Cotton Incorporated 2008 Annual Report

Trade

China remains the world’s largest mill user of cotton at approximately 50 million bales. This represents more than 40% of the world’s usage of cotton, up from 22% of world use just ten years ago. Although mill use is expected to be down in the coming year due to the global economic slowdown, consumption will remain well above China’s ability to produce cotton and, therefore, China will likely remain the major export customer for U.S. cotton for years to come. In addition, China is likely to become the second largest user of cotton at the consumer level.

To further solidify its efforts in the region, Cotton Incorporated opened an international office in Hong Kong in May of 2008. The strategic location centralized a ten-member team, affording them easy access to both decision-makers in Hong Kong and the mills and manufacturers on the Chinese mainland. From the new office, located in the Gateway Building in Harbour City, the team will offer technical services for mills and manufacturers in the Asia-Pacific region. They will also provide information on cotton supply and demand, fiber quality and consumer research trends, as well as product trend analysis services which include sourcing and supplier information. Additionally, the office will host industry experts from the U.S., who will visit regularly to service clients’ specific needs such as trend forecasting, sourcing, textile innovations, better quality cotton, market research, and consumer information.

Additional and notable trade accomplishments in China, some of which have already been mentioned in this report, include: the installation of the EFS® System in Weiqiao Textile Company Limited, the largest cotton textile producer in China; the presentation of three minifairs to Chinese buyers, retailers and brands; the adoption of the WICKING WINDOWS™ technology by China’s leading sports and athletic apparel brand and retailer, Li Ning Sportswear, and the first-ever Global Denim event in Shanghai.

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Consumer

Cotton fashions created by Chinese designers were part of the 2008 Fashion Road that toured six cities in China.

In 2006, Cotton Incorporated realized the potential for cotton among the then-burgeoning Chinese middle class. To capitalize on this market, the company and Cotton Council International initiated an educational program to increase awareness of and demand for cotton products among Chinese consumers. The COTTON-BEYOND YOUR IMAGINATION™ program continued in 2008 and encompassed print, Web and television communications, as well as a traveling exhibition of cotton-centric fashion designs.

When the public relations program launched in 2006, it included a student fashion design competition executed in conjunction with the Beijing Institute of Clothing Technology. The winning designs were placed on public view via a traveling exhibition. In 2008, the program shifted away from the student design contests to highlight four fashion designers who reside, design and sell in China. The designers created cotton wardrobes that were featured in a fashion road show that toured the cities of Beijing, Shanghai, Qingdao, Dalian, Guangzhou, and Chengdu. The exhibitions produced 190 media stories and aligned cotton with inherently Chinese fashion.

The program also added a broadcast component in 2008, through a relationship with Modern Times TV. Five 15-minute segments were produced in 2008, each one articulating a core message about the comfort and versatility of cotton products. Including three repeated broadcasts, the segments had a total of 19 airings in 2008.

Cotton fashions created by Chinese designers were part of the 2008 Fashion Road that toured six cities in China.

Cotton fashion and home textile related editorials continued in 2008 through the Web site, www.cotton-imagination.com, and the affiliated social networking site, www.bidu.com. The performance of the entire Internet portion of the program is difficult to gauge because of complexities in Chinese Web measurements; however, it is clear that more than 40,000 consumers visited the cotton-imagination site directly in 2008. Among the challenges for the public relations agency managing the program locally next year will be fine-tuning the Web portion of the program, increasing traffic to the Web site and supporting Web performance with credible metrics.

Other efforts related to the China public relations push included the placement of COTTON-BEYOND YOUR IMAGINATION™ promotional visuals at point-of-purchase areas in stores, and the distribution of two to three press releases a month to consumer publications and newspapers. In addition to the Modern Times TV segments and press surrounding the touring fashion exhibitions, the consumer program garnered over 200 Internet and print articles in 2008.