Assessing Cotton’s Changing Role in the Textile Industry
December 10, 2012 
For the better part of 50 years, cotton has been losing the market share battle to polyester and its synthetic cousins. But the pain hasn’t been as intense as one might expect because the constantly expanding global population continues to demand more and more fiber to meet its needs. So while cotton might be losing overall market share, its overall consumption continues to rise, year after year.
However, the tipping point might be approaching quickly. While global population numbers are expected to surpass 9 billion by 2020, a new competitor – one much more ominous than synthetic fibers – has developed: competition with food crops for planting space.
The need for food will always take precedence over the need for fiber. Researchers are working on that problem, too, as they try to engineer cotton plants that can endure growing conditions with less water (or more water, for that matter) and colder temperatures. If we can’t create new land for cotton to grow on, the thinking goes, perhaps we can make the plant more adaptable and expand the places it can be grown, instead.
Obviously, the cotton industry can’t just sit and wait for science to save the day. The first step to increasing mills’ consumption of cotton – the place we ultimately want to get to – is gaining a realistic look at where the natural fiber stands today in the minds of spinners.
To gain a better understanding of cotton’s current market position, Cotton International engaged Robert P. Antoshak, managing director of New York-based Olah Inc., a marketing, sales and consulting firm. With more than 30 years of experience in the cotton and textile industries, few people are in better position to lead that discussion. Antoshak not only supervises Olah’s global cotton marketing and consulting programs, he also directs global marketing, branding and licensing programs for Bayer CropScience.
CI: Can you provide a brief overview of the presentation you will be giving in Hanoi at the annual meeting of the International Textile Manufacturers Federation (ITMF)?
RA: The title of my presentation is “Global Cotton and Textiles: Friends or Foes?” I chose this topic as the volatility in cotton prices witnessed over the past couple of years has strained margins for textile mills and their customers, branded apparel and retail companies. Planning has become exceedingly difficult. As a result, many downstream customers have turned to synthetic alternatives in an effort to better manage their price risk. The question for cotton producers is if this shift by downstream customers to synthetics simply just a temporary defensive move or does it represent a permanent shift in the market away from cotton? My talk will provide an answer.
CI Cotton clearly has both advantages and disadvantages when compared with synthetic fibers, from a textile mill’s perspective. Advantages would include the fact that it’s a natural and renewable fiber, and consumers generally prefer it for its comfort, breathability, etc. Disadvantages would include the price volatility, uncertain availability due to unpredictable weather conditions, logistics and shipping expenses, and delays if the mill is far from the cotton production. When you compare them head-to-head,
What are the most important pros and most important cons of using cotton vs. synthetics?
RA: One of the key aspects of the relationship between cotton and synthetics is price. Often, people forget that the price of cotton and the price of, for example, polyester staple tend to track one another. When the price of cotton spiked 18 months ago, the price of polyester staple also rose. In turn, polyester staple suffers from significant overcapacity around the world, particularly in China and India. Because of this, polyester staple prices can act as a drag on cotton prices, but when cotton prices rise then almost certainly fiber producers will raise their prices accordingly. However, it is consistent supply that gives textile mills pause during times of cotton volatility. Fiber companies are far better able to meet market demand on short notice, as it is simply a matter of adding or subtracting producing machine capacity to meet demand. If only it were so easy for cotton growers! The vagaries of cotton production are a disadvantage when compared to the predictability of synthetic fiber production. Farmers don’t have the benefit of turn on or off a crop once planting is done.
Even so, natural production has broad appeal to consumers. Natural sells, with the most extreme example being organic. The “green” movement has had its impact on the marketplace, for sure, but not for reasons you might expect. Certified organic cotton production is very small making up less than 1% of global cotton production. Despite its small market share, organic advocates have successfully directed a campaign of awareness and environmental sensitivity far larger than its actual stake in the business.
Consumers have asked for “greener” products. Industry has worked to meet the demand. Although organic cotton has proven not to be viable on a large scale, other initiatives have taken off tapping the broader sector of the global cotton industry. For example, sustainable production is viable using techniques that promote efficient use of natural resources including water and soil management.
The “green” movement has also had a significant impact on synthetic fiber producers as well. Recycled polyester, for example, is all the rage for many apparel companies. Plastic water and soda bottles can be melted down to its base polymer and then extruded as polyester fiber. The polyester may be based on petrochemicals, but it can be recycled – a green message for consumers demanding green solutions.
CI: This is related to the prior question, but if you put on your “spinning mill hat,” what is the thought process a mill owner goes through when making this decision? Do they look at long-term consumer trends, or the immediate needs of the retailer/finished goods manufacturer? Do they analyze their fiber needs weekly, monthly, quarterly, etc.? I am hoping that, with a better understanding of the mill owner’s decision-making process, cotton might be able to come up with a more effective strategy to recapture market share.
RA: Their first consideration is always price, and then they look to find the best means of supporting their price with raw materials. Sometimes mills are asked to run a specific yarn or fabric with particular characteristics, but generally mills are set up to run batches of product. By so doing, mills are better able to manage the cost structure and benefit from economies of scale. Small runs with frequent shifts in product design run up the cost for mills. In turn, their customers are reluctant to pass such prices increases to consumers. We saw that most directly when cotton topped $2.00/lb. The supply chain ate much of the price increase. Even some retailers were forced to eat the higher costs without passing those costs on to consumers for fear of losing customers. At the same time, many retailers moved to lessen the amount of cotton used in their clothes in an effort to offset higher cotton prices. To do so, they simply used more poly/cotton blended fabrics. Polyester at the time was priced competitively opposite cotton. Rayon also made some inroads at the expense of cotton.
CI: Do demand creation efforts, like those of Cotton Incorporated and CCI, have a direct impact on mill owners? Are they ever targeted directly by demand creation, or are those activities reserved for retailers and consumers, with spinning mills simply responding to the shifting demand of their buyers?
RA: As you know, I have been fortunate to work with Bayer and their Certified Fibermax program. Downstream marketing programs are very effective, particularly from the standpoint of creating brand awareness and customer recognition. Awareness translates into sales. Moreover, downstream education is essential for mills as sometimes they are not aware of the latest developments in the cotton industry, new cotton technology and growing techniques. Both CCI and Cotton Incorporated have done an outstanding job of educating textile mills, apparel companies and retailers around the world about the benefits of using cotton. I think this is some of the best money spent by the industry. The talented teams at both organizations make a big difference in the effectiveness of the programs, as without good people to manage the message the effort would undoubtedly fall flat.
Despite all the progress the cotton industry has made in marketing its products, the industry still has to compete with the synthetic fiber companies – which are terrific marketers as well. However, fiber companies are not limited by an industry-wide approach to selling its products. Virtually all fiber companies stress sales of branded products. This is an advantage as they can focus on attributes of their products to stand out from the competition. It’s harder with cotton. Other than promotional programs for extra-long-staple cotton (such as Supima), the industry has chosen to market its products in a broad sense. Cotton is just cotton: the benefits of using cotton a readily available from Cotton Inc. and Cotton Council International, but that’s it. This isn’t surprising, as these programs are industry-wide and cannot favor one brand over another or they would undermine their mandate to promote the entire industry.
Of course, there is the very successful COTTON USA program by CCI, an excellent global marketing program by any measure, but even it falls short in that it cannot promote specific varieties of cotton as its mandate only goes so far as to capture markets for US cotton in general. So what about branded upland cotton? There are few programs out there (other than Fibermax) that help to distinguish one variety of upland cotton from another. Because of this it is easy for mills to just lump cotton together from a purchasing perspective. Some may say that mills want to throw all cotton together because they blend cottons. But this ignores the fact that mills are continually being pushed by their customers to come up with new and different products. It is surprising, for example, how many mills today ask for Fibermax by name and 100% Fibermax in their yarns and fabrics.
CI: Both cotton and synthetics are conducting research into ways their fibers can “act” more like the competition (eg, cotton making inroads into athletic apparel, synthetics researching ways they can look and feel more like cotton, etc.). Do you foresee any of those activities achieving any type of breakthrough and having a dramatic impact on market share in the future?
RA: Such research has been conducted for a long time. It’s really nothing new. But research is essential in order for both sectors of the fiber business to succeed in the long run. On the synthetic side of the equation, work has been conducted to replace petrochemical inputs with natural alternatives.
Examples include corn, soy and milk derivatives. Also, efforts have been made to change the age-old production of rayon to include new sources of cellulose from alternative forms of wood pulp. Most famously, bamboo was marketed as a new product, but was found to be nothing more than reworked rayon. The point is that the synthetic fiber companies have been and will continue to be aggressive in their research and use of alternative materials.
What about cotton? Seed companies have definitely upped their game in terms of quality and improving the characteristics of some varieties of cotton to be more attractive to spinners and textile mills around the world – cotton that’s stronger with a longer staple and greater uniformity. Mills around the world demand quality in their cotton as better cotton translates into better textiles, but better cotton also translates into lower production costs saving mills time and real money.
In some ways, I see both sides of the fiber business – cotton and synthetics – moving closer in that each side continues to borrow characteristics from the other. Synthetics look to replace petrochemicals with natural alternatives, while cotton looks to incorporate new technologies to help to produce a more versatile product.
CI: Does textile equipment have an impact on which fibers a spinner uses? Is cotton-based textile machinery discernibly different in any significant way from those that use polyester?
RA: One of the key advantages polyester has over cotton is its ability to be extruded into filament yarns. These yarns (which look like fishing line), in turn, are woven or knit into very strong fabrics ranging from outdoor applications, to automobile seat belts, to protective clothing, to name a few. Cotton can’t compete in these applications, as it cannot be spun into yarns strong enough to hold up to the demands of such products. Of course, polyester staple and cotton can be blended and run on the same spinning equipment. Such blending is done all the time for performance and cost reasons. So, on the one hand, polyester can operate in end uses where cotton cannot, but on the other hand, there are also end uses where both products coexist.
CI: Any other thoughts/comments?
RA: For the cotton industry to prosper over the long run, development of new technologies will be essential. The market demands it and the cotton industry can deliver over time. Additionally, the cotton industry must focus on evermore focused marketing and educational campaigns. The best technology in the world can wither on the vine without strong marketing.
Remember Betamax tapes? Finally, the industry needs to embrace new business models and not be fearful of changing its way of doing business just because that’s the way business has been conducted for years.
Downstream customers are demanding more of cotton growers and fiber companies. Synthetic fiber companies are actively working to meet the challenge of the ever-changing marketplace. It is imperative for cotton to meet the challenge as well. Remember wool? Today, wool is a relatively small percentage of the global consumption of all fibers. There was a time when that was not the case. Times changed, but the wool industry failed to adapt. Let’s not let that happen to cotton.
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