins and other information. If the customers buy the clothing, they can opt to carry the item home or have it shipped free with a 10 percent discount on the total price.

“Customers are moving back and forth between these two channels — e-commerce and stores,” he said.

Another theme at the conference was Africa’s rising importance in agriculture. Aveda said Africa is the leading source of its essential oils, including ylang-ylang from Madagascar. Organic cotton production in Africa grew 83 percent last year from 2005. Nordstrom’s Mudget said she hopes to sign contracts with African growers because that continent will be an important source in the future.

“Africa’s got so much potential,” said Emil Grey, business project manager overseeing organic cotton for Woolworths, the 76-year-old retailer in Cape Town that has annual sales of more than $2.5 billion. After introducing organic cotton clothing in 2004, Woolworths aims to grow sales of 100 percent organic cotton clothing to $60 million by 2012.

TOP FIVE USERS OF ORGANIC COTTON THIS YEAR:
1. Wal-Mart
2. Nike
3. South Africa’s Woolworths
4. Coop Switzerland
5. C&A