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Smartwool Sourcing

Sourcing: An Interview with the former President of SmartWool
SmartWool is a world leader when it comes to comfort and performance. But the company also has a unique relationship with the growers supplying the wool for our award winning products. We're not pulling the wool over anyone's eyes in saying that SmartWool has unequaled expertise in every stage of wool product development. Here to shed more light on the sheep subject is Chip Coe, who took time away from the sheers to share his thoughts on the company's unique relationship with its wool growers and processors.
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Question: Why do we buy our wool from New Zealand?
Answer: The more we learned about merino wool, the more we saw New Zealand as an ideal source for our wool. Sheep need a healthy environment to flourish and New Zealand has the perfect climate for them. If sheep are under stress, whether from lack of food or water, or from predators, they have less energy for growing their wool. Their wool then develops a weak section that makes the fiber difficult to spin into yarn. New Zealand has no natural predators and there is consistent food and water for the sheep. New Zealand is also greener than other Merino habitats so our wool doesn't harbor as much dirt and twigs. It's easier to deal with a stronger, whiter fiber when spinning and dyeing.

Question: How often do you go to New Zealand for SmartWool?
Answer: At least two times a year for the past five years, Mostly I meet with the growers. During a typical visit, I'll visit up to eight properties and discuss our future. We hold Grower Events where I'll meet with all of the growers and present SmartWool's direction. Sometimes I'll visit Timaru, a port city on the South Island where we process the wool. I'll also go to Canisis, a wool research organization that we belong to , to see if there's any new wool information and discuss the projects we might be interested in.
Question: Do you know of other company presidents that meet their raw goods producers?
Answer: Occasionally other wool based companies send people to meet the growers, but not at the same level as SmartWool. We buy more New Zealand merino wool than any brand in the world. As for non-wool and synthetic fiber-based companies, I can't imagine that they meet with the raw goods producers. If you make a polyester base-layer I can't imagine meeting the guy on the oil drilling rig.

Question: What type of relationship do you have with the growers?
Answer: A terrific one, largely because we always over deliver on our promises. Our wool buying contracts offer growers long-term stability, which preserves their way of life. They love knowing that their wool is going into a SmartWool product. The high quality of SmartWool products is a reflection of the grower's hard work, which makes for a strong relationship. The growers are very excited to host us when we visit. During my last visit, I spent seven nights with our growers, and only one night in a hotel. I also participacted in the Fall Muster (bringing the sheep down to be sheered), working with horses and dogs to move the sheep down from the highlands. The scenery was mindblowing and I'll remember the experience for the rest of my life.

Question: How is our approach to buying wool different than that of other companies?
Answer: The main difference is that we're not focused on price. If we were focused on price, we'd buy wool on the open market as a commodity. We're more interested in quality, and in developing long-term contracts that make our business more predictable and sustainable for the growers. This gives us and the growers the opportunity to focus on quality. Our current contract covers seven years, which allows the growers to plan out their business (i.e. how many sheep they need, if they need more land, etc.)

Question: Do our contracts help preserve the growers' way of life?
Answer: Our contracts may be the single biggest influence on growers being able to continue their lifestyles. Selling wool under a long-term contract is very different from how growers usually do business. They usually sell their wool in the sport market where all the wool is sold on one day. Sometimes the price is good, sometimes it's not. But it's difficult to plan your business if you don't know what price you're going to get. With our contract, they know what the specs are and they know the price. Our contract assures the mortgage can be paid and enables growers to pass on their way of life to their children.

Question: Are our wool contracts a big deal in New Zealand?
Answer: They're huge. We've been featured on TV1 during primetime, which is the New Zealand equivalent of BBC or NBC. We've also been featured in all the major newspapers. Our current contract will pay the growers in the range of NZ $42 Million over its term. That's a big deal.

Question: Do our contracts have other implications?
Answer: Absolutely. We are very focused on animal welfare. We're the first company to commit, along with our growers, to end the practice of mulesing, a procedure that involves removing skin from the rear of the sheep to prevent blow fly infestation. We and our growers felt we had to do something to end this practice, so we wrote in bonuses for growers to work toward ending this practice as of the end of 2004. The wool industry has talked about phasing it out in 2010, so we are way ahead of the curve. We paid a premium but it's worth it.

Question: Any other comments?
Answer: We've learned a great deal through our grower relationships and have gained a valuable perpective from them. I don't think any other company in our industry has this type of relationship with their raw materials producers. We listen to their needs and that is reflected in the contracts, and ultimately in the quality of all SmartWool products.
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