16 February 2024

Leatherbiz Market Intelligence - The ‘squeezed’ middle feels the pain

We published a new Market Intelligence report on February 13. With the markets quiet for the new year holiday in China and other Asian countries, plus the lead-up to Lineapelle in Europe, the report this time looks at possible scenarios for the future of the leather pipeline. Report by Leatherbiz.

It expresses certainty that leather will continue to be produced for many years to come and that there is no reason to fear the end for the industry. But it warns: “It is more a question of which types of leather can be produced, in which price segment and where”.

The report points to three major areas for leather production. First, the luxury sector, which produces luxury goods from expensive raw materials using high-quality, expensive production processes. “The added value is immense and therefore there are no major problems in passing on the increased production costs,” it says.

The next sector is the one in which the European leather industry has been very successful for many years, the middle-to-higher-price segment. Leather from this category is neither a mass product, nor a niche product, but good-quality material for making good-quality finished products that hold appeal for many buyers. It has been exported successfully to many countries around the world.

Lastly, there is the large-scale mass production for global consumer goods, which, Market Intelligence insists, can only be produced with low-price raw material input and low production costs.

The greatest decline and the strongest price pressure can be seen in the middle segment.

Customers expect the quality from producers in this segment to be higher from their counterparts in the mass market. Making this differentiation, however, generates higher production costs and the use of more expensive raw material. “This has led to extraordinary difficulties and promises little success either at the moment or in the near future,” the report concludes.

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