One crisp South Island evening in August 2009 I found myself in Oamaru, speaking to a group of about 70 businesswomen gathered at Portside restaurant. I am asked to speak to groups all the time and I generally decline, but when local businesswoman Sue Morton asked me to come and speak to her business network, it ticked three of my boxes: Will this advance the recovery of the wool industry in New Zealand? Will this inspire and motivate women as I, in turn, have been inspired and helped by the women who went before me? And, finally, is it somewhere I would like to go?
It turned out to be a wonderful evening, with the discussion ranging over many themes, from doing business in a recession to feminism. When we finished, I climbed into Cindy and David Douglas’s four-wheel-drive for the 45-minute drive to their home at Dome Hills Station. On a property framed by mountains which are under snow for many months of the year, Cindy and David have diversified their business from pastoral farming to include tourism, and Cindy operates a tourist lodge on the station. However, she thought I might feel a bit isolated staying there by myself so she kindly offered me her daughter Lucy’s bedroom to stay in, as Lucy was away at university. The next morning David, Cindy and I drove through the snow around the station and talked about sheep, skiing and land tenure review. It all felt a very long way from anything I’d ever done before.
It was the third iconic South Island high-country station I’d been on in eight weeks, after John and Heather Perriam’s Bendigo Station in Central Otago, and Christine Fernyhough and John Bougen’s Castle Hill Station in Canterbury. On Castle Hill I’d spent the afternoon mustering merinos with John Bougen and just one huntaway dog. At Bendigo, friends and I had enjoyed John Perriam’s wonderful hospitality in his restored turn-of-the-century homestead and visited the adjacent gold-mining settlement remains.
These visits were part of a new venture for me, chairing Wool Partners International, a commercial entity set up to reinvigorate New Zealand’s strong wool industry — that is, wool 28.5 microns or coarser, used primarily for carpets. This wool comes from sheep such as Romneys. We had just launched a premium brand, Laneve, and announced deals with two large US carpet manufacturers, Glen Eden Wool Carpet and Bellbridge Carpets, to manufacture Laneve ranges from early 2010. These recent milestones, the three high-country sheep station visits and the talks I had been giving to various rural groups, consolidated the feeling that I was in the thick of farming issues and that this was an exciting — and pivotal — time for both sheep farmers and the wool industry.
New Zealand was built on the sheep’s back, as they say. Wool was once the country’s major export, but this proud industry had been in decline for around 30 years, completely outmarketed internationally by the synthetic carpet industry and driven by acrimony, narrow self-interest and far too many players at home. During the previous 12 months, the chief executive of Wool Partners we had recruited, Iain Abercrombie, had taken on a rather heroic challenge: to convince farmers that there was a future for strong wool and demonstrate that the right strategy for success was to bring growers and the market much closer together than the current fragmented state. This was along similar lines to the successful model of New Zealand Merino Ltd, a company formed in the mid to late 1990s to market and promote merino — fine wool.
At my talk in Oamaru, and at Bendigo, Castle Hill and Dome Hills stations, the conversation quickly turned to the crisis facing sheep farmers today. Twenty years ago farmers were paid $6 a kilo for wool used in carpets, but by 2009 they were lucky to be getting half that. Manufacturers in the United States told us that the price of synthetic carpets, which are produced from oil, rose nine times in the year to July 2008, when the oil price hit US$150 a barrel, yet prices paid to sheep farmers for wool declined.
New Zealand produces 30 per cent of the strong wool traded worldwide. We also produce the highest quality wool in the world. This is not just a story we tell ourselves: when I went to the United States in late 2008 and listened to manufacturers big and small, they all said New Zealand wool was the best in the world. Despite this, there have been very poor returns to growers for at least two decades, and over that time our sheep population has dropped from well over 60 million to just over 30 million.
As we discussed that night in Oamaru, how many industries are there in which New Zealand has world-scale volume and a quality advantage? Not many. Perhaps only dairy, and look how the success of Fonterra, New Zealand’s multibillion-dollar dairy cooperative, has transformed the agricultural sector to the benefit of farmers and all New Zealanders. We all agreed — wool should be a marketer’s dream. Instead, the near disintegration of this industry is a national tragedy.
Nylon carpet was invented as a cheaper alternative to wool, but it has grown in popularity and now only a fraction of carpet sold in the United States is wool. Worse, the marketing of the nylon carpet industry features lambs — so they have outmarketed wool using wool’s own imagery!
There have been many books written on the wool industry, and a useful place to start is the gradual demise of the New Zealand Wool Board, which began in the 1990s although formal disestablishment didn’t occur until 2003. New Zealand started withdrawing from the International Wool Secretariat (IWS) in 1994. This meant New Zealand no longer had rights to use its Woolmark — a very well-recognised brand — and it was replaced by the Wools of New Zealand fern-frond identity, often referred to as the ‘fern mark’. Farmers from those days tell me that New Zealand wool growers did not feel they were getting a fair shot from the IWS whose focus was much more on Australia.
With the industry in flux, New Zealand merino growers, who numbered only many hundreds rather than the many thousands of strong wool growers, seized the chance to do their own thing, setting up their own marketing organisation. Bendigo’s John Perriam was a key player when New Zealand Merino was formed. Through the company working with the likes of clothing manufacturer Icebreaker in New Zealand and SmartWool in the United States, the price growers receive for merino has steadily risen. When New Zealand Merino started in 1996, 19-micron wool sold for $6.76 a kilo, around 15 per cent cheaper than Australian wool at that time. By late 2009 New Zealand Merino was offering 19-micron contracts for the active outdoor market at $14 a kilo — a premium of 18 per cent over average Australian prices since 1996. That turnaround was achieved by the growers partnering with manufacturers who produced great products and told the story behind them.
Wool is traditionally a very fragmented industry, with farmers often selling wool to brokers, who then sell it at auction for whatever the price is on the day. Of course, wool is not a disposable product. If a tanker doesn’t turn up at a dairy farm to pick up the milk, the farmer’s got a problem, but with wool, growers can choose when they shear, and how long to keep the wool before they sell it. There is some wool in storage in Napier that’s been there for 18 years! Traders buy the wool at auction and sell it overseas, sometimes directly to manufacturers and sometimes to agents, who in turn sell it to manufacturers. No way is it a value chain: at best it’s a supply chain, and a very inefficient one at that because unless you spin your own wool for knitting, you don’t buy wool, you buy yarn. The whole process of collecting the wool, cleaning it, spinning it, weaving it and turning it into a finished product can take place through many different countries.
I believe that the formation of Wool Partners International is the solution that could turn the industry around. Our principles are to start with the market and create an integrated channel to reach it. We want to leverage New Zealand’s current capabilities, built on 170 years of knowledge and research and development in wool, to collaborate within the industry, securing agreements with manufacturers and large end-user customers that will realise a premium for the quality of New Zealand’s wool and will add value by having the wool spun here wherever possible. We will build on New Zealand’s competitive advantages: our volume, our quality, our sustainability and our reputation. We want to unify New Zealand wool growers, consolidate the wool clip and innovate in the market. We strongly believe that unless farmers control their own industry it will not have a sustainable future, so Wool Partners was set up to be half-owned and majority controlled by the farmer cooperative Wool Grower Holdings, and half-owned by the New Zealand rural services supply company PGG Wrightson and we are very open to the participation of others.
In December 2008 we bought Wools of New Zealand, the company that owned the only international brand marketing support structure for New Zealand wool in the world, with more than 120 manufacturing partners worldwide. Wools of New Zealand was established in 1994 by the Wool Board and was an ‘industry good’ body funded by a levy on farmers, charging carpet manufacturers a few thousand dollars a year to use the brand on their carpet. But it wasn’t able to sell wool directly because it wasn’t a commercial company and didn’t have any direct links with growers.
In the six months after buying Wools of New Zealand and developing our premium brand Laneve, we had a dozen agreements with manufacturers who wanted to be part of what we were trying to create — a strong market identity for New Zealand wool as a premium product.
My vision for the New Zealand wool industry is a combination of what Fonterra has done in terms of aggregating supply and creating a commercially driven organisation, and what New Zealand Merino has done in completely repositioning fine wool. Remember when we used to think wool was that scratchy thing you’d never wear next to your skin? We want to emulate with carpets the fashion component that is now intricately linked with fine merino clothing — after all, we’re as likely to read magazines about decorating our homes as we are fashion magazines about decorating our bodies. Finally, we also want to take a leaf out of the wine industry’s book by showcasing different varieties and regional variations. Different breeds of sheep not only have their own personalities, their wool also has different characteristics and is best used for different purposes. We want to reintroduce a luxury fibre to a changing world.
One of the first projects we took on in that first year was the creation of a premium marketing brand, similar to Cervena for export venison and Zespri for kiwifruit, and I enjoyed putting my skills to use in this context. We created the brand Laneve — a combination of laneus, the Latin word meaning woollen, and weave which nicely rolls off the tongue — which would stand alongside the brand names of the manufacturers. But Laneve isn’t just a brand name: it will also stand for high-quality animal management practices, the quality of the product and its direct path to market.
The two contracts with American manufacturers — Glen Eden and Bellbridge — and the dozen other contracts with US manufacturers that have followed are just the first steps in what is going to be a multi-year recovery programme. And now we’ve also succeeded in getting wool back into the game in the green buildings code in the United States — so it is measured against its own set of criteria rather than compared to synthetics — I feel sure we are on the right track.
It’s true there’s nothing new under the sun. Back in 1931 a prospectus was issued for the New Zealand Cooperative Scouring & Carbonising Co Ltd, which later became the New Zealand Cooperative Wool Marketing Association Ltd. As a grower-owned marketing company, it aimed to bypass the auction system, source wools direct from the farmer and market scoured lots of uniform quality. Over the next 50 years the company grew to the stage where it owned and operated five scouring plants, had more than 11,000 members (probably a quarter of commercial sheep farms, together with many small holdings), and at its peak it handled about 8 per cent of the wool clip. Ultimately it failed — the location of its scouring plant was a disadvantage when container shipping was introduced; always seriously under-capitalised, it was unable to build adequate reserves due to pressure from shareholders to rebate profits, and obligations to take wool from supplier shareholders made it a weak seller. Eventually it was absorbed into the Mair wool group in the late 1980s.1
So what’s different now?
Wool’s time has come, big time — there are now significant groups of consumers prepared to make ethical buying decisions around what they eat, what they wear, the car they drive and what they have in their homes. Today manufacturers are prepared to pay $1.50 a kilo more for ‘organic’ wool — quite a premium when your base price is only $2.50 a kilo.
It is fantastic that Fonterra, our huge dairy company, has done so well for New Zealand, but I strongly believe we need agricultural diversity and a healthy sheep industry alongside it.
Of course, two years ago you wouldn’t have found me arguing so emphatically about all this, discussing wool clips and carpet specifications and shearing seasons. I’d have been talking to business groups about unbundling and cellular networks. But now it seems like one of the most important things I could be doing for this country and its future.
Maybe it’s the Catholic in me that makes me want to devote my time to things I truly believe in (I once saw a play called Once a Catholic and laughed all the way through because it was so accurate). I’ve always been attracted to heroic female figures in the church; my early heroines were Joan of Arc and the great mystic saints such as Catherine of Siena and Teresa of Avila. As I’ve got older it’s become more and more important that my heart is in what I am doing. My new passion for wool is clearly based around a commercial company, but for me it’s also a mission.
It’s a long way from Telecom — but perhaps not so far from Rotorua, where I grew up.