I have been hearing a lot about price points recently. At the annual meeting of the International Council of Tanners, Andy Seaward, the chief leather specifier for Clarks International, told delegates that to meet their price points they would pay up to $2.60 for men’s weight leather per sq ft, $2.20 for women’s and $1.95 for children’s.
Above that price, there must be something special about the leather to enable them to sell on since 40% of the cost of the shoe was in the leather. In Europe, Clarks find that price points peak at Euro99 for men’s shoes and Euro79 for women’s (they only sell children’s shoes in the UK). If men’s shoes are priced at Euro100 or more, the volume drops.
While business is said to be flourishing in south east Asia, much of the leather buying in the region is done on price. European and American tanners simply cannot compete at these basic prices. UNIC told us that: ‘Those companies which produce medium quality volume leathers are finding it very difficult to compete with manufacturers in the Far East.’
There was a definite buzz on the first couple of days of the Asia Pacific Leather Fair in Hong Kong. The obvious inference was that the fair benefited from the crossover of parts one and two, allowing visitors to take in both shows and for the exhibitors of one to visit the other.
Of course, it could just be that business confidence is increasing in the region. It could also be a coincidence that one company who were more than happy with the number of new enquiries they were receiving were Porvair who specialise in upgrading leather.
There is still a hardy band of quality tanners who continue to exhibit due to their conviction that the wealth in the developed coastal region of China will increase.
In anticipation of the APLF, traders had hiked their prices by 5% which provided a definite obstacle to trading. What with high raw materials prices and overcapacity in the tanning industry generally, it is extremely difficult for tanners in countries with a high cost of living to find any margin for profit.
Among the talking points at the Hong Kong fair was the shock news that the owner of World Leather had died very suddenly just before the start of the fair. Raymond Wilson was very well known in the industry and had family associations going back long before he founded his own publishing company in the mid 1980s.
Another topic for conversation was the fact that Prime have sold their share in the Chinese and Taiwanese joint venture tanneries to their partners Pou Chen. There has been the suggestion that this came after a period of heavy loss making by the leather manufacturing side.
One piece of good news was the announcement by Irving Tanning that they had reached an agreement with their lenders which is a major step towards emerging from Chapter 11. Irving have been operating an aggressive cost-cutting and quality improvement programme and have returned to profitability.
There has been much conjecture in the industry as to the fate of the Poletto Group which has been experiencing a financial crisis. However, the consensus of opinion is that after a restructuring of the company and their debts, they will continue to operate.
In the meantime, both Ge.ma.ta and Mostardini have re-established their independence. Foresto Mostardini told me that his company had sufficient surplus land and commercial buildings to either sell or lease which would enable his company to remain financially viable. The company’s managers are putting together a rescue package that Mostardini hopes will satisfy both the banks and the workforce.
