William Bettendorf & Marc Lewkowitz Director of supply chain mktg for South and SE Asia-CCI & President and chief executive-Supima CCI & Supima
Cotton Council International (CCI), the export promotion arm of the National Cotton Council of America (NCC), is a non-profit trade association that promotes US cotton fibre and manufactured cotton products around the globe with the Cotton USA trademark. CCI has 60 years of experience promoting US cotton fibre and products to trade and consumers, and works with spinning mills, fabric and garment manufacturers, brands, retailers, textile associations, governments and the USDA to facilitate the use of US cotton. Its reach extends to more than 50 countries through 20 offices around the world. Supima, on the other hand, is also a non-profit organisation in the US whose main objective is to promote the use of US-grown American pima cotton around the world and is involved in quality assurance and research programmes. Founded in 1954, it derived its name from 'superior pima'. Supima licenses about 400 selected high-quality mills, textile and clothing manufacturers, and brands/retailers to use the Supima trademark. Members finance the activities of Supima by payments calculated on a "per bale" basis. William Bettendorf, director of supply chain marketing for South and Southeast Asia at CCI, and Marc Lewkowitz,president and chief executive at Supima, were in India recently for their third annual seminar at Coimbatore. Bettendorf and Lewkowitz spoke at length about US cotton to Subir Ghosh.
This is the third time that you are here. What was your experience from the last two times, and keeping that in mind how do you look at this year's event?
WB: I am new in this position; I kind of inherited this. So, Peush (Narang) [CCI representative for India and Sri Lanka] would be the best person to respond with details. But I can tell you that had we not had very positive responses, we would not have been here again. It was (on the earlier occasions) very well received, and our Executive Director Bruce Atherly joined Marc last year for this, and he was very impressed with the group that came together. That sealed the deal, and confirmed the fact that we would continue.
ML: This might well be the third event, but we have had a very long history of working in India. So, we have established relationships with multiple, different industry sectors and companies; they have grown over time. The amount of cotton imported into India has grown. The perception and understanding of the quality of US cotton has grown within the Indian marketplace. Specifically for Supima and Cotton USA, we are beginning to see the opportunity now for a nation that has an intrinsic value for cotton and is looking for better quality cotton products to be available in the marketplace.
Could you share numbers on this?
ML: From an import basis (number of bales India imported), they set a record this past year with 250,000 bales of just Supima imports. That's a substantial increase over the previous years.
WB: The numbers we are presenting (here) shows 1.2 million bales.
Going back in time only till the time of the last recession, how much have things changed primarily from the American point of view (w.r.t India)?
ML: For Supima, we have launched into consumer-based activities with a couple of our partners. Those would be Raymond and Arvind. The Supima-based fabrics and Cotton USA fabrics that are going into the ready-to-stitch markets are very substantial programmes. There was some problem with the Egyptian cotton that was being imported into India. The quality of the Giza cotton that was being exported from there had some trouble. It was an unfortunate circumstance for them. But mills are always dependent on stability, and that is one of the biggest strengths that American pima and US cotton have in general. The farming practices-because of the size of operations, the efficiency of the operations, the amount of research done, the involvement of universities in terms of the continuing education and research for growers and new seed varieties, the breeding programmes, and now we have the US Department of Agriculture (USDA) which does thirdparty classing of every single bale. So, every mill that gets US cotton knows exactly what the value is of each bale. So, that gives them unique position to have very uniform laydowns year after year.
And what do you think were the lessons from the controversy over Egyptian cotton? Surely there was a lesson for everyone there?
ML: Sure. There were two issues. One was the problem that Welspun had, which was more of an industry issue rather than an Egyptian-only issue. The other was what developed within Egypt, with regard to maintaining and protecting the identity and quality of the cotton grown there. On the latter, you have to recognise that everything that we do as a country is focused on producing the most sustainable, the most effective, the highest quality possible... and to keep pushing that bar higher and higher. That was certainly supported in what happened this year and last year, and it is rewarded also with the increase in demand. So, that is something we will continue to be doing. We will never rest. The US will always be a cottonproducing country. And cotton is still cotton-it is a beautiful, natural, biodegradable fibre that has not been replaced by a synthetic alternative.
In terms of cotton, there has been a resurgence in the US over the last couple of years or so. What do you think has led to this?
WB: Cotton is a commodity and American farmers are businesspersons. They had to choose whatever crop they could plant to get the best returns for themselves. So, with the increase in global commodity prices, cotton has become a better investment for the last couple of years. That is why we see an increase in acreage. It is really very simple.
ML: You see... you have to market it against alternative crops. California is a little bit more complicated just because of the environment that can hold so many crops. They say they can grow over 200 agricultural crops in the San Joaquin Valley where most of the American prima is grown. A lot of those crops are permanent crop; so, those will displace the cotton crop permanently... for a period of say thirty years. If a grower is going to make an investment in having a crop planted for seven years before they can begin to start reaping the first initial rewards-they want that crop to make a long-term investment viable and then to get to the point of their first harvest, they have to be able to not only financially support that (which means they look for the other crops to support the overall farming operations), they also have to be in a position where they can burden that investment for that period of time till there is a revenue.
And, how much of the acreage as well as production is driven by exports?
ML: For American pima, that would be 90-plus. In fact, almost 95 per cent of our crop is exported. Therefore, exports are incredibly critical to American pima in terms of the demand.
Is any of this export demand influenced in any way by the stockpile of cotton that China has?
ML: I would say it has mainly affected the global cotton position, as opposed to the ELS (extra long staple) position. But it has also had some impact on the ELS position because over the last couple of years China was subsidising the ELS cotton production at 60 cents per pound. So, for every pound that the grower was growing, they would receive from the government those funds. It was disruptive because all of a sudden China became a much bigger producer of ELS cotton until this year when the production has fallen back. So, the challenge for the American pima industry and producers was two-fold. It took out a lot of the demand that was there in China; and Chinese mills that were the largest importers of American pima were not able to import, even though the prices were competitive. So, China dropped from being the largest importer to being the second-largest; India now being the biggest.
Is there any particular reason why the demand for US ELS in India has been rising?
ML: There are two. The first is that there had been an issue with Egyptian cotton over the inconsistency, and also the contamination issues still being driven. The other is availability; because of the size of the American pima crop (being the largest in the world) with most of it being exported, it becomes the most accessible to international textile mills whenever they need high quality or consistent quality cotton (besides being contamination-free cotton). So, when someone is looking for such cotton, they would be looking for a consistent supply. Therefore, the size of the crop, the year-around availability and the USDA classing all make it the go-to solution.
How much of Indian cotton are you competing with (in India)? How do you position yourselves?
ML: The textile mills obviously have an infinitesimal amount of choices-you can look at the US, Australia, Brazil, West Africa, the CIS (Commonwealth of Independent States). There are a lot of alternatives of different fibres. Bettendorf: For Cotton USA, which is upland as well as ELS, it is a question of quality, consistency and reliability. That's why the mills like our cotton. They can sleep well at night knowing that they are going to get what they want to buy. Those are always on spec. Our quality parameters are growing year by year, and we are constantly delivering better quality products. With that they are able to produce better quality textiles and command higher premiums. It is all about building better premiums.
We could add sustainability to that as well. There seems to be a big drive from brands and retailers in terms of knowing what the cotton is, where it comes from, what it is about, how it is grown, and getting a better feeling and comfort with regards to knowing those details about the cotton. In the US and Australia, we formed the Cotton Leads programme. It specifically speaks to the historical improvements that we have seen in terms of the reduction of water use, pesticide use, CO2 emissions, besides better carbon sequestration, less tillage, preserving the soil, better land husbandry, crop rotations, drip irrigation. California is an exceptional case in terms of regulations for production. It is probably the most regulated agricultural environment in the world, not only in terms of local, but also state and federal regulations that dictate what can and cannot be done with regards to producing an agricultural crop. Then, there is the question of labour laws. Brands and retailers want to make sure that there is no child labour being used in the production of cotton. That is not even remotely possible in the US; the consequences are frightening, and incredibly serious. The amount of inspections and regulations that farmers go through are incessant; the reporting that farmers do both mandatorily and voluntarily is unmatched by most of the cottonproducing countries, barring probably Australia. The efforts put forth by a cotton grower in the US is amazing. When the inspectors come in, there have to be reports on water consumption, chemical use; the gas tanks should have vapour collections systems so that no fuel vapours are released into the environment; the pumps have to be electric because they cannot be diesel anymore. The farming equipment has to meet very specific high-level tier system of engines. All farm equipment have to be either upgraded or discarded-it is an incessant, ongoing process. There is no break. At times, you make an investment for one year, but the next year you have to change things all over again.
You talked about the concerns of textile mills, and you also mentioned brands. Do you think the demand for American pima or US cotton overall is driven by the mills themselves? Or, is it about brands exerting pressure on mills to import a particular kind of cotton?
ML: It is definitely both. The mills are doing it for efficiency purposes-it (US cotton) is more consistent and efficient; there is less downtime. Those are financial implications. They also feel there is a value in it when they are offering the yarn since it will have better consistency and quality. That will add better value to their customers. And, with the brand partnerships that we are developing, it is a real target for us at Supima. Unless we have a customer at the end of the chain learning about what they are buying, and understanding the value of what they are paying for, it is hard to drive things forward. So, the relationships that we develop with our brand partners both globally and here in India is about talking with them, helping them, crafting messages that highlight the qualities and characteristics that make the cotton so special and unique. The consumers when they buy the products and appreciate the durability, they come back to the brand asking for the same.
When you talk about awareness building, do you do it through the brands? Or, do you have a plan of your own as well?
ML: We tried that a long time ago. When I joined the organisation almost 15 years ago, we were mill-focused. We were trying to brand ourselves with the mills, and have the mills promote the yarn through the supply chain. That was fine, but to a degree. It took a few years, and about ten years ago, we switched over to working with brands and retailers, educating them about what Supima is, taking them on farm tours showing them first hand what the cotton is and what it takes to grow the cotton, how the quality is controlled, taking them to the USDA to show it is classed. It is through those crafted relationships that we are finding that it is much easier to partner with them, help them craft the story, and get the messaging out; than for us to do it as a fibre by ourselves because we don't make anything. If someone wants to know about Supima, they have to go and buy Supima. I don't have the Supima that they want to buy. And, it works much better when the messaging is tied directly to a product.
Is the messaging bit built into any kind of deal that you strike with a brand? Or, is it up to them?
ML: It is up to them. We are a small non-profit. So, our funds are small. We don't have a lot of assets that we can use to fund a consumer campaign. In the US, to run a consumer campaign you would probably need $10 million to make just a dent. For us, to do a campaign just for the fibre does not work. It requires the participation and engagement of our partners. They have gone out of their way to find something special, something that makes their product stand out in front of their competitors'. Now, they would want to be in a position whereby they can highlight that and share that story with the customers, so that the customers appreciate all the hard work that went in to get the product made.
Do you have any means to track how much of awareness is generated?
ML: We do not have a definitive measure; but what we do track is who our brands are, because we license everybody. So, we can see the growth in the number of brands. When I started 15 years ago, about 50 licensees; today we have over 400. We have had an eight-fold growth in the last 15 years. That's pretty measurable. Then, you take a look at the brands that we have been working with in the last five years or so. We have had companies like Levis, Gap, etc. If you do a search now in India, you will find a lot of small, millennial brands pop up that are labelling their products as being made with Supima. It is not that they are licensed yet, but they have come to the conclusion through their research, sourcing and quality testing that for what they want to do Supima would be what they would want to use. It is interesting to see this organic, natural growth. Those are obviously very good indicators because often they become the disruptors. We have already seen that in multiple ways in the US. Bettendorf: We started the Cotton USA mark in 1989. Over time we have come to the same realisation that Supima has, which is that we don't have the kind of money to conduct the large consumer campaigns that we would like to. So, we have had a shift in strategy in the past year or so. We are back in a way from consumer campaigns into supporting the trade more because at the end of the day we are going to promote the sale of US cotton. That happens when the consumer buys the product. What makes us different from countries that market their cotton is that we follow the cotton through the supply chain. So, we are trying to invest the funds into supporting the trade. Some of our brand partners reserve some funds to support their retail sales promotions. This year, Arvind and Raymond partnered with Supima and Cotton USA and they overshadowed our investments massively. Due to the tiny budgets we cannot compete in the consumer space. We will do what we can do to support our partners.