2004 AGM - Information forum part 6
Transcript of 2004 AWI Annual General Meeting
Information forum - Mr Stephen Brender - Managing Director of DPK Australia
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KEVIN BELL: Thank you very much, Pascal. I'm sure you share my excitement about the potential for wool into these markets and at the end of the session I'm sure Pascal could answer any queries you might have.
However, we move on and our next speaker is no less exciting in that Stephen Brender is Managing Director of DPK Australia, a major fabric and apparel manufacturer based in Sydney. Just so put it in context, this company, DPK is one of the largest suppliers of women's apparel to the Target chain of Australia and supplies fabric to fashion companies worldwide, including Lands' End in the United States. We're lucky, I guess, to have Stephen to give his manufacturer's perspective on the challenges and opportunities he sees from using wool in his business. We need to know this. Please join me in welcoming Stephen. Thanks.
STEVEN BRENDER: Thank you, Kevin. I would like to thank the directors and management of AWI for giving me the opportunity to speak to you today. I have broken up my address into the following four areas: about DPK Australia, who we are and what we do, why DPK went into wool, challenges for wool including the various perceptions of wool in the market place, the different markets, new markets, future potential. So if you'll bear with me while I introduce you to my company, DPK Australia.
DPK is the totally virtual locally based manufacturer of quality knitted garments, (video) this also include where we different handles and finishes (video) both chemically and mechanically (video) through to garment design, manufacture and distribution.
We live in a very competitive market place, becoming even more competitive with the imminent collapse of the worldwide quota systems in the US and Europe that Pascal noted in his address. The simple reality is that in order for DPK to survive in this very competitive market place against the giants of China and India, we must set out to manufacture our products that are different, difficult to produce, perform better, get it to market quicker or whatever to differentiate our products from those of the manufacturing giants like China so as not to compete just on price. Actually, wool is in a very similar situation, wool being one of the more expensive fibres in the world today fighting the cheaper fibres of cotton and synthetics.
DPK's heritage is in the fashion world. Latterly we have moved into the active sporting wear markets where it is performance attributes rather than price dominates, which parallels our goals. We have always pushed the quality barrier and to that extent we are Target Australia's largest supplier of ladies knitted apparel garments, just to clarify what Kevin said before, Target being one of the few Australian retailers who have steadfastly refused to compromise their quality standards in the pursuit of cheaper prices out of, say, China.
It is this philosophy that not surprisingly led DPK into wool. DPK and wool. Wool is certainly not currently the largest fibre yarn +DPK uses, unfortunately far from it. You will see from this slide that DPK uses a vast array of different yarns, the most dominant currently being cotton followed closely by viscose or viscose type fibres like modal and lyocell.
It's part of our strategic philosophy to produce products, be they fabrics or garments, that are different or better or unique in the market place or just plain hard to get right.
It was four years ago that DPK first exhibited its fabrics along with a delegation of half a dozen Australian fabric producers and companies under the joint banner of Fabrics Australia at the Texworld Fabric Show in Paris. Amongst the delegation was one of your own, Stuart Adams from Izwool. It was Stuart that introduced me to the amazing attributes of wool, its inherent natural elasticity, its strength, its performance attributes in terms of moisture management and so on. He, as you probably know, has developed a wool supply chain under the banner I-Merino, although I recall it as smart wool highlighting these wonderful attributes. In fact, just a few weeks ago, at the most recent Texworld show where we again exhibited as we have every year since our first showing four years ago, a Danish group of activewear suppliers who had heard of Stuart's smart wool, as they called it, came onto our stand and asked if we could supply smart wool and went on to list smart wool's performance attributes. I tried to explain to them that all Australian Merino wool has these same attributes, although I felt they seemed reluctant to accept this. In the subsequent Texworld, DPK and Macquarie textiles, a woven wool suiting fabric manufacturer that you may be familiar, were the only remaining Australian exhibitors.
Until this last exhibition it was quite embarrassing when potential customers would come onto DPK's stand and ask to see our wool range. Being an Australian fabric producer they assumed we must supply wool. We were only able to show two fabric headers from a range of several hundred. It became clear to us that there was a potential and growing market in knitted wool fabrics worldwide and that few companies were serving that market effectively. So DPK strategically developed its own wool collection. If Australia is known for anything, it's wool, being the world's main supplier of fine and micron Merino, over 90 per cent, Woolmark's research said. This became our focus. If an Australian knit fabric company was to make a name for itself in the world market place, we decided that wool had to form part of our arsenal. I brought with me today a selection of our wool collection which you can go through at your leisure following the forum. I believe they are exhibited in the marquee outside.
So what are the problems or challenges associated with wool as we find them? Firstly, wool is expensive. Other than elastomeric that is used in only a small percentage to add stretch to fabrics of course, wool you don't necessarily need to use it due to wool's inherent elasticity it is the most expensive yarn we use, which is ironic, of course, because you believe that you're not getting enough for your wool, as Ian Rogan said this morning.
In the middle volume fashion market as opposed to the high end that DPK's garments are sold, wool is perceived in much the same way as the exotic fibres of cashmere, angora and mohair. In the knit fashion market, as opposed to the men's suiting market where wool or wool blend fabrics almost dominate, as Pascal reported, we need to work hard to explain why wool is to expensive relative to other products like cotton and synthetics. At present we're selling to companies both in Australia and overseas who already know and appreciate wool, especially in Japan. The big task is to expand this market worldwide. In fact, we're very excited to be ever so close to securing a very significant opening order for the volume Japanese retailer and what's even more exciting is it's for their spring/summer range, not their autumn/winter range.
The performance activewear market on the other hand is different. Here wool's performance attributes are, and with further education will be, more appreciated irrespective of price.
A further challenge is in conflicting consumer perceptions and the various misconceptions about wool in the consumer market place. The amount of times I've heard from consumers or customers, both retailers and suppliers to retailers, that wool is itchy and hot is mind numbing. Woolmark's own research, which I'm sure you've all read, has graphically and clearly shown that their consumer perceptions of wool being itchy and uncomfortable standing side by side with it being soft to touch, or expensive yet worth paying extra for. Other examples are too hot and only for cool climates, yet we all know wool is cool in summer and warm in winter. Or some believe wool is hard to wash and shrinks, yet others believe it's easy to care for and maintains its shape. Of course, this research also reflects the huge varieties and qualities of wool in different products in the market place.
It was a (inaudible) research study that concluded that a recent review by a panel of exerts consistently rated wool better than its public perception, the consumer perceptions of our wool is lagging wool's actual capabilities and consumers are unaware of some of its most positive attributes. In addition, there's an overall ignorance of wool in the market place. As I referred to earlier in my experience it is recently with the activewear customer looking for smart wool, most people even from the textile industry itself have no idea what an incredible fibre wool is and it's all natural. Other than people from AWI, everyone who has seen our wool fabrics are amazed at the natural elasticity of our wool fabrics and suggest that there must be an elastomeric yarn in them.
So as a manufacturer we must develop processes which address these negative consumer perceptions. We need to develop fabrics which are machine washable, don't shrink excessively, don't pill, are easy care and all at competitive prices.
At DPK we're proud to have put together a collection of wool fabrics including some with our new mechanical developments to produce what we call polished wool, which makes wool feel like silk. Your Eric Finnie of AWI demanded as much. He said, "Let's try to make wool not feel like wool" and he's actually right. In the fashion world we need to develop new innovative fabrics which surprise the consumer. "That's nice - oh and it's wool." We need an educational campaign to get the consumer to understand and appreciate the incredible attributes of wool to appreciate its value. To this extent we use fine micron balls to produce shear wool and wool blend fabrics to show case wool's great attributes with new different handles and finishes. We're modifying our knitting and finishing techniques with new yarn sources to produce the looks and handles that we are looking for.
Unfortunately there's still a price point that must be achieved at the retail end, no matter what end of the market you're selling to. As an example, at our last trade show in Paris we really excited the Marks and Spencers buyer of a new collection they had recently launched called Limited Collection, a better end of range of fashion garments that they are distributing to 150 of their 300 stores. He initially selected several of our wool fabrics but during the final selection culling process, he selected the cheapest. Admittedly it was still beautiful, special, but it goes to show that even at the Marks and Spencers level, the price point dominates. On the other hand, we've successfully penetrated Target Australia with wool for the next autumn/winter season and they've tripled their orders even before the season kicks off, so I guess woolgrowers and their wives, I think we have to start shopping at Target to at least get them to triple them again.
Other areas of activity. The luxury casual wear area where wool jersey and rib fabrics can replace cotton and rayon fabrics in both ladies' and men's collections. We are currently negotiating with South African menswear manufacturer retailer who is looking to replace his cotton skive program with a more luxurious wool product to differentiate his product from the mainstream.
The active performance wear market. This includes surf, bike, action sports, hiking, adventurewear and now even embraces the streetwear market. Here functional performance of the product is paramount and innovation and newness is viewed as necessary to give a competitive advantage. In these markets, as a recent research study by Andrew Rich ex-Mambo commissioned by AWI, showed, it is not that companies expressed a negative view of wool, it is simply the fact that wool just hasn't appeared on their radar. If it did, it was poorly understood. Wool was certainly not seen as a sophisticated fibre and/or aligned with advanced technology solutions that drive that industry. As an example of this was a Helly Hansen garment that I recently purchased while I was in Europe. Now they showed that Helly Hansen is the premium adventurewear company in the world and one of the few that has its own research and development departments. The product is made from a polypropylene wool bi lab fabric with polypropylene on the inside and wool on the face. We assumed that the polypropylene on the inside was to avoid the itchy wool next to the skin system and, judging by the quality of the wool that was on the outer layer, it certainly would have been uncomfortable. It also shows an ignorance of different qualities of wool and wool's various attributes.
Similarly we've recently heard from a major performance fabric producer in Indonesia, a company called Texmaco who supply polar fleece type fabrics to all the top adventurewear retailers of the world, including in the USA, North Face. They have been asked by North Face and others, including Columbia, Patagonia and Nike, to develop sophisticated wool blend products and bi lab soft shell fabrics with wool, either using it together or using their proven bonding and lamination technologies with different wind breaks and air permeability. We expect various versions of wool fleece originally developed by AWI to invade this market in the foreseeable future. As you may know, this market was initially opened up by the New Zealand ice breaker wool range which has created enormous interest in wool products generally for the adventurewear market.
Further education of the manufacturers, the retailers and the consumers in this market is needed right now to solidify wool's position and explain it's incredible performance attributes, otherwise it will again be lost to synthetics.
Technical fabrics. How is it possible that not every racing car driver wears a wool all in one suit under his or her racing gear? Wool, as we know, is a natural fire retardant. How could Nomex, which is not even cheaper, it's actually more expensive, have made such inroads into this technical market?
And so to the future. DPK will continue to focus on fabric developments to the fashion industry. It's our heritage, it's in our blood and no doubt there will be continued price pressure in this market so we need to keep coming up with newness, especially in wool, to justify its value. DPK will pursue other markets, where the performance attributes of wool can and will be more appreciated.
We believe the performance sport activewear market is one such market where wool is underdeveloped and has a great potential for significant growth.
To summarise then. One, there is a need to educate the consumer as well as retailers and manufacturers in all markets about the incredible value of wool and its inherent attributes and to dissolve the misconceptions of wool in the market place and resolve the conflicting perceptions of wool. Two, in both of the fashion and even more so the activewear and performance fabric market, the time is right and the time is now for whatever reason people are looking for and asking for wool. Wool is all the rage at the moment, I'm telling you. And number three, we all of us here need to develop new, innovative products to present to the market place with performance attributes, beauty, softness, colour, whatever, to grab this opportunity. In this regard we've been working with AWI with Eric Finnie and his team in several projects, including different yarn developments and spinning systems and dye stuff and chemical treatments to achieve this end.
Thank you for having me.
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