Raw Materials & Luxury: All you need to know about tanneries being snapped up by luxury brands

FNA | 04 December 2013

Italian and French luxury brand acquisitions of tanneries are not a new phenomenon. Along with soaring raw materials prices and a
finite number of quality hides and skins there has been an explosion in demand for high-value leather goods. Some of the worlds
largest luxury brands have snapped up tanners to secure supply and maintain an artisan tradition. Martin Ricker reviews the recent
trend.

Les Tanneries Roux - now part of LVMH

In the past three or four years a number of high-end luxury brands such as Gucci, LVMH and Hermes, have acquired a number of
small to medium niche tanners to ensure that the leather that goes into their valuable end products has a secure supply and a
consistent quality that meets their brand values and the aspirations of their customers.

The luxury brands are boosting their vertical integration by owning the production chain from the raw material through to the end
retailer. The brands are very cagey about their ownership of tanneries and those tanners that ILM contacted did not give out
specific information and referred me directly to the brand owners PR departments. The luxury brands like to create an air of
mystery and mystique forming part of their brand appeal. Although luxury brands owning tanners and other key elements of their
supply-chain is not new, recent increases in the cost of raw materials, especially in calf, fine sheep, goat and exotic species, has led
a clamber to secure leather supply.

I first recall talking about the Italian global fashion super brand, Gucci upgrading the Italian tannery they owned, Caravel Pelli
Pregiate, located in Castellfranco near the tanning cluster of Santa Croce Sull Arno in Tuscany, some ten years ago. Even back
then Gucci put their stamp on the plant by ordering a number of pastel green coloured polypropylene drums with yellow and red
paintwork from drum makers, Italprogetti, to brighten up the wet-end.

Today, Caravel Pelli Pregiate process exotic leathers such as crocodile for Kering (formerly known as PPR), the parent group of
Gucci and other well know luxury brands in the group that use leather such as Bottega Veneta, Saint Laurent, Alexander McQueen
and Sergio Rossi. They also own sports brands Puma and Tretorn.

In 2001, when Caravel was acquired by the Gucci Group (as it was then) it was the largest reptile skin tannery in the world. At the
time leather goods accounted for around 30% of the groups total revenues.

For brands like Louis Vuitton, Gucci, Prada, Hermes and others, their core business stems from the use of leather and although,
today, modern consumers buy the brand and not necessarily the material, leather is still at the core of many of these famous names.
Raw material supply
Since the world financial crash took place in 2008-09 when demand slumped across the world and raw material prices also took a
tumble, prices of raw materials have continued to soar, reaching record levels with the now famous $100 a hide (US Native
Heifers) barrier being broken last year. In particular, prices of premium selections such as exotics, Spanish entrefino and French
calf, have also risen sharply over the same period driven by demand from the luxury sector.

Soaring raw material prices, especially for premium selections coupled with lower overall slaughter numbers, have led to a higher
demand. In addition, consumer demand for luxury leather goods all over the world, from the BRIC nations, particularly China, has
led tanners to battle it out for the higher quality materials such as box calf, soft nappa, nubuck and full aniline for use on leather
goods and high-end footwear.

Reptile skins such as snake (python), crocodile and alligator have all seen a huge consumer demand in recent years with crocodile
skin handbags costing upwards of $35,000 a piece that only the super rich can afford. The aspirational desire for designer leather
products from a name associated with luxury has even led queues around the block at some stores, particularly in Paris and the
larger urban cities of China.

Luxury and leather timeline

The recent acceleration by the luxury brands into buying tanners started in October 2011 when the largest luxury group in the
world, LVMH, took over the Heng Long tannery in Singapore owned by the Koh family. Heng Long are renowned tanners of
crocodilian leather and began trading in the 1950s.

LVMH paid 92 million to jointly own and control the business taking a 76.5% stake. Heng Long process around 280,000 skins
annually.

Not content with buying Heng Long, LVMH were back on the hunt for further tanning operations when in May 2012 they
announced that they had brought the French calf leather tanner, Les Tanneries Roux.

The current CEO, Jean-Claude Ricomard, sold roux for an unknown sum. Founded in 1803 in the south of France, the tannery
produces calfskin leather for footwear, belting and leather goods. Prior to the acquisition they were already supplying Louis
Vuitton, the worlds leading luxury leather brand, Celine, Dior, Loewe and Moynat.
Since 2009 LVMH have established their own Les Tanneries de la Comete and the company have publically committed themselves
to the sustainable procurement of hides and skins as well as in-house finishing techniques.

Hermes
Not content to be left out, in January 2013, French luxury brand, Hermes announced that they had acquired French calf leather
tanners, Tannerie dAnnonay located in Annonay in the French Rhone valley. The tannery is one four owned by Hermes through
their subsidiary HCP (Hermes Cuirs Precieux).

The acquisition is in line with the strategy of preservation and development of sources of supplies and the know-how related to
them, said Hermes at the time.

It is also understood that Hermes may also have a controlling stake in Tanneries Haas located 30 minutes south of the French city
of Strasbourg. Haas also specialise in producing French calfskin leather for leather goods, footwear, garment and saddlery. The
tannery was founded in 1842 and was believed to be of particular interest to a luxury brand like Hermes because of Haass leather
quality, artisan know-how and craftsmanship which adds value to their leathers which can be packaged up under the Hermes brand
and sold to consumers as a high value artisan product.

Hermes is also reported to own a further tannery in France (Gordon Choisy - TCIM) and a reptile leather maker Roggwiller in
Louisiana, USA. The interestingly named Tanneries de Cuirs Indochine et de Madagascar were founded in Beaumont, France, in
1920. As the name suggests they specialise in exotic skins, mainly reptile.

Two months after the take over of Annonay by Hermes, the luxury group Kering announced that they had brought France Croco,
the exotic leather tanner based in the northern French region of Normandy. France Croco were founded in 1974 by Jacques
Lewkowicz and are now managed by his son Dan who remains CEO of the tannery. France Croco produce high-end crocodilian
skins and employ around 60 people.

Not content with buying one tannery this year, it was announced in May that Kering had also invested in a bankrupt tannery in
Serbia, lured by state incentives. Kering are investing 6 million in the bankrupt Ruma Fabrika Koze plant in Ruma northwest of
Belgrade and will receive 8,000 for each of 120 people they will employ according to a report by the Serbia Export Promotion
Agency (SIEPA). The statement said that the newly re-opened tannery would be called Luxury Tannery DOO.

Supply and demand

As long as demand in the global economy for luxury goods continues to exist then leather will remain a key material for the global
groups that dominate the market. As raw materials become scarcer and the quality diminishes further then we may see more
tanneries being bought up by the luxury fashion houses.

Tags:
#leather
#manufacturing
#material
#snake
#luxury
#crocodile/alligator

<< Prev Post

Next Post >>