A Tale of Two Companies

What it takes to succeed in today’s global textile marketplace.

Put any two companies side by side these days and you’ll likely find good people, good products and good intentions at both organizations. Firms cannot have survived the turbulence of the textile business this past decade without savvy management and an innovative product portfolio. Why then does one flourish and another fail? How can one invest in the future while the other ceases production?
And yet this Spring as news of Lenzing’s best quarter was being reported, it was announced that Dow XLA was shutting down. Here we take a close look at the strategies for Lenzing’s success and the reasons for Dow XLA’s demise. We offer both a personal and market perspective on the Dow Fiber Solutions situation. Gray Maycumber, who wrote the very first story on the launch of XLA, gives his insight on the situation while in a companion piece we offer industry views. For comparison Tricia Carey answers questions on Lenzing’s strength and goals in the domestic market. Two companies, one left standing.

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Dow Fiber Solutions: A Personal Perspective

When Dow Chemical introduced its new fiber operation, Dow Fiber Solutions (DFS) and its new (and only) fiber, XLA, a stretch olefin, in New York in 2002, there were many who seriously questioned the move. They were right.

The fiber, as one Dow XLA executive told me, “had several challenges.” Not the least of which was logistics.

The fiber, lastol, was to be manufactured in a plant in Tarragona, Spain. Marketing was being done in Europe and NYC. The business director of the operation, Juan Carlos Cuadrado, was based in Switzerland. The targeted market was U.S. and more important, Asia.

A fiber made in Spain to be sold in the U.S. and Asia, by marketers in Europe and the U.S., created a rather large carbon footprint.
Also, there was no lacking in already established stretch fibers.

Asia, where most textiles and apparel are now made, was already saturated with the leading stretch fiber, spandex (both Lycra and generic versions), as well as other branded spandexes like the Korean, Hyosung.

Also, olefin fibers (the largest in this family, is polypropylene) have traditionally never been particularly popular in the fashion world.
There really is no need for this fiber, was the feeling. But Dow XLA thought it could find its own niche, mostly with designers.

In 2006, Cuadrado told me that, “Our marketing strategy is not to replace another fiber but to differentiate ours for a different market. We won’t replace, but differentiate.” He also stressed that the target was an upscale, higher priced market than spandex.

That market really did not develop fast enough and large enough for DFS to reach the profit level it wanted. Liaisons with designers always sound great in press releases, but very often don’t bring in that much cash. The textile/apparel business is noted for always looking for lower prices, not higher.

Also, many observers felt that Dow’s approach to marketing, using mostly former DuPont, Invista and other fiber executives, as well as establishing an expensive showroom on Broadway, when other companies were replacing their NY presence with an Asian one, was rather “yesterday.”

Of course, neither Dow nor anyone else could have foreseen the huge economic down turn that would come later, badly effecting textiles, apparel and everything else. For other reasons, Dow did not have the resources to carry the experimental fiber.

Partially due to the downturn, partially due to some bad judgment, Dow got into a very expensive deal to acquire the large chemical firm, Rohm & Haas. There was trouble, and when the dust cleared, it is reported that move put Dow into a $25 billion hole.

Supporting a boutique fiber became a very low priority and along with other Dow divisions, it had to go.

I talked to Rebecca Bentley, senior public affairs leader at Dow Chemical, who summed it up. “Dow is in the process of exiting the fiber solutions business and will cease production of Dow XLA products within the next 6-18 months. After a thorough review, Dow determined that DFS was unable to compete with other Dow Performance Businesses for further investment and expansion.”

She added that Dow would continue to operate the
fiber production facility in Tarragona to meet customers’ current and final order requirements and then close it. —S. Gray Maycumber


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The Price of Business Today: A Market Perspective

An impatient marketplace, a pricey product positioned as a niche player and a parent company looking to cut expenses on the heels of a financially costly deal, all contributed to Dow XLA’s exit from the fiber business. Not to mention some mismanagement, a too traditional approach by a chemical company and a fashion industry high on low quality trendy goods.

Executives from inside and outside the company praised the product and personnel efforts – “they fought the good fight” – but also recognized the assortment of challenges to succeeding in today’s tricky textile business.

“These days, everything is short term. People aren’t as bold. Brands are scared of anything they are not sure will sell. People want to be sure of the viability, before taking a risk,” comments Brad Poorman, president of Cocona. He recalls meeting with Dow XLA managers who were trying to reach out to other technologies to bring to their niches – for example, Cocona to dress shirts. “I felt like they trying the right things, but corporate was slow to catch on,” says Poorman. “Also things went south with the Rohm & Haas deal.”

Poorman and other textile veterans realize bringing a new product to market takes time. “XLA was moving along in a positive direction but not moving along fast enough in today’s economy,”
comments an exec with 25 years in the business.

“Everything moves at warp speed now and the world of finance is so different. In the past, companies were willing to sit back and allow businesses to grow and mature. Now it is more about instant gratification.”

DuPont took decades to build each of the apparel fibers. Though it may have seemed like it, nylon, polyester and other fibers were not overnight successes. Even in more recent years, in the case of CoolMax, it wasn’t until the product struck it big in the sock market and then with golf shirts did the fiber really take hold. It takes a couple big programs for a product to gain traction.

In the case of Dow XLA, no-iron shirts were not going to be enough. Other markets being targeted included denim, swim, and more recently workwear, and even some intimate and active. According to someone close to the company, Dow XLA was definitely making inroads, with orders up significantly.

However, even this exec admits the small scale nature of the business was problematic as was price: “People value differentiation, but just don’t want to pay for it.”

Indeed every single source contacted mentioned price as a factor. One person repeated of the nature of a conversation he had had with an old friend who is a high-level DuPont exec, whose response to Dow XLA launch was “It better be a low-priced fiber if it is going to succeed.”
Many commented that Dow’s development process was out of sync with the times. As one textile consultant notes, “It use to be that a chemical company (like a DuPont) would innovate, bring the product to the mills, let them do the R&D and sell the fiber. Now, however, the power has shifted and retailers dictate what they want and how much they spend. The chemical company no longer calls the shots.”

Others agreed and chimed in, “A chemical company such as Dow doesn’t have a feel for the market.”
And, perhaps nor do they want to. The other Dow operations are big and the company is not in the consumer business. XLA wasn’t big enough to compete for Dow dollars.

But Dow did spend — and at times lavishly. One competitor recalls being awed by a “fabulous” trade show booth Dow XLA had at a Paris exhibition made to look like an indoor pool to highlight chlorine-proof swimwear. Then there was the NYC showroom. In 2006, Dow Fiber Solutions spent $1.5 million to open a 2500-square-foot XLA showroom designed by architect Thierry Peltrault.

Two years later fashion photographer Henrik Halvarsson was hired to shoot Dow XLA’s first solely branded advertising campaign, featuring looks from partners like Citizens of Humanity and Calvin Klein. The global campaign involved print, TV and internet.

In the end, it all boiled down to price. Described as “full of promise,” an industry vet then sighs and says, “If they had just priced it competitively, then it would have worked.” — Emily Walzer


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Lenzing: The Future Looks Bright

Tricia Carey, merchandising manager at Lenzing, Highlights Domestic Business

What is your job at Lenzing?

My role is merchandising manager for the US. I’m reaching out to retailers and brands to use Lenzing brands including MicroModal, MicroTencel, ProModal and others. Our core fibers are Tencel and Modal. We also help with techniques for Viscose in the U.S. We have more than just two fibers and we have to always be giving that reason for being in the market. I’m always getting questions like “What are the performance benefits of this?” and “What are the attributes?”

You have to know about everything. We have 15 merchandising managers globally and we are all linked together.

The first quarter of 2010 was the company’s best in history. What is selling so well?

After everything with the economic crisis, people are coming out of it and looking at the supply chain differently. There was a cut down and a time that people went without placing any orders at all, but now they are building up again. Things like cotton impact us too since we’re often blended with other fibers. Overall we are positioned to be diversified. We are also in intimates, denim, menswear and home. We are never dependent on just one.

How are you investing in innovation domestically?

I find innovation really exciting. At the yarn spinner stage, we are bringing new products to market. Buhler recently launched MicroTencel and are the only ones spinning it in the U.S. It provides a good supply chain route with Los Angeles too. Tuscarora is working with ProModal in heathers in the U.S. They are also doing a recycled Indigo with Modal, for a slubby, vintage effect.

Is there new opportunity in denim?

Denim was an original market for Tencel, but there are so many fashion cycles. For the last couple of years, it was about stiffer denim. That is tougher for our products. But denim has become softer now, so it is better for Tencel. At the PV Denim show, I heard key Italian mills were there. That is good.

Tell me about your involvement in Texworld USA.

We are excited about the expansion into home this year. We will have the largest pavilion ever with 33 apparel mills and four for home. Supima is joining the show, which is good. We like to create a real impact show in the U.S. so people will come to New York rather than go to Europe and Asia. A lot of our mills are repeat visitors as well. Out of the seven U.S. mills, six are repeats, so you can count on people being there. For Los Angeles mills, it provides good outreach to the New York market. We also have 13 seminars lined up including one with David Wolfe, color and design trends, FTC claims, fiber innovations and Pantone home color trends.

What’s next for Lenzing in the U.S.?

We are continuing to educate and place emphasis on eco and sustainability. There is always a level of education that needs to be done. There are always new decision makers coming into the market. We are working with Organic Exchange to reach out to customers. When you’re doing well, you never want to sit back. We continue to focus on building strong relationships. — Suzanne Blecher

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