“People are looking for things that are very specific. Cotton isn’t just cotton anymore.” High-Tech Commodity Testing Advances; Anxiety about supply-chain lapses is prompting some retailers to step up their use of technologies such as DNA testing and bar-code scanning

High-Tech Commodity Testing Advances

LESLIE JOSEPHS

Updated Dec. 8, 2013 7:41 p.m. ET

Jesse Curlee is on a mission to stamp out textile trickery, one strand of DNA at a time. As president of Supima, the three-decade veteran of the textile industry is tasked with ensuring that the brand of premium U.S.-grown cotton touted on labels, such as those on Brooks Brothers and L.L. Bean shirts, is legit.When a textile mill in Hong Kong flagged substandard yarn from a spinner in India, Mr. Curlee shipped a sample of the fiber off to Long Island for a genetic test. Supima canceled the Indian supplier’s license after the results showed the fabric misleadingly was of a cheaper cotton.

“It was not Supima,” Mr. Curlee said. “It’s so easy to be deceptive.”

The episode highlights the new tools that sellers of premium products from button-down shirts to coffee are using to protect their lucrative reputations for quality.

Crops like coffee and cotton travel thousands of miles and trade hands dozens of times before they reach consumers in the form of dress shirts and espressos.

The opportunities for mishaps are plentiful and worrisome, ranging from unscrupulous suppliers to shipping mix-ups.

Those who fail to certify their goods can face substantial penalties. In January, the Federal Trade Commission said companies including Macy’s Inc., M +0.56% Amazon.com Inc.,AMZN +0.64% and Kmart owner Sears Holdings Corp. SHLD -3.78% agreed to pay $1.26 million for selling items labeled as “bamboo” when in fact they were rayon.

Anxiety about supply-chain lapses is prompting some retailers to step up their use of technologies such as DNA testing and bar-code scanning.

“If we put our logo on a bag, we absolutely have an obligation to certify what’s in that bag,” said Craig Russell, Starbucks Corp.’s SBUX +0.28% head of coffee.

The Seattle-based coffee roaster and cafe operator started attaching bar codes to track individual sacks of coffee beans from Ethiopian farms.

While dozens of companies offer commodity-testing services, companies such as Supima, Brooks Brothers and Starbucks say new methods give them an added layer of security.

Supima, based in Phoenix, promotes American pima cotton, a variety that is longer, stronger and costs about twice as much per pound as upland cotton, which comprises 90% of the U.S. crop. It also licenses mills around the world that spin, weave, cut and sew Supima into products including shirts, dresses and towels.

To protect its brand and the millions of dollars in sales generated by retailers such as Brooks Brothers Group Inc., a unit of Retail Brand Alliance Inc., Supima has enlistedApplied DNA Sciences Inc., APDN +4.12% a biotechnology company in Stony Brook, N.Y.

“DNA gives you that full length of precision that physical tests do not,” said MeiLin Wan, Applied DNA Sciences’ executive director of product development. “At the end of the day, at a molecular level you can say that the DNA is in that garment. You cannot refute it.”

Starbucks has spent hundreds of thousands of dollars for an Arlington, Mass., company named GeoCertify to tag its bags with labels at the farm level.

Fine coffees are supplied by hundreds of thousands of growers who farm small plots, often in remote areas.

Since beans from several farms often are brought to the same processing plant, they can be mixed up and roasters may have several grades of quality in a single batch.

“We get the coffee we want from the place we want,” Starbucks’s Mr. Russell said, referring to the bag-tagging program.

GeoCertify has tagged 200,000 bags of Ethiopian coffee this year, up from 50,000 in 2012 and 12,000 in 2011, when it was running a pilot program, the company said.

More-robust commodity testing has its roots in a government directive.

In November 2012, the U.S. government started requiring the Defense Logistics Agency, the Defense Department arm that provides the military with spare parts and other supplies, to use only electronic microcircuits that were stamped with DNA, called SigNature DNA made by Applied DNA Sciences.

The Defense Logistics Agency “views DNA marking as a proven method to combat counterfeiting for electronics and other commodities,” it says on its website.

Supima, whose members also include cotton growers from the Western U.S., last month began using SigNature DNA which could be detectable from the raw-cotton stage to a finished garment, and Brooks Brothers says it is working with Supima on the process.

The testing is still in early stages for the apparel industry and hasn’t won over all skeptics. Some observers say other methods are cheaper, such as employing fiber and fur experts.

“We say, what is the most cost-effective way?” said James Kohm, head of the enforcement division at the FTC. “We haven’t had DNA testing yet to do that.”

Supima says each DNA test costs $500.

L.L. Bean Inc. uses a third-party organization to test its products, says David DaPonte, the Freeport, Maine, company’s senior manager of global quality assurance and testing. He said he would be open to using DNA technology because current methods of certifying premium cotton amount to nothing more than “a paper trail.”

Jennifer Dwyer, marketing manager for consumer testing services at Geneva-based SGSSA, SGSN.VX +0.55% one of the world’s biggest inspection and testing companies, says she has seen in increased appetite from apparel companies to test their goods.

“People are looking for things that are very specific,” she said. “Cotton isn’t just cotton anymore.”

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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