The wool market has battled dwindling demand from the infiltration of high-tech fabrics in the outerwear market for many years and lost supply in its home market of Australia, where growers have increasingly opted for more profitable use of their land.
But a new market has emerged that has helped to boost what Australian Wool Innovation (AWI), the marketing arm for wool growers, sees as a recent spike in consumer usage.
Fresh styling such as Adidas AG’s marquee Ultra Boost, Allbirds and athleisure lines has helped wool footwear come on strong in women’s fashion footwear for Fall 2018. Bayton, Dr. Scholl’s, Seychelles and Timberland are among the brands adding wool uppers to their fashion collections.
AWI’s monthly “Market Intelligence Report” said, “Demand has been driving the wool market. More consumers across the world are looking for wool and not just in cooler months. The advent of merino wool as a superior fiber worn next to skin for leisure and for sport has seen steady growth in recent years. Global companies such as Adidas, Nike and New Balance all use merino wool in their ranges now and this is trend can also be seen in outdoor companies such as Mountain Designs and The North Face over the past decade.”
AWI noted that wool continues to defend its traditional markets in men’s suiting, as well as women’s fashion, “a market where wool had lost significant ground in recent decades.”
Increased affluence in traditional markets such as China and growing demand for natural fibers in athleisure wear has coupled with limited supply to create a “perfect storm” for wool, according to AWI, which represents 24,000 growers in the country that supplies roughly 90 percent of the world’s apparel wool.
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“[Prices] can only go up, [they] can’t go down,” AWI chief executive officer Stuart McCullough said in an interview with Bloomberg.
Prices, which jumped 30 percent last year, are on track to reach $20 Australian ($15.92) a kilogram after climbing to $18.22 Australian ($14.58) on Tuesday, he said. Wool closed at $18.01 Australian ($14.41) on Friday, AWI said in its weekly price summary.
“China is the perfect consumer of Australian wool–they have always been good manufacturers and they also now have the affluence to start buying wool” more for their own use, McCullough said. “They want the finer things and wool will always feature in luxury spending behavior.”
China is the biggest consumer of Australian wool and accounts for about 78 percent of exports. Italy is the second-biggest buyer.
But it’s the U.S. where there is room for significant growth, according to McCullough. Per capita wool consumption in the U.S. is just 300 grams (11 ounces) a year–compared with close to 1 kilogram in China, Europe and Canada, he said.
AWI is driving a campaign to boost use of the fiber in the U.S. with television ads planned for later this year, McCullough said. The campaign will target Gen Y consumers who have a greater interest in responsible sourcing and product life, and will focus on outdoor and leisurewear garments.
“It’s not a new market, it’s a lost market,” McCullough said. “We have to change the perception of wool in the U.S. They often think of it as itchy, scratchy, something your granny knitted you that doesn’t wash very well.”
Along with Adidas, Nike and Puma are using wool in sneakers and clothing as more consumers seek out natural fibers over synthetic. These brands “recognize that there is a generation coming through that wants to know where it comes from and where it is going to,” he said.
Prices will be underpinned by supply constraints with production in Australia mostly stable since around 2010. Exports are forecast to gain just 4 percent to 446,000 metric tons in 2017-18.
“There is no easy way of getting substantial growth in the wool market,” McCullough said, citing infrastructure constraints for farmers. “We will see it tick along at 2 percent to 5 percent growth over the next significant period.”