A legal letter sent to WNZ from Australasia’s largest flooring manufacturer disputes the grower-owned firm’s claim it’s cheaper to carpet a house with WNZ’s new range of 48-ounce cut pile wool carpet than Godfrey Hirst’s equivalent solution, dyed nylon carpet.
The claim it would cost $8,158 to carpet an “entire house” with a 48-ounce cut pile manufactured in Turkey was made at WNZ’s annual general meeting last month.
That price for a quality, NZ wool carpet had seen it land a recent contract for 71 new Christchurch homes as part of a deal with Fletcher Living.
By WNZ’s reckoning, that price undercut both Godfrey Hirst’s dyed nylon carpet equivalent and Cavalier Bremworth’s comparable wool carpet.
But Godfrey Hirst – via Chapman Tripp partner Tim Smith – says the claims, which were published in BusinessDesk on November 26, are “false and misleading” and contrary to the terms of the Fair Trading Act.
It says any comparison “ought more properly to have been made with Godfrey Hirst’s 48oz SDN product, rather than a 58oz SDN,” which it didn’t manufacture in any event.
The legal letter claimed this carpet would cost closer to $4,500 to fit a standard 120-square metre house, “significantly less” than WNZ’s quoted price point.
In response, WNZ chief executive John McWhirter accepted the reference to a 58oz solution dyed nylon carpet was a misprint in the shareholder presentation, and should have been corrected to a 55oz SDN carpet.
While he felt the comparison was appropriate, he accepted the firm should not have used competitors’ names and will now “endeavour not to use competitor names in future communication with shareholders.”
Godfrey Hirst NZ general manager Tania Pauling told BusinessDesk she had no formal comment on the issue, although she’d been surprised by the WNZ comparison, given Godfrey Hirst’s strong, historical support of NZ wool growers.
However, McWhirter said WNZ, whose 720 strong wool growers produce about 14 million kilograms of strong wool a year, hadn’t supplied any wool to the multinational “for some time.”
Geelong-based Godfrey Hirst’s focus was now on the hard flooring and commercial carpet tile segments served by its parent company, US-based Mohawk Industries, the world’s largest flooring multinational. Meanwhile, competitor Cavalier Bremworth has switched back to wool and natural fibres, away from synthetics altogether.
The natural fibres sector of the market, according to a Carpet Courts spokesperson, represents about 10-15% of all retail sales, after losing ground to hard flooring and synthetic floor coverings over the past several years. But price remained an issue, he said, with quality woollen carpets about 30% dearer than synthetic.
The jury is still out on Cavalier’s wool-based strategy, which has already come at a cost.
For the past trading year, non-trading adjustments cost the NZX-listed carpetmaker $11.2 million, plunging it to a loss before interest, tax, depreciation and amortisation of $8.9m on revenue of $118m.
To help pay for its strategic transition, which effectively cuts out about 45% of its prior commercial income streams from synthetic wool, Cavalier opted for a sale-and-leaseback of the jewel in its manufacturing crown, its main Auckland factory. It expects to settle on a $25.5m sale of the site by the end of next month.
Cavalier’s financial position prompted an auditor’s footnote in its annual report that, following the sale of synthetic inventory, the firm expected to generate negative operating cashflows until sales volumes of woollen carpets “increase significantly.”
Cavalier – which is being rebranded as simply Bremworth – is keen to push the eco-credentials of wool and the fact that its wool carpets use 87% natural materials. However, the challenge will be to educate the market on the merits of wool and grow the overall wool market in NZ and Australia.
The silver lining to that, McWhirter says, is that it promotes the wool industry as a whole.
