December is here… feeling cold? Thinking of updating and upgrading your wardrobe with trendy sweaters, shawls and mufflers? Before you do that, here’s a question for you. Have you ever thought where the wool would come from? Of course, from sheep, you say. But, have you ever thought, from which country...? This winter, The Dollar Business helps you find the answer, and much more!

Vanita Peter D’souza | The Dollar Business

Winter’s round the corner. And just like millions of others, you must be surfing for winterwear online. Never mind if you don’t like e-shopping. Roadside and branded stores have also updated their winterwear sections. So, what are planning to buy? A Zara T-shirt? A Burberry jacket? Or, a Monte Carlo sweater? If the patriot in you is pushing you to go for Monte Carlo, think again. For, there is very little chance that the sweater you buy is completely swadeshi. Confused? Well, even though Monte Carlo is an Indian brand (the flagship brand of Ludhiana-based company Oswal Woolen Mills Limited), the wool that is used to make the sweater, more often than not, is imported.

By default

It is not that just Monte Carlo sweaters are made of imported wool. The warm red sweater you might be donning this evening and your new soft blanket, which has made your winter mornings more lazy and cozy, are most likely, also made of imported wool!

In case you are shocked to read this, let us shock you a bit more. India, despite being a tropical country and being home to the third-highest sheep population, is the 2nd biggest importer of wool in the world, after China. In fact, in FY2014, India imported over $325 million worth of wool (not carded or combed), most of it from Australia.

More, not good

The moment one goes through such data points, the first question that comes to mind is just why does India import wool in such large quantities. To find the answer, we met Satbir Goel, Proprietor, Capital Woolen & General Mills, a Panipat-based manufacturer of woolen blankets and sweaters. While yarn made by the company are procured by the Indian Army’s sweater manufacturers, blankets made by it are used by Jammu & Kashmir police. “Fine quality wool is required to manufacture sweaters and shawls, and there is a scarcity of this kind of wool in India. Local production is enough to cater to just 5% of the demand. Hence, almost 95% of fine wool or apparel grade wool is imported,” Goel told The Dollar Business. Interestingly, although India  has a large sheep population, Indian wool cannot be used to weave clothes and blankets and is mostly used in the manufacturing of carpets.

Golden sheep

When it comes to wool varieties, that derived from Merino sheep is considered to be of very high quality. And since Australia has almost a monopoly over this breed, the country automatically becomes the top exporter of wool to not only India, but also the entire world. The difference in quality of Indian wool and Merino wool can be gauged from the fact that even the Government of India, not necessarily known to be very quality conscious, has been procuring only Merino wool or woolen clothes and blankets made from only Merino since 2010. In fact, this is one of the primary reasons why Indian wool imports rose by over $100 million (y-o-y) in FY2011.

Sheep to men

Now that we have figured out the variety of wool that India and the world prefers, let’s talk about the processes that take place before you get to wear that perfect sweater. And for this, we again reached out to Satbir Goel. “India, usually, imports greasy wool because the cost of washed wool is extremely high in the international market,” Goel said. In fact, in Ludhiana (India’s unofficial wool capital), there are several units which have the expertise and ability to wash greasy wool. After washing, the wool is carded so that all kinds of dust is removed, and then wool tops are made. These tops are then used for manufacturing yarn. The yarn, in turn, is used to manufacture shawls, blankets, clothes and sweaters.

For diversity

The next obvious question in India’s wool trade is what we do with such large quantities of wool. And the answer to this is not too difficult to figure out. For, not only is there a huge demand for woolen clothes in the North and North East, but India also exports a reasonable quantity of yarn and woven fabrics to Europe (primarily Italy and UK), Japan and US. But why don’t’ we import the end-products directly from China as many other countries do? “We do not import finished woolen products from China, because their quality is not good. So, we import Australian Merino and manufacture our products here,” Goel said.

Importing warmth

According to a Ministry of Textiles report, though India is home to special breeds of sheep (which are the source of fine wool varieties like Angora and Pashmina), the country has not been able to increase production. Similarly, although some parts of South India (for instance, the countryside of Bangalore in Karnataka)  have the right climatic conditions for sheep rearing, they are yet to be exploited. The report also points out lack of adequate veterinary healthcare facilities as one of the reasons for the low production of fine wool in India. High pre-weaning mortality rates and rising red meat consumption are also two reasons for low wool production in India.

Goel feels if the government could pay more attention and provide proper nutrition to sheep, wool yield is bound to increase in India. But in a country, where not the best of healthcare facilities are available to humans, it’s easy to imagine how long it will take for that to reach to our sheep. Until then, we will continue to import in massive amounts, particularly since winters are getting harsher by the year and quality consciousness is on the rise in our population. All this means a multi-million dollar opportunity for Indian importers, to keep their wallets warm. Already feeling the warmth?

“As India’s infrastructure improves, so will wool consumption”

A discussion on wool can’t be complete without the views of Stuart McCullough, CEO, Australian Wool Innovation – the final authority on Merino wool. So, The Dollar Business caught up with the man, who, interestingly, had started his career as a jackaroo!

Interview by Vanita Peter D’souza | The Dollar Business

TDB: What factors have helped Australia become the world’s top wool exporter?

Stuart McCullough (SM): 200 plus years of genetic improvement of the Merino sheep has positioned Australia as the very best and largest supplier of apparel wool in the world.

TDB: Help us understand what is unique about Merino wool, which is almost a monopoly of Australia.

SM: The genetic improvement in Merino has bred out dark and inferior fibres. So, the product is basically pure in every aspect.

TDB: How much premium does Merino wool get in international markets as compared to cross-breeds?

SM: Wool’s price is determined by the fibre diameter and Australia receives a premium for its wool because it is pure, has a low fibre diameter and is prepared with good levels of quality assurance.

TDB: Tell us about your marketing campaign ‘Cool Wool’, essentially targeted at markets like India that have a tropical climate.

SM: Consumption of wool on a mass scale, in any one country, is typically determined by three things – affluence, population and a cold climate. India has the first two, but not necessarily the third. But interestingly, a new trend is emerging called Soft Tailoring. Soft Tailoring is the construction of a suit without the interlinings, fusing and padding of a traditional suit. Combine this with light weight worsted wool fabrics, and you can achieve a very nice warmer climate garment. We are using the ‘Cool Wool’ programme to support retailers and brands that are pursuing this very innovative way of constructing a suit in a deconstructed way.

TDB: India is the 2nd biggest importer of wool after China, with almost 50% sourced from Australia. What is the main difference in the consumption pattern in the countries?

SM: Growth of wool consumption in India has been modest. As a manufacturing converter of greasy wool to garments, India has a very aggressive competitor in China. As India’s infrastructure improves and China’s labour cost increase, I see good opportunity for India to improve consumption volumes of Australian merino.

TDB: What do you think is the market share of premium varieties like Merino in the Indian wool market?

SM: India consumes about 7% of the Australian Wool Clip.

TDB: What do you think is the reason for China being the world’s biggest importer of wool despite it having the highest import duty of almost 40%?

SM: It’s all about excellent infrastructure and low labour costs. Both of them make   China a great manufacturing hub for a lot of companies across the globe.

TDB: In what way does the Australian government incentivise the local wool industry? Can India, with the 3rd highest sheep population in the world, do something to scale up in the international wool market?

SM: I see no reason why other countries around the world, including India, can’t compete with Australia-produced Merino. The genetics can be bought, the climate (in places) suits and labour costs are relatively low. Often, we find that demand for protein, outweighs the requirement for luxury apparel products.