Initially, one of the key aspects to making NZM’s business model work was defining an identity for New Zealand Merino wool that was clearly differentiated from other sources and could command a premium price.

NZM initiated this exercise by researching the inherent benefits of the Merino fiber itself and by branding the fiber in a way that would encapsulate these attributes and protect New Zealand Merino from competitive or substitute offerings.

While traditional wool is widely perceived as being scratchy, hot, heavy, and smelly, New Zealand Merino wool has numerous natural advantages:

Moisture management
The complex natural structure of Merino fibers gives them the unique ability to both absorb and repel moisture. When it comes to shower/rain resistance, a Merino garment can hold up to 30 percent of its own weight in water without feeling damp. It can also absorb vapor from the skin during activity, increasing the time before sweat condenses to a liquid form and makes a garment uncomfortable.

Softness/comfort
Coarse wool fibers push into the skin and irritate nerves close to the surface; fine Merino fibers bend against the skin and do not aggravate the nerves.

Thermal control
Merino provides natural temperature control by absorbing and releasing moisture. For example, in cool, wet conditions, the Merino fibers generate a small but perceptible amount of heat as water vapor interacts with their chemical structure. This heat prevents the wearer from becoming chilled.

Insulation
The natural crimp (wave) and resilience of Merino fibers make Merino garments warm and comfortable to wear by trapping air next to the skin.

Fire safety
Unlike synthetics, wool is naturally flame retardant.

Odor control
In contrast to synthetics, Merino wool has a unique ability to minimize the build-up of body odor during activity.

Easy care
Merino is naturally resistant to shrinkage and wrinkles.

The NZM team further evaluated what distinguished New Zealand Merino from fine Australian and South African wool. What they found was that New Zealand Merino is superior when tested for its whiteness and brightness. This attribute increases the potential color choices when dyeing the wool. It also improves the product’s ability to retain color without fading. New Zealand fibers are also long and strong, which increases their durability, enhances their ability to stay smooth and soft, and decreases the likelihood of pilling. Finally, NZM validated that the country’s Merino sheep are raised in a more responsible and sustainable manner than Merinos in other countries.

Based on this information, NZM developed an “ingredient brand” called ZQ. Wool that meets ZQ standards is the highest quality natural Merino fiber available in New Zealand. The label is also meant to give buyers confidence that they are procuring materials that give their products substance in the following areas:

Environmental integrity

Animal welfare

Social responsibility

Economic sustainability

Traceability

By positively addressing these factors in a certifiable manner, ZQ appeals to the IQ/Minds (intelligence quotient) and EQ/Hearts (emotional intelligence quotient) of brands and consumers alike. As Brakenridge pointed out...

A lot of retail brands are very superficial now. There’s nothing underneath them. The ZQ badge provides brands with a compelling story they can share with consumers about the substance of their products to help engender increased brand loyalty.

 

NZM believes that ZQ, the ingredient brand it developed to identify New Zealand Merino wool that meets the industry’s highest standards, can be a differentiator for its brand partners.

New Zealand Merino Attributes

New Zealand Merino Attributes

In terms of who would be most likely to respond favorably to ZQ, NZM’s research indicated that it should focus on brands operating in the growing “lifestyles of health and sustainability” or LOHAS market. In the United States alone, this market was estimated to be more than US$200 billion in size. Brands targeting LOHAS consumers (see box) fell into several different categories:

Active outdoors
Knitted garments for the active outdoors market (note that many brands and garments in this segment are increasingly seen as being fashionable as well as functional).

High-end hosiery
Knitted garments, particularly socks.

Luxury suiting
Woven garments, primarily men’s and women’s suits.

Knitted fashion
Fashion garments such as knitted jumpers and dresses.

Baby wear
Knitted garments and bedding for infants.

School uniforms
Woven garments for use by private schools for student’s uniforms (particularly in Japan).

Bedding
Mainly knitted blankets or wool-filled pillows and duvets.

Interior textiles
Woolen throws, rugs, and upholstery.

To pursue the brands that fell into these categories, Brakenridge described NZM’s approach: “We looked at the segmented market, we took the attributes that we had learned about the fiber, and we lined them up so that it became more like an a la carte menu. And we customized our message for each market segment. Then we tried to identify the leader in each category, or if there wasn’t a leader we had to define one. Next we did some international market research in a qualitative manner for these companies and came up with prototypes that we could take to them. When we went to visit people, we went there with prototypes and said,

Look, here’s your product. If you differentiate it with the ZQ and/or the New Zealand Merino label, here’s some market research that validates what that would do for your brand.

Over time, this approach allowed NZM to build a portfolio of leading brand partners that included:

Designer Textiles International

Ibex

Icebreaker

Johnstons

John Smedley

Loro Piana

Reda

SmartWool

LOHAS

Characteristics of LOHAS Consumers:

Active

Involved

Passionate

Influential

Principled

Responsible

Self-confident

Discerning

Sophisticated

High discretionary income

 

Unmulsed Merino Sheep

A Note on Mulesing

Mulesing is a controversial procedure that involves the removal of skin around the buttock of the Merino to help reduce the incidence of flystrike (a parasitic disease that can be deadly). The practice is generally accepted as an effective way to prevent flystrike. However, because the procedure is performed without anesthesia, animal rights groups have recently deemed it inhumane and unnecessary.

In Australia, organizations such as PETA (People for the Ethical Treatment of Animals) have mounted opposition in the form of protests and boycotts. The industry association known as the Australian Wool Innovation (AWI) initially pledged to phase out mulesing by 2010 but then rescinded its commitment in mid-2009, which exacerbated the conflict.

In New Zealand, growers identified the market pushback surrounding mulesing and many took a different approach and voluntarily adopted alternatives to mulesing in an effort to distance themselves from the controversy. The market also provided them with an economic incentive to cease mulesing. The majority of NZM growers have ceased to use the practice, and it is strictly prohibited on ZQ-certified farms. This approach has further differentiated New Zealand Merino from Australian Merino. Another benefit is that the animals no longer experience the stress associated with mulesing, which helps keep their wool strong and undamaged.

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