Leather - from overcapacity to oversupply

Fifty years ago, there were too many tanneries. Overcapacity was the major underlying problem of the leather industry, and it was a major reason why tanneries had low margins. The situation got worse as new tanneries were built in emerging areas, faster than old ones closed in the developed world.

Hide and skin supply, linked to agriculture, was only growing at one per cent per annum so there was also a concern that raw material was running out to supply leather to a global population growing at twice that rate. This supply shortage was largely solved by the steady reduction of consumption of leather in footwear as sneakers swapped into textiles and plastics.

What was scarce is scarce no more

Today the scenario could hardly be more different. Tannery closures around the world mean that we rarely hear of overcapacity problems. Indeed, we are short of capacity to handle raw hides in some countries such as the UK where closures have gone too far. Low margins remain for many but are more a result of lack of innovation and proper marketing. This has lead to intense competition with leather alternates that have dramatically improved.

World population growth is projected to fall below one percent this year and continue a steady decline to almost zero by the end of the century. On the other hand, hide supply will remain growing at one per cent per annum for the time being, pulled by increasing demand for meat and dairy products as more and more people are pulled from poverty into the middle classes.

So, the difficulty we are seeing today in marketing some types of leather is hardly surprising, and it has not been helped by the fact that tanners have resolutely refused over the last fifteen years to do any serious marketing either individually or more importantly as a global group. Even today complaining and squabbling remains the dominant feature, with big sums spent getting together to do it. But point number one is that if you want to keep making leather you had better realise that marketing is a vital part of your toolkit. Minimum expenditure of 3% of your turnover, including your Leather Naturally fees. Raise that to 10% if you want to sell directly to consumers. An occasional waft at social media or the odd hang tag is not going to do it.   

Industry strategy

That apart, does it matter if the market does not want as much leather as tanners can make? Will unwanted hides and skins really create an environmental issue in the long term? My guess is that the gelatine, cosmetic and food industry will eventually fit most of them into their supply chains. Good uses for protein material.

And what about the vacant tanneries? They could decide to close. Old ones lacking proper waste water treatment should be encouraged to do so anyway, as they are the ones damaging the image of leather.

Equally why should tanneries only process leather? Why not help with hybrid materials, or with the new recombinant collagen structures. The complaint the leather industry has with these materials is about unfair competition. It is about synthetic producers who are “free riders” on the leather industry’s recognition success with consumers and all sorts of materials that get called “leather” falsely to confuse the consumers. Simply we object to dishonesty; but not to competition, or to modern technology.

So perhaps now is the time to embrace it and bring it into our tanneries to be part of making it better for all. We have a lot to contribute to some of these materials and while being a by product industry currently limits growth this thinking could allow for long term industry growth.
Dr Mike Redwood
Source:http://internationalleathermaker.com/news/fullstory.php/aid/6395/_Leather_-_from_overcapacity_to_oversupply.html

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