Tony Leggett outlines a fresh marketing approach to generate demand for strong wools.
A bold strategy to sell more 100% wool carpet to New Zealanders by making it cheaper will be launched within three months by grower-owned company Wools of New Zealand (WNZ).
The company laid out its plans to offer a range of more affordable carpets to consumers during last month’s annual general meeting.
WNZ chief executive John McWhirter says eliminating price rejection by creating a 100% wool carpet option that is priced just above dyed nylon carpet alternatives is the quickest way to deal with the over-supply of strong wool that is depressing farm gate prices.
WNZ still intends to educate consumers on the superior qualities of carpets and rugs made from wool, but McWhirter says overcoming price rejection is the right strategy to create immediate action for strong wool growers.
The more affordable range of wool carpet will be manufactured by a long-time partner of WNZ, Turkish carpet manufacturer Zenova. NZ grown and scoured strong wool will be shipped to the Zenova plant and return as carpet ready for installation in NZ homes, either direct to home construction firms or through the existing retail channels.
After applying a standard retail margin on trade prices for carpets sold in NZ, WNZ can provide the carpet for an average-sized home in NZ for about $8500, just $300 more than an equivalent specification, solution-dyed nylon carpet, and up to $2500 less than other wool carpet options.
Knowledge and systems developed here in NZ will help the company gear up to attack the mega-sized North American market in 2022.
McWhirter says a key to the success of the strategy lies in having a company with the scale of Zenova to manufacture the carpets cheaply and in owning the supply chain to the homeowner to maximise profit margins.
“Zenova is effectively a toll processor for Wools of New Zealand, taking our shareholders’ scoured wool and turning it into low-cost quality wool carpets,” he says.
McWhirter says growers are price takers in the historic wool carpet production model where margins leak away at every step.
“We don’t have to be the manufacturer. We just need to capture that value at the consumer end of the market because that’s where it is highest.”
WNZ has employed two experienced carpet retail marketers to grow demand in the NZ market.
The company has successfully completed a pilot project, producing enough carpet to cover the floors of 70 new homes under construction by Fletcher Living. This consignment is about to arrive in NZ and will be installed during January.
McWhirter says he is comfortable with a strategy that pitches wool carpet just above the price of equivalent dyed nylon carpet, regardless of wool’s superior attributes.
“The reality is that wool carpet sales currently make up less than 20% of the total sold here in NZ, so the consumers clearly don’t see value in paying extra for wool carpet over man-made fibre alternatives.”
“We believe the only way to increase demand for wool carpets is to remove the price objection that many consumers feel when given the choice at point of sale.”
“We’ve spoken to some retailers over the past few months and they are delighted to talk about the WNZ (Fernmark) brand, so we have a winning opportunity,” he says.
McWhirter is confident of success and says WNZ has sufficient cash to cover its NZ market plans. However, it will need to raise further capital before tackling the North American market, scheduled for 2022. Sources of capital include existing and new shareholders encouraged by the success in the NZ market to invest further money, institutional investment, and debt funding.
Other opportunities identified by WNZ included the carpet market in the United Kingdom, supplying wool acoustic panels for soundproofing, and rug manufacturing.
“We have another idea that if we can activate it, there won’t be enough wool in the world to meet the demand. I can’t say any more about what it is, but we’re looking beyond traditional uses like carpets or rugs,” he says.
McWhirter says WNZ’s Fernmark brand is owned by its 700 farmer shareholders, but only 400 sell their wool through the company.
“We’d love the other 300 to get behind this story and this initiative. We want to use the names of their farms to name the range and colours of our carpets, so we want to connect their farm names back to the carpets that are selling in the retail stores in NZ,” he says.
