The organic cotton market

The history of organic cotton production

The certified production and consumption of organic cotton dates back to the early 1990s, when pioneers in the United States and Turkey started to create markets for cotton that was grown as a rotational crop on certified organic farms. The first organic cotton textiles brought to the market consisted of a limited range of 100% certified organic cotton products, which were sold in a small number of dedicated shops - usually natural and health food stores. They were primarily marketed for their ecological characteristics, rather than for their quality, design or fashionable appeal.

Trends in the 1990s

In late 1992, some environmentally motivated textile and clothing designers and companies launched the sale of more fashionable ecological textiles, later known as the 'eco-look' in fashion. Ecological textiles were now also for sale in fashionable shops such as Esprit and Hennes & Mauritz (H&M), in addition to the continuing sales in health food and natural textile shops. Products on offer tended to be either 'ecru' or dyed with soft 'natural' colours. Environmental awareness about fibre, textile and clothing production was created among consumers and in the industry. However, there was also confusion about the value of the different environmental claims found in the marketplace (e.g. 'natural' or '100% hand-picked cotton'²⁶). The eco-look lasted till late 1994, when fashion turned towards the use of bright colours and synthetic fibres.

The design, quality and colour range of organic cotton items improved significantly in the second part of the 1990s. The range of yarns and fabrics available expanded, which widened the offer and the quality of the organic cotton textiles and clothing for sale. Supply of organic cotton fibre was in excess though, while overall demand stagnated. Several large United States-based companies involved in organic cotton usage at the time, such as Levi's and the Gap, withdrew from organic cotton use.

Overall, global demand for organic cotton remained more or less stable up until 2000. Most demand came from Europe, particularly from Germany thanks to mail order companies such as OTTO and Hess Natur, and to a large number of small and medium-sized companies processing and selling 'natural textiles' including organic cotton items. In Switzerland, the supermarket chain Coop ensured a steady and increasing demand for organic cotton from 1995. By 2000, this example was being followed by its main, larger, Swiss competitor Migros. Demand in the United States and the United Kingdom relied in this period primarily on mail order catalogues and also on early electronic commerce.

Mail order catalogues were (and are) also very important in Germany. Catalogues are a good medium to tell the 'organic cotton story' to geographically dispersed consumers in a small and newly emerging market. Around 2000, however, the German market for organic cotton textiles and clothing was in difficulties because of a mail order crisis, affecting companies such as Hess Natur (Germany), Köppel (Switzerland) and Waschbär (Germany). Many specialized natural textile shops had to close down. The decrease in consumer demand was probably related to issues concerning the design, quality and fit of the organic cotton items on offer. Design, fit, colour and price are all major elements of consumer choice for textiles and clothing. Environment and 'organics' are at best an additional positive feature.

Trends between 2000 and 2005

By 2000, new strategies were required to increase organic cotton demand and subsequently production. In the United States, large companies operating internationally became increasingly concerned about the value of their brand and image, following public concern about social issues such as child labour and the working conditions in sweatshops. Some brands became aware that involvement in organics might help them to increase or restore their brand value and image.

They were not keen though on paying significantly more to farmers for certified organic cotton than for conventional cotton. Supplying large brands would also require fibre volumes which were enormous for the newly emerging organic cotton market. Furthermore, organic cotton actors (in the United States in particular) were aware that the provision of large volumes of fibre to only a few large companies would generate a high level of dependency and risk.

A solution was found in the development of so-called blending programmes, in which brands engage in the use of a small percentage of organic cotton fibre (for example starting with 3%-5%) in their products. At the spinning mill, the organic cotton fibre is mixed into conventional cotton yarn or into other yarn types. Thanks to blending, the costs of using higher-priced organic cotton could be limited as a percentage of product value. Organic cotton usage per company was intended to gradually increase over time, along with supply.

This United States-developed model for growth in organic cotton usage proved successful for a number of brands. The sports brand Nike, in particular, gradually increased its organic cotton usage from 2000 on, making it the global leader in organic cotton fibre usage in 2005. Nike also succeeded, together with Patagonia, in interesting brands such as Timberland, Marks & Spencer and Nordstrom in conversion programmes using 5% organic cotton.

By 2006, many large and medium-sized textile and clothing companies had followed the example of Nike and others, and launched organic cotton conversion programmes. The organic cotton business network Organic Exchange has been instrumental in that process since its foundation in 2002. According to Organic Exchange, there are now at least 35 companies running organic cotton conversion programmes, plus an additional 2,000 smaller brands and initiatives using organic cotton around the globe (Calahan Klein, 2006).

The demand for organic cotton is increasing rapidly, with 100% organic cotton items now showing up in regular fashion fairs such as Magic (United States), Première Vision (France) and the London Fashion Week (United Kingdom). Organic cotton textiles and clothing are now for sale at top locations in high-end fashion streets, in addition to other distribution channels such as supermarkets, natural and health food stores, specialized boutiques, mail order, and electronic commerce.

Organic cotton production

Reliable data about the production, trade and consumption of organic cotton are difficult to establish. Independent data from third-party certifiers are not available for reasons of commercial confidentiality. Differences between the declared and the real volumes of traded organic fibre can be significant.

The data presented in this chapter stem from a variety of sources, including documentary and Internet research, interviews and electronic contacts with about 130 actors in the organic cotton textile chain, attendance at trade fairs for cotton and textiles, and participation in the 2006 conference of the organic cotton business network Organic Exchange. The data presented are based on self-declarations and claims of projects and companies, and on additional 'best guesses' by the author.

Today, certified organic cotton is grown in 22 countries in the world (see table 5.1).²⁷ Total production of and trade in organic cotton fibre is estimated at 23,000 tons in 2006.²⁸ Earlier estimates in 2001 and 2004 amounted to 6,000-6,500 tons and 10,000 tons of fibre respectively (Ton, 2002; Ton, 2005). Production growth was an annual 70% over the period 2001-2006, and has reached 120% per year since 2004. Despite this spectacular growth, the volume of organic fibre traded on the international market still represents only 0.09% of the 24.8 million tons of cotton fibre traded worldwide.

Please click to enlarge

Figure 5.3: Organic cotton production and trade worldwide (in tons of fibre, 1992-2006)

Organic cotton production is concentrated in Turkey (10,000 tons of fibre; 43% of total production) and India (6,500 tons of fibre; 28%), where growth has recently also been most spectacular. Together they now produce more than 70% of the world organic cotton supply. Other relevant producers in terms of volume are China (1,750 tons; 8%) and the United States (1,500 tons; 7%).The African countries together accounted for about 1,800 tons of fibre in 2006, or 8% of total production, mainly in Uganda and the United Republic of Tanzania,²⁹ but also in Egypt and in French-speaking West Africa (Mali, Burkina Faso, Benin). Countries that recently started or restarted organic cotton production are Australia, Burkina Faso, Kenya, Kyrgyzstan, Nicaragua, Pakistan, South Africa and Zambia.

It should be noted that more than half of the global production of organic cotton fibre is in the hands of two single organic cotton projects. The largest organic cotton producer in the world is Mavideniz in Eastern Turkey, with a claimed 8,000 tons of cotton fibre in 2006, thus accounting for 80% of Turkish production, and for 35% of global production. The second-largest organic cotton producer is Eco-Farms in Maharashtra, India, with a claimed 4,000 tons of cotton fibre in 2006. Eco-Farms plans to expand production to 6,000-7,000 tons of fibre in 2007.

This high concentration of production in two single projects points to the vulnerability of the supply of organic cotton fibre. The performance of these two projects in terms of quality, price, reliability of supply, control and certification, and transparency, may determine the future of the global organic cotton market in the short and medium term.

Organic cotton consumption

The number of large textile and clothing companies involved in eco-textile sales is steadily increasing as are the volumes they purchase. Today, there are around 20 companies using more than 100 tons of organic cotton fibre per year (see table 5.2). Two-thirds of these companies started selling organic cotton textiles and clothing only after 2002. New brands entering the market along with established brands are responsible for the growth of the international market for organic cotton fibre.

In 2005, the largest users of organic cotton fibre worldwide were the sportswear brand Nike and the supermarket chain Coop (Switzerland). Nike was the absolute leader in organic cotton fibre use thanks to its blending programme and to sales of 100% organic cotton items. Sales of the latter started in the United States, but most 100% items are now on offer in Europe. Nike claims to have used in 2005 a total of 4.3 million pounds of organic cotton, or 1,950 tons of fibre (Duffy, pers. comm., 21 October 2006). This is the equivalent of 4% of its cotton usage worldwide. Coop in Switzerland was second in 2005 with a claimed usage of 1,428 tons of fibre. Coop sells a wide range of organic cotton textiles and clothing in its supermarkets and department stores throughout Switzerland. More than 50% of Coop's annual cotton usage now consists of organic cotton (Coop, 2006). Well behind Nike and Coop comes the number three in terms of organic cotton usage in 2005: outdoor sportswear company Patagonia, with around 650 tons, which is 100% of its cotton usage.

The organic cotton market is very dynamic however. In late 2005, the world's largest retailer, Wal-Mart, announced its decision to expand the range of organic products it has for sale, including organic cotton items. Wal-Mart first launched the sale of organic clothing in 2005 through its United States subsidiary Sam's Club, which had great success in the sale of 100% organic yogawear. In May 2006, Wal-Mart supermarkets started to sell organic cotton babywear under the label George Baby Organic. The range of organic cotton textiles and clothing for sale will be expanded in 2007. In order to do this, Wal-Mart placed the largest order for organic cotton fibre ever in spring 2006: 10 million pounds, or about 4,500 tons of fibre. This is the equivalent of no less than 20% of the organic cotton fibre traded worldwide.

Organic cotton: an issue of large brands?

Up to 2000, the market for organic cotton and eco-textiles was shaped by a few committed and leading companies (Patagonia, OTTO, Coop, Nike, Hess Natur), together with a wide range of small and medium-sized textile and clothing companies. Since then many new brands and retailers have started an organic cotton blending or conversion programme. The number of small and medium-sized companies entering the organic cotton market has also expanded rapidly to a current estimated total of 2,000 (Calahan Klein, 2006).

Market share of the big brands and retailers had increased between 1998 and 2001 from about one-third of global organic cotton fibre volume to about one-half, under the influence of the organic cotton blending programmes (Ton, 2002). Today, the estimated market share of large brands and retailers (some 25 in total)³⁰ has increased to 58%, taking into account the new Wal-Mart involvement. The organic cotton market thus relies increasingly upon usage by big brands and retailers.

Organic cotton processing

In the 1990s, retailers wishing to offer organic cotton items for sale to consumers were faced with a lack of infrastructure. Technical challenges were still many (for example the homogeneity of quality, and access to environment-friendly dyes), and markets for higher-value organic cotton items were limited. Production runs were small and production costs per unit high. Few industries were therefore ready to set aside workers' time and production capacity for the manufacturing of organic cotton textiles and clothing

The blending programmes mentioned have helped to overcome this situation. Large brands such as Nike and Marks & Spencer started to require their suppliers to blend some percentage of organic cotton into the product. The brands did not wish to pay any premium for the blends, however, expecting the mills to absorb the additional expenses in exchange for preferential treatment by the buyer. This push by some big brands motivated many spinning and weaving mills to inquire about organic cotton, to learn about the story behind organic cotton, and to try to ensure their access to organic cotton supply. Awareness-raising of the industry was (and is) an important output of the blending model. It created the foundations for future growth.

The growing demand for organic cotton, and the significant interest from new brands, makes it possible for industries today to operate larger production runs of organic cotton textiles than before, thus reducing the cost per unit. The infrastructure for organic cotton manufacturing, including 100% organic cotton items, is improving. Blending actually seems to be losing importance as a strategy. Many textile mills now consider it to be more interesting, technically and financially, to produce higher-priced 100% organic cotton items rather than blended 3%-5% organic cotton items for which no higher price is being paid by the buyer.

There are many spinning mills and integrated textile mills involved in the production of organic cotton items today.³¹ Most organic cotton spinning takes place in Turkey and in India, but there is also spinning in China, Indonesia, Mexico, Pakistan, Peru, Portugal, the Republic of Korea, Switzerland, Thailand and the United States. The largest organic cotton spinner in the world today is Sanko Textile in Turkey, which reportedly spins all estimated 8,000 tons of fibre from the Mavideniz project in Turkey. The second-largest spinner of organic cotton worldwide probably is Indorama, in Indonesia, which claimed to be using around 2,500 tons of fibre in 2006, or 10% of the global market. Speciality spinners are also involved in organic cotton spinning, as is for example the case of Hermann Bühler Yarns (Switzerland), which specializes in very fine yarn counts, and Güçbirliði Tekstil (Turkey), spinning yarn from naturally coloured cottons.

In the other stages of the textile chain (e.g. knitting/weaving, dyeing, mercerizing and confection) the infrastructure for separate processing and handling of organic cotton products is also expanding. Most companies entering into organic cotton usage started (and still start today) selling knitted shirts, dyed and/or printed, the production of which does not require high minimum volumes. Woven organic cotton items are not yet very common in the marketplace. Minimum quantities in weaving are much higher than for knitting, thus increasing financial risk.

Up until 2005 it was very difficult for consumers to find products such as jeans made of organic denim. Denim mills require huge minimum volumes to run. Today, however, there are a growing number of suppliers of organic cotton denim fabrics for jeans, including Cone Denim (United States), Hellenic Fabrics (Greece), Ital Denim (Italy), Isko (Turkey), Orta Anadolu (Turkey) and Tavex (Spain). The infrastructure of the organic cotton market is strengthening and expanding, and as a result a wider range of fashionable products is becoming available to end-consumers.

Retail of organic cotton items

The retail of organic cotton textiles and clothing is increasingly conforming to regular textile and clothing sales. Thanks to the involvement of the large brands and retailers, the number of points of sale is expanding rapidly, thus literally bringing organic cotton items to consumers. Consumers no longer have to go to unique specialized stores and boutiques, changing their purchasing habits in order to access the items.

Organic cotton items can now be found for sale in top locations such as high-street fashion shops as well as in supermarkets, for example:

• The Celio, Levi's and Quiksilver stores in Forum les Halles in Paris (France);
• The Sportarena department store in downtown Frankfurt (Germany);
• The Bijenkorf department store on Dam Square in Amsterdam (Netherlands);
• The Topshop department store in Oxford Street in London (United Kingdom);
• Nordstrom's department store in the Fashion Show Mall in Las Vegas (United States);
• Timberland's Outlet Store in Potomac Mills in Washington DC (United States);
• Supermarkets including Coop (Italy), Coop (Switzerland), Migros (Switzerland), Monoprix (France) and Wal-Mart (United States);
• Natural and health food supermarkets including AlNatura Biomarkt (Germany), Biocoop (France), Natuurwinkel (Netherlands) and Whole Foods Market (United States).

Organic cotton items are also for sale today in stores outside Europe and the United States, for example in Australia, Brazil, Egypt, Japan, Mexico, the Republic of Korea and South Africa. Points of sale in organic cotton producing countries are still few, except for the United States.

Choice in organic cotton items is still fairly limited. Most retailers offer only a few labels and a few products, in very few styles, colours and fits. In fact, there is tremendous room for growth if current sales of organic cotton items are found to be economically attractive by brands and retailers. The infrastructure is there at retail level to rapidly expand the sale of organic cotton items.

Mail order remains an important sale channel for organic cotton textiles and clothing, as geographically dispersed consumers can be reached at low cost, and can be informed about the backgrounds of organic cotton production and processing. The importance of mail order sales in overall sales may have gone down relatively over recent years. In Germany, there has been a reduction in usage by the organic cotton market leader OTTO, which is also the leading European mail order company in textiles and clothing. Number two Hess Natur, however, has recovered from its 2000 sales crisis, and Greenpeace-Germany, which then quit, is now back in the market. In France, mail order has gained importance through companies such as Somewhere/La Redoute, Vertbaudet, Le Camif and Fibris. In the United Kingdom and the United States mail order is also of importance, with suppliers such as Gaiam (United States), Greenfibres (United Kingdom) and many smaller ones.

Pricing and positioning

Economies of scale, increased efficiency in the organic cotton textile chain, and the pricing policies of individual companies, have made 100% organic cotton items much more accessible to consumers than before, when they were often sold as high-priced, exclusive items. Organic cotton items are now also available in medium and lower price segments of the market, making them more accessible to the average consumer. Overall, organic cotton items have become less expensive, even if the price often still is significantly higher than for comparable conventional items.

The pricing and positioning of organic (and conventional) clothing items depends, among other things, on a company's sale strategies. Companies have different options available. They may, for example, decide to position organic cotton as a luxury item, targeting fashion-oriented consumers who are looking for exclusivity and who are less responsive to price. This was for example the case with EDUN's launch in 2005 of the sale of exceptionally high-priced organic cotton trousers (up to $250 per piece) and printed shirts (up to $100 per piece). Pricing of organic cotton items may also be deliberately higher in order to obtain a higher profit margin on this new and exclusive product.

However, companies may equally well decide to temporarily support the sale of organic items, for example offering them at conventional prices (i.e. at a lower profit margin), in order to gain market share or to create a market where none exists. Coop Switzerland, for example, deliberately subsidized its organic cotton sales for many years in order to create a market. Another option is of course for companies to price organic items realistically, incorporating in the price of the organic items only the actual additional costs of organic cotton fibre compared to conventional cotton.

Consumers now also find items in the market that contain only some percentage of organic cotton, as is for example the case in the United States of Nordstrom's 5% organic/95% conventional cotton shirts for men. Blended items tend to be sold at conventional prices. No publicity is made to consumers about the blending unless on the product label inside the item or on a hang-tag.

'Fair' pricing

Organic cotton fibre itself is more expensive than conventional cotton fibre, because of higher production costs and often also lower yields.³² However, this does not necessarily have to translate into a much higher price of the end-product as long as the percentage of fibre price in the total product value is limited.

Overall, it is estimated that the value of a clothing item is about 25-30 times the value of the fibre that is contained in it. A mark-up of around 30%-50% on the price of organic cotton fibre (i.e. on 3%-4% of total value) would then translate in a 1%-2% mark-up on the final clothing product, or EUR 0.25-0.60 on a standard-priced shirt of EUR 25-30. If the product is sufficiently fashionable, having an attractive design, colour and fit, end-consumers will normally not care about such a price difference.

However, in practice we see that the mark-up on prices of organic cotton items is much higher. Depending on the item, retailer, sales channel and so on, retail mark-ups are generally about 20%-40%, but occasionally 100% or more. The higher sales price is usually explained by the additional costs relating to smaller scale, separate handling and additional labelling, and by overhead costs.

²⁶All cotton originates from vegetative production. Mechanical picking is generally limited to high-producing, capital-intensive production (e.g. United States, Australia).

²⁷Four countries are expected to join in 2006/07: Malawi, Mozambique, the Syrian Arab Republic and Viet Nam.

²⁸The organic cotton business network Organic Exchange gives a much higher estimate of 31,000 tons (Ferrigno, 2006), while overestimating 2006 production in India and Africa.

²⁹In 2006, production in Uganda and the United Republic of Tanzania suffered from severe drought, halving cotton fibre output. Some United States growers also had severe losses due to drought.

³⁰'Large' here refers to an estimated organic cotton usage in 2006 of 100 tons of fibre or more, and to large textile and clothing companies that have started with organic cotton blending programmes or with trials of 100% organic cotton items. 

³¹For a listing of actors involved in the production, processing and trade of organic cotton, see the Organic Cotton Sourcing Directory 2006 at www.organicexchange.org and PAN's International Organic Cotton Directory at www.organiccottondirectory.net. 

³² Scarcity is sometimes cited as an additional feature.