Don’t just follow the sheep, follow the market.
There is a lot going on in the world right now. Uncertainty seems to be everywhere. Many industries and sectors are reeling from the dramatic impact of Covid 19. In response, strategists are out in force helping entrepreneurs, business owners, and management executives work out where to next. Sometimes, answers to the future have already been seeded in the past. Take the New Zealand cashmere industry for example. This was an industry that in the mid 1980’s was being touted as the next big thing…and then is wasn’t. So, what happened? Simple, the missing ingredient was market access or perhaps more accurately, a coherent marketing strategy to reach consumers in markets. Cashmere has always been viewed as a premium product and discerning buyers have always been there. Of course, demand is just one component of any market analysis. In 2020, the great news is, demand for premium cashmere never went away and now it’s increasing. With that point established it begs the question: is now the time?
Every industry has its champions, especially in the beginning. Someone needs to ride the alpha brain waves responsible for creating light bulb moments in the brain’s visual cortex. Someone has to provide the brain with a dream and a problem to solve. This is how big ideas get hatched. These creationists are critical too, because without them ideas are not born or nurtured. Strong support is vital for an idea to survive. In the the early stages the nurturing role is often played by the founding entrepreneur. Fragility during the start-up phase is the reason so many ideas falter before they even see the light of day, let alone a consumer. Champions are important.
Two such champions are David and Robyn Shaw, farmers from Clinton in Otago. This couple believe New Zealand is perfectly positioned to produce world class cashmere fibre. They also believe this premium luxury fibre can offer a range of excellent benefits to farmers and they have invested considerable time and money to prove this claim on their own farm. Equally, and importantly, this amazing fibre offers incredible value to consumers. Particularly those seeking to differentiate themselves with tasteful consumption of high-end sustainable luxury. Shouty, conspicuous brands, are not enjoying the traction they once did. Consumer behaviour is changing and so are once endemic fashion trends. It’s not quite so cool to be seen wearing products that are out of sync with today’s human challenges.
For example, fast fashion is likely to face headwinds in the future. It is out of step with the big issues of our time. McKinsey and Company back in 2018 suggested that,
“In fashion, the shift to new ownership models is driven by growing consumer desire for variety, sustainability, and affordability, and sources suggest that the resale market, for instance, could be bigger than fast fashion within ten years.”
Tomorrow’s clothing will require environmental, ethical and sustainable credentials to win the hearts and minds of consumers. Products will need to be durable and last for more than one season. Throw away is yesterday.
High-end lifestyle fashion companies like New Zealand’s Untouched World (www.untouchedworld.com) are already pioneering pathways to these new consumer frontiers. Untouched World understands that today’s ethical consumer wants beautiful, easy to wear, easy care fashion that will last for years. They also understand that sustainability and environmental concerns are very real, here to stay and won’t go away. It’s a disruption moment that is catching many brands snoozing. Attempting to ‘ethics wash’ fashion offerings is doomed to failure. Taking advantage of this situation is where New Zealand could be, and should be. New Zealand can be a lifestyle clothing powerhouse and cashmere can help it get there. Cashmere sits very nicely in the mix with merino too. It isn’t one or the other, it’s both. It’s a potential ‘white gold’ genesis that could fuel more New Zealand start-ups and scale-ups like Allbirds and Icebreaker.
So, awesome, tick, this all sounds exciting. Many would say, it’s a no brainer, but the irony in 2020, is demand for cashmere fibre is running ahead of supply. Cashmere is profitable too with prices for top grade fibre currently reaching $150 per kilogram. As I just stated, cashmere was once known as white gold and once worn, a customer never forgets the experience. The product is beautiful to touch, it’s extremely light weight to wear, warm, and long lasting. New Zealand Cashmere’s farm in Clinton is currently producing fibre as fine as 13 microns. This represents the best of the best fibre available anywhere in the world. For context, only 1 to 2 kilograms of Chinese fibre in every 100 kilograms of fibre produced reaches this penultimate grade, and China doesn’t have the environmental credentials of New Zealand.
In fact, the opposite is closer to reality. The Chinese cashmere industry faces significant impacts and constraints stemming from the environmental limits being generated by climate change. These issues and weaknesses are likely to play out in the minds of consumers as supply chains become increasingly transparent. In the future, consumer decisions will be driven by evidence of provenance, authenticity, and friendly to the planet credentials. These critical elements will become key differentiators for fibre marketers and premium retailers. Again, New Zealand is beautifully positioned to strongly differentiate on its climate friendly credentials and the latest regenerative initiatives will help farmers, manufacturers, marketers, and retailers enhance this position even further.
And the premium story isn’t just for the cashmere consumer. It plays out very well for the farmer too. Shaw states conservative gross margins of over $200 per stock unit are possible, and that’s if you count the forage input at all. This upside is available because goats graze differently and as a result are complementary to sheep and beef. Pastoral farming also needs new strings to its bow and a super-premium fibre would meet this requirement perfectly. This becomes even more so because cashmere fibre can be grown across wider geographical and topographical ranges than merinos. Therefore cashmere can provide an attractive and practical choice for many farmers who cannot produce premium merino fibre due to their farm’s location. Another significant benefit to farmers coming into the industry in 2020, is the space isn’t new. New Zealand Cashmere has also been busy capturing knowledge stemming from the country’s almost 50 years experience in breeding goats for cashmere. As a result, farmers working with New Zealand Cashmere have access to advanced, world class genetics. The Dtreo system being utilised by New Zealand Cashmere is backed by an innovative and dedicated recording system developed specifically for cashmere goats by renowned New Zealand science and technology firm AbacusBio.
New Zealand Cashmere will be partnering with Woolyarns on the manufacturing and production of high-quality yarns side, and Untouched World will turn these yarns into beautiful high value garments. Both of these leading enterprises are leaders in their respective fields and share common values around the future of fibre. They are also intrinsically New Zealand firms who champion produce from New Zealand farmers. That means the story comes from the country’s heartland. This will resonate with consumers and once woven together, the stories of each enterprise reinforce the strength of the cashmere opportunity. These types of initiatives are important to New Zealand’s future. They provide much needed innovation in the food and fibre sector and offer a clear pathway to the creation of high-value exports. They also represent opportunities to increase productivity across the supply chain and by doing so will create high paying jobs in agricultural production, textile manufacturing, fashion design, marketing and premium retailing. These are the jobs New Zealand wants and needs to secure its future.
Most great ideas need large doses of perseverance and resilience to bring the entrepreneur’s vision to life. They also need some luck and timing on their side. When you consider the Shaw’s stubborn commitment to cashmere fibre over the last three decades you realise you’re witnessing a couple with real belief and passion in an idea that to all intents and purposes is now perfectly suited to its time. Cashmere fibre is a luxury fibre with a ready and waiting market. That market is estimated to be worth USD $3.1 billion by 2022. Sadly, most New Zealand farmers hardly recognise the potential goats offer. To put the number into context, the New Zealand Merino Company has been talking up the fine wool industry and rightly so. The total value of wool exports in 2019 was $550 million.
Wine produced $1.7 billion and kiwifruit brought home returns of $1.86 billion. What could cashmere be worth? If New Zealand could capture 10% of the global cashmere market in the next decade that would equate to NZD $450 million per year. Not a bad contribution to the country’s export receipts and GDP. In 1988, New Zealand goat farming peaked at 1,338,000 goats, so it was well on its way back then. In those days, the market was nowhere near as lucrative as it could be today, but reaching these markets remains a challenge. Successfully taking advantage of this cashmere opportunity will require government support, farmer buy-in, serious long-term investment and industry wide commitment to making this opportunity come to life. The Shaw’s have put in the hard yards, and now they need support. Building an industry is not an individual pursuit, it’s a team effort. Working together is an area where New Zealand has proven it can punch well above it weight. It is a country that revels in underdog status. The Kiwi mentality is famous for under promising and then over delivering with surprises all around on the upside. What impact could applying this Kiwi centric approach have on the cashmere industry in New Zealand?
The old objections to goat farming no longer hold up. Times are changing. We’re seeing more regenerative options than ever before. There is Wiltshire shedding sheep and there is plenty of talk around carbon farming and transitioning to value. Ironically, out of the many innovations doing the rounds there are arguably none with the immediate potential of cashmere. It is an industry that ticks every box and comes with an accelerated pathway to generating premium returns in export markets. Farming cashmere offers farmers diversification, environmental solutions, and a ticket away from price driven commodity markets. Currently about 70% of the world’s cashmere production comes from China and cashmere enterprises there are near their limits. Knock, knock, it certainly looks like, and sounds like, the timing is perfect. Manufacturers are waiting, designers are waiting, and consumers are waiting. Perhaps, it’s time to look past the sheep…and climb onto the goat’s back. A similar approach worked before.
By Jim Wilkes