Bendigo station co-owners Dan and Stu Perriam discuss the new fixed premium contract pricing set to funnel millions of dollars into the NZ wool industry with Devold Wool Direct general manager Craig Smith.
Woollen garment company Devold of Norway has committed to its New Zealand growers, offering fixed premium contract pricing in a move proposed to funnel more than $40 million into the NZ wool industry.
Initially, on its one-year basis, the new contract regime is valued at $9m as growing European sales demand more NZ wool.
The new contract pricing goes against the current wool contract system, whereby growers are paid a fluctuating rate depending on the market average.
Devold Wool Direct, the buying arm of the company, NZ-based general manager Craig Smith says the increase is a natural evolution.
“At Devold we have always valued quality; to produce the very best garments we need the very best wool, so naturally the sentiment must be reflected in what we pay our growers,” Smith said.
Devold is the first in the industry to place such value on its supply chain.
“I hope we won’t be the last,” he said.
“By increasing the current contract price and fixing it for one year to begin with, we are giving certainty in an ever-changing world.
“Showing loyalty to our growers, as they do to Devold, is providing opportunity for reinvestment back into the land, which ultimately benefits us through the quality of wool produced.”
Under the new contract growers will receive a fixed price per kilogram, higher than the market average, for 16 to 20-micron wool.
Initially it will be a one-year contract with steps in place to grow it out to five years.
Devold will also offer a bonus payment of $2/kg above the new contracted base rate for wool meeting certain quality criteria.
This differs from the previous model in which growers are at the mercy of market fluctuation.
Devold chief executive Cathrine Stange says the company will be looking to fix the contract for a further four years, to five in total, once the uncertainty in Ukraine has levelled.
When a five-year contract is concluded it will push the value of the new contract to more than $40 million.
“We remain confident in the Devold brand’s strong market position and continued growth.
“Our commitment to our sheep-to-shop programme and quality strategy remains the same and current demand looks to indicate that we will need more wool than originally planned this year,” Stange said.
Devold launched sheep-to-shop in 2017, with a pledge of full traceability and total transparency at every step of its value chain, recognising that quality today is about operating in the right way across the entire value chain from the sheep growing the wool to the finished product.
“Our growers are very important to us and we will do our utmost to ensure their contribution is valued,” she said.
Otago’s Bendigo station co-owner Stu Perriam says the new contract has reaffirmed a strong relationship with the brand.
“One of the big positives of the contract is that it rewards us as growers, it gives us certainty as we move forward,” Perriam said.
“From my perspective, Merino has always been in my family and we are very proud of the Bendigo name.
“Having this contract in place gives us the confidence to produce the very best wool we can.
“It’s quite special really.”
Devold, which recently opened its flagship NZ store in Wanaka, operates a vertical model where every step of the process from the wool to the yarn, to the final finished garment is managed and controlled entirely by Devold.
“What we are trying to do is redefine how clothes are made from the ground up,” Smith said.
Meanwhile, European sales are driving demand for more NZ wool.
“Sales in Europe have been fantastic, so we are on the drive for more, particularly longer, wool to meet growing demand,” he said.
