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AWI CEO_StuartMcCullough
AWI CEO_StuartMcCullough

AWI’s response to the impact of Coronavirus

The coronavirus pandemic is both a terrible health crisis and a major economic shock to the world economy. Here AWI CEO Stuart McCullough provides an important update on how AWI has adapted to these challenging times and is getting on with its business of R&D and marketing for the benefit of Australian woolgrowers.

AWI REMAINS OPEN FOR BUSINESS

Throughout the global coronavirus pandemic, AWI is continuing to work for woolgrowers to ensure the sustainability of our industry and the profitability for your enterprises.

Your interests and future remain the focus of all AWI staff in Australia and across the world. They all continue to work hard for you, albeit currently from home for most them. We are an agile company and have the digital support infrastructure and frameworks to ensure productivity while staff work remotely. Regular internal meetings and communication now occur online, keeping everyone engaged and supported.

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MARKETS TAKE A BIG HIT

The global coronavirus pandemic affects the wool industry in many ways, but the way that it affects most profoundly is in the reduced purchasing of garments by consumers. Due to social distancing and lockdowns in so many countries, people have simply been unable to get to stores to buy garments. Furthermore, global economies have been badly shaken and many people do not have the spending power they once had. Fiscal concerns and potential unemployment weigh heavily on many consumers. Make no mistake, retail sales have been hit very hard indeed and it looks like overall consumer demand for wool will be weak for at least the next four months or so.

photo by Jorgen Haland-new zealand wool-min
Photo by Jorgen Haland

On the bright side, some governments, such as the UK government, have been very proactive in trying to support business and protect jobs which will help people’s on-going capacity to consume beyond basic needs. It was also fortunate the pandemic hit during the spring of our all-important northern hemisphere markets rather than the high turnover autumn/winter seasons for wool.

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The pandemic has impacted some countries more than others. At AWI, we are looking to ensure that we identify markets and sectors that will recover quickly and drive demand as we come through this unprecedented disruption. I think China, in particular, has got the potential to recover most quickly which would be great news due to the size of its economy and its importance for Australian wool as both a big consuming and processing market. Other markets about which I am hopeful are Germany and the Nordic countries which seem to have weathered the virus better than many. While the US has been badly hit by the virus, it will be interesting to see if it can recover as quickly as it did coming out of the GFC. Unfortunately, two of our biggest markets, the UK and Italy, have been badly hit by the virus and each had to impose severe lockdowns which have badly reduced consumer spending there.

Wool Market Report 
Wool Market Report

MARKETING PROJECTS REVIEWED

AWI must be smart about when, where, and indeed whether it is prudent to actually spend woolgrower funds – and this is especially the case with our marketing activities at the moment. Given the drop- off in consumer spending across the globe, I asked our marketing teams at the start of March to review all our current marketing campaigns and collaborations, and stop any expenditure on projects that rely on face to face shopping or were no longer expected to produce a return on investment.

There is no point spending money marketing a product if consumers cannot buy it. Those marketing funds are better held back and spent at a later time when it is more likely investment will yield results. Once we see a market recovering, we will deploy the marketing funds that we held back as quickly as we can and try to stimulate demand.

There is a lot of uncertainty about the market outlook at the moment and we don’t want to invest woolgrowers’ funds if we have imperfect information. We have therefore set up a special business intelligence unit dedicated to collecting information to help us during this unique global situation. The unit has been reaching out to AWI staff across the world who have been focused during the past two months on collecting the best intelligence they can get on markets and businesses. This will enable us in due course to begin releasing marketing funds again in the most effective manner – at the right time, in the right locations, with solvent business partners, in optimum retail sectors – but only when there has been a thorough evaluation of the merit.

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ADAPTED MARKETING IN THE SHORT TERM

When the full impact of the coronavirus pandemic first hit in March, we switched our focus in the short term to retailers and brands that have proven digital retail platforms, because online purchasing has not been hit as hard as brick and mortar stores. While so many people have been isolated at home, online shopping and social media has been key to our promotion and messaging to sell product.

Our marketing teams have worked hard to tap into what people are likely to purchase online while at home and identify opportunities for wool. We have tried to be in step with the mood of consumers and have been highlighting wool’s health and wellness benefits, its suitability for comfort in the home and whilst exercising its benefits for rest and sleep, and hand knitting for keeping busy and easing anxiety. We have also been promoting wool’s natural eco-credentials.

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ON-FARM: R&D CONTINUES, EXTENSION AND SELLING TURNS DIGITAL

Most of our on-farm R&D projects continue as normal and we closely monitor their progress and budgets. However, during the past three months, many face to face industry events and activities for woolgrowers have had to be postponed or cancelled due to government social distancing guidelines. AWI has responded quickly and made many of its own events available online instead. Examples include the Back to Business series of 12 webinars that were originally scheduled as workshops throughout bushfire and drought-impacted regions. Another example is AWI’s popular RAMping Up Repro workshop that was held online as a webinar in early April. All these webinars are recorded and made available to be viewed free at any time by woolgrowers wherever they are in the country. Once social distancing measures have been relaxed in Australia, AWI will resume its attendance at wool industry events nationwide.

The decision by the Federal Government to allow shearing to continue under strict health and hygiene protocols was a great result for the industry. AWI worked closely with other organisations to push the case. However, we have suspended our face to face in-shed shearer and wool handler training during the past two months, but as an alternative have recorded and rolled out a series of well-received online training videos. While rural areas thankfully do not seem to have been directly affected by coronavirus infections as much as metropolitan areas, it is important that people remain vigilant. We have provided information for woolgrowers on how to help ensure that their farming operations, staff and contractors, family and friends are as protected as possible.

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Wool auction rooms posed a challenge in terms of managing social distancing but they have remained open. During this period, we have worked hard with industry on the WoolQ platform to offer WoolQ Market (an online auction for the sale of wool) as a contingency to the open cry auctions.

Successful trials of the WoolQ Market auction system took place with brokers and buyers in April and WoolQ began conducting regular weekly auctions at the end of that month. It has always been WoolQ’s aim to complement all the strengths of the existing open cry auction system at the same time as delivering additional services, rather than a replacement.

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SUPPORT TO THE TRADE

Much of our off-farm textile innovation R&D projects across the world continue as normal under close monitoring. However, many of our trade and designer partners have been badly affected by the global lockdowns and we are doing what we can to support them. For instance, the expertise of our global technical team is being promoted to our partners, and communications have been sent to Woolmark licensees offering our support in supply chain management, staff education and training.

Trade education is an important part of what AWI does. While we have had to cancel face to face education workshops, we are fortunate to have previously converted many of our training resources into a digital format and launched our online Woolmark Learning Centre. This has enabled us to easily provide access to comprehensive online educational resources for all levels, from student to professional, as an alternative to our usual face to face training.

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With so many students across the world studying at home, we have sent communications to all our education databases (students and teachers) highlighting the digital learning opportunities available via our online education platforms including the Woolmark Learning Centre, Learn About Wool, Wool Performance Challenge, Wool4School and Woolmark.com websites. For younger children at home, we have been publicising the Shaun the Sheep online games for children at Supernaturalwool.com.

International trade shows at which we would have normally exhibited during the coming few months have been postponed until later in the year – these include Milano Unica (high-end textile and fashion) in Milan and Première Vision (woven fabrics and wovenwear) in Paris. We will be ready to resume our presence at trade shows once they open again, but in the meantime have been working on digital alternatives.

LOOKING TO THE FUTURE

I hope you have all been safe and well during these unprecedented times and remain so. The situation changes daily and we are all continually working to adapt to the new normal. 2020 will be a tough year for everyone, markets and woolgrowers. Despite the coronavirus pandemic being a major shock to key macro-economies, I am quite confident that the wool industry and woolgrowers are more than robust enough to get through the crisis.

Figure: Globally the consumption of wool yarn has increased significantly.

Although the EMI has dropped, I am encouraged as to how well the wool market has held up compared to other markets during these extraordinary times. There are still wool processors buying our raw wool and I am sure they believe, like me, that there is decent underlying demand for the premium and natural qualities of our fibre along the supply chain right through to consumers. Furthermore, the positive relationships AWI has built along the supply chain during the past decade will help ensure a positive outcome for Australian wool in the future.

RECOVERING FROM DROUGHT AND BUSHFIRE

While there has been much focus by the business on the effects of the global coronavirus pandemic, I am still deeply concerned with the circumstances of the many woolgrowers and rural communities that have been struggling from the effects of ongoing drought conditions and then bushfires.

A wetter start to 2020 has eased the severity of short-term rainfall deficiencies over much of eastern Australia. However, the lack of rainfall over an extended period was so severe that recovery will be a slow process. Furthermore, while many parts of the country have recently received some reasonable falls of rain, there are areas that have not been so lucky.

Source: June 2020 edition of AWI’s Beyond the Bale magazine.

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