Organic Consumers Association

Opportunity Grows for Organic Cotton Market

by Joyanna Laughlin and Richard Fleming
LOHAS Journal Oct. 2003

Push comes to pull as suppliers work to keep pace with rising demand from
consumers who cotton to organic

In the early 1990s, Texas farmer La Rhea Pepper "started exploring what we
could do to bring economic sustainability back to the farm-gate level as well
as to have sustainability at the soil level," she recalls. Organic cotton was
the answer.

In 1993 La Rhea and husband Terry helped found the Texas Organic Cotton
Marketing Cooperative (TOCMC), which now includes 54 family-owned and -operated
farms with more than 10,000 acres of land in organic production of cotton and
other crops. By 2000, TOCMC was producing one-third of the organic cotton grown
in the U.S., according to Pepper, who is the group's market-development

When co-op members learned of rising consumer demand for organic feminine
products, they founded Organic Essentials Inc. in 1996. After developing a line
of tampons, cotton balls, swabs and cosmetic rounds for its product mix, the
company reaped FY01 sales of $1 million, up 50 percent from FY00 sales, which
had grown 41 percent from FY99.

Pepper, who also serves as president of Organic Essentials, attributes the
growth of the company and the organic cotton market in general to "consumers
becoming aware that organic is more than food." She estimates that the U.S.
organic cotton industry generates $125 million in revenues annually.

According to the Greenfield, Mass.-based Organic Trade Association (OTA),
13,460 acres of certified organic and transitional cotton were planted in the
U.S. in 2000, a 15-fold increase since 1990. While the amount of organic cotton
produced is growing-67,765 bales worldwide in 1999-the conventional cotton
harvest easily dwarfs its up-and-coming sibling, turning out 87.3 million bales
globally during the 1999/2000 year, according to the U.S. Department of

Concerns over the health effects of conventional cotton led Natracare LLC,
developer of the first modern-day cotton tampon, to switch to certified-organic
cotton in 1997. "When you're a company that has developed a 100-percent cotton
tampon for health and environmental reasons, the switch to organic cotton is
the next step, for all the reasons that make organic a better choice in other
things, such as food," says Susan Carskadon, who heads the Denver-based
company's North American operations. Since switching to organic cotton,
Natracare has had annual revenue growth rates ranging between 50 and 65
percent, growth that Carskadon attributes to a rising awareness among women
that certified-organic cotton tampons are a healthy choice.

Sandra Marquardt, coordinator of OTA's Fiber Council, says women are the
primary buyers of organic cotton products in general, and notes, "Food could be
acting as an organic gateway to these buyers."

That was the case with at least one manufacturer as well. Maggie's Organics was
in the chip and salsa business in 1992 when one of its growers announced that
he had a crop of organic cotton that he needed help selling. "We began to
research cotton and found out that it is the second-most pesticide-laden crop
in the entire world, and that it uses 25 percent of all pesticides on the
planet," says Bená Burda, company president and owner. Ruminating that people
spend a third of their lives sleeping on cotton sheets, and much of the rest of
the time in cotton clothes, Burda and her associates developed a product line
that includes socks, T-shirts, camisoles, underwear, bedding and Oxford shirts.
And annual sales have been increasing at a 50 percent rate. "It's a consumer
pull-through that's happening," she explains. "We used to have to browbeat
distributors and retailers into carrying our products. Now customers come find
us. The tide turned about a year ago"-a turning point Burda attributes to the
health and sustainability movement.

Stepping up to help meet that demand are well-established players in the
healthy lifestyles sector, like Broomfield, Colo.-based Gaiam Inc. and Green
Babies, of Tarrytown, N.Y. Both companies seem of the same mind as OTA's
Marquardt, who sees the organic cotton market being driven by demand for
children's clothing and adult activewear.

Gaiam expanded its organic cotton offerings with last year's launch of Gaiam
Organix, a division focused on performance wear, casual clothing and infant
togs, as well as towels and bedding. Gaiam Organix targets consumers who are
looking for quality fabric goods, positioning its products in the midrange of
the price spectrum and selling their organic origins as a bonus value. "We want
our items to have the same style, quality and price as conventional products,
with the added value of organic," says Lynn Powers, president of Gaiam. "Given
that choice, we believe consumers will choose organic."

Gaiam is augmenting its catalog and online channels by expanding the number of
retail outlets offering its Organix line, taking its "functional wear"-clothes
that have a reason to be worn beyond fashion, such as yoga togs or bathrobes-
into mainstream sporting goods stores and department stores. "We're seeing
growth in our direct consumer base, and we believe we'll see the same on the
retail side," Powers says.

Green Babies, a maker of organic clothing for children as well as organic
sheets and diapers, has experienced 50 percent growth over the past two years,
with current annual sales of around $2 million. Lynda Fassa, who in 1994
founded the company with her husband, Hossein, says Green Babies products
appeal to both organic and crossover shoppers who are fashion-conscious but
also want to do something good environmentally. "I'm selling the idea that
[organic baby clothes] are a nice thing to do and a nicer way to do it," she

When it comes to activewear, there's no bigger player than Beaverton, Ore.-
based Nike, the largest domestic buyer of organic cotton. In 2000, $182
million, or 20.9 percent, of Nike's FY00 U.S. net revenues of $868 million were
generated by sales of organic cotton-blended products. This year Nike plans to
spin 1.2 million pounds of organic cotton into T-shirts, sweatshirts and fleece
products made and sold in the U.S. Those products will be 5.7 percent organic
cotton, according to Heidi Holt, global environmental director for Nike's
apparel division. The company has a goal of a minimum of 3 percent organic
cotton in all of its cotton apparel by 2010 and next year plans to launch a 100
percent organic cotton women's line in the U.S.

However, Nike's ambitions to grow the amount of organic cotton in its products
are subject to a tangle of factors that plague the industry as a whole. Along
with higher cost and limited supplies of organic cotton, the industry is
challenged by a continuing trend of U.S. textile mills moving overseas, high
production minimums from contract manufacturers that work against the lower
milling and weaving volumes typical of organic cotton runs, and increased
production overhead due to required equipment cleaning between runs of
conventional and organic cotton in order to maintain product purity.

Such problems caused Adidas-Salomon, headquartered in Herzogenaurach, Germany,
to abandon the use of organic cotton in its apparel and footwear products after
a couple of years.

Those challenges didn't deter outdoor gear and apparel maker Patagonia, which
devoted a year to the process of educating employees about organic cotton and
modifying operational procedures in order to switch completely to organic in
1996. (See "Patagonia's Journey to Sustainability," LOHAS Journal July/August
2001.) "It made many jobs a lot harder," recalls Jil Zilligen, the company's VP
for environmental initiatives. "We had to go back through all the manufacturing
and design processes to get them to conform to using organic cotton."

But the ordeal has paid dividends both financially and in terms of public
relations, according to Lu Setnicka, Patagonia's public affairs director. "It's
made us a more successful company and it's been a great story for us to tell,"
she says, adding that the company is encouraging the use of organic cotton
among its suppliers. "We're using leverage we have as a business to grow the
market for organic cotton," she says.

Nike, which typically buys T-shirts already made, is developing long-term
relationships with organic farmers, including the Peppers, to stabilize its
supply of organic cotton. "Not only is this a more sustainable relationship
with the farmer, but it brings the price down significantly," Holt says.

And industry insiders expect the organic cotton market to produce a growing
crop of healthy profits. As more and more consumers "see the connection between
organic and health, we see growth continuing in an exponential manner," says
Ellen Feeney, Gaiam's director of marketing communication.

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