AWI cuts back as lessened revenue takes hold

Australian Wool Innovation cuts back as lessened revenue takes hold

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AWI chief executive Stuart McCullough said recent challenges to the wool industry have been tough.

AWI chief executive Stuart McCullough said recent challenges to the wool industry have been tough.

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Australian Wool Innovation has had to make some tough decisions on personnel and projects as coronavirus and lessened wool prices impact its revenue.

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Australian Wool Innovation has had to make some tough decisions on personnel and projects as coronavirus and lessened wool prices impact its revenue.

And the wool marketing and research body's chief executive Stuart McCullough said decisions would continue to be made as conditions worsened.

Mr McCullough said over the years as the market fluctuated and other factors impacted AWI's revenue, the organisation got bigger and smaller, and this time around, "we're just going to end up getting a lot smaller".

"When you take away 25 per cent of our levy, 25-30pc of the wool clip and when wool prices fall by 800 cents a kilogram, that's going to have a big impact on our revenue," he said.

"When we were at the height of wool prices at 2100c/kg, we had 400 programs deployed internationally in both research and development, but in the next 12 months we'll be looking at closer to 200."

He said while AWI had initially planned to draw on its reserves by $29 million in the 2019-20 financial year, they only ended up using $10-12 million.

This was due to AWI ceasing a number of marketing projects worldwide because of coronavirus closing down markets.

"The issue we've had over the last couple of months is literally every apparel retailer has had their doors closed," he said.

"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 an investment will yield results."

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Instead, he said AWI was trying to ascertain what countries and brands were going to recover the quickest post COVID-19.

"We have therefore set up a special business intelligence unit dedicated to collecting information to help us during this unique global situation," he said.

"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."

Mr McCullough said AWI had turned its attention to the online marketplace, as "there's nowhere else to shop".

One of the sponsored posts AWI shared through The Woolmark Company on Instagram.

One of the sponsored posts AWI shared through The Woolmark Company on Instagram.

"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," he said.

"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."

But he said AWI was being careful when choosing what brands it worked with as not all were as digitally savvy.

"There are retailers that have spent a lot of time and energy in their e-commerce strategies and there are some that by having their doors closed, had to become more e-commerce focused," he said.

"And I'm not exactly convinced that some of those that have just turned it on are necessarily going to have the ability to do great numbers of sales.

"E-commerce isn't something you just switch on, it's something you build through search engine optimisation and having customer-focused interactions that drive traffic."

The story AWI cuts back as lessened revenue takes hold first appeared on Farm Online.

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