Coats is a global leader in growing markets and well positioned to take advantage of global socio-economic trends and specific factors affecting the environment in which we operate.
Global socio-economic trend
The continued growth of the urban middle class in Asia is fundamentally changing our world (see map). What it means for us:
- Increasing global demand for apparel and footwear;
- Increasing demand for consumer products with Performance Material threads and yarns;
- Asia Pacific moving from production base to world’s largest consumer market;
- Asia Pacific will challenge developed economies in the production of high-end consumer goods.
Apparel and Footwear thread
Consumer demand for clothes and shoes tends to grow faster than overall economic growth. Historically, there is a strong link between clothing retail sales and GDP growth.
Thread is a critical component to the performance of a garment and, as the world’s leader in Apparel and Footwear (A&F) thread, we are a key supplier to the global $1.5 trillion apparel industry. Globally, the industry is expected to grow by low single digits per year over the medium term, but this will be double in Asia as – not only will more consumers demand more garments – but more affluent consumers will demand higher-end garments. The global footwear industry is c$350 billion in size and has similar growth prospects.
Garment production has been highly mobile; with the flight from West to East at the end of the 20th century and more recently between new economies, the supply chain to the industry has had to follow, and it is highly fragmented.
Within these demand and supply dynamics, Coats has not only remained the global market leader (we are almost double the size of our nearest competitor) but has also gained market share. The garment industry is currently facing a number of pressures, to which brands, garment manufacturers and component suppliers are having to respond:
- Speed (to market, in sampling, in sourcing);
- Productivity (low-cost locations scarcer due to inflationary pressures);
- Innovation (product, process and consumer experience);
- Quality (as a differentiator);
- Compliance (environmental, labour, sourcing)
Coats is leading the industry in meeting these needs. We are positioning ourselves as the leading value added partner to the global apparel and footwear industries.
Performance Materials, Threads and Yarns
Coats defines Performance Materials (PM) as thread and yarn not used in apparel and footwear. This ranges from thread used in traditional markets such bedding and air bags, emerging applications such as tea bags, and high-technology markets such as fibre optics cables and value added engineered yarns used in composites and conductive products.
Demand for PM thread is increasing due to growing consumer and government demand, and it tends to grow in excess of economic growth. The main drivers currently are:
- Pace of urbanisation in developing countries (for example, the rollout of fibre optic cables);
- Economic growth, which means consumers purchase more products with PM thread (for example, leisure goods, cars with airbags, tea bags);
- Consumers demanding more innovative products which can use smart thread to enhance their functionality (for example, wearable technology);
- Increasing public sector spending and safety compliance in developing countries (for example, utility infrastructure, flame retardant protective clothing for military and industrial uses).
Coats estimates the addressable market (in to which we currently or could realistically serve in the near term) is currently c. $3.2 billion in size of which c. $2.7 billion is in relation to high-technology end uses such as composites. PM customers are demanding manufacturing localisation and global supply solutions, with ways to apply threads and yarns both in enhancing existing products and in creating new ones.
Coats is the leader in its addressable market and is gaining market share by leveraging its core global capabilities:
- We have leading innovative brands;
- Our size means we can out-invest in new technologies;
- Our global customer relationships;
- We can leverage our global, world class A&F asset base to develop centres of excellence beyond the US and Europe;
- As the market leader, we are in a position to use bolt-on acquisitions to access new geographies and adjacent end-markets.
Coats is the market leader in the ~$1.8 billion Americas textile crafting industry. Growth in Crafts is driven by inspiring our customers and consumers to spend more time crafting.
In the North American market, we are leaders in handknittings, which can be split into ‘foundation’ and ‘fashion’ yarns. Foundation yarns tend to be longstanding, value products characterised by steady growth, and our market-leading brand Red Heart has made share gains over the last few years. Demand for fashion yarns tends to more transitory and unpredictable and follows consumer trends, which are driven by a variety of on and offline media sources.
In Latin America, Coats has a market leading presence in both needlecrafts and handknittings. Here the dynamics of the region are different with the needlecrafts market the largest.