US deal oversold admits Elders

Elders Primary Wool has conceded it oversold the returns expected from its supply contract with United States carpet retailer CCA Global Partners, announced in February.

Some farmers say they were promised up to $5 a kilogram for their wool only to find six months later it has not been sold, meaning it has had to be sold at auction either by Elders or a competing broker.

National export manager Craig Wilson said Elders had been overoptimistic about what it could achieve, given a decline of up to 40 per cent in carpet sales in the past year.

Declining sales also led to delays in promoting its Just Shorn brand, which was launched in June.

That brand was linked to relationship branding and promotion with CCA Global Partners, and would now happen next year at CCA's annual retail convention on February 1-2.

Wilson said that at that point he hoped to give an indication of pricing.

"When we do come out with a contract, at that stage we will be able to give a sense of the order of magnitude of premium and timing around the delivery of that premium."

He said the relationship with CCA was genuine. "We have people working for us in the US who are in almost daily contact with CCA."

CCA was committed to the Just Shorn brand, and two weeks ago Elders Primary Wool (EPW) presented that branding programme to CCA's advisory board, which included key retailers, he said.

When announcing the deal and the Just Shorn brand, EPW had confidence it would result in an increase in retail carpet prices. However, some EPW staff suggested the deal would see farmers receive $5 a kg for their wool, the result, Wilson said, of confusion.

He was reluctant to say what premiums could be achieved, but believed EPW's marketing strategy of promoting the Just Shorn brand to retailers was correct, as opposed to that of Wool Partners International (WPI), which he said was targeting carpet manufacturers with its Laneve brand.

Wilson said carpet manufacturer Glen Eden had already said it would not pay a premium for wool despite being a WPI partner. WPI agreements were memorandums of understanding which did not obligate firms to buy WPI wool, he added.

Manufacturers would pay more for raw wool only if the products they made were earning more at retail level.

A 5 per cent increase in the retail price of carpet would translate to a significant lift in the price of raw wool, he said, and focus groups before the Just Shorn launch said they would pay a 20 per cent premium for carpet made of sustainable and natural products.

Capturing that extra value was difficult and this had also contributed to the delays finalising the agreement.

- OTAGO DAILY TIMES