Elders insists American wool deal safe

Rural services company Elders insists its deal to sell high-end New Zealand wool carpets through major American retailer CCA Global Partners is intact, despite persistent farming-sector talk that it is far from signed and sealed.

The CCA agreement is a key plank of Elders' strategy for raising the price of New Zealand wool.

Like its rival Wool Partners International, it aims to reposition wool as a luxury fibre, sign exclusive supply contracts with farmers and sell direct to overseas markets. Early this year it announced the agreement with CCA Global, saying that it also involved five United States carpet manufacturers.

But at least one of those manufacturers, New Jersey-based Couristan, decided several months ago not to go ahead with the arrangement.

Senior vice-president of sales Steve Codella said he attended a meeting where people involved voted down the Elders proposal.

"If anybody else has done anything since that meeting, you know, I can't say. But Couristan is not part of any deal involving that, and to the best of my knowledge the deal with CCA Global Partners and the five suppliers is dead."

Codella said his company decided the Elders offer did not make sense for its business. "There were a lots of costs involved in putting a programme together like this and it was 'who's going to pay for all this?'."

Couristan was a long-time customer of Wools of New Zealand, now part of Wool Partners International, and it was happy with that relationship, he said.

Elders said in a statement yesterday that it signed an agreement and commitment to work with CCA Global Partners in February.

CCA was working with it on all aspects of the wool-marketing initiative, and its new luxury wool brand Just Shorn would be included at CCA's Trade Fair early next year.

Both had been in discussions with carpet manufacturers since May and were encouraged by progress.

"Momentum from these discussions has slowed due to the recession in the US, a strong New Zealand dollar and competitor activity. Progress with each of CCA's preferred manufacturers are at varying levels of completion," the statement said.

The Business Herald understands that what Elders may have with CCA is a memorandum of understanding, rather than a contract.

Sources say this is because it is not possible to sign a contract at the marketing end until supply deals are signed.

Elders has only just launched its drive for growers to buy shares in Primary Wool Co-operative, the farmer-owned side of its wool strategy.

Some farmers are losing patience with the assurances they have been given over better returns for their wool.

One South Otago grower said he gave his clip to Elders a year ago, encouraged by promises of $4.50 a kilo on the strength of the CCA deal.

Wool is currently selling for just over $2 a kilo.

"We haven't heard bugger all back from them since and every time we check up on it, 'oh yeah the wool's still sitting there', it hasn't been sold, and that's a year ago and that's our income, you know."

Howie Gardner, director of Primary Wool Co-operative, conceded there was "perhaps some over-exuberance on behalf of a couple of our agents" at the early stages of the programme.

The co-op was working to address that and to manage farmers' expectations.

THE PLAYERS

Elders: Co-owns Elders Primary Wool with grower body Primary Wool Co-operative. Is running the Wool Marketing Enterprises programme to increase the value of New Zealand carpet wool. Owns the Just Shorn brand.

CCA Global Partners: The US retailer has 14 independent brands such as Carpet One and Flooring America.

Wool Partners International: Joint venture between rural services company PGG Wrightson and farmer co-operative Wool Grower Holdings. Absorbed Wools of New Zealand. Owns the rival Laneve wool brand.