Global giant19 May 2021
Brazil is the land of carnival, football and – some may be surprised to discover – a well-structured leather industry. The country hosts 244 tanning factories, 2,800 leather and footwear component plants, and 120 machinery and equipment manufacturers. Together, the sector provides around 30,000 jobs and brings in about $2bn to the economy each year. Sabrina Auler talks to some of the industry’s key stakeholders about the state of Brazil’s leather manufacturing landscape today.
The largest producer of commercial cattle in the world, it is little wonder that Brazil has used this to its advantage to become a major producer and exporter of leather. Indeed, the country exports around 80% of the leather it produces; currently, Brazil supplies leather to around 80 countries, including China, Italy and the US.
But it’s not just the nation’s abundant supply of raw materials that makes Brazil one of the most important players in the global leather industry. The country is strategic in the way it manages its leather clusters, relying on well-established associations and institutions to strengthen and advocate for each other. This ensures that Brazilian leather maintains its reputation in the international market as a high-quality product and demand remains robust.
Standing up for sustainability
Given the size and significance of Brazil’s leather industry, environmental issues are at the top of the agenda, as Jose Fernando Bello, executive president of the Centre for the Brazilian Tanning Industry (CICB), explains. For this reason, the country established the Brazilian Leather Certification of Sustainability (CSCB). “The CSCB was built by the entire leather industry and is audited by an independent certification body. This certification promotes and recognises best practices in tanneries all over the country in terms of economic results, reduction of environmental damage, and relations with employees and communities,” Bello says.
“There are more than 140 indicators to be worked on by companies included in the CSCB programme, such as the reduction of water and energy consumption; product quality control; documentation of alignment with legislation and raw material suppliers; restricted substances; and staff health and safety,” he continues.
The CSCB certification also has an environmental dimension: Principle II of the document deals with the traceability of livestock. “Suppliers must achieve several criteria related to farming to be able to |supply cattle to slaughterhouses,” Bello explains.
A global concern, in 2020 the deforestation of the Amazon reached the largest recorded area in the past 12 years. According to Brazil’s National Institute for Space Research, around 11,000km2 of rainforest was destroyed that year, an increase of 9.5% from 2019. Agribusiness and the breeding of livestock are widely regarded as being to blame for this damage, and the CICB has sought to make consumers and lobbyists aware that the leather industry itself does not contribute to deforestation.
“The CICB and its member tanneries are totally against deforestation, land grabbing and burning. The associates buy raw material of known origin, from suppliers that indicate the source of the slaughtered animals,” Bello claims. “All wet-blue tanneries have documents from the federal, state or municipal inspection service. Tanneries in Brazil are required to have these records as well as the slaughterhouse’s reports, for supplying the food industry with gelatine,” he continues.
Bello points out that Brazil is the only country in the world that has these records. “Again, it is important to emphasise that tanneries do not buy any hides of unknown origin, as they must declare that the product does not come from indigenous land, quilombola territories [communities originally established by escaped slaves], or an area embargoed by the Brazilian Institute for the Environment or other or state environmental agencies,” he explains, adding that 70% of the country’s cattle are raised outside the Amazon rainforest.
The organisation and strength of Brazil’s leather industry is known around the world, and it has even served as a guide for other countries to follow. Brazil was a pioneer in its implementation of a leather law, a piece of legislation that supports the establishment of local tanneries.
Law No. 4,888, also known as the Leather Law, was enacted in 1965. It prohibits the use of the term ‘leather’ for products that are not produced exclusively using animal skin. Such regulation has been used as a guide for countries such as Italy and Portugal, which decided to take a similar approach to protect their leather industries in more recent years.
“In Brazil, several efforts have been made to make people aware of the importance of the correct use of the word ‘leather’,” Bello says. “It is vital to say it’s a material made from animal skin only. The CICB has been working intensively on this topic, promoting leather in the mass media, industry and commerce.”
As Bello explains, with the organisation’s own resources, in addition to its partnerships with unions and associates, the CICB launched the Leather Law Project in 2013. This initiative focused on reforming how brands communicate their leather and synthetic products to consumers.
“A 24-hour online monitoring initiative has been established as part of the Leather Law Project. Since the beginning of this programme, we have sent more than 50,000 notifications for corrections of e-commerce ads, news articles and comments,” he says. “Also, there have been more than 30,000 face-to-face visits to shops to raise awareness of the law and the value of leather products. The project is committed to promoting adjustments within retail and industry giants operating in the country as well.”
Any violation of the Leather Law is considered a crime of unfair competition. Offenders may be penalised with detention from three months to one year, or a fine. “Again, the purpose of the Leather Law is to prevent the misuse of the word ‘leather’ – a material that, in addition to differentiating itself by its aesthetic and durability, also stands out for its thorough manufacturing process,” Bello says.
Resilience in a crisis
Brazil’s leather sector, like many industries around the world, was impacted by the outbreak of Covid-19 and the resultant economic crisis. Sales of leather and leather goods fell as soon as the pandemic hit, and only started to recover in the final quarter of 2020.
Tanneries were classified as an essential activity during the pandemic in Brazil because of their purpose of working with a byproduct from the meat industry. The government issued decrees to support companies as an incentive to maintain jobs and authorised special credit programmes. Despite the measures taken, tanneries had to use some creativity to juggle heavy workloads and survive the difficulties brought about by Covid-19.
An efficient solution was to boost tanneries’ presence in the digital world. Many companies opened e-commerce platforms, improved their social media profiles and discovered new channels to communicate with stakeholders and clients.
This was the case for Curtume Natur, a tannery in the city of Portao. Focused on finished leather, it has a capacity to produce 500,000ft2 of leather per month. As Magali Grandi, the company’s general director, explains, the tannery had to close for three weeks in March 2020 due to the financial impact of the pandemic. “We had to think of a very fast and restricted plan to reduce costs and focus on how to achieve the customer’s needs with this new type of business relationship, without travelling and face-to-face contact,” she recalls.
“It seemed quite impossible to find an alternative as we were talking about leather, a material that people want to touch. Then, after preparing an attractive digital catalogue, we felt that designers and customers liked it and we started to discover new ways of maintaining contact in the digital world”, she says. “We focused on developments and didn’t stop to follow the trend calendar. We have just released our second leather collection during the pandemic and have seen growth compared with figures from our first campaign. We all learnt lessons and we believe we will get used to this new way of doing business.”
At first, Covid-19 had a significant impact on Grupo Minuano, a company also located in southern Brazil that produces upholstery and automotive leather as well as hair-on hides. The business, which was established in the 1970s, reorganised its commercial strategies and then, since mid-2020, recovered its production volumes, noticing a peak in demand in the decoration sector, most likely due to the fact that people were spending more time at home because of the restrictions imposed by the pandemic.
The group’s director, Mateus Leao Enzweiler, is confident that the tannery is making the most of this business opportunity by developing new colours and articles to meet different market demands. “We are following a special trend in the market, which is asking for more cleaning performance on upholstery leathers,” he explains.
Enzweiler believes 2021 is going to be better than 2020 for the Brazilian tanning industry. “Grupo Minuano has been dealing with strong demand at the moment. We actually expect this to continue at least until December. Our hope is that this pandemic ends as quickly as possible, which would be good for the whole sector and naturally for society,” he says.
Nova Kaeru, a tannery located in the state of Rio de Janeiro that specialises in the skin of the pirarucu (a giant fish found in the Amazon river), admits that Covid-19 had an inevitable impact on sales. Despite the disruption to normal business, the company used this time to seek out new opportunities. Paulo Costa, Nova Kaeru’s director, believes that the pandemic has given tanneries the chance to innovate. “The slowdown imposed on us by Covid restrictions has been taken as an opportunity to focus on new ecological products, which we plan to bring to the market as soon as global demand picks up again,” he says.
According to the Brazilian Footwear Industries Association (Abicalcados), the pandemic affected shoe manufacturers just as much as other segments, with a 20% fall in production in the first half of 2020. However, a gradual recovery started in the second half of the year and, by January 2021, the industry had already seen its highest export figures since April 2020.
Haroldo Ferreira, executive president of Abicalcados, says that this quick recovery demonstrates the resilience of the Brazilian manufacturing industry. “We are ready to resume business operations this year, especially given new sales strategies and an emphasis on the digital market,” he explains. Ferreira’s positivity for the future of his own company reflects his outlook on the industry as a whole, which he hopes will grow by 14% in 2021.
Andre Nodari, president of the Brazilian Association of Machinery and Equipment for the Footwear and Leather Industries shares this optimism. “Even though Covid-19 heavily impacted production and commercialisation at first, exports are now recovering at a surprising rate despite the high freight prices caused by the pandemic,” he says. “But there have been issues surrounding the international visits conducted by technicians, as most countries have travel restrictions or entrance requirements in place at the moment. We also, of course, don’t want to expose our personnel, so business trips have had to be substantially reduced.”
Nodari notes that companies that are more adapted to the digital age have found it easier to adjust to the new normal. “The capacity to serve customers through the internet and with remote access… minimises the need for business trips, resulting in both lower costs and machine uptime,” he says.
Although the Brazilian raw materials industry has seen a 23% drop in exports and a decline of around 20% in production, the sector found its way to keep trading through the pandemic.
Gerson Luis Berwanger, president of the Brazilian Association of Companies of Components for Leather, Footwear and Manufactured Goods, explains that digital platforms were used to overcome the challenges brought about by Covid-19. “We converted our most important trade fair into a digital event and started to encourage components companies to challenge their own traditional sales structure,” he explains.
“To facilitate this must-needed new approach, we developed training, advice and courses on digital sales… Converting the Brazilian components industry into a digital format has brought positive results, including an increase in business with international buyers and a lot of content and information for the market,” Berwanger says.
“Clearly, it has positioned Brazilian companies to be more flexible and able to quickly incorporate the market changes required by the pandemic,” he adds.
Berwanger is confident that industrial production and sales will slowly get back to normal in 2021. “It will still be a year of recovery with some uncertainties along the way, but with the rollout of vaccines, there is a light at the end of the tunnel and this is very encouraging for the Brazilian industrial sector.”
Brazil has shown its ability to cultivate a reputable leather industry, which seems to be robust and able to adapt to unforeseen circumstances. The sector counts on the support of competent associations that assume the responsibility of providing the optimum conditions for future growth of this global giant.
Amount of Brazilian leather destined for export markets.