2 questions about Wood Industry Business Management in Canada B.C

WOOD 365 Marketing Report

“Plasticell”

Group 28

Claire Huang (56197932)

Kelly Joe (66549320)

Dingfan Cui (90884099)

Zixuan Wang (74009747)

Introduction

Nowadays, plastic pollution is becoming more of a public concern. Until 2015, the world consumption of plastic products reached 381 million tonnes. Typically, wasted plastic is discarded. In 2015, about 55% of plastic was discarded and 22% was burned globally, while only 6% of plastic waste was recycled. These discarded plastic then pollute ocean habitats (Eriksen et al., 2014). In BC, there is a problem with wood waste after timber harvesting. From 2004 to 2008, about 4.3% of the total harvested went to wood waste. The coastal region accounted for 60% of the provincial wood waste volume (Forest Practices Board, 2010). Currently, burning is the cheapest way to deal with these wood waste. In 2012, slash burning contributed up to 13% of BC’s carbon emissions (Hernandez, 2016). A new and sustainable way of converting these wood waste and plastic waste into valuable products is necessary, and this is where our product “Plasticell” comes in.

Product

“Plasticell” is an innovative form of eco-friendly, biosynthetic fiber that will be woven into textile. It is a composite material consisting of both recycled wood and plastic waste to capture a part of the market not yet assumed by existing recycled materials or biomaterials (such as recycled polyester or bamboo fiber). By combining these two materials, we are able to combine the strength and water-resistant properties of plastic with the softness of modern biological fibers. This material will then be used to incorporate into a wide variety of different clothing and accessories with superior softness, lightweight protection, and durability.

Price (cdf)

The cost of producing Plasticell is similar to the cost of producing bamboo fibers. For example, to produce bamboo thread, it costs ￥29,000 (about CAD $5500) per ton and to produce wood thread, it costs ￥35,000 (about CAD $6600) per ton (Yao, 2004). In a survey we conducted, based on their monthly incomes, most of the people were in the middle-upper class (Figure 1) and these people had little to a strong interest in Plasticell (Figure 2). We collected some comments from those who did not want to buy our products and the most significant reason was because the price of Plasticell is higher than other threads used to create clothing. If we choose to sell Plasticell to other clothing factories, sales volume-based pricing would be the most fitting as we would sell Plasticell in volumes. However, if we choose to further develop Plasticell into clothing, which would then be sold under a company called Hemlock Clothing, cost-based pricing while maintaining somewhat of a status quo pricing would be used. The status quo pricing would be based on the cost of other somewhat upper-end clothing costs that would also hopefully incorporate the cost-based pricing. There is somewhat of a danger in starting up and perhaps maintaining our business as the customer is price sensitive (it is elastic) as there are many other clothing options available; however, we hope the other benefits such as sustainability and durable yet soft clothing among other benefits would be sufficient to appeal some customers.

Place

The production of Plasticell is separated into three processes: from wood and plastic waste into fiber, then from fiber into textile, then from textile to clothing. To reduce transportation fees, the fiber processing plant will be located near harvesting sites. The processing of converting wood and plastic waste into fiber then to textile will be done here. After the two different wastes are transported to the factory, a fiber extraction machine will extract cellulose obtained from bark and stem. As for the plastic waste, they will be melted into tiny resin pellets. Then, by adding the “cellulose extract” and melted resin pellets in different ratios needed, they can be formed into a “Plasticell” fiber. This can then be run through a spinning machine and loam to become fabric (Majumdar et al., 2013). Afterwards, this fabric can be transported again to a clothing factory close to indigenous communities to support local indigenous people and other locals by providing job opportunities for them. The clothing will then be sold by intensive distribution in both online and physical stores. Our product will mainly target first world countries such as the USA, Canada, and China. Appealing to the Asian markets is especially important as they have strong purchasing power which can account for 38% of the global outputs (Romei & Reed, 2019). There will be physical stores in the States, Canada, and some Asian countries such as China, Korea, and Japan. Physical stores will be located in shopping malls and main streets. Consumers can also purchase clothing online and have it delivered to the closest store.

Promotion

To promote our proposed company “Hemlock Clothing” which uses our product “Plasticell”, we will use a multi-channel marketing approach to capture a larger portion of the environmentally friendly consumer base. This will be done using a mixture of television and internet advertising so as to show our process of development and thus allow us to capitalize on our company’s competitive advantage of being a superior environmentally friendly material. This will also draw added awareness to the importance of environmentally sustainable textile and production methods, thus promoting sustainable consumption habits through our recycled material. From there, we will start to develop our online social media presence through collaboration with celebrities that are shown to advocate for both environmental awareness and consumer responsibility in the fashion industry. Therefore, our company will be able to position itself in both the minds of older demographics as well as millennial and generation-z consumers as a company aligned with both fashion-forward and environmentally sustainable initiatives.

Customer

Within the market segmentation, several factors were identified. Under the geographic feature, we would appeal to first world countries such as Canada, the States, and few other Asian countries. Our target demographic would be those from Gen X, Gen Z, and millenials. The clothing we choose to produce will not be gender-restricted, and anyone who would like to buy our clothing will be able to buy them. The most restricted demographic factor would be income. As this product is on the more costly side, those in middle-upper classes will most likely purchase our products. If possible however, it would be great to further make our products more affordable, though this may take some time when the business is just starting. In the psychographic category, those with interests in environmental stability would be most likely to buy our products. Lastly, under the behavioral factor, we would benefit from those behaviors associated with occasions as different clothing items depending on different seasons will be produced. Thus, with all of these factors considered, people aged 18 to about 40 who are interested in environmental sustainability and are in middle-upper classes will most likely be our target market. Our market positioning will be in the middle of inexpensive and premium, with more utilitarian, middle-level products. An additional survey was conducted with 149 people. Half of them, from age 21 to 30 (Figure 3), showed strong awareness of the environment (Figure 4). This age structure meets the expectation of our biggest customers age range.

We also asked additional questions asking what kind of features they found attractive. Most people noted that whether the product is fashionable or not was the most important factor, then followed by price, then the type of materials used to make the clothing. So, from this survey, we learned that we should shift our focus in creating fashionable clothing items.

Company (SWOT)

Currently, there is no competitor who produces a product similar to Plasticell. We also have a complete supply chain from raw material to final product which can potentially prevent other competitors from entering our supply market. There is however, competition from those who create clothing with other fabric types. To make the product become more appealing, besides the value of the product itself, our company will promote our product as a symbol of sustainable development. For example, we could make a promotional film to connect our product with wildlife animals and marine habitats, and show consumers that our products are able to mitigate the effects of waste pollution. We also have opportunities to collaborate with charity organizations to support third-world countries. For every piece of clothing we sell, our company will donate that equivalent piece of clothing to those in need. Our company will also collaborate with non-governmental organizations to help with rainforest and ocean conservation. The optimal result by doing these things is our company becoming a symbol of environmental conservation. It means what we are selling is not just clothing but that our product is also the combination of tangible good and intangible idea of conservation. Therefore, consumers will be more willing to pay for our product. Thus, our strengths are that we are able to decrease wood and plastic waste and bring sustainability and environmentally-friendly products to those who are interested. Another strength is the amount of potential collaborations we are able to do, which are further listed in the collaborations heading.

There are several potential weaknesses and threats of our product such as not as many people may not care about environmental problems or are not willing to change their habits. However, a survey conducted by Nielsen found that 81% of people globally feel that companies should help improve the environment, with the highest support from millennials (The Evolution of the Sustainability Mindset).

This means that there is a high number of people, especially youth, who are potential target groups of our product, and there is a great opportunity for our product to enter and succeed in the market. Also, a survey in 2014 indicated that the public concern about conservation is increasing and people tend to do more to reduce their personal impact (Easman, Abernethy,& Godley, 2018). Our product can provide what they want, so there may be a large group of potential customers for our product. For people are not as willing to change the clothing they are used to wearing, advertisements through social media and other promotional activities may be ways to encourage them to try our product.

A weakness of our company is our resources because harvesting wood waste is limited due to the annual allowable cut. The annual allowable cut in the Fraser region is 1,220,808 cubic meters per year (Nicholls, 2019). If we want to produce more of our products, we need to collect wood waste from other harvesting areas which will increase the transportation cost. Also, there is a threat that the integrated wood product companies such as West Fraser, which will lead to their becoming our competitor due to the production of biomass energy using wood waste. To ensure we have enough resources, we may need to collaborate with these wood product companies.

Competition (cdf)

Some of the textiles our competitors produce include traditional cotton clothing, bamboo fiber-based clothing, synthetic clothing, etc. Our survey, as seen in Figure 6, shows that 90.6% (=135/149) of participants love cotton clothing followed by synthetic clothing. Other plant-based (bamboo and linen) and animal-based (wool and silk) have fewer preferences. Our product, however, combines both advantages of cotton and synthetic textiles. Compared to traditional cotton clothing, this product can maintain temperature and meet the requirements of human skin’s moisture without static electricity. Not only that, but the production of cotton requires excessive amounts of water, pesticides, and fertilizers, which further leads to soil depletion. This product does not directly require pesticides and fertilizers, so it becomes more environmentally-friendly. This product also has better fiber softness than true, organic bamboo fiber-based clothing. Compared to synthetic clothing, this product may have features, such as their being anti-bacterial, self-cleaning, removing unpleasant odors. Additionally, Plasticell is created with renewable resources unlike polyesters which is also toxic to produce.

Porter’s five forces are mentioned in Figure 7. above, as well as some other factors of Plasticell. Firstly, producing it does not need a high technological basis, while manufacturing will be costly. Secondly, this career highly depends on the supplier of wood and plastic, which means the locations of the factory are limited to the proximity of timber mills or other areas which will not require expensive transporting fees. Another threat is that once wood waste supplies are low, the product will face a high risk of closing. Thirdly, as Figure 6 shows, the number of substitutions of Plasticell is huge, and the cheaper price and clothing-purchasing habits will lead to our losing many potential customers. And for customers, we are aiming to target middle-up class customers because of higher price.

Climate (PEST)

The fashion industry is also growing at a steady rate, showing an increase in purchases by 60% from the year 2010 – 2015 (McFall-Johnsen, 2019). However, being that the growth of fast fashion is one of the biggest contributors to environmental waste pollution globally, as over 85% of all textiles are dumped yearly, this creates an opportunity for Plasticell as an ecologically sustainable production method when compared to traditional materials (McFall-Johnsen, 2019). While people are buying more clothes than ever before, products made by our materials will capitalize on the growing segment of individuals making the shift towards more environmentally conscious products without compromising their consumption habits. Many global retailers are also starting initiatives that focus on recycling and repair services instead of buying new items such as Patagonia which makes 40,000 repairs a year in its Rio, Nevada location alone (Butler, 2018). This shift in consumer preferences can be seen in the development of additional sub-brands of sustainable fashion in companies such as H&M too which have been well known for their reliance of fast fashion models in the past, as well as the rise in consumer interest shown in search activity for sustainable fashion rising in places like the global fashion search platform LYST, by an average of 75% every year (Benson, 2020). While this at once creates ample opportunity for the brand, it should also be noted that due to this shift in consumer attitudes and demand, that there is also a higher rate of competition as more and more new entrants attempt to penetrate the market to satisfy this growing segment. Along with the shift in consumer demand the company will also be at the forefront of environmental policies such as the Environmental Stewardship Initiative in Canada through the creation of this new area of sustainable technology (“Environmental Stewardship Initiative”). This makes countries like Canada where social, economic and political values align a market extremely well suited for our proposed composite material.

Collaboration

As mentioned above in promotion, to best advertise our products in an increasing digital age, we plan to collaborate with celebrities, or otherwise known as influencers, that promote on platforms such as YouTube and Instagram. By collaborating with those who equally value the environment and sustainability, and those who have a large fanbase, we will be able to appeal to a much larger audience. We also may collaborate with charity organizations to support third-world countries. For every piece of clothing we sell, our company will donate that equivalent piece of clothing to those in need. Our company will also collaborate with non-governmental organizations to help with rainforest and ocean conservation. Despite that Plasticell was originally thought of being used in a clothing company called “Hemlock Clothing”, it may be difficult to enter the clothing market due to high competition between the already existing companies. Another idea of distributing our main product, Plasticell, might be by collaborating with pre-existing clothing companies that may have the same values, such as sustainability. One company that is taking a step into sustainable fashion is H&M and their “Conscious Products”. According to them, products that contain at least 50% of sustainable materials qualify as “Conscious” products. By introducing our product to H&M and collaborating with them, we will be able to more easily enter into the market. Patagonia is another brand that values the environment as indicated by their “1% for the Planet” program, in which they donate 1% of their annual revenue to the “preservation and restoration of the natural environment” (1% for the Planet). Again, by appealing our product to them, we may enter the clothing market much more easily and effectively.

Summary

Plasticell, which will then be created into clothing under the company “Hemlock Clothing” has a lot of potential as it is an innovative product that no other has yet thought of. It has great potential in garnering attention through its extensive promotional and collaborative methods. Not only that, these products are able to attract a whole range of people, which will further contribute to its potential success. However, its pricing may be an important factor in determining its success as there are many other competitors who produce clothing much cheaper than ours would be. Other threats such as the decrease in timber supply and competitors threaten our position in the market. Despite this, the increase in the interest of sustainable fashion and the wide range of our target market may allow the success of Plasticell and Hemlock Clothing.

References

1% for the Planet. (2020, February 22). Retrieved from

https://www.patagonia.com/one-percent-for-the-planet.html

Benson, S. (2020, February 15). The Myth Of Sustainable Fashion. Huffington Post. Retrieved from

https://www.huffingtonpost.ca/entry/sustainable-fashion-climate-change_n_5e3984eac5b66c4

eafda7d35?ri18n=true

Butler, S. (2018, December 29). Is fast fashion giving way to the sustainable wardrobe? Retrieved

from

https://www.theguardian.com/business/2018/dec/29/fast-fashion-giving-way-sustainable-ward

robe

Conscious products explained. (2020, February 22). Retrieved from

https://www2.hm.com/en_ca/customer-service/product-and-quality/conscious-concept.html

Easman, E. S., Abernethy, K. E., & Godley, B. J. (2018). Assessing public awareness of marine

environmental threats and conservation efforts. Marine Policy, 87, 234-240.

doi:10.1016/j.marpol.2017.10.030

Environment - environmental protection; findings from wuhan university in the area of environmental

protection reported (how much are the public willing to pay for the environmental protection:

Evidence from chinese general social survey data). (2019). Ecology, Environment &

Conservation

Environmental Stewardship Initiative. (2019). British Columbia. Retrieved from

https://www2.gov.bc.ca/gov/content/environment/natural-resource-stewardship/consulting-wit

h-first-nations/environmental-stewardship-initiative

Eriksen, M., Lebreton, L. C. M., Carson, H. S., Thiel, M., Moore, C. J., Borerro, J. C., Reisser, J.

(2014). Plastic pollution in the world's oceans: More than 5 trillion plastic pieces weighing

over 250,000 tons afloat at sea. PloS One, 9(12), e111913. doi:10.1371/journal.pone.0111913

Forest Practices Board. (2010). Measuring Wood Waste in British Columbia. Retrieved February 23,

2020, from

https://www.bcfpb.ca/wp-content/uploads/2010/09/IRC170-Measuring-Wood-Waste-in-BC.p

df

Hernandez, Jon. (2016, June 28). Province-wide slash burning sparks controversy. CBC News,

Retrieved from,

https://www.cbc.ca/news/canada/british-columbia/province-wide-slash-burning-sparks-contro

versy-1.3652496

Majumdar, A., Das, A., Alagirusamy, R., Kothari, V. K., O'Reilly for Higher Education, Textile

Institute (Manchester, E., . . . Elsevier All Access Books. (2013;2012;). Process control in

textile manufacturing (1st ed.). Oxford;Philadelphia;: Woodhead Publishing Limited in

association with the Textile Institute.

McFall-Johnsen, M. (2019, October 21). The fashion industry emits more carbon than international

flights and maritime shipping combined. Here are the biggest ways it impacts the planet.

Business Insider. Retrieved from

https://www.businessinsider.com/fast-fashion-environmental-impact-pollution-emissions-wast

e-water-2019-10

Nicholls, D., British Columbia. Ministry of Forests, Lands, Natural Resource Operations and Rural

Development, & British Columbia Government EBook Collection. (2019). Tree farm licence

52 held by west fraser mills ltd: Rationale for allowable annual cut (AAC) determination,

effective june 17, 2019. Victoria, B.C.: Ministry of Forests, Lands, Natural Resource

Operations and Rural Development.

Romei, V., & Reed, J. (2019). The Asian century is set to begin. Retrieved February 23, 2020, from

https://www.ft.com/content/520cb6f6-2958-11e9-a5ab-ff8ef2b976c7

The Evolution of the Sustainability Mindset. (2018, September 11). Retrieved from

https://www.nielsen.com/us/en/insights/report/2018/the-education-of-the-sustainable-mindset/

Yao, F. (2004). Study on the manufacturing process of straw-wood fiber composite material [D].

Nanjing Forestry University.