Report to the 64th ICAC Plenary Meeting
Delivered by:
Woods E. Eastland
President and CEO, Staplcotn
Chairman, National Cotton Council of America
September 26, 2005
Thank you, Mr. Chairman.
It is my great pleasure to speak to you today about a topic that I passionately believe in. That topic is consumer promotion of cotton.
I know that others have spoken to you before about the good work of the International Forum for Cotton Promotion — or "IFCP" — and about the need to build demand for cotton products at retail. While I will remind you of the background for the IFCP today, the primary focus of my remarks is to explain why I believe so strongly in consumer promotion.
For me, as a cotton grower and as the CEO of the Staplcotn cooperative representing about 4,500 cotton growers in the midsouth and southeastern growing regions of the United States, supporting consumer promotion of our cotton products is not just an option — it is a vital necessity! That is why I personally contributed the equivalent of $2.48 per bale of cotton produced on my farm last year specifically to support cotton research and promotion programs. This dollar value represents about 8 tenths of 1 percent of the value of each bale — not a large amount but, as you will see, this small amount per bale generates a huge return in demand for my cotton — and for your cotton. When I sum up the contributions of all of Staplcotn's grower members for 2004, this small per bale contribution turned into nearly $11 million in funds collected to support cotton research and promotion.
While I and my fellow growers can think of a lot of ways we would like to use that money for household expenditures or to reinvest in our operations, there is no better investment, in my opinion, than plowing those funds into promoting our product.
Let me remind you of why that is the case.
Back in the 1950s through the early 1970s man-made fiber, particularly polyester, had captured the imagination of the American consumer. Nylon, polyester and other man-made fibers were the new and modern fibers on the market. Natural fibers like cotton, wool and linen were the old and stodgy fibers that did not seem appropriate for a country that was entering the space age.
Without a strong message reminding the consumer of the timeless qualities of cotton, consumers rapidly turned to man-made fibers to fill the void. It was not because polyester was cheap — it was actually more costly than cotton at that time. Consumers were making the switch because man-made fibers were being promoted as stylish and modern and easy-care.
You will note the rapid switch.
No one at that time was countering that image in any significant way, even in America. The National Cotton Council, which I am proud to chair, had lots of technical and policy programs, and even an export promotion program at that time, but it had no significant consumer promotion program in the U.S. market.
Why not? Because it took a unanimous vote of the seven segments of the U.S. cotton industry to launch and fund such an effort. While everyone saw the threat to our industry as man-made fibers began to seriously erode cotton's market share, the industry as a whole refused to tax itself to fund an adequate advertising and promotion effort to turn the tide.
To make a long story short — and there are several well-written histories of the events that led up to our consumer promotion effort in the U.S. — let me just tell you that the cotton growers of the United States decided they could not stand by and watch their product erode into a minority fiber. The growers had to take action. They had to make a difficult decision to dig deep into their pockets to fund consumer promotion.
Why? Because it was clear that no one else would.
It was easy to talk about the need for promotion — but the only sector to clearly see the threat and believe it could be reversed was the U.S. cotton producer segment.
Within a few years, the grower research and promotion effort was spun off from the National Cotton Council and eventually was consolidated into what is today recognized globally as Cotton Incorporated.
The result was the beginning of a dramatic reversal of cotton's market share in the U.S. that is unparalleled in any other country or other fiber.
As U.S. cotton growers and the U.S. industry overall, we are extremely proud of that history.
We are not only proud. We are completely convinced that the ICAC is correct in estimating that, had it not been for promotion over time, the world of cotton in 2005 would be lacking around 12 million bales of demand — or roughly one tenth of the total demand for cotton on an annual basis.
That is our history, and it came about because of the vision and dedication of those who preceded me in the cotton grower leadership in the U.S., but it pretty much happened during my generation as a grower. It took those visionaries — and then it took a lot of hard work, tough decisions and vigorous defense against many critics to keep it going.
The latest in such tough decisions and vigorous defense was just this year when critics of the cotton checkoff and other such mandatory self-funded promotion programs in the U.S. carried forward a set of legal challenges to checkoff consumer promotion programs. One of those cases for another commodity reaching the U.S. Supreme Court. Fortunately, through legal defense efforts spearheaded by the U.S. Government and supported by growers, the challenges to such promotion programs have been pushed back, although they are certainly not over.
Ladies and gentlemen, whenever something involves money there will be disagreement. It is sometimes hard for you or me to make a decision on how to spend our hard-earned money. We all know that.
However, I can tell you that it is a lot harder to trust someone else, or to trust a committee, to spend your hard-earned money wisely. Yet, it has to be done if we want to ensure that cotton is a vibrant and profitable fiber in our future.
I mentioned a few moments ago the 12 million bales of added cotton demand created by the U.S. cotton producers. This was a generic effort. It did not identify origin of the cotton or the textile products.
While we, the U.S. cotton growers, funded this effort and executed the consumer promotions in our own self interest, the fact is that these bales of added demand benefited every cotton producer, ginner, crusher, warehouseman, cooperative, merchant and manufacturer in the entire world — and we need to do more!
Let me give you a simple statistic.
If the cotton's global market share of fiber consumption today had just held its 1990 level, then the world would be consuming an additional 26 million bales of cotton annually according to USDA baseline data!
In other words, if cotton had simply held its own in the rising world demand for fiber, world demand for cotton would be 20 percent greater than the current amount — and this is on top of the 10 percent additional that the U.S. industry built through its national consumer promotion programs. Think of what an addition 20 percent in demand would mean to cotton growers and to prices in places like Central Asia, West Africa, Brazil, India or China.
Instead of this added demand, we have a crisis on our hands in cotton demand today. While the U.S. has seen cotton's share of fiber consumption for apparel and home furnishings increase steadily since its promotion campaign gained traction in the 1970s, every other country has seen a stagnant or declining market share.
As a matter of fact, in some of the world's largest cotton growing countries and largest textile economies, cotton's share continues to decline today.
Here is a look at the history of cotton versus man-made per capita fiber consumption history in the world's third largest cotton producer — India.
And here is a picture of the situation in the world's largest cotton producing country and largest textile economy — China.
That is what cotton's market share trend in China and the forecast into the future look like unless we can find a way to reverse this trend.
Ladies and gentlemen, we in the U.S. cotton industry know what happens when one does not promote his product to the consumer — you have a shrinking market and you eventually lose your industry.
As I pointed out at the beginning of my presentation, we faced that very situation in the U.S. in the 1960s and 70s.
I think we also know what happens when the global cotton industry does not promote its product. Those impacts are clearly demonstrated in the graphs I showed you today. We also know that a failure to promote our cotton results in trade frictions and unpleasant and costly actions such as the Brazil WTO suit against U.S. cotton support programs.
While I am sure not everyone in this room will share my view, I personally believe that we would not have had a Brazil WTO suit, and we would not have a West African cotton issue today, if the world had that extra 26 million bales of cotton demand that I talked about earlier.
Much of our attention, analysis and investment are appropriately focused on the supply side of the supply-demand equation. My message today is we need to focus more of our attention, efforts on the demand side of that equation.
Can we be effective through promotion?
Indeed, I believe we can.
And this is not just blind faith. It is a belief that is based first in the effort that was successfully funded and carried out by cotton growers in the United States, and has created an additional 12 million bales of annual demand for the world's cotton producers.
There is another recent example of such success. This is a trial effort carried out jointly by Cotton Council International and Cotton Incorporated in conjunction with the Indian cotton industry and retailers for the past three years. We call that experiment the "Cotton Gold Alliance".
I know you have heard about this effort before in the International Forum for Cotton Promotion sessions held at the past few ICAC Plenary sessions. Let me briefly update you on the results.
As background I want to clarify that the CGA effort is focused on promotion of cotton and cotton products regardless of origin. It is using the Seal of Cotton, which makes no mention of country of origin. The textiles, apparel or fiber therein can come from anywhere — in this case by far the bulk of that fiber is Indian cotton. It was designed as a generic cotton promotion program with leading Indian mill and retail industry partners.
We are in the final months of year three of the Cotton Gold Alliance, and the end of the second year of consumer advertising.
Figure 9, Figure 10, Figure 11
Cotton Council International and Cotton Incorporated are pleased with the results. Changes in consumer attitudes and behavior during the period of implementation of the CGA program clearly indicate a positive impact.
Let me just highlight a few results from our impact tracking of the CGA:
Figure 12, Figure 13, Figure 14
For the program in India to be successful, as with any consumer promotional program, the first step is to be able to create awareness.
In the CGA, we used the Seal of Cotton as the brand identifier and "trust mark" of 100% cotton products. Through public relations and advertising we define the cotton symbol in the consumer's mind and establish its credibility.
Our goal with the Seal of Cotton trust mark was to create a preference for quality products that are identified as 100% cotton. As you see, preference for products that bear the Seal of cotton has grown significantly since the CGA was launched. Up 20 — 25 percentage points on each of these six key criteria.
We track recognition progress among our target audience. Awareness of the Seal of Cotton among our top targeted market segment has risen dramatically — by about 4 ½ times, from 5 percent to 22 percent. Progress among these A and B socioeconomic categories is important because these are the trend setters in a consumer society, and strong growth here will accelerate growth among the other groups.
So, these data show that the CGA, in less than three years, has successfully created a trusted identifier and a "brand" for 100% cotton as represented by the Seal of Cotton. On a very limited budget we have increased consumer preference for products carrying the Seal.
But, have we had an impact in the marketplace? Have we moved any more cotton?
The answer is YES! As this graph indicates, since the beginning of the CGA program the decline in cotton consumption has begun to reverse course versus synthetics. While there are a number of factors influencing this change, we believe that at least part of the reason for this reversal in market share is the result of changes in consumer buying patterns driven by the CGA program
To get at the sales impact very specifically, we carried out in-depth annual household purchase research. Based on these data, we have determined that our target audience increased purchases of cotton products from about 9500 grams of cotton per year in 2003 to almost 11,500 grams in 2005. This represents almost two kilograms, or about 4 pounds per capita, of increase in purchases!
In terms of bales ... this represents about a 300,000 bale increase in off-take. Clearly this is good news and a well-documented indication that consumer demand can be built on a relatively modest budget. When I say modest budget, in this case the Cotton Gold Alliance was costing about $2 per bale to generate this demand increase — not cheap, but an excellent return on investment!
Ladies and gentlemen, I have now provided you with two successful examples of how the consumer can be influenced to prefer and buy more cotton products — the long-running case of promotion in the United States which was responsible for the comeback of cotton against man-made fiber, and the recent case of the Cotton Gold Alliance experimental project in India that influenced consumer attitudes in one of the world's most dynamic retail markets.
Although both case studies were successful, there is a major difference between the two — the U.S. promotion is well funded through a checkoff program designed to raise enough funding to move the market, while the Indian program is in danger of disappearing for lack of local funding.
We are still hopeful that either the Indian industry or Indian Government will step forward to put local funding behind the effort. The CGA had a 3-year term as a trial program and it has a proven positive and cost-effective impact. That trial period will expire at the end of this calendar year. Without a significant commitment of funding or a takeover of the program by the Indian industry or government, the Cotton Gold Alliance will cease to function at the end of this year.
If the CGA or a similar program does not continue, it will be a major opportunity lost for the Indian cotton economy and the global cotton economy. This is an example of the difficulty in getting such promotion programs adequately funded even if they are shown to be successful.
So, where do we go from here?
Ladies and gentlemen, as I pointed out in my earlier comments, there is nothing we can do that can better influence our future and our profitability than to raise retail consumer demand for our fiber. As we have clearly demonstrated in the U.S., the rising tide of consumer demand for end product helps the domestic cotton economy and the global cotton economy.
While I have shown that there are proven practical solutions to the challenge of the increasing the demand side of the equation, I do not know what the solution is to funding that needed promotion. I do know that the U.S. cotton growers and industry are financially committed to the effort. The U.S. industry has commissioned its promotion organizations, CCI and Cotton Incorporated, to use their extensive experience and contacts in this arena to explore alternatives.
I also applaud the efforts of the International Forum for Cotton Promotion in this regard. For those of you who do not know, the IFCP's mandate is to "encourage and facilitate national market development programs, organized by associations and commercial organizations in individual countries, and funded from domestic resources".
The IFCP is currently made up of 17 member organizations from 13 countries.
Founded at the 59th ICAC Plenary Meeting in Cairns, Australia in 2000, the IFCP already has a list of specific achievements in its short history. For example, the IFCP completed an extensive study of fiber labeling laws around the globe. As you know, clear and dependable fiber labeling is a prerequisite for successful consumer promotion.
The IFCP compiled information on past successful consumer promotion worldwide and made this information available on an attractive Internet Web site.
Additionally, the IFCP has conducted training sessions and a workshop to educate interested parties in the specifics of consumer promotion. Those services are available to countries and organizations who have a demonstrated desire to promote cotton products in their markets.
Most recently, the IFCP has created a means by which interested companies can easily contribute to the funding of the organization so that the common effort of promoting cotton can be sustained.
These are all efforts that are to be applauded, and those of you who participate in these activities can take justifiable pride in your achievements.
However, ladies and gentlemen, we need more.
As important as the IFCP efforts have been to date, we are never going to make a serious dent into cotton's falling market share in the global fiber market place without a much more well-funded and well-orchestrated effort.
I do not know today exactly what that effort will look like or how we will get there, but I do want to impress on you that the U.S. growers and the U.S. industry are willing to work with the global cotton community to find solutions and to get results.
As a U.S. grower and the chief elected official of the National Cotton Council of America, I am keenly aware of the strong criticism of our U.S. cotton programs — some of that criticism coming from members of this very body. I am not here to address those criticisms. They are being discussed as part of the Doha Round. I can tell you that we are willing to do our part to have a sustainable cotton economy for not just our U.S. growers and industry, but for the global cotton industry which we collectively represent.
At the same time, I reiterate that our U.S. growers have made a number of positive contributions to the global cotton economy, not the least of which is the successful creation of 12 million bales of added annual consumer demand in the U.S. through our self-financed promotion efforts. With every container of cotton textiles or garments we consume in the U.S., all cotton producers worldwide and the broad industry benefit.
We need that demand creation as much as we need a successful solution to subsidies and market access through the WTO.
I ask you to work with us, to work with organizations such as the IFCP, Cotton Council International and Cotton Incorporated, to find ways to enhance our mutual success through demand creation.
Earlier I spoke of the 26 million bales of missing cotton consumption.
Today I would like to challenge all of us to a goal. That goal is to "find" those 26 million bales of lost demand by the end of the year 2010. That would mean growing global demand by roughly 5 million bales per year for the next 5 years.
It is an ambitious goal.
However, if I challenged all of you to grow an added 5 million bales per year on the supply side for the next 5 years, I am sure you would find that realistic and achievable — and you might all rush out to make it happen. I am sure the cotton growers in Australia, Brazil, West Africa, India and even the U.S. would all be happy to contribute to achieving that supply side goal.
Why is it so surprising then, and seemingly unachievable, on the demand side??? The only reason for that lack of confidence is our inability to date to apply the right tools and the right financing to the task. Or maybe we are just lacking imagination and the willingness to work together toward a mutually worthwhile goal.
Again, I and the U.S. cotton producers and industry are willing to work with you hand and hand to realize such an ambitious goal.
However, if the cotton producers of the world collectively fail at this, all will be left to continue what we are now doing. What we are now doing is fighting each other desperately for market share because our production potential is growing much more rapidly than the demand for our fiber.
Thank you very much for your attention.
More: Woods E. Eastland's bio