Organic Clothing Sales Major Growth
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Green Threads for the Eco Chic
Organic-cotton apparel is fast making it to market, embraced by the big-name brands. But can supplies keep pace?
Business Week Covers the Major Growth in Organic Clothing Sales
"The big joke in the organic advocacy world is that one day we'll have a shirt we can eat," says Rebecca Calahan-Klein, president of nonprofit group Organic Exchange.
While you won't be eating your Brooks Brothers any time soon, the reference is apt: The apparel industry is following in the early footsteps of the food industry as it veered toward products made from certified organic materials farmed without chemicals. For the clothing business, the first big organic material is pesticide-free cotton, which promises to appeal to the same eco-friendly consumers already hooked on organic food. It's the target group loyal to grocery stores such as Whole Foods (WFM), which saw $5 billion in total revenues in 2005 (see BusinessWeek.com, 7/21/2006, "Whole Foods: A Little Too Rich?"). And it's the same psychographic that convinced Wal-Mart to double its organic-food offerings earlier (see BusinessWeek.com, 3/29/2006, "Wal-Mart's Organic Offensive,").
PRICEY THREADS. Apparel manufacturers facing the to-be-or-not-to-be-organic question have it easier than the early Whole Foodies in that a large market of consumers willing to pay up for organic products is well established. That means big-brand clothing makers and sellers are diving in earlier than they did in the food market. And Wal-Mart is the perfect example: Its March announcement of plans to double its organic food offerings was followed by the May debut of the George Baby line of infant clothes made with 100% organic cotton.
And others are following the trend. Levi Strauss & Co. will debut a line of organic-cotton jeans in November. Levi's Eco features 100% organic cotton, natural dyes, and a tag made of recycled paper and printed with environmentally friendly soy ink. The jeans are part of the company's premium Capital E label and will bear a hefty $250 price tag—largely because organic cotton is rare.
And that's the problem: The demand for organic cotton—fueled by the growth of the organic foods industry—has outraced supply. The Capital E Levi's Eco jeans will be available in selected Levi's stores only. In February, 2007, the company plans to roll out lower-priced, mass-market styles ranging from $65 to $80 in department stores, followed by jeans in the $40 to $60 range by fall 2007. "The goal is to have significant organic content in the lower-priced lines," says Robert Hanson, Levi's <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />U.S. brand president. "We're aiming for minimum 50% organic."
HIGH DEMAND. The company's plan to roll out three lines of organic-cotton jeans over a year's time "is significant," says Organic Exchange's Calahan-Klein. "This shows that big-brand apparel makers are really making a commitment to organic farming. It's not just a fad." The question is how this can be done. And that turns on both regulation (what is certified as organic) and agriculture (how much can be grown). And demand.
On the regulation score, for cotton to be certified as organic, it must not be genetically modified at all, according to U.S. Department of Agriculture guidelines. The USDA states that 52% of the nation's 2005 crop was genetically engineered, meaning that the seeds have been altered to resist insects in an effort to avoid harmful pesticides. While cotton is a crop that can qualify as "certified organic," there's no "organic clothing" standard set by the USDA that labels a shirt or pants as fully organic.
As for demand, according to the Organic Trade Association—a 21-year-old membership-based business organization that represents farmers and retailers dedicated to the promotion of organic goods—organic retail sales in the United States have grown between 20% and 24% each year since 1990. Today, approximately 39% of the U.S. population purchases organic products. Total organic food and beverage sales increased from $1 billion in 1990 to $12.2 billion in 2004. Last year, the figure reached $14.6 billion.
TRENDY BANDWAGON. Some of the demand comes from companies that make social issues an important aspect of their brand philosophies. American Apparel, the trendy Los Angeles-based retailer, is known for its anti-sweatshop stance and offers a "Sustainable Edition" line of organic-cotton T-shirts and baby clothes (see BusinessWeek.com, 6/27/2006, "American Apparel's Virtual Clothes"). Outdoor clothing and gear maker Patagonia also offers organic-cotton clothes, as does Timberland, the maker of boots popular with hikers. And Edun, a year-old, socially conscious fashion label that supports farmers in developing-world nations (founded by Ali Hewson, wife of U2 singer Bono, and hip clothing designer Rogan Gregory), produces Edun Live, organic-cotton T-shirts made in Africa. The Edun Live organic-cotton T-shirts are proving popular: To date, the company has shipped 100,000 units in roughly one year.
But increasingly, companies without explicit social agendas are going organic as well. In addition to Levi Strauss, Nike has been using organic-cotton blends in some of its athletic clothing since 1998. The athletic-apparel company plans on integrating a minimum of 5% certified organically grown cotton into all cotton-containing apparel materials globally by 2010. H & M features some organic cotton in its babies' and kids' lines of clothing and sold out a limited-edition organic-cotton T-shirt by hip designer Stella McCartney in 2005.
And at Organic Exchange's annual conference on growing, selling, and marketing organic materials and goods, held this year in Utrecht, The Netherlands, from Sept. 13-15, it was clear that even more big brands are exploring the possibility of designing and developing goods made with organic cotton. Reps from Target, Victoria's Secret and trendy British retailer Topshop, for example, were present for the first time.
USEFUL WORK-AROUND. So the challenge isn't the demand—it's the supply. Organic-cotton production in the U.S. increased by 8%—and was up 7% in China, 25% in India, and 40% in Turkey—between 2004 and 2005, according to an April, 2006, Organic Exchange report that lists the top four producers. But demand for organic-cotton fibers by clothing makers increased 93% in the same period. As a result, the growing number of retailers wanting to offer eco-friendly clothing is facing a crunch.
In less than a decade, Nike's use of organic cotton has grown exponentially. In 1997, the company purchased 250,000 pounds of U.S. certified organically grown cotton for use in apparel. By the end of 2006, Nike plans to use an estimated 7.2 million pounds this year alone. However, Levi Strauss' Hanson says organic cotton remains too rare to make mass amounts of 100% organic jeans—hence the high cost of the exclusive first batch of Levi's Eco jeans.
Some companies are seeking new, previously untapped areas where organic cotton is grown. By starting to purchase from developing nations whose farmers simply can't afford expensive genetic engineering processes or pesticides, Edun, for example, is finding a solution to dwindling organic-cotton supplies and supporting farmers in poverty at the same time.
"We buy from Peru. Africa, too, has a great potential. There are areas untouched by genetically modified cotton. Most cotton in these regions is hand-grown and picked," says Edun Chief Executive Christian Kemp-Griffin. There's a caveat, though.
WIN-WIN. "Organic certification is a problem," says Kemp-Griffin. "Many farmers in developing nations are growing organic cotton but don't know or don't have a way to certify it…yet."
Purchasing clothes to support farmers in the U.S. and abroad who grow pesticide-free cotton might prove enough of a lure for consumers keen on jumping on the fashionable eco-chic bandwagon. For big-brand companies such as Levi's and Nike, the lure of organic-cotton clothes is appealing for the same do-good, feel-good reasons. It's also a savvy marketing strategy, clearly aimed at trendy customers in the habit of shelling out green to buy green.
It's worth noting that apparel sales in general are up, just as organic-product purchasing is up. Brand extensions into "greener" clothing lines might indeed be timely. Market researcher NPD Group reports that U.S. apparel revenues reached $181 billion last year, up 4% from 2004. And women's jeans and T-shirts, usually made with cotton, organic or otherwise, each saw 10% increases in sales in 2005.
The reality of pesticide-free versions of clothes so pure that they're "edible" is still a pipe dream. But casual apparel containing organic cotton is poised to be a growing wave in popular organic products.