India-based home textile manufacturer, Welspun India recently announced that it has initiated steps to closely monitor and control its Egyptian cotton business, which had come under suspicion earlier this year over quality issues.
Welspun reportedly said in a statement, “The company is moving towards producing all the Egyptian cotton products in-house i.e., from procuring cotton to the finished product.”
The statement further added that the steps to be taken by the company in order to control and closely monitor the Egyptian cotton include deployment of a dedicated resource in Egypt for sourcing of Egyptian cotton, increasing third party assurances such as Gold Seal from Cotton Egypt Association, vendor audit and DNA tests.
The move aims to regain the company’s lost reputation which was damaged after US-based retailer Target Corp. accused the company of selling cheaper sheets as premium Egyptian cotton for two years, hitting the manufacturer hard and leading to a net loss of Rs. 147.52 crore in the quarter ended September 30, 2016 against an otherwise healthy profit of Rs. 179.37 in the same period last year.
“We have taken a one-time hit of Rs. 501 crore with regard to the traceability issue in Egyptian cotton, which we believe will be sufficient to cover the likely cost on this matter,” said BK Goenka, Chairman, Welspun Group, adding, “The issue on Egyptian cotton was the traceability of the fibre. There was never any issue regarding quality, safety or its fitness for use. During the last two months, we worked with all our top customers to support their actions for a comprehensive resolution. Today, we continue to do business with all our customers but one.”