Bioprocessing for Sustainable Production of Coloured textilesthe interior textile firms in the Benelux and Herning (Denmark). These firms often represent a unique cultural heritage

Work Package 7 – Exploitation and Business Plan

Lead contactor for this deliverable: UNISI Coordinator organisation: University of Siena Coordinator: Rebecca Pogni Dissemination Level: CO Confidential, only for members of the consortium (including the Commission Services)

Bioprocessing for Sustainable Production of Coloured textiles

CIP Eco-innovation – First Application and market replication projects ECO/09/256112/SI2.567273

www.biscol.unisi.it

Starting date: September 1st, 2010 Duration: 36 months

Deliverable 7.4 Business Plan of dyeing process

Bioprocessing for Sustainable Production of coloured textile

WP7/Deliverable 7.4 Page 2 di 23

1. EXECUTIVE SUMMARY .......................................................................................................................................... 3

2. BUSINESS SUMMARY............................................................................................................................................... 4

2.1 TEXTILE AND CLOTHING: TRENDS IN BUSINESS MODELS...................................................................... 4

2.1.1 VALUE CHAIN CONTROL.................................................................................................................... 4

2.1.2 NICHE MARKET CONTROL ................................................................................................................ 4

2.1.3 FRAGMENTATION................................................................................................................................. 5

2.1.4 THE COMMODITY TRAP ..................................................................................................................... 5

2.2 POSITIONING OF SUB SECTORS ........................................................................................................................ 6

2.2.1 RAW MATERIALS .................................................................................................................................. 6

2.2.2 SPINNING.................................................................................................................................................. 7

2.2.3 WEAVING AND KNITTING .................................................................................................................. 7

2.2.4 FINISHING................................................................................................................................................ 7

2.3 PRODUCTS AND SERVICES.................................................................................................................................. 8

2.3.1 PRODUCTS AND PRODUCTION DESCRIPTION............................................................................. 8 2.3.1.1 ENERGY IN TEXTILE INDUSTRY ................................................................................................... 9 2.3.1.2 WATER CONSUMPTION.................................................................................................................. 11

3. MARKET ANALYSIS SUMMARY......................................................................................................................... 14

3.1 INDUSTRY BACKGROUND ................................................................................................................................. 14

3.2 MARKET ANALYSIS ............................................................................................................................................. 15

3.2.1 INTERNATIONAL MARKET TRENDS ............................................................................................. 15

3.2.1.1 EUROPEAN CONSUMPTION........................................................................................................... 15

3.2.1.2 EMERGING MARKETS..................................................................................................................... 16

3.2.1.3 RELOCALISATION............................................................................................................................ 16

3.3 SWOT ANALYSIS ................................................................................................................................................... 17

4. STRATEDY AND IMPLEMENTATION SUMMARY.......................................................................................... 18

4.1 PRODUCT POLICY................................................................................................................................................ 18

4.2 PRICE POLICY ....................................................................................................................................................... 18

4.3 PROMOTION AND EXPLOITATION POLICY................................................................................................. 18

5. FINANCIAL PLAN SUMMARY.............................................................................................................................. 19

5.1 ASSUMPTIONS ....................................................................................................................................................... 19

5.2 SALES FORECAST................................................................................................................................................. 21

5.3 CASHFLOW STATEMENTS................................................................................................................................. 21

5.4 PROFIT AND LOSSES FORECAST..................................................................................................................... 22

5.5 BREAK-EVEN ANALYSIS..................................................................................................................................... 22



1. Executive Summary The textile and clothing industry is one of the world most global industries, and constitutes an important source of income and employment of many EU countries. It suffers now displacement to the developing world due to high labour costs in Europe and a more stringent environmental regulations. The rise of the ethical, social or ecological concerns is one of the outstanding trends of the last decade in the sphere of consumption. Consumers go for “cleantech” products: hybrid cars, energy-efficient lighting etc. After the bio-food and the bio-houses, the spotlight is now on the bio-clothes. In BISCOL project a new dyeing process has been proposed following these specific objectives:

• synthesis of bio-dyes and auxiliaries with low environmental impact • new tinctorial dry pre-treatments based on plasma technologies • optimization of the dyeing process

The approach developed during the BISCOL process is mainly devoted to the European market of dyes and textiles. Our target is represented by:

• Consumers asking for natural eco-friendly non-toxic products • Producers wishing to reduce their ecological footprint therefore strengthening their brand

image

New bio-dyeing process will have a beneficial impact on the following environmental issues: • Climate change: reduction of greenhouse gases • Soil and stream pollution: reduction of amount of waste and hazardous waste • Sustainable production and consumption: reduction of raw materials and extra chemicals • Protection of water resources • Reduction of toxicity of new dyes and auxiliaries

It is expected that the new dyeing process will lead to a concrete evolution of the traditional colour industries toward high tech SMEs, which become more competitive, more innovative and develop sustainable processes.



2. Business Summary - Promotion of green products and processes Target groups Retail groups - who wants to promote themselves as supporter of a sustainable development - who wants to carry a green image - who wants to develop a collection of bio-dyed products Consumers are now much concern about the green activities. They choose products which are non-toxic and cause no harm to both the human society and the environment. This tendency for eco-friendly products has been extended to textile and apparel products, particularly those products which directly come into contact with the skin for prolonged period. 2.1 Textile and Clothing: trends in business models 2.1.1 Value chain control Increased competition inside the EU and the commercial innovation required to tap into the potential of emerging markets, point to a trend of vertical integration. A successful business model is indeed to aim at controlling the value chain. This strategy has taken shape in clothing by downstream investment into retailing, whereas retailing is closely associated with branding strategies. The strategy of verticalisation had strategic and financial motives and was enabled by technological factors and regulatory factors. Strategically retailing was motivated by creating a reliable turnover growth and controlling the value of the brand as well as stimulating faster feed-back from sales into product development and production. Verticalisation was also a defensive strategy as brands were faced with retailers not communicating sales information, not optimizing sales and price integrity and eroding the brand equity. The financial consequence is closely related, by integrating into retailing the clothing firms could control more value added, working capital could be lower and turnover time of capital could be shorten. Finally besides shorter payment lags, retailing offered better control over credit. At times of difficult access to credit, vertical integration combined with quick response production is a successful formula. The strategic and financial benefit of retailing was most relevant in countries without a well-developed retail structure, such as Southern and Eastern Europe. It is also an instrumental part of a strategy to open emerging markets. Indeed leading European brands combine the development of exports with opening stores. A new addition to verticalisation is to open an internet sale channel, which is a feature of most European brands and represent a challenge for most SMEs in Europe. 2.1.2 Niche market control Specialization into niche markets is a successful strategy for companies in the northern and southern member states. Through research and innovation companies develop specific technologies and skills, protect their intellectual property and carve for themselves a market niche with high barriers of entry. This is typically a strategy followed in technical textiles and in industries with very specific technologies and engrained skills; in particular, the difficult transmission of tacit knowledge creates the conditions for niches. A gradual shake out has led to the survival of a limited number of specialists that have become survivors in niches with high entry barriers, like in the cases of printers in Como, or the wool weavers in Biella, the lace makers in Caudry (northern France), or



the interior textile firms in the Benelux and Herning (Denmark). These firms often represent a unique cultural heritage rooted in centuries of industrialization and the preservation of those types of industries is the defence of an artistic and industrial tradition and the availability of specific products is at stake. The niche market logic is a strategy ideally suited for SMEs. However it is also a strategy that demands a long term strategic commitment, the development of specific skills, a deep embedding in demanding markets and an active policy in developing and protecting intellectual property rights. In general a niche market strategy requires a dynamic export policy since a niche is usually (too) small at the level of one single country to attain critical mass. Niche players have had over the last 15 years the benefit of a deepening and widening internal market. In some sectors it is the fragmentation of distribution and differences in taste that create niches. The companies in interior textiles point to a very fragmented distribution system, the prevalence of bespoke (made to order) sales model in the upper middle and high end of the market that protects jacquard weavers (addressed in Denmark and the Netherlands cases) as well as printers in Italy. The same logic is also to be found in the luxury clothing sector were a high level of customization is demanded. However, luxury markets can be very cyclical and a downside of the high barriers of entry. A growing niche segment is mass-customization. This segment has developed a new generation of start-ups especially in Italy, the Netherlands and Belgium but is also mainstreaming in the clothing industry. Also the wool weavers and the shirting weavers are adjusting their service to this niche. 2.1.3 Fragmentation Against consolidation, which is mainly a logic amongst medium size and larger companies, fragmentation of the industry is still a salient feature. Fragmentation is a consequence of low entry barriers such as the occurrence of subcontracting, low capital requirements and fragmented (geographically, distribution and taste) markets. Fragmentation can only be overcome by raising entry barriers, and could go then along a major shake out of the industry. During 2010, 197.000 companies are registered as being engaged in textiles and clothing production. The average size of companies in employment terms is below 10 people. The trends gathered out of Eurostat and Orbis data point rather to a decline than an increase in average size. Fragmentation may be the result of different trends. In subcontracting regions the average size of companies is declining, both as the sector downsizes and companies spilt up in smaller units to be industrially more flexible and to attain smaller overheads. In design/brand oriented regions also small companies dominate the manufacturing sector. However, self-employment also is emerging for technical specialists that prefer to work as independent contractor (e.g. in the Netherlands, rather than to be employed). The focus on creativity, and in some countries the large number of graduates coming out of design schools, as well as new forms of distribution constitutes a new segment of micro-enterprises often integrating design, production and distribution. In London, Porto, Vilnius, Milano, clusters of small companies are oriented towards specialised niches or try to offer products and brands that are distinct from the retail offer. These firms also try to offer customized products, for consumers not catered for by the dominant retailers (e.g. consumers with handicaps), and also for products made of sustainable materials. 2.1.4 The commodity trap One of the dangers that were highlighted in several regional cases is the commodity trap. The commodity trap means being positioned in a market segment where barriers of entry have declined, opportunities of product or service differentiation have dwindled and competition on cost has become paramount. The commodity trap means that European firms are stuck in a segment where



Europe has little competitive advantage. There are methods to get out of the commodity trap, mainly through design and service innovation or by vertical integration and attaining economies of scale. A typical situation where the commodity trap applies is in the spinning sector, weaving and knitting of grey fabrics, some home textiles and also carpets. However, also in technical textiles some products present the features of commodity goods: personal protective equipment in less demanding applications and materials for these PPE such as polyester/cotton blends geosynthetics, some medical textiles especially bandages. Commoditization also occurs when too many companies diversify into a niche. Many companies shifting from home textiles or clothing textiles into technical textiles have often the effect of increasing competition in that segment with the effect of reducing prices and profits. Established companies then seek to upgrade into sub-segments with higher barriers. 2.2 Positioning of sub sectors 2.2.1 Raw materials Europe as a source of materials has been addressed in several reports for flax, cotton and technical fibres. Europe is small but still relevant fibre producer in the world. Europe produces 3.8 Mln Tons man-made fibres out of a total volume of 53 Mln Tons (7%). In natural fibres Europe produces 0.5 Mln Tons out of a global production of 20 Mln Tons (2.5%). The overall trend in fibre production is one of constant decline and rationalization of capacities. Only specialty fibres hold on, or fibres for which there is a large downstream production capacity (i.e. polyamides) Europe is a minor player in the production of bulk fibres: in polyester its share is below 5% and is mainly oriented towards technical fibres (high tenacity, fire-retarding). Europe has a stronger position in polyamides (10% share in world production) in which it is a net exporter of fibres and a large end user in carpets and hosiery. European companies are also strong in cellulose fibres, but production is mainly carried out outside Europe (in Europe there is a share of 15% of world production). However, overall Europe is a net importer of synthetic fibres and yarns and is no longer assured of innovative leadership except for technical fibres. In natural fibres the European Union is the leader in linen production with a share of 40% in world production. However, over 80% of fibres are exported to Asia for the following productions phases. Europe is also a minor cotton producer: Greece has a market share of 2% in the global cotton production, but also in this case the fiber is exported partly in Europe (Italy and Germany) but the majority outside. Europe is still a leader in wool transformation, but imports over 95% of its needs, mainly from Australia. It is also leading in the production of alternative fibres from nettle and hemp, but production volume is below 0.01 Mln Tons. Finally, Europe plays a substantial and growing role in the production of biopolymers and fibres made thereof. Nevertheless, bio fibre production in Europe is still below 0.2 Mln Tons (share in global production is ca. 35%). The support to special natural fibres culture and production, interesting for very specific niche market applications, could be an interesting way of re-conquering competitive advantage for Europe. Indeed the so called “Green Economy” is globally growing in importance and in value. This also applies to emerging development of biopolymer based materials. Similarly the EU industry is highly depending on synthetic fibres from third countries. The development of mini-mills and development capacity of new modified fibres around public research centres could be the basis for new business models but also the basis of alliances with bulk manufacturers. Finally recycling is also an emerging trend. A comprehensive approach may be appropriated, covering natural, biopolymer and novel synthetic materials.



2.2.2 Spinning Spinning is carried out as an independent activity or as part of vertical operations. Spinning can be connected to primary processing of raw materials or integrated with fabric manufacturing. Precise data do not exist but evidence gained in interviews points to a general reduction of spinning capacity in Europe (with imported yarns providing an increasing share of market). An increasing share of spinning is now carried out in vertically integrated firms. However, also integrated firms source part of their yarns outside the firm. Vertical integration is dominant in the wool sector, in the carpet sector, in the home-textiles sector and in hosiery industry. In non-vertical operations, spinners have most often shifted to more flexible value added production of specialty yarns such as yarns from fibre blends and technical yarns. Spinners making functional blends can develop proprietary IPR while companies spinning technical fibres are often linked in licensing strategies of their suppliers. Another strategy is to survive through increasing in scale and efficiency. Firms following this strategy have most often been caught in a commodity trap and are faced with difficult access to raw materials, rather higher energy and labour costs. In Europe the strategy of cost leadership through scale and efficiency gives a very vulnerable position. 2.2.3 Weaving and knitting The weaving and knitting industry remains the core of the textile industry in Europe. This industry either makes semi-products to be further processed in the clothing or furniture industry or almost end products requiring simple processing operations (e.g. carpets, geotextiles etc…). Companies are traditionally specialized in a specific fabric formation technique, but we found anecdotal evidence of weavers investing in knitting equipment in order to offer fabrics with other properties. We shall call this group weavers, but it also covers a broader scope. Weavers can specialize in weaving alone or can be integrated with finishing of fabrics. Weavers can also be associated with spinning (e.g. Hellenic textiles in the Greek case). In very few instances, but notably in the Biella wool industry, weavers have also developed clothing production and brands as Loro Piana or Ermenegildo Zegna. Weavers largely work on their own account, and if they are not integrated, they need the services of commission finishers. Commission weavers are a minority of the weavers and are only prevalent in Italy and Spain. Weavers can work for designers (usually called editeurs), but often in that case -that is common in furniture and furnishing fabrics - the weaver proposes a design to the client and manufactures on his own account. A dominant trend is that fabrics are increasingly co-developed with clients, which leads to an intensive but also in Como for luxury brands. Co-development is associated with exclusivity and protection of designs; in this situation the client often applies for the protection of the design. The weaving sector is also gaining the most from an active export policy, either directly as suppliers of quality fabrics, or indirectly through European clothing brands and quality retailers. However, the weaving sector is also subject to the commodity trap. This is especially the case for grey fabric weaving, cotton weaving and, outside Italy, in the wool weaving sector. However, in several sectors niches (also in interior textiles) pertain. It is also weavers that have been most eager to diversify towards technical textiles. The automotive sector has been an attractive target. Weavers of complex fabrics such as velours have also developed into 3-dimensional weaves for highly technical applications. 2.2.4 Finishing Dyeing and finishing is probably the area with most technological dynamism and opportunities. In technical textiles but also in sport and workwear end-users demand materials with a broad range of



functionalities. The application of technical finishes, but also multilayer coating and lamination is area of substantial innovation. A new generation of finishes based on nanotechnology is also at a level of market introduction. Biotechnology based functionalities such as enzymes, plant extracts are being researched and developed. Alternative, more sustainable finishing processes based on digital technology, plasma or supercritical CO2 are being explored and tested. Several of these methods are essentially oriented to functional properties, but especially Italian finishers are also exploring the aesthetic potential of new finishes and finishing technologies. As these production phases are globally a major source of pollution, one can imagine a big niche could be created for EU “clean” producers versus global competitors, once consumers pay more attention to carbon footprint and pollution issues. Europe still has a commanding position in textile finishing worldwide. Finishing is where most of the functionalization towards special properties can be applied, and therefore plays a key role when it comes to incorporate innovative properties to a textile product. It is also the first mover in new technologies such as digital printing. However, this sector is weakened by the limited number of commanding finishers who can effectively reap the benefits of innovation. The costs of R&D lead to consolidation, in terms of critical mass required to sustain innovation. Another trend fostering consolidation is that the environmental regulations (especially imposed by local authorities) demand increasing investments in appropriate equipment. Energy reduction might also foster a larger scale of operation. Finishing companies are often essential resources in industrial districts, the survival of these type of firms is often essential to the health of the district. Major details on business trends for the textile and clothing sector can be found in the report “IN-DEPTH ASSESSMENT OF THE SITUATION OF THE T&C SECTOR IN THE EU AND PROSPECTS” (task 7, MICHIEL R. SCHEFFER 2012).

2.3 Products and Services 2.3.1 Products and production description The new dyeing process proposed in BISCOL project consists of the following objectives: - Synthesis of bio-dyes: new bio-dyes have been synthetized at semi-industrial scale by scale-up of bioreactor containing laccase enzyme, able to bio-synthetized new coloured compounds (Del. 7.3). - Textile pre-treatments: scale-up of technologies abling to increase dyeability of selected textiles versus bio-dyes. - Synthesis of new auxiliaries: new auxiliaries at lower environmental impact, have been synthetized at industrial scale and combined with bio-dyes. - Optimization of dyeing process: reduction of dyeing process energy demand (e.g. lowering temperature and time of treatments) has been combined with the use of new bio-dyes and auxiliaries in order to validate at industrial scale the proposed new dyeing process. A comparative sketch of the innovative process against with the conventional one is showed in Figure 1. The production of bio-dyes is based on a know how belonging to the consortium of the BISCOL project (Del. 7.3). The partners, integrating industrial and academic experiences have worked to define some important tasks, regarding bio-dyed textile quality, to obtain more detailed data for the final business plan.



Figure 1 – System boundaries for the BISCOL and conventional dyeing processes.

2.3.1.1 Energy in textile Industry

In the world’s new economic system the conditions for keeping the competitiveness have become quite difficult for establishments. The fast-growing Far East has significantly pulled down the profit rates of industrial establishments. Both the shrinkage in the market and the decreases in profitability have forced industrial establishments to effectively manage their costs. In order to reach this goal, the companies have not only oriented towards qualified human resources but also have started to pay attention to quality energy supply, which is another fundamental factor in the sector. Manufacturing loss due to high energy consumption is reflected on the income statements and balance sheets of these companies, as an increased cost due to inefficient management of the resources. Particular attention must be paid to implementing energy conservation measures, specifically in the area of the dyeing and finishing process, where many small- to medium-sized companies are operating and that is the target of the BISCOL project. In general, energy in the textile industry is mostly used in the forms of: - electricity, as a common power source for machinery, cooling and temperature control systems, lighting, office equipment, etc.; - oil as a fuel for boilers which generate steam; liquefied petroleum gas; coal; and city gas. In Table 1 energy consumption shares of two different step of the textile chain have been reported and it can be seen that energy consumption is relatively high in the fields of dyeing and finishing, fiber production, spinning, weaving and clothing manufacturing.

PPUURRGGEE && WWAASSHHIINNGG

PPRREE--TTRREEAATTMMEENNTT DDYYEEIINNGG WWAASSHHIINNGG DDRRYYIINNGG

PPUURRGGEE && WWAASSHHIINNGG

PPRREE--TTRREEAATTMMEENNTT DDYYEEIINNGG WWAASSHHIINNGG DDRRYYIINNGG

WATER ENERGY RAW

(BASOLAN) (DYESTUFF

WATER ENERGY RAW

(BIODYES)

(NEW AUXILIARIES)

(PLASMA)

SYSTEM BOUNDARIES

Conventional Process

BISCOL Process

1 kg woollen fabric

1 kg treated

fabric



Table 1 – Type of energy used in the textile industry.(source UNIDO Japan).

According to that, it is very important to advance energy conservation in the dyeing and finishing field, which has a high energy consumption share in terms of both the amounts of money and energy used (up to 13 M kcal). As it has been extensively reported in the Del. 1.2, the dyeing and finishing process consists of many interwoven unit operations, and it is well known that the process generally goes through repeated wet and dry operations. The heat balance of a unit operation can mainly be considered as the difference between the total supplied heat on the one hand and the sum of the heat required by the system and various forms of heat losses on the other. This clearly illustrates the importance of the development and utilization of process- specific techniques, apart from the already-described management technologies. Table 2 shows that energy saving is a crucial issue in the implementation of production rationalization. Table 2 – Relationship between production rationalisation and energy saving.

The new dyeing approach (Figure 4) that have been developed within the BISCOL project can induce a direct impact with the reduction of the treatment time and/or reduction in the



process temperature and on the switch of non water-based operation that have been listed as priorities for an effective energy management.

Figure 2 – Breakdown of the eco-friendly approach investigated within BISCOL project. More in details, the following benefits are expected by the approach that is under investigation: - Acceleration of process time The combined use of plasma accelerates processing effects, by using this techniques in pre-processing. - Reduction of the temperature required to dyeing textile substrate The set-up of the new bio-dyes and auxiliaries in combination with plasma pre-treatment allow to significantly reduce the processing temperature. - Reduction of water consumption Plasma pre-treatment allows to achieve high performances for the treated textile preserving primary resources such as water. The LCA study performed in order compare the environmental performances of the innovative approach with the conventional one for woollen fabrics dyeing process showed that a remarkable reduction of the energy consumption can be achieved with BISCOL solution (for a detailed discussion see del 6.2-6.3).

2.3.1.2 Water consumption

In average in the EU water consumption is around 32% of water extraction, since most of extracted water is not consumed but returned to the water cycle and made available to further uses, after proper treatment or natural purification (Figure 3).

Figure 3 – Sectorial water extraction in Europe (source EWA 2007).



Excluding cooling water, the main industrial water users are the chemical industry, the steel and metallurgy industries, the pulp and paper industry. Industrial use of water accounts for about 32% of total water abstractions in the EU. Cooling water represents about 10%, because most of cooling water is used and not consumed, generally returned to the water cycle. The textile industry is energy-, water-, and chemical-intensive. Within the industry, the majority of energy, water, and chemicals consumed is for wet processing. At least 40 litres of water are required to produce 1 Kilogram of textile, on the average. Typical water demand for the production of 1 kg of textile for selected fabric type is shown in Table 3. Table 3 – Distribution of water use in textile processing by fabric type (adapted from US EPA, 1996).

Since textile manufacturing is also a chemically intensive industry and, therefore, the wastewater from textile processing operations contains processing bath residues from preparation, dyeing, slashing, and various other operations, textile effluents contain a very diverse range of contaminants that must be treated prior to disposal. The analysis of the water availability in Europe depict that the situation of textile industry is under stress. Even if in the EU15 countries the average WEI was around 21% (EEA, 1999), which is quite a sustainable index; severe imbalances between regions are observed as shown in Figure 4, 4 countries, in southern Europe, are water stressed (Cyprus, Italy, Malta and Spain); 9 countries, lying mainly in southern Europe, which represent 32% of EU population, are moderately water stressed (Germany, Bulgaria, Denmark, Portugal, Romania, Turkey). Belgium extracts more than 40% of its total renewable freshwater resources.



Figure 4 – Water availability around Europe.

The picture also compares WEI in 1990 and in 2002 and shows that the WEI has decreased in 17 countries during the period 1990-2002, mostly in the new member states due to the decline of abstractions (institutional and economic changes), but also in older members, such as Denmark and Sweden due to the implementation of sustainable water use programmes. Six countries have increased their WEI – Greece, Luxembourg, Malta, Portugal, Turkey and the UK. If we consider that Textile industry is located in the Southern countries that are the most severely affected by water scarcity it is easy to understand the importance of an effective water management in this manufacturing sector. As it has been highlighted in the LCA study, the implementation of the plasma technology in the production line could allow reducing water consumption up to 20 L per kg of textile. This means that per year a total reduction of around 3.6 m3/year can be achieved. Considering that at least 40 L of water in the average is required to treat a textile this is the amount required to treat up to 300 m of fabric. Moreover, if we consider that by the application of the eco-friendly auxiliaries a reduction between 10-20% of the pollution load (in terms of COD) can be reached an additional benefit from the economical point of view can be achieved. In fact, according to the table (Table 4) provided us by GIDA (Municipal WWTP in Prato) the costs for the discharge of the wastewater in the treatment plan is increasing by increasing the COD of the effluent.



Table 4 – Discharge costs for industrial effluent at the Municipal WWTP in Prato (year 2011).

Considering that a finishing company has an average COD in between 750 and 1000 mg/L the reduction of COD in the expected range could allow to reach in the worst case, a reduction up to 0.15 €. Considering that the total amount of water required to produce 1 kg of coloured textile with the BISCOL approach is around 60 L, 0.01 € can be saved per kg of treated fabric meaning at least 15,000 €/year saved.

3. Market Analysis Summary Is there a market for bio-dyed textiles? Yes, there is a market, especially a “Niche market”.

3.1 Industry background European market consumption is actually depressed in all main segments like clothing, interior textiles and technical textiles. Clothing markets are often the first to adjust downward at time of crisis, as it has happened in 2008. It is also the first market to pick up when signs of recovery show up. After a pickup in the second half of 2009, this market is now very fickle. In 2010 clothing markets recovered only in Northern Europe. In 2011 and 2012 clothing markets declined in almost all EU countries (Scheffer 2012). Most EU countries have depressed housing markets, which has an impact on interior textiles. Building volumes have dropped significantly in almost all EU countries. The mobility of households has declined as well. Only in those countries where incomes remain stable, there might be a replaced demand for interior textiles such as carpets and furnishing. The textile industry is comprised of a disperse, fragmented group of establishments that produce and/or process textile-related products (fibre, yarn, fabric) for further processing into apparel, home furnishings, and industrial goods. Textile establishments receive and prepare fibres; transform fibres into yarn, thread, or webbing; convert the yarn into fabric or related products; and dye and finish these materials at various stages of production. The textile chain is thus long and complex. In its broadest sense, the textile industry includes the production of yarn, fabric, and finished goods. To characterize the ecological impact related to textile finishing it is therefore of crucial interest to have a look on the overall textile production chain. The production of textile affords a great variety of processing steps. The stages are highlighted in the process flow chart shown in Figure 5 below.



Figure 5 - Typical Textile Processing Flow Chart (EPA Office of Compliance, 1997).

The life-cycle of a textile starts from natural fibres or the production of man-made fibres, the next step is the production of yarns from the natural or synthetic fibres. Fabrics are produced of the yarns/fibres by different technologies (weaving, knitting, non-woven technologies, braiding, tufting). Finishing processes (pretreatment, dyeing, printing, and finishing) follows. Some textiles are coated or laminated. These process steps are not always in the same order. Dyeing, for example can be carried out on loose fibres, on yarns, on fabrics, and on ready made textiles. The make-up (cutting, sewing, assembling) is the last step before selling in retail trade or whole trade and consumer use.

3.2 Market Analysis 3.2.1 International market trends 3.2.1.1 European consumption Consumer demand in the EU and USA is likely to stagnate or even decline under the impact of higher unemployment, fiscal measures (e.g. VAT increase), limited credit and higher savings. European consumption is likely to be depressed in all main segments: clothing, interior textiles and technical textiles.



Clothing markets are often the first to adjust downward at time of crisis, as in 2008. It is also the first market to pick up when signs of recovery show up. After a pick up in the second half of 2009, this market is now very fickle. In 2010 clothing markets have recovered only in Northern Europe and during the period 2011-2012 they have declined in almost all EU countries. Most EU countries have depressed housing markets, which has an impact on interior textiles. Building volumes have dropped significantly in almost all EU countries. The mobility of households has declined as well. Only in those countries where incomes remain stable, there might be a replaced demand for interior textiles such as carpets and furnishing. Furniture, also a market using textiles is also likely to stagnate in the next years. 3.2.1.2 Emerging markets The importance of emerging markets is an instrument for growth and is a consistent strategy of the European Union, both in opening up third markets (since the Marrakech agreement in 1994) and in fostering conditions for export. Member states have also played their role in fostering export promotion and improving export credit. Demand in emerging markets is likely to grow although the global economic uncertainty will possibly lead to lower growth figures (rather near 5% than near 10% of growth). Many economic projections point to growth through consumption in emerging markets, like in China, India and Brazil. The composition of growth in demand is of relevance: Europe is still a global leader in luxury and premium products and profits mainly from the transition from middle to high income social groups and less of the transition of low to medium incomes. However, protectionist tendencies have been reported in some of these emerging markets during the interviews. Some emerging markets have still very high import tariffs (i.e. 35% for some products in the Mercosur) and also technical barriers are often mentioned in relation to consumer protection and safety. Indeed, many emerging market are adopting regulations with high standards comparable to EU with a benefit effect for EU companies. Some countries have a still very long import procedure (Russia and Brazil) which is a relevant problem for seasonal products such as fashion items. Technical textiles export to emerging countries is hampered by public procurement regulation demanding local content (mentioned for India and China). 3.2.1.3 Relocalisation If it is unlikely that demand (all other factors being equal) in industrialized countries will act as a leverage for growth and/or recovery, relocalization of production has been mentioned as a possible trend. Regular anecdotal evidence from the cases suggests that "production is coming back to Europe". It is also striking that only very few companies mentioned that they were considering a further delocalization of production. In most instances companies were justifying further delocalization in order to be close to emerging markets rather than reducing costs. The trend towards the relocation is an important step forward for clothing production.This has not occurred over the last eight years, mainly for lack of progress in automation of sewing. We have, however, witnessed a relocalization of printing because of digital printing as well as a breakthrough in mass-customisation concepts in menswear, which also has an impact on weavers. In many cases textiles companies in Italy or Portugal reported the trend of receiving orders that were in the past placed to Asian producers. Also companies subcontracting their production (based in Denmark or the Netherlands) to increase their sourcing in Europe inside their so-called “two-string strategy”. The relocalization (or a slowing down of delocalization) of production at times of economic crisis is not a new phenomenon. In fact a similar trend has been observed in 1980s and in that case relocalization or resilience of European production was mainly associated to a lack of commercial credit available to retailers, uncertainty in the market and hence a wish of retailers to keep working capital low, lead times short and stocks low. This leads to an acceptance of rather higher prices



associated with EU production in which retailers accept lower profit in relation to turnover, in exchange of a higher profit ratio in relation to working capital. 3.3 SWOT Analysis

Strenghts Weakness

• Return on investment by the profit margins from the dyes marketed. • Commercialization through partnerships and joint ventures with major

sectors for dye production and application of dyes. • Reduction of the production costs in the long-term perspective

(energy, chemicals, water) • Investment in new catalytic properties of enzymes produced by a

variety of fungal strains • Safe and effective dyes production method • Energy use is reduced by bio-dyes production processes conducted at

room temperature • Plasma treatment is representing a viable and economic process for

the modification of natural fibres in order to improve dyeing yield • Use of eco-friendly auxiliaries for dyeing process of plasma pre-

treated textiles at low temperature (energy saving) respect to conventional process

• Inputs are no toxic or corrosive and other ingredients are similar to those used in the production of synthetic dyes, with the exception of the enzyme laccase (no OGM fungi are used for cultivation);

• Screening of conventional or novel precursors through enzymatic bioconversion to create coloured molecules,

• Screening of the most promising in terms of the industrial quality and dye molecules with low toxicity

• Select of the most promising dyes and demonstrate their functionality in end-use applications

• Delivers a high absorption rate in the application, which generates less wastewater during the application process colors on the support,

• Direct link between the dye molecules and fiber clothing, • No requires finishing chemicals with heavy metals, eliminating

sources of toxicity for the end user • Use of liquid dyes with a better eco-profile respect to powder dyes • Low environmental impacts of the whole dyeing process respect to

conventional • Reduction cost of 50% for the whole dyeing process of 1 kg of dyed

textile (0.64 €/kg vs 1.30 €/kg for conventional process)

• Lower amount of produced dyes at industrial scale

• Eco-dyes with comparable tinctorial properties of commercial dyes

• Niche market

Opportunities Threats

• Synthetic dyes industries have increased their interests to reduce the environmental impact of production processes and products

• New European regulation to establish non-toxic products • Environmental regulations become more stringent, especially in

terms of wastewater discharges and CO2 emissions impact • Evaluate biocatalyst properties by molecular and genetic tools to

increase the stability and achieve a higher activity of enzymes produced from fungal strains

• Create infrastructure and tools for a broad and effective investigation of a wide range of precursors, enzymes, dyes and coloured molecules

• Rapid penetration in the segment of bio-clothing as organic cotton and non-toxic dyeing.

• A more gradual diffusion in the broader market for the general use of dyes in the textile, leather and cosmetic sectors.

• Industry is focused on cost reduction and is less interested to invest in processes with high breaking technology.

• Low investments in R&D • Global economic crisis



• Global colorants market is projected to annual grow of 3.6% (2013-2018)

• Consumer preference for eco-friendly products • Increased competitiveness for companies operating in the EU Dyes &

Pigments market 4. Strategy and Implementation Summary 4.1 Product policy Engineering solutions have been designed in order to meet some technical challenges: a) Products - use of bio-dyes for application in different types of textile: wool, cotton and synthetic fibers - perform quality and toxicity industrial tests for existing and new bio-dyes to fully meet commercial standards application in target industries - increase the industrial production of bio-dyes in order to meet the market demand for several application sector b) Process - Improve immobilization technology of enzymes within the bioreactor in order to: maximize the enzymatic activity, maximize the reuse of the enzyme - Energy and water saving process. Possible application sectors have been considered as reported in del. 7.3: protective clothing, sportswear, leather, cosmetics and dyes producers. Organizations are perceive environmental marketing as an opportunity to achieve its objectives due to green market trends in China and India. Firms have realized that consumers prefer products that do not harm the natural environment as well as the human health. Long term options about the marketing of bio-dyes are the following: • Opportunities for investment in the joint venture for the production of eco-colorant • Sale of exclusive right of eco-colorant production or use of a specific market sector 4.2 Price Policy

Euro/kg of dyed textile (conventional process)*

Euro/kg of dyed textile (BISCOL

process)* Selling price 1.64 0.81

Production cost 1.30 0.64 Margin 0.34 0.17

*These data have been taken from Life Cycle Cost (LCC) analysis and the personnel costs have not been taken into account for both processes. This licensing model assumes that 1 kg of dyed textile with BISCOL dyeing process receive a market price lower than ≈ 0.66 euro/kg compared to the prices of dyed textile from conventional dyeing process 4.3 Promotion and Exploitation Policy In order to promote bio-dyed products and attract new customers, the following sales process methods have been identified: - direct marketing - advertising (web-site, media, eco-labels) - social marketing



5. Financial Plan Summary 5.1 Assumptions

a. Market increased expected Textile market is pretty cyclic and seasonable. This could influence the market demand for a specific dye, even though the production of them is quite stable from year to year. As the European market experiences uncertainty, expectations are that wool consumption in the EU will continue to fall for the economic crisis. In the short run, fall in demand will be stable (year 2014). Nevertheless, reduction or stability in demand from EU will be compensated by the growth in China. China’s economic growth is forecasted to slow down, however, it will continue to grow at a rate just below the double digit level and their consumption of wool will stabilise. Starting from year 2015 a gradual increase in wool consumption in the EU could be assumed (Table 5).

b. Potential market for dyed wool fabrics in volume The world global dyed textile production at 85.8 million tons/year (year 2012). This is comprised of about 44 million tons of synthetic, 5 million tons of regenerated fibers and 33 million tons of natural fibres (∼0.56 million tons for wool). Value for BISCOL Project According to RICCERI dyehouse production capability of 500 tons/year, it is possible to state that the new market will approximately consist of maximum 485,000 €/year in 2017, in the case that the third party service (pre-treatment + dyeing of the woollen fabrics) would be sold at 0.97 €/kg (with the inflation rate computed according to BCE estimation till 2017).

Market Targets Production (tons/year) Price (€/kg) Turnover (million €) 2015 750 0.93 0.70 2016 1,000 0.95 0.95 2017 2,000 0.97 1.94

d. Dyed Textile price (euros/kg) Therefore, with the hypothesis that innovative BISCOL process allows to dye 1 kg of wollen fabric at 0.64 €/kg (without personnel costs), the value of the world wool fabric production can be estimated to 358.4 M€/year. In our assumption, the BISCOL innovative process is suitable for 10% of the existing wool fabric market and therefore the market can be estimated to 35.8 M€/year. In the light of what reported above, one of BISCOL partners, SETAS, as an industrial dye producer, envisages that the price of eco dyes should not go beyond to the value of 20 $/kg, meaning 15 €/kg. Over this limit, the effect of the price of the eco-dyes on the final eco-garment would be too heavy, and would compromise the success of the new products in the final market. The eco-colorants produced in the project should receive a market price higher than ≈ 4 €/kg compared to the prices of synthetic dyes and the final price will be lower than the above mentioned limit price (9.85 €/kg). Actually, one of the basic conditions for the marketability of bio-clothing, already tested by many big retailing chains, is that the price of the final garment does not overcome an increase of 20% of the price of traditional clothing. The BISCOL dyeing process assumes that 1 kg of dyed textile should receive a market price lower than ≈ 0.66 €/kg compared to the prices of dyed textile from conventional dyeing process (estimated to be equal to 1.30 €/kg without personnel costs).



Table 5 – Estimation of the market over 4 years after the end of the project.

Base Line 2013 Baseline

2013 2014 2015 2016 2017

a. Market increased expected - +0.0% +50.0% +33.0% +50.0% b. Potential market for woollen fabric according to biodyes production

500 (based only on

RICCERI capability)

500 750 1.000 2.000

c. Inflation rate of price - +1.6% +1.8% +1.8% +2% d. Dyed Textile production cost (euros/kg) 0.75 0.75 0.76 0.78 0.80 e. Dyed textile selling costs 0.92 0.92 0.93 0.95 0.97

e. Costs, Revenues The projection of costs and revenues and cash inputs and outputs is based on the following assumptions:

• The production needs the purchase of the equipment machinery Plasma at € 150,000. This equipment is depreciated over 10 years, considering the yearly depreciation fee € 15,000 according to functional RICCERI dyehouse production capability of 500 tons (Del. 4.2 and 4.3).

• production is distributed in equal parts during the year (purchases and costs) • The production is part of a company that can finance the project in terms of purchase of

machinery (other scenarios may be leasing, financing, etc.) • Variable costs grow incrementally with respect to production with a baseline production of

500 tons for 2015 • Unit variable cost per ton of dyed fabric stands is estimated at € 560 • The sales are constant with equal distribution during the year • The collection times for the sales is 60 days, and the last two months sales of the year are

collected in the following year • The projection of costs follow the inflation rate of the previous table (Table 5) • The projections of losses/profits are presented net of the tax impact as the tax depends on the

context in which the project is located • For the assessment of the production costs related with the other processes required to

produce a dyed woollen fabric the final costs including purchasing of auxiliaries and other chemicals, water and energy consumption have been considered.

The production costs are reported in Table 6. Table 6 – Production costs.

COSTS Costs in € for the

production of 1 kg of dyed wollen fabric

Costs for initial production (500 tons/year)

Purge and Washing 0.03 € 10,500

Plasma pre-treatment € 40,650

(Depreciation Plasma Machinery) 0.159

€ 15,000

Dyeing process 0.42 € 147,000

Washing 0.03 € 10,500



Drying 0.005 € 1,750

Personnel 0.11 € 55,000

TOTAL 0.75 € 280,400.00

5.2 Sales forecast The following tables describe the amount of money expected to raise from sales (Table 7 and Table 8). Table 7 – Monthly Sales Forecast.

Sales Forecast Jan- 15

Feb- 15

Mar-15

Apr-15

May-15

Jun- 15

Jul- 15

Aug-15

Sept-15

Oct- 15

Nov-15

Dec- 15

Unit Sales

Tons of Dyed Textile 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5 62.5

Unit price

€/kg Dyed Textile € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93 € 0.93

Sales

Total Sales Dyed Textile (€) 58,125 58,125 58,125 58,125 58,125 58,125 58,125 58,125 58,125 58,125 58,125 58,125

Table 8 – Annual Sales Forecast.

Sales Forecast 2015 2016 2017

Unit Sales

Tons of Dyed Textile 750 1,000 2,000

Unit price

€/kg Dyed Textile € 0.93 € 0.95 € 0.97

Sales

Total Sales Dyed Textile (€) € 697,500 € 950,000 € 1,940,000

5.3 Cashflow

Cashflow balance 2015 2016 2017

Cash From Operation € 581,250 € 907,917 € 1,775,000 Cash Sales € 581,250 € 907,917 € 1,775,000 Cash Expanditure from Operation € 548,100 € 512,359 € 959,548

Purge and Washing € 15,750 € 21,378 € 43,611

Plasma pre-treatment € 60,975 € 82,763 € 168,837



Dyeing process € 220,500 € 299,292 € 610,556

Washing € 15,750 € 21,378 € 43,611

Drying € 2,625 € 3,563 € 7,269

Personnel € 82,500 € 83,985 € 85,665

Plasma Machinery € 150,000 € 0 € 0

Operational Cashflow € 33,150 € 395,557 € 815,452

5.4 Profits and losses forecast This section describes the expected profits considering the expected revenue from sales net of costs incurred in the production process in terms of personnel cost and depreciation.

Profits and Losses Forecast 2015 2016 2017

Revenues € 697,500 € 950,000 € 1,940,000

Sales Revenues € 697,500 € 950,000 € 1,940,000

Costs € 413,100 € 527,359 € 974,548

Operating Costs € 315,600.00 € 428,374.40 € 873,883.78

Purge and Washing € 15,750.00 € 21,378.00 € 43,611.12

Plasma pre-treatment € 60,975.00 € 82,763.40 € 168,837.34

Dyeing process € 220,500.00 € 299,292.00 € 610,555.68

Washing € 15,750.00 € 21,378.00 € 43,611.12

Drying € 2,625.00 € 3,563.00 € 7,268.52

Personnel € 82,500.00 € 83,985.00 € 85,664.70

Plasma machinery depreciation € 15,000.00 € 15,000.00 € 15,000.00

Profit/loss before tax € 284,400 € 422,641 € 965,452

5.5 Break-even analysis The break-even point of the project represents the volume of business, the number of units, where total revenues (money coming into the business) are equal to its total expenses (total costs). Total Revenues (TR) = Total Costs (TC) TR = Price (p) * Quantity (Q) TC = Fixed Costs (FC) + Variable Costs (VC) VC = Unitary variable cost (vc) * Quantity (Q) Q = FC / (p – cv)



To calculate the Break-even point we consider: Fixed Costs (FC) € 97,500 (Depreciation + Personnel)

Unitary Variable Costs (vc) € 560 (1 Tons Dyed Textile)

Unitary Selling Price (p) € 930 (1 Tons Dyed Textile)

Quantity => 263.51 (Tons) = 97,500 / (930-560)

Documents

Bioprocessing for Sustainable Production of Coloured textilesthe interior textile firms in the Benelux and Herning (Denmark). These firms often represent a unique cultural heritage