Made In Iceland: A Look Inside Iceland’s 120-Year-Old Wool Industry

On the very edge of Greater Reykjavík, not far from the northbound Ring Road, sits an industrial estate of vast, dripping factories and warehouses. Tourists pass the area in their thousands every day, many of them on the way to the Golden Circle. But little do they know that behind the shutters of one of these hulking buildings lies Ístex, the company that manufactures the entirety of Iceland’s commercially produced wool supply. Almost every authentically Icelandic lopapeysa (“wool sweater,” in English) begins its life here.

The 7500m Ístex factory is a hive of activity. Workers buzz around the cavernous space in overalls, operating huge dryers and spinning machines between mini-convoys pulling around heaps of wool in various stages of processing. Hypnotic machines tick away, carrying out all kinds of repetitive tasks, from drying, to spinning, to winding the wool onto spindles en-masse.

Hulda Hákonardóttir, the company’s marketing manager, shows us to the very back of the factory, where the wool first arrives in large bales, from a facility in North Iceland. These house-sized stacks are pushed into industrial washing machines, where the wool is cleaned, dyed, and blended into colour mixes. The tufts of wool then pass through a complex system of pipes and conveyor belts before being blown into huge drying tanks, where they drift to the floor like brightly coloured snow. By the end of the process, pallets of neatly packed wool balls emerge in a rainbow of colours, boxed up and ready to go out into the world.

The most value possible

Guðjón Kristinsson is the managing director of Ístex. “Wool production is a 120-year-old industry in Iceland,” he explains. “Ístex started 25 years ago, after the previous wool company, Álafoss, went bankrupt. Álafoss started in 1896 and had 200 employees, trading with Europe and the Soviet Union. There were 2000 people working in wool at its peak—they used to knit, cut, sew and make clothes.”

When the Soviet Union collapsed, Alafoss lost about half of their business, and the company went into receivership in 1991. “Ístex was started for the farmers, to keep up their production,” says Guðjón. “47% is owned by three employees, with rest owned by 2000 farmers who are slowly buying it out.”

“Wool production goes back to the basics of Iceland… it’s connected to our nature and heritage. I fell in love with idea of recreating the market for Icelandic wool.”

He tells us how there are 500,000 sheep in Iceland, from which the 2000 farmers shear 1000 tonnes of wool a year. This is reduced to 750 useable tonnes after washing; 400 tonnes of the best material is processed into knitting wool, with the second class remainder exported to the UK, mainly for use in upholstery and carpets.

“We’re always trying to influence the farmers to treat their sheep better, to up the quality of the wool,” he explains, “to keep them dry, and shear them before they get dirty. They get a much higher price for the best wool. Our goal here is to create the most value possible of Icelandic wool, on behalf of the farmers.”

Itchy and scratchy

One customer of Ístex is Páll Kr. Pálsson, a businessman who’s the owner and manager of Glófi, a textile company, and the founder of VARMA (“Thermal,” in English). Based in Reykjavík 108, VARMA is a clothing design and manufacture company whose products are on sale all around Iceland.

“We buy the machine knitting yarn we use in our VARMA products from Ístex,” says Páll. “We do use some imported yarn mainly for private label production, for companies who want a different kind of feel. Sometimes, they feel Icelandic yarn is too itchy.”

Iceland’s northern climate means that its sheep grow two types of wool: a soft, inner insulating fibre, and then an outer layer that protects them against wind and rain. So while Icelandic wool is warm, breathable and shower-proof, it’s itchy compared to the softer wool produced in warmer places.

Páll sees this as a challenge for the whole industry. “I’ve spent a lot of time constructing a research and development project between VARMA, Ístex and the Farmer’s University,” he explains. “The aim is to teach farmers to shear better, and to sort into second class, first class and gold class wool. Ístex are buying new equipment to help make the wool less stiff and itchy. Then we are trying out different methods with oils, natural soaps and enzymes to soften the fibre. These are the kind of things we need to do to increase the market for Icelandic wool.”

Made in Iceland?

Another challenge for VARMA comes from the fact that the clothing market is increasingly competitive, with cheaply made Icelandic-style products being imported for the tourist market, flooding shops with low-priced alternatives.

“All our products are made in Iceland,” he says. “It’s a labour-intensive industry, which is why lots of textile companies have moved their production to Turkey, Romania or Asia. The labour costs in China are 15% of what they are here. So most hand-knitted Icelandic lopapeysur today come from outside of Iceland.”

Clothing companies know that tourists want to take home something authentically Icelandic, and employ a variety of labelling techniques to create that impression. “Some products are being sold as ‘Designed in Iceland,’ but they’re manufactured in Asia using Australian or Chinese wool,” smiles Páll. “There’s not much that’s Icelandic about that. I think this is misleading labelling—people obviously believe these products are made in Iceland when they buy them.”

Despite all these challenges, Páll is determined to make it work. “Wool production goes back to the basics of Iceland,” he finishes. “A lot of people ask me: ‘Why are you trying this?’ The business was mostly bankrupt when I went into it. But I felt I wanted to do something connected to our nature and the heritage. I fell in love with idea of recreating the market for Icelandic wool, using the best materials, design and production methods. We need to rebuild the status of Icelandic wool to where it should be.”