NEW YORK (MarketWatch)—The four-year drought in California is hurting more than just farmers. It is also having a significant impact on the fashion industry and spurring changes in how jeans are made and how they should be laundered.

Southern California is estimated to be the world’s largest supplier of so-called premium denim, the $100 to $200-plus-a-pair jeans such as VF Corp.’s VFC, -3.29% 7 for All Mankind, Fast Retailing’s 9983, +0.30% J. Brand and private-equity owned True Religion. Water is a key component in the various steps of the processing and repeated washing with stones, or bleaching and dyeing that create that “distressed” vintage look.

“(The) water issue in fashion in Los Angeles is a big deal,” said John Blank, economic adviser to the California Fashion Association, a trade group. Premium denim “requires water. It is all about that processing. It is the repeated washing to get the premium look. This is what people pay for.”

Southern California produces 75% of the high-end denim in the U.S. that is sold worldwide, said Blank. The Los Angeles area, home to companies like American Apparel US:APP, generates $18 billion of revenue from local fashion manufacturers, and premium denim accounts for 8% to 10% of that total. The area employs about 200,000 people, making it the largest U.S. fashion manufacturing hub, said Blank.

Blue Creations of California Inc., which does garment washing and dyeing for upscale brands such as Helmut Lang and Frame Denim (which is sold at retailers including Nordstrom Inc. JWN, -3.07% ), plans to buy a second “ozone machine” in the next year. The ozone machine uses ozone gas to create that stonewashed and bleached look without using water, said Oscar Quintero, who handles sales and marketing at the company located 15 miles south of L.A.

The machine works by converting oxygen to ozone gas, according to Apparel Magazine. Jeans are then dampened, exposed to the ozone and rinsed. The ozone is reconverted to ordinary oxygen before being released into the environment.

“ Premium denim “requires water. It is all about that processing. It is the repeated washing to get the premium look. This is what people pay for.” John Blank, The California Fashion Association ”

Since it bought its first ozone machine in 2011, Blue Creations has cut its water usage by as much as 50%, reducing its monthly water bill by half to about $1,300, Quintero told MarketWatch.

“The drought is definitely having an impact on design and on the manufacturing process of garments,” he said.

Blue Creations, with 2014 sales of $3.5 million, received a $20,000 subsidy to cover the cost of the $65,000 machine from West Basin Municipal Water District, the local utility. Some of Blue Creations’ customers are aware of the issue and have pushed for it to use the ozone machine to cut water usage. Frame Denim now requires Blue Creations to use the ozone machine in most of its styles, Quintero said.

Using the ozone machine only adds up to $1 more in cost per item to its customers, Quintero said.

Don’t wash your jeans

Major denim brands are also working to cut water use, now that water conservation is a global priority. San Francisco-based Levi Strauss & Co., which makes most of its products overseas, is also striving to get the same look and feel while reducing water use, said Michael Kobori, Levi’s VP of Sustainability, in an interview.

Levi, with companywide sales of nearly $5 billion including its Dockers brand, is using ozone machines to replace the bleach traditionally used to lighten denim. It is also reducing the number of times it washes jeans. The company has saved more than a billion liters of water since 2011 with its Levi’s Water Less campaign and collection. By 2020, the company plans to have 80% of Levi’s brand products made using the Water Less process, up from about 25% currently.

Traditionally, about 34 liters of water are used in the cutting, sewing and finishing process to make a pair of Levi’s signature 501 jeans, the company said. Nearly 3,800 liters of water are used throughout the lifetime of a pair of Levi’s 501. A study found cotton cultivation represents 68% of that and consumer washing another 23%.

The California drought has compelled Levi to step up its save water campaign in the San Francisco Bay Area, promoting the idea that jeans only need washing after 10 wears--the average American consumer washes after two wears.

Levi CEO Chip Bergh last year famously urged people to stop washing their jeans, saying he hadn’t washed his one-year-old jeans at the time. You can air dry and spot clean instead, he said.

In another drought impact, California’s Pima cotton crop acreage is expected to decline for a fourth straight year to 110,000 acres, down from over 250,000 acres five years ago, according to a USDA forecast provided to MarketWatch by trade group Cotton Inc.

The decline is noteworthy because California supplies more than 90% of the U.S. Pima cotton that is used in dress shirts and sheets, said Jon Devine, senior economist at Cotton Inc.

“This is going to affect the Pima prices,” he said.