Tags: sheet | egyptian | cotton

Short Sheeted: Egyptian Cotton on the Label but Not on the Bed

Short Sheeted: Egyptian Cotton on the Label but Not on the Bed

(Fieldcrest promotional material)

Tuesday, 15 November 2016 09:37 AM

American retailers Target, Walmart, Bed Bath & Beyond and others have been selling premium-priced sheets purportedly made of Egyptian cotton – a byword for luxury in linens – but that may have been woven with lower-quality cotton blends.

Discovered by Target investigators, the deception set off a salvo of class-action lawsuits that have created a king-sized public relations challenge for the textiles industry in India and the U.S. companies it supplies, reported Bloomberg.

Three suits seeking to be certified as class-actions have been filed against supplier Welspun India Ltd. – and a separate one last week was directed at Wal-Mart. The complaint accuses the world’s largest retailer of questioning the fiber content of Welspun’s products as early as 2008, but not halting its sales until after Target did so in August. Wal-Mart said it will “vigorously defend” itself.

The other lawsuits, all filed in the U.S. against Welspun, allege the company fraudulently labeled its bed sheets as Egyptian cotton. Welspun declined to comment on the suits.

Managing Director Rajesh Mandawewala told analysts during a conference call in August that “the error is on our side so we have to take responsibility for it.” Target, meanwhile, hasn’t been sued.

“The marketing has created this image in our heads that high-quality cotton and Egypt are synonymous," said Louis Rose, a Memphis, Tennessee-based cotton industry consultant. “Consumers should be skeptical of these marketing claims. They’ll be under a lot more scrutiny now.”

Target has cut ties and ended all of its $90 million in annual business with the Indian supplier, and Wal-Mart Stores has stopped selling Welspun sheets that had been labeled 100 percent Egyptian cotton.

Bed Bath & Beyond Inc. followed suit on Monday, sending Welspun’s stock as much as 9 percent lower in Mumbai the next day. With these significant blows from some of Welspun’s biggest customers, the shares have tumbled more than 40 percent since Aug. 19, when Target announced its decision.

The fake Egyptian sheet episode came to light after exhaustive work by Target investigators who analyzed sheet fibers under microscopes and tracked their journey through a global supply chain. The probe found that 750,000 of Target’s "Egyptian cotton" sheets, sold for as much as $75 a pop, didn’t contain any Egyptian cotton at all, but an amalgam of lower-quality fibers from cheaper sources.

That July discovery touched off a scandal spanning from Minnesota to Mumbai and Cairo that threatens the future of Welspun, part of a $3 billion conglomerate headed by entrepreneur Balkrishan Goenka. It may also hobble Indian textile manufacturers in the race to supply Western consumers with high-quality sheets and towels, creating an opening for competitors from China and elsewhere to grab the business, according to industry analysts.

The Welspun-made sheets Target examined were sold under the Fieldcrest brand. While it has interests in steel, energy, and infrastructure, textiles are the bread and butter for Welspun, which says it supplies one in five towels sold in America and posted revenue of about $900 million in the 2016 fiscal year. Tennis stars like Roger Federer mop their brows with Welspun towels at the Wimbledon championships – a fact the company highlights in investor presentations.

The sheets fiasco reflects a simple reality: There’s a scarcity of Egyptian cotton. It first became a key export product in the early 19th century, when it arrived in France and became sought after for its silky feel. Production has been falling since the 1990s, however, and last year Egypt’s post-revolutionary military government ended subsidies for cotton farmers to shore up the state budget. A gradual decline in output has become a precipitous plunge. The U.S. Department of Agriculture estimates there will be a 53 percent decrease in production this year, to an all-time low of 160,000 bales.

The system for certifying Egyptian cotton is administered from Cairo by the Cotton Egypt Association, an industry group that grants stamps of approval to suppliers of 100-percent Egyptian cotton products. To receive one, CEA executive director Khaled Schuman explained, a manufacturer pays an initial fee of $5,000 and submits records of Egyptian cotton purchases and product samples, which undergo DNA analysis to identify whether the fibers were grown in Egypt or elsewhere. The companies are charged an additional $3,000 annually for the certification, according to Schuman.

But once a certification is granted, producers are mostly left alone until they need to renew their label a year later. “You can’t put an employee from the association on each production line to inspect” every item being produced, said Mohamed Negm, who conducts testing of certification samples for the association to verify the fibers are Egyptian-grown. Typically, suppliers like Welspun purchase cotton in raw form from Egypt for import to Asia, where it’s turned into finished products for sale in the U.S. and elsewhere, he said.

The highest-quality Egyptian material costs twice as much as the standard grade sourced from India, providing a powerful incentive to cheat. “Factories have mixed the Egyptian cotton with other low quality cottons to make profit, which has ruined the reputation of Egyptian cotton,” said Negm, adding that’s what the DNA testing and certification aim to curtail.

Blending is widespread in the industry and quietly tolerated by many retail chains, according to two executives at producers other than Welspun who asked not to be identified discussing the procedure. Sometimes that means mixing good-quality non-Egyptian cotton that maintains the same feel amid shortages of the real thing, but it also often includes using cheaper grades to save money, said the people, citing their experience with cotton processing departments and export requirements for U.S. retailers.


© Copyright 2018 Bloomberg News. All rights reserved.

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American retailers Target, Walmart, Bed Bath & Beyond and others have been selling premium-priced sheets purportedly made of Egyptian cotton – a byword for luxury in linens – but that may have been woven with lower-quality cotton blends.
sheet, egyptian, cotton
Tuesday, 15 November 2016 09:37 AM
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