Produced by Tiger Sniff ESG Group
Author: Chen Yuli
Header image: Visual China
This article is the 080th article in the #ESG Progress Watch# series
lululemon今年开始认真"补课"了。
自lululemon2月宣布尼龙衣料回收突破以来,4月其又推出了首款由酶回收聚酯制成的产品——lululemon 限量版 Packable Anorak 夹克。
In just two months, lululemon has made two breakthroughs in the recycling technology of core raw materials, and lululemon has clearly realized the appeal of recyclable fabric products and has begun to make efforts.
Since 2022, when environmental groups exposed its rising greenhouse gas emissions, lululemon has faced criticism from environmentalists.
As the fastest-growing fashion and sports brand in recent years, lululemon started by selling yoga clothing, and its market value has entered the ranks of the top five global sports brands.
According to lululemon's financial report, in 2023, its revenue will increase from $8.1 billion to $9.6 billion, an increase of $1.5 billion, a growth rate of 19%. In the past decade, lululemon's average revenue growth rate has exceeded that of the industry by 88.91%.
However, in February this year, lululemon was accused by the international environmental organization "Stand.earth" of misleading consumers about its environmental impact, and "Stand.earth" claimed that lululemon's environmental initiative "Be Planet" was just a "show" to cover people's ears.
The fact is that lululemon's supply chain carbon emissions have been increasing since the promotion of the "Be Planet" campaign, from 748,273 tons of CO2 emissions in 2020 to 1,233,964 tons of CO2 emissions in 2022.
And this isn't the first time lululemon has been charged. As early as 2022, lululemon was exposed to the continuous increase in greenhouse gas emissions, which led to thousands of protesters taking to the streets to protest, including yoga enthusiasts.
Faced with the dual pressure from environmental protection organizations and core customer groups, lululemon now needs to find a feasible path in ESG.
Behind the successive breakthroughs in technology: lululemon is eager to "reduce carbon"
The new lululemon Limited Edition Packable Anorak Jacket is made from a combination of bio-processed polyester fibers, using enzyme recovery technology from Samsara Eco and innovative carbon capture technology from LanzaTech of Illinois, to deliver the same feel and quality as the lightweight, dry fabrics that lululemon guests love.
Why is this product being launched? Recall that in February, Samsara Eco collaborated with lululemon to launch a recyclable nylon fabric product, the meaning behind it could not be more obvious:
According to lululemon's 2022 Impact Report, 67% of the materials used in its products are polyester or nylon, and if both raw materials can be recycled instead of being incinerated at landfills, it will not only significantly reduce carbon emissions, but also reduce the company's raw material costs.
Yogendra Dandapure, vice president of raw material innovation at lululemon, said in an interview with foreign media: "Ending fashion waste is a crucial step in tackling the climate crisis. Our enzymatic recycling technology creates new possibilities for applications by utilizing waste materials, extracting fibers from waste textiles and repurposing them. This can help drive change away from the linear economic model of stagnation in plastic products. ”
According to Tiger Sniff, there are four steps behind Samsara Eco's recycling technology -
The first step is to crush the plastic waste, the second step is to break down the waste from the polymer state to the single-molecule state, the third step is to purify the raw material components and separate the plastic from other additives such as colorants, and finally to make new products from the degraded recycled materials.
From an industry perspective, clothing recycling technology is not new, but Samsara Eco, a deeply bound partner of lululemon, has a different technology, and its CEO Paul Riley once told the media: "Most clothing recycling mixes various materials together to remake, which means that the clothes produced cannot be reused three or even four times." ”
"Samsara's technology blends polyester and it can be broken down again and again to form recycled polyester to create new clothes," says Paul Riley. "With Samsara Eco's technology, lululemon's polyester can be recycled an unlimited number of times at one-eighth to one-quarter of the cost of traditional recycling techniques.
Behind the successive technological breakthroughs are actually the sustainability goals that lululemon desperately needs to achieve. The environmental group "Stand.earth" has said in a research report that lululemon is achieving "exponential growth" by using fossil fuel-powered manufacturing and materials, which has caused a lot of controversy among its core customer base. Therefore, change is imminent.
Polyester, the brand's most commonly used material, is an important part of lululemon's sustainability strategy, so it has been "put on the table" in lululemon's sustainability vision: by 2025, lululemon will ensure that at least 75% of its polyester materials come from recycled sources; By 2030, all products will be made entirely from materials that are environmentally and socially sustainable.
Lululemon 'Packable Anrad'
At present, lululemon has not released its full-year 2023 ESG report, and the breakthrough recycled fabric technology has not yet been put into production, but as Yogendra Dandapure, vice president of raw material innovation at lululemon, said: "Reducing material waste in apparel is a critical step in the fight against the climate crisis. Helping us to test and learn as we advance circularity also creates exciting possibilities for all industries looking to move to a circular economy model. ”
From an industrial point of view, the current carbon emission problem of the garment industry is quite serious. Paul Riley, CEO of Samsara Eco, estimates that the size of the polyester market in apparel is about three times that of the packaging market, but the packaging sector receives significantly more attention to polyester waste. At the same time, a number of studies in the industry have also pointed out that the apparel industry accounts for about 4%-10% of the world's total carbon emissions, which should be taken seriously.
This means that in order to completely solve the carbon emission problem of the apparel industry, it is necessary to carry out the rapid expansion of the recycling industry, as Paul Riley said: "The challenge we face is not the demand for recycled fabrics, but the construction and capacity support of the supply chain of recyclable fabrics." ”
Clearly, when recycled polyester and nylon fabrics can be mass-produced, a real sustainable revolution in the apparel industry will come. "The climate crisis cannot be solved unless the plastic crisis can be solved, and it is vital to put an end to the waste of raw materials in the apparel industry. With more than 90% of garment waste currently being pulled for incineration, Samsara Eco's partnership with lululemon shows the promise of the future of recycled fabrics," said Paul Riley, CEO and founder of Samsara Eco, in an interview.
Currently, Samsara Eco is considering receiving a capital injection to build a 30,000-tonne plant to process garment product waste and convert it into brand new apparel products.
ESG之外,lululemon的高端故事的挑战与机遇
It's not enough to rely solely on carbon emissions reductions to reshape consumer perceptions, and lululemon is now facing extreme environmental and performance pressures.
During the 2023 earnings call, CEO Calvin McDonald said that lululemon's sales in North America had a slow start in the first quarter, and the U.S. consumer environment was challenging: North American sales increased 9% in the fourth quarter of 2023, compared to 29% in the same period in 2022 and 12% in the third quarter of 2023.
You know, in 2023, the Americas will still be lululemon's largest market, accounting for 73%, and the slowdown in sales growth in core regions means that its growth potential is beginning to be questioned.
Rachel Wolff, analyst at Insider Intelligence, said: "lululemon's lower-than-expected earnings forecast highlights a common challenge for retailers as persistent inflationary pressures force consumers to cut back on discretionary spending in favor of cheaper brands. ”
After the release of the annual report, lululemon's stock price continued to decline, and has shrunk by nearly $20 billion from its peak market value of 64.3 billion at the beginning of 2024. Obviously, in the current complex economic environment, lululemon is also facing hesitation from capital.
In the past few years, one of the benefits enjoyed by lululemon is its high-end product premium, since the establishment of its brand, lululemon has been linked to keywords such as "middle class, women", a classic Align yoga pants sell for about 850 yuan, the price is twice that of Nike and Adi of the same type of products, and whether it is online channels or offline stores, there are very few discounts, and the high-end brand image has been deeply rooted in the hearts of the people.
But now, the situation is reversing, and lululemon itself is trying to "diversify" while expanding its product line for men, and the "high-end" story needs to be told, but it needs to be adapted.
It is worth mentioning that the Chinese market has become a potential "gold mine" for lululemon. According to the public financial report, in the fourth quarter of fiscal year 2023, lululemon's net revenue in Chinese mainland increased by 78% year-on-year; For the whole fiscal year, the net revenue of the Chinese mainland market was 964 million US dollars (about 6.969 billion yuan), a year-on-year increase of 67%, setting a new growth rate in the past three years.
Meghan Frank, chief financial officer of lululemon, said, "Our performance in the fourth quarter and full year of fiscal 2023 demonstrates the strength and resilience of our omnichannel operating model and brand differentiation positioning...... Given that the penetration of the international business (outside of the Americas) is still low, accounting for only 21% of the business, it also shows the vast opportunity that lululemon has in front of him. ”
Indeed, by the end of fiscal year 2023, the number of lululemon stores in Chinese mainland reached 127. Online, Xiaohongshu has become lululemon's main brand recognition hub, with 840,000+ notes created around #lululemon #今天穿lululemon#话题浏览量高达1 600 million times.
Could China be lululemon's second flywheel? There is no definite answer to this point. However, it is certain that the recyclable fabrics mentioned in the previous article can only be used as a "color" item for the brand, after all, the price of the limited-edition Packable Anorak jacket is $188, which is not "beautiful", at least for Chinese consumers.
Therefore, under the trend of "grading" of middle-class consumption, how does lululemon solve consumers' pursuit of "cost performance" and how to balance the contradiction between high-end brand image and price? In addition to ESG, there are many more questions it needs to answer and solve.
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