November 19, 2014 / 9:07 PM / 5 years ago

From scratchy blankets to luxury suits, NZ wool goes up-market to survive

WELLINGTON (Reuters) - Italian luxury textiles house Loro Piana recently made its annual trip down under to select two bales of the finest merino wool, one from New Zealand and the other from Australia, for its premier line of suits, which sell for tens of thousands of dollars.

Sheep farmer Roger Barton shears one of his sheep on his farm in New Zealand's Wairarapa region, November 14, 2014. REUTERS/Naomi Tajitsu

Along the edge of the ultra-fine fabrics, the LVMH-owned clothier stitches a tag denoting provenance and vintage, not unlike the label on a bottle of fine wine.

“Any time we mention New Zealand wool and build brands that mention New Zealand origin, we’re adding value, so it’s absolutely in our interest to say where our product is coming from,” Deputy Chairman Pier Luigi Loro Piana told Reuters.

Loro Piana’s fabrics are a far cry from the scratchy sweaters and blankets made decades ago in the heyday of New Zealand wool, as the world’s second-biggest exporter after Australia goes upmarket to resuscitate an industry in decline since the 1980s.

The luxury market, especially in China, has opened new opportunities although volumes remain small and excess supply has undermined some of the price gains of recent years.

New Zealand exported around $583.6 million in wool products in 2013 according to Statistics New Zealand, down from $1.52 billion in 1989, around the time sheep farmers began converting their land into more lucrative dairy farms.

Once the main export from the South Pacific country, where sheep still outnumber humans six to one, wool production has slumped under an assault from synthetic fibers.

“Wool was pretty damned important in my father’s day,” said Roger Barton, a fifth-generation sheep and beef farmer in the rolling hills of the Wairarapa region, an hour from the capital, Wellington.

On his father’s farm, wool generated around 60 percent of gross income, a figure now down to 15 percent as growing global demand for protein lifts returns on lamb.

“Wool is just not on the radar because it’s too small a part of the total economic package inside the farm gate. The priority now is on meat ... It’s pretty frustrating,” Barton said.

But a growing focus on natural fibers has opened the door for New Zealand exporters to sell what they say is the finest, whitest and strongest wool in the world, lifting prices from the near-rock-bottom levels hit in 2008.

“Everyone hated wool 20 years ago because it was the old-fashioned thing,” said Jeremy Moon, founder of New Zealand merino sportswear label Icebreaker. “We set out to create a new experience for people which was different from their perception of wool, which was something that was scratchy and itchy.”

The firm touts the breathable, temperature-regulating and antibacterial properties of wool from merino sheep, whose dense fleeces protect against harsh conditions in the high country.

Icebreaker’s sales have grown to $165 million from $24 million in 2004, enabling it to expand into Europe, North America and soon to Asia.


A tentative recovery in the luxury goods market lifted fine wool prices to a record high of NZ$17,500 ($13,770) per tonne in 2012, but demand has failed to keep up with production, knocking prices down to NZ$15,200 this year, according to Beef and Lamb New Zealand.

In Australia, the world’s largest merino producer, a similar oversupply has knocked the benchmark price down to $9,140 per tonne last month from around $15,000 in mid-2011, according to Australian Wool Innovation Ltd.

Despite its growing brand recognition, merino accounts for only 5 percent of New Zealand’s wool clip. The rest is from cross-bred sheep, which fetches roughly one-third the price.

Cross-bred wool, too coarse for clothing, is exported in bales mainly to China, to be made into carpets, bedding and insulation. But some manufacturers are now targeting the higher end of these markets to lift margins.

Slideshow (4 Images)

After years of supplying to hotels in China, carpet manufacturer Cavalier Corporation is expanding into residential sales in the world’s No. 2 economy.

“I’d like to be in every up-market villa and apartment in China in the next few years,” said Managing Director Colin McKenzie. “The new money, the Maserati drivers - that’s where we need to be.”

(1 US dollar = 1.2708 New Zealand dollar)

Editing by Lincoln Feast and Alan Raybould

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