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In what may be an image building exercise after a controversy around the authenticity of some of its products adversely impacted the Mumbai-based textile company, Welspun India announced a tie-up with Cotton Egypt Association (CEA) to promote and market Egyptian cotton products worldwide.
In August 2016, it came to light that some bedsheets that Welspun had sold to the US-based retailer Target Corp, which were said to be made of premium Egyptian cotton, were actually made of non-Egyptian cotton. This led to Target offering a full refund to its customers to whom such bedsheets had been sold; and the retailer snapping all business ties with the Indian company that supplied this linen.
Even as its stock price plunged on the bourses with each successive trading session since these developments came to the surface, Welspun, the largest supplier of bed and bath linen to the US, appointed consulting firm EY to conduct a full audit of its systems and processes.
Though the business lost on account of Target represented a small portion – around six percent – of the BK Goenka-led group company’s turnover, the damage done to its reputation as a textile vendor of choice for some of the largest retail brands, including Wal-Mart, JC Penny and Bed Bath & Beyond, was significant.
While the company’s stock price has recovered some ground since the shock last year and none of its other clients have initiated any adverse action, tying up with CEA may be a masterstroke that leaves negligible room of doubt with respect to the products made of Egyptian cotton that Welspun sells in the world market going forward.
As part of the agreement signed with CEA and announced on Thursday, Welspun India will invest $3 million towards various initiatives to enhance the supply chain of Egyptian cotton – from cultivation to the final product. The two entities will also create joint programmes for the promotion of Egyptian Cotton logo in retail markets across the globe.
“The Cotton Egypt Association, post verifying Welspun’s quality and supply chain reliability processes, has granted the company the right to use the Egyptian Cotton logo for five years until 2022,” the statement said. “Notably, Welspun had undertaken stringent audit and traceability programme to ensure the best product quality that is certifiable, verifiable and auditable.”
Welspun India, a part of the $2.3 billion Welspun Group, is also exploring options for the expansion of its Egyptian operations, to include a manufacturing facility for home textile products made of Egyptian cotton. “We foresee an increase in demand for Egyptian cotton and find an ideal condition for making Egypt one of our hubs for sourcing and manufacturing Egyptian cotton products. We’re looking at the best option to utilize this opportunity,” said Dipali Goenka, CEO of Welspun India.