Information drivesresearch and development at Cotton Incorporated andcollecting as much information as possible on cotton demand, markets, consumer preferences and what competitive fibers are up to keeps Kim Kitchings more than busy.
The senior director of corporate strategy and program metrics for Cotton Incorporated discussed such far-ranging topics as the price of cotton, what women want in fashion, and the environmental footprint cotton leaves throughout the industry during a recent multi-region tour of the organization’s headquarters and research facility in Cary, N.C.
Kitchings and her team analyze cotton supply and demand for the world and individual countries; they also look at trade issues and decisions on exports and imports.
But, it’s cotton price that currently attracts the most attention. “We look at cotton prices daily,” she says.
They also look at substitute crops — corn and soybeans — that compete for acreage, as well as synthetic fibers, and evaluate commodity prices and how they affects cotton plantings. “We expect a 14 percent jump in U.S. cotton acreage in 2011,” she says.
Recent increases in cotton consumption indicate that current production can’t keep up with demand, Kitchings says. The gap is about 1.3 million bales. “This gap has been occurring for the past six or seven years as we have down inventories of cotton.”
A five-year stocks-to-use ratio averages 50 percent, she notes, and “We’re currently at 37 percent. The five-year average price is 66 cents per pound; now, it’s $1.44.
“Demand for U.S cotton is strong.” Some 83 percent of the U.S. crop will go to exports, and less than 20 percent for domestic use. “We have no excess — 100 percent of the crop is committed.”
Higher prices and short supply are creating concern at the retail level, Kitchings says. Her group looks at consumer preferences, and product and consumer research help Cotton Incorporated identify market opportunities.
With higher cotton prices, monitoring prices for competing fibers will be “critical the next couple of years,” Kitchings says. “We also watch key consumer growth areas and are doing research on how higher prices will affect consumption. We also want to know how much cotton competing countries are offering to their consumers.”
A recent survey offers insight into India and China. “Their consumers are becoming more accepting of cotton and that offers an opportunity to grow demand.” A similar study will be conducted in Germany and Japan.
Retail intelligence is also an important tool. A Cotton Incorporated retail monitor, which includes a survey of more than 30 retailers and 160,000 products, identifies the percentage of various products that contain cotton. For jeans, 100 percent of those available at retail in the U.S. contain cotton. But only 44 percent of athletic apparel and only 30 percent of women’s dresses contain cotton. “Those are opportunities to grow,” Kitchings says.
The recent announcement by athletic apparel manufacturer Under Armour that they will offer a 90 percent cotton product is “phenomenal news for the industry.”
Consumers continue to show a preference for cotton, she says. “Consumers who are buying apparel with functional features are willing to pay more. We know that seven of 10 consumers prefer natural fibers and that cotton is the No. 1 choice. Consumers want value in their apparel.”
Kitchings’ group communicates with more than 900 executives in the textile industry about cotton prices and issues such as disasters and production gaps. They also communicate with retail, government and trade commissions, media and other entities. They disseminate that information to industry leaders “to help them make better decisions.
“We participate in at least three conference calls daily on the economics and the price of cotton, and we’re also starting to use podcasts to provide information.” These communications efforts will improve efficiency and help ease industry executives’ concerns about price and other issues at the retail level, she says.
One effort will be working with the product development team to identify ways to increase cotton use in women’s dresses. That may include using cotton in a blend to increase the percentage of dresses that contain cotton.
“We’re working with agricultural research to understand what farmers need.”
A life cycle analysis of cotton, part of a joint effort (Vision-21) by Cotton Incorporated, the National Cotton Council and Cotton Council International, developed to understand cotton’s environmental footprint, traces cotton from seed to final disposal of a garment or other cotton product.
“We talked to more than 1,300 farmers around the world,” Kitchings says, including questions asked about water, energy and chemical use. They also talked with 18 mills around the world about water and energy and with 2,000 consumers about product use and disposal.
The study shows the highest energy use occurs at the consumer level — laundering requires considerable energy and water use.
Another critical component of the corporate strategy and program metrics team is to “make sure our programs satisfy the industry,” Kitchings says. “We can use that information to improve service.”
A service value survey with ratings from 1 to 5, with 5 the best score, shows Cotton Incorporated programs are effective. “We received no score less than a 4,” she says.
Kitchings says she has seen no slowdown in cotton consumption due to the recent price spike. “The industry had reduced spinning with the recession. We will monitor the situation. We’re also looking forward — retail prices will be up by the time school starts next fall.”
Prices, based on the amount of cotton fiber in a garment, should not go up significantly, she says. Jeans contain about two pounds of cotton, so a $30 pair of jeans could increase by $1.20, based on fiber cost increases. “For some consumers, that will not matter,” she says.
The cotton market will level off, Kitchings says. “The issue now is availability — at peak use, we may not have enough cotton to meet demand. We could see some risk in the t-shirt market and we will monitor that. For now, we are selling all the cotton we’re producing, and at a good price.”