Icebreaker Ltd.: New Zealand's Merino Wool Success Story

Introduction

Despite the fact that New Zealand is a relatively small market, in recent years the country has experienced growth across several industries. One industry experiencing exponential growth is the clothing industry. This paper overviews a case study regarding Icebreaker Ltd., followed by commentary on the case study and Icebreaker's participation in this high-growth industry.

Case Summary

With just over four million people, New Zealand is considered a reasonably small economic market; however, a variety of its industries are growing rapidly, including the clothing industry. Icebreaker was formed through a convergence of "kiwi ingenuity and an unanticipated encounter that occurred in Pohuenui" (Andrade, 2010, p. 2). Brian Brakenridge, an owner of 3,000 merino sheep, wanted to change the public's negative perception of wool by demonstrating that it could be applied to outdoor garments. Following a trip to the United States and a meeting with the owner of an outdoor store, Brian began production in the mid-1990s of some very basic garments under the label Ice Breaker.

Jeremy Moon discovered the advantages of merino wool for outdoor garments in 1994, mortgaged his house, quit his job, and bought half of Ice Breaker, changing the name to Icebreaker Nature Clothing. By 1995, the company was the first "in the world to develop a merino wool layering clothing line for the outdoors, including underwear, mid layer and outerwear" (Andrade, 2010, p. 4). Icebreaker quickly expanded its product line to five styles, with four unisex sizes, an array of designs, and two colors.

Despite growing sales in New Zealand, Icebreaker had the opportunity to expand internationally. International growth could produce more revenues as well as mitigate risks of underperforming markets and balance seasonal and cyclical sales fluctuations. However, the process was fraught with challenges, such as distributor selection. Despite these challenges, "within five years, Icebreaker became the largest outdoor clothing brand in Australasia" (Andrade, 2010, p. 4).

Expansion into Europe began in 1999, and by 2005 more than half of Icebreaker's revenues came from international sales. Combining state-of-the-art technology and natural merino wool, by 2010 Icebreaker clothing was available in 30 countries and in 2,000 stores. Two hundred and twenty-five employees distribute products around the world (Andrade, 2010, p. 5).

Supply Chain and Global Expansion

The company's supply chain involves a variety of participants. The first step is the sourcing of merino wool directly from New Zealand's sheep farmers. Since its first purchase of just 700 kilograms in 1997, the company grew to hold the largest merino contract in the world, with 2.5 thousand tonnes contracted between 2006 and 2008. With such a significant portion of the supply chain relying on animals, animal welfare has been a primary concern for Icebreaker (Andrade, 2010, p. 6).

Other supply chain steps involve shipment to China or New Zealand for cleaning, carding, combing, and superwashing. Yarn spinning follows in Australia, Korea, or China. From there, fiber is sent to either the United States for sock manufacturing or to Shanghai for other garments. All garments are designed in America (Andrade, 2010, p. 6). The total process from wool to distribution of finished garments takes 33 to 43 weeks, and the complexity of the supply chain requires a high degree of coordination to maximize effectiveness (Andrade, 2010, p. 7).

Conclusion

In the end, Icebreaker is a true success story. The company emerged from the relatively small market of New Zealand to become a globally successful outdoor clothing manufacturer. The commitment to changing the public's perception of wool clothing was the inspiration for the company, and the experience of merino wool's comfort and warmth would begin to take the company to the next level. International expansion into Australasia was soon followed by entry into the European market. International outsourcing and expanded distribution networks further facilitated growth. However, it is the company's commitment to the highest-quality product — with innovative designs for outdoor wear — and its dedication to ethical business practices that have set the organization apart from its competitors, enabling it to compete on dimensions beyond pricing. This has positioned Icebreaker to take full advantage of the growing opportunities in the global clothing industry.

References

Andrade, A. (2010). "Nothing to hide: Managing intellectual assets throughout the supply chain." Asia-Pacific Economic Cooperation, pp. 1–10.