The sacrificial cow

Nike report that 2002 gross margins 'may be negatively affected' if tanners increase leather prices as a result of the problems encountered through foot and mouth disease and the consequent pressure on raw materials. They said a 10% increase in the cost of leather would result in a 50% increase in the production of a pair of shoes. So, why issue this statement now? Is it a shot across the bows of tanners - in effect saying if you increase prices, we will be forced to look at alternative upper materials? They are obviously looking for ways in which to dampen down the tanner's justifiable need to increase leather prices by threatening to stop buying if prices are increased. It is ironic they complain at a time when compared with May last year hide prices in the US are, on average, nearly 50% higher. Another question to ask is why should a 10% increase in leather prices lead to a 50% increase in finished shoes? Surely, the increasing prices in crude oil will affect the cost of producing synthetic soles, uppers or even processing chemicals more than any increase in hide prices. There is, of course, the recent report highlighting that Nike, and other producers, are using cheap labour conditions in third-world countries to reduce the cost of production. Perhaps they are being forced to pay more reasonable wages and, hence, are looking for ways to cut total costs. Are Nike just making the industry the sacrificial cow in the name of profits? Another report that shows the frightening lack of understanding about farming diseases was highlighted in USA Today newspaper, recently. In it: * 46% of those people surveyed said they thought cows with foot and mouth can infect humans * 19% said they thought that foot and mouth diseases and mad cow disease were the same thing and * 27% thought there was a direct link between the two Of course, it is not only from outside the industry that problems come. There have been reports that note some delays in Europe with respect to the expedient taking up of documents on previously purchased shipments. The claim season is, seemingly, about to get into full swing - again. Just what the leather industry does not need at the moment.