Dive Brief:

• Wal-Mart Stores Inc. issued a notice to customers who had bought products manufactured by Indian textile company Welspun Global Brands and marketed as “100% Egyptian cotton” because they may contain non-Egyptian cotton fibers.

• The notice on Wal-Mart's website indicates the recall is limited to “Better Homes and Gardens” brand and Canopy brand 400-thread-count damask stripe sheet sets and pillow cases. “Welspun has not been able to assure us the products are 100% Egyptian cotton, which is unacceptable,” Wal-Mart spokesperson Marilee McInnis told the Wall Street Journal.

• Wal-Mart told news outlets that it’s not severing its relationship with Welspun. Rival Target cut ties with Welspun last month after discovering some products don’t contain Egyptian cotton as labeled, prompting Wal-Mart, Bed Bath & Beyond and other retailers to take stock of the authenticity of Welspun products.

Dive Insight:

This cotton debacle has hit Welspun’s fortunes hard, and left its retail customers scrambling to reveal the problem and compensate customers who bought the mislabeled sheets involved. But it's not quite that easy, considering Welspun's apparent lack of knowledge on the matter.

The issue pinpoints the complexities of today’s global supply chain, as well as the hardships that can come from several retailers depending on one major supplier for comparable goods. Welspun shares have tumbled hard since Target pulled some $90 million worth of business with the supplier, and the retailer later said it might work with rival Indian textile supplier Trident. 

In a conference call with investors last month, Welspun Managing Director Rajesh Mandawewala said the company took responsibility for the problem, which he said was rooted in the origins of the fiber. "The product themselves were rated highly by the end consumers," he said. "In the manufacturing process, we source a lot of materials, raw materials at the intermediary stage as well from various vendors, be it cotton, cotton yarn or greige fabric. We thus want to revalidate all our supply processes and systems. Although growing volumes and programs have resulted in increasing complexity, an issue of this nature is unacceptable to us.”

It's an astounding admission, one that shows that most U.S. retailers, too, likely have little idea about the source of the raw materials of their goods. That could become a growing issue in an era when many consumers are demanding sustainable manufacture of products. But the problem is complicated by customer demand of premium products at discount prices. Textiles made from Egyptian cotton are normally quite expensive, prized for their softness, and not likely to be found on discount shelves. 

There’s quite a bit of wiggle room in the meaning of the phrase “Egyptian cotton.” The Cotton Egypt Association, which licenses the trademark and certifies suppliers, estimates that some 90% of products labeled “Egyptian cotton” are inauthentic. The phrase is a marketing term that doesn’t actually denote a type of cotton, but that fibers were grown in Egypt. Still, “Egyptian cotton” has become shorthand of sorts for “luxury” and “quality” without regard to the fact that some consumers find other types at various prices and with various textures preferable.