Bedding Demand Up, But so are Prices
April 12, 2010,
Global bedding manufacturers see improving sales opportunities in many of their major markets this year. However, high prices for cotton and shipping are putting the hurt on profitability, and many say the global market still suffers from excess capacity.
In the United States, Cotton Inc.’s most recent monthly report noted that the current world production estimate is down 5% compared to 2008/09 and down 14.7% compared to 2007/08.
World consumption this season is estimated at 115.7 million bales, “which is 5.6 million bales more than in 2008/09,” according to the organization.
“It is appearing that the market is in a correction mode,” said Anurag Sharma, president of exports, Welspun.
Over the past two to three decades, there was an imbalance in demand and supply that worked against manufacturers, he said.
“As a result, quite a few capacities shifted from West to East. Later, we saw a fall out of weaker and non serious capacities/manufacturing units,” he added. “The current steep increase in cotton prices appears to have taken a final toll. Going forward, the fittest and serious player will survive and a fair balance between demand and supply is now getting visible. If that happens, the increase in raw material prices, inflationary increases etc., will be passed on to the ultimate consumer. In short, if she wants cotton, she will have to pay for it.”
“Cotton is the fiber of the year, and its demand is far outstripping supply,” said Rajiv Uppal, general manager, Birla Century. “Prices are expected to remain firm in the foreseeable future, though it is increasingly becoming difficult to predict a course.
In Birla Century’s domestic market in India, manufacturers are grappling with competition from cheap imported fabrics from China, he said. The company is looking at South America as well as Australia and Scandinavian countries as new markets.
“We will need to make coarser count fabrics which are in greater demand in these countries,” he said.
Cotton price increases is a challenge, but if managed well, still will not hurt sales, according to Arun Agarwal, ceo, Alok Industries.
“But if retailers’ fixation to compete on thread count does not come to realistic expectation, that might hamper sales. High thread counts will become very expensive and nearly out of reach. For example, 100’s yarn prices have increased by more than 80% in less than a year. This is one of the predominate yarns used for 500 or higher thread counts,” he said. “Quality call out need to be focused more than just competing on thread counts.”
Kam International, one of Pakistan’s largest bedding exporters to Europe and also a supplier to the U.S. market, sees both improved consumer demand but also an altered competitive landscape.
“Business conditions have changed forever. We are in the age of survival of the legitimate. To make a difference, it is imperative for the entire supply chain to stay abreast with current trends, adjust promptly and maintain a strong capital position, said Zeeshan Ahmed, senior manager, marketing.
Kam will continue to explore new markets, he said, specifically Turkey, South America, China and India. Kam is looking to form alliances with regional partners and establish regional offices. As a first step, Kam has expanded its operation in Turkey with a regional office and warehousing.
“With Turkey’s domestic industry contracting at a rapid pace, we are projecting an attractive turnover in 2011 and onwards,” said Ahmed.
Crescent Textile Mills, which is primarily focused on the United States, is also looking for partnerships in Germany and France, said Rehana Malik, manager of concept of design.
“With some markets, it is observed that to cope with price pressure, customers tend to use medium base fabrics instead of higher thread counts and add visual value in terms of embellishment and packaging to boost the sales — while the others offer higher end base fabrics with very nominal embellishments,” she said.
Currently, cotton prices are so high “that almost all products are unviable to produce at today’s cotton prices and 2009 selling prices of finished products,” said Pradeep Mukharjee, president of global sales and marketing, Himatsingka.
“This is likely to force many marginal, non-integrated exporters to shut shop this year,” he added. “The bigger players, who have a much larger commitment and investment in resources both in India and overseas, will continue — and hope for a shift in pricing upwards sometime in the near future.”
Towellers continues to expand globally and is in the process of setting up an agency office in South America. Currently with offices in the United States, UK, Russia, and South Africa,” we are aiming very high and hope some of these come to fruition this year,” said S.M. Obaid, ceo and managing director.
He does not see prices settling in the near future and believes the global bedding market may not rebound as quickly as many are hoping.
“Bedding has recently been added to the luxury category as disposable income is still very limited and the constant fear of losing this income is making people save globally,” he said.
WestPoint Home has dedicated a certain portion of its bedding mill in Bahrain to non-U.S. business this year, part of its international expansion strategy that began in earnest last year.
“The easiest regions to pick up were ones that didn’t have loyalties — Australia, New Zealand., Costa Rica, Panama. They’re just looking for great product at great prices. You don’t have to be under priced, just fairly priced,” said Alan Kennedy, senior vp of sales.
“We’re getting some nice signals from Europe that it is starting to turn around,” he added. Overall, though, he said: “Average unit prices are going to be higher than they were before.”
Al-Abid, which does 60% of its business in the United States, also sees growth opportunity in Europe as retailers there continue their shift to direct importing.
“I’m happy as far as the business, but I am not getting the prices I need,” said Azim Suttar, director.
As to cotton prices, “they’re not going to go down, at least not before July. But even then it will be a very minor correction. At some point in time, retailers will have to pass it on to the consumer.”
It’s not that retailers haven’t begun accepting higher prices, it’s that they aren’t absorbing enough to make a difference, said Mohit Jain, director, Indo Count.
“At Heimtext, people though it would come and go. At [New York Home Fashions Market], they were taking it seriously,” he said.
He hasn’t seen serious de-specing yet, he added. “If it was over-speced before, it is properly speced now.”
Bombay Dyeing is reinvigorating its direct sales efforts in the US and seeing better market share openings in South America, Europe and Australia, said ceo P.G. Makhija.
While pricing remains a concern, he is also wary of the organic cotton and fair trade cotton initiatives globally.
“While the intentions in launching these products are good — and noble to some extent — the reality is that the consumer invariably pays premium for 'organic’ or 'fair trade’ stuff, but she does not always get what she thought was buying,” he said. “I have travelled to many cotton growing countries and have debated this matter with the growers, the traders, the ginners, the spinners etc. The whole system is flawed and is certainly not fool-proof. It is very likely that at least one link in the whole chain is not 'reliable enough.’ This is true across the globe.”