The NZMC said the deal reflected the high value of the country's merino wool © NZ Merino Company
The NZMC said the deal reflected the high value of the country's merino wool © NZ Merino Company

Icebreaker's $100m wool deal is 'longest contract ever'

13 November 2017

New Zealand (NZ) outdoor clothing company Icebreaker has signed what is claimed to be the longest ever supply contract with merino wool farmers, worth $100m over 10 years.

The Auckland-based company said it signed the deal with New Zealand woolgrowers in collaboration with The NZ Merino Company (NZMC) to ensure it had a long-term supply of the fibre. 

Greg Smith, Icebreaker executive officer, said he believed the 10-year deal was a world first in supply contracts. 

“As far as I'm aware, this is the first agreement of its kind for the New Zealand fibre industry and globally,” he said.

He added that the value of the $100m investment would go directly to New Zealand farmers. 

“When we are developing the contracts, we travelled the country to meet with our growers and discuss what they valued most about our relationship,” he said.

“A common theme to all of the discussions was loyalty and respect—it is this that had provided the foundation for the 10-year contract.”

Smith said that under the contract, the company would pay above market prices, to recognise long-term farmer loyalty, and use on-farm imagery and storytelling in its global marketing campaigns.

The company’s link with NZ merino wool goes back to 1994 when founder Jeremy Moon tried on some prototype thermal merino clothing that had been developed by a merino sheep farmer on Pohenui Island.

Today its clothing is sold in 47 countries through wholesale, branded retail and e-commerce platforms. Its entire product assortment is based on Merino wool, plant-based fibres and recycled fibres.

John Brakenridge, NZMC chief executive, said the contract was further endorsement of its business model.

“In partnership with Icebreaker and our growers, we have pioneered forward wool fibre contracts to provide greater price certainty and stability,” he said.

“By developing relationships between growers and the end users of wool we have been able to achieve market recognition of the value of producing high-quality wool to strict environmental, social and animal welfare standards.”

Last year, The NZMC signed a five-year $45m deal to supply fine merino wool to Italian luxury fabric manufacturer Successori Reda, which, at the time, was the NZMC’s longest-ever contract. 

The deal comes a week after Icebreaker announced it had been sold to US-based VF Corporation (VFC), which owns The North Face, Timberland and Vans

It did not disclose how much the company sold for, however VFC needs Overseas Investment Office approval, meaning the deal is worth at least $100m. 

Last year, Icebreaker had annual sales of $220m, of which 86% were in offshore markets. Its own outlets and e-commerce sales make up 32% of sales, according to the company’s latest statement. 

VFC has annual revenue of US$17.4bn, according to company figures. 

Moon said he and Icebreaker chairman Rob Fyfe would be staying on at the company. 

“Our partnership with VF provides us with the largest platform in the world to tell our story, access new markets and reach new consumers at an accelerated pace,” he said.

“This is a once-in-a-lifetime opportunity for our global Icebreaker team and for our New Zealand wool suppliers to introduce a whole new universe of consumers to the benefits of sustainably farmed, ethically sourced, NZ merino wool.”

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