Italian Leather Industry Finds Saving Grace in Upholstery
August 2, 2000
Briarcliff, Manor, N.Y. (USA) -After two difficult years, the Italian tanning sector is looking forward with greater confidence. According to Italy's UNIC (National Union for the Tanning Industry), tanners feel that there are concrete possibilities for recovery. This is especially true of the upholstery sector, which now constitutes 25 percent of Italy's upholstery leather production and is the fastest growing sector in the industry.
Italian leathers have found export opportunities in America and the Far East, and are usurping furniture markets in Europe once held by the prestigious German producers, forcing the German companies to turn toward the more specialized upper end markets of luxury contract automotive, airline and cruise ships. ''We have two marked advantages over these producers,'' claimed export manager Loris Panarotto of Arzignano-based Zini. ''One is that our producers are concentrated in just three areas of the country, offering economies of proximity to different specializations. The other is that our production costs are lower in terms of environmental and labor issues.''
The opportunities for Italy's leather converters (all rawhide in Italy is imported) have some of the one-time monarchs of the shoe industry hopeful that upholstery leather will help fill the void left by the drop in leather consumption in their traditional domains - clothing, shoes, handbags and luggage - which has seen mass migration toward lightweight synthetics and ''sports'' fibers since 1997.
But as the world's demand for leather clothing and shoes dropped off, the demand for leather seating rose dramatically, beginning with luxury markets and followed by demand for leather in every range, from automobiles and airline seats to sofas and chairs. Most experts agree that while this demand in Europe, which currently accounts for about 60 percent of the market for Italian-tanned leather, may be leveling off, the North American market is gaining momentum.
In fact, sources say that the American demand for leather furnishings has increased by as much as 50 percent in the last two years in every range of the marketplace, and right now represents more than 20 percent of the dollar volume in the American home furnishings industry. This opens up gigantic possibilities for Italian leather producers, especially considering the dollar's strength compared with the lire. Many tanneries that traditionally sold only domestically or to European markets are now planning to open new export areas.
On the other hand, this increasing demand for leather furnishings is driving up the prices of raw materials. At the same time, Italy's current oversupply due to the steep declines in the footwear, clothing and handbag industries has forced Italian leather prices down. The resulting squeezed profit margin has been slowing the recovery of Italy's leather industry and keeping sights short.
''The current demand is strong and most tanneries are working overtime,'' said Simon Croucher of Futura Leathers, one of some 250 tanneries in the Arzignano region. ''But demand is pushing up the prices of raw material which has seen an increase of over 30 percent since September 1999. We are nearing the slow period for furniture manufacturers - April/May - which might mean an easing of prices, but in the meantime it is difficult for tanneries to place long term contracts.''
The tanneries are working at their full capacity to produce upholstery leather, agreed Fulvia Bacchi, director of external relations for UNIC, but ''we have arrived at the apex of our upholstery production in Italy,'' she said, adding that UNIC does not expect any more tanneries to jump on the wagon. In fact, many Italian tanneries are just not ready to invest so much, especially in the technology necessary to start the production of upholstery leather, she said. Most of Italy's tanners would prefer to wait for a turnaround in the shoe and handbag industries rather than make the commitment to upholstery leather. But for those that did make the commitment, specialty production will be the dividing line between success and failure, predicted Bacchi. As competition in the upholstery marketplace continues to rise, companies will have to differentiate themselves. But Italy's tanneries seem confident that the fashion sense they have become renowned for, will give them an edge in upholstery leather as well as help them make a comeback on the runways and roadways. Leather's appeal seems to be its association with affluence, success and style.
''Many of our tanneries have tried to find new niches,'' she said. ''That's the secret, to find a niche, a specialization in the market.''
Italian leathers have found export opportunities in America and the Far East, and are usurping furniture markets in Europe once held by the prestigious German producers, forcing the German companies to turn toward the more specialized upper end markets of luxury contract automotive, airline and cruise ships. ''We have two marked advantages over these producers,'' claimed export manager Loris Panarotto of Arzignano-based Zini. ''One is that our producers are concentrated in just three areas of the country, offering economies of proximity to different specializations. The other is that our production costs are lower in terms of environmental and labor issues.''
The opportunities for Italy's leather converters (all rawhide in Italy is imported) have some of the one-time monarchs of the shoe industry hopeful that upholstery leather will help fill the void left by the drop in leather consumption in their traditional domains - clothing, shoes, handbags and luggage - which has seen mass migration toward lightweight synthetics and ''sports'' fibers since 1997.
But as the world's demand for leather clothing and shoes dropped off, the demand for leather seating rose dramatically, beginning with luxury markets and followed by demand for leather in every range, from automobiles and airline seats to sofas and chairs. Most experts agree that while this demand in Europe, which currently accounts for about 60 percent of the market for Italian-tanned leather, may be leveling off, the North American market is gaining momentum.
...the increasing demand for leather furnishings is driving up the prices of raw materials.
At the same time, Italy's current oversupply due to the steep declines in the footwear, clothing
and handbag industries has forced Italian leather prices down. The resulting squeezed profit
margin has been slowing the recovery of Italy's leather industry and keeping sights short.
At the same time, Italy's current oversupply due to the steep declines in the footwear, clothing
and handbag industries has forced Italian leather prices down. The resulting squeezed profit
margin has been slowing the recovery of Italy's leather industry and keeping sights short.
In fact, sources say that the American demand for leather furnishings has increased by as much as 50 percent in the last two years in every range of the marketplace, and right now represents more than 20 percent of the dollar volume in the American home furnishings industry. This opens up gigantic possibilities for Italian leather producers, especially considering the dollar's strength compared with the lire. Many tanneries that traditionally sold only domestically or to European markets are now planning to open new export areas.
On the other hand, this increasing demand for leather furnishings is driving up the prices of raw materials. At the same time, Italy's current oversupply due to the steep declines in the footwear, clothing and handbag industries has forced Italian leather prices down. The resulting squeezed profit margin has been slowing the recovery of Italy's leather industry and keeping sights short.
''The current demand is strong and most tanneries are working overtime,'' said Simon Croucher of Futura Leathers, one of some 250 tanneries in the Arzignano region. ''But demand is pushing up the prices of raw material which has seen an increase of over 30 percent since September 1999. We are nearing the slow period for furniture manufacturers - April/May - which might mean an easing of prices, but in the meantime it is difficult for tanneries to place long term contracts.''
The tanneries are working at their full capacity to produce upholstery leather, agreed Fulvia Bacchi, director of external relations for UNIC, but ''we have arrived at the apex of our upholstery production in Italy,'' she said, adding that UNIC does not expect any more tanneries to jump on the wagon. In fact, many Italian tanneries are just not ready to invest so much, especially in the technology necessary to start the production of upholstery leather, she said. Most of Italy's tanners would prefer to wait for a turnaround in the shoe and handbag industries rather than make the commitment to upholstery leather. But for those that did make the commitment, specialty production will be the dividing line between success and failure, predicted Bacchi. As competition in the upholstery marketplace continues to rise, companies will have to differentiate themselves. But Italy's tanneries seem confident that the fashion sense they have become renowned for, will give them an edge in upholstery leather as well as help them make a comeback on the runways and roadways. Leather's appeal seems to be its association with affluence, success and style.
''Many of our tanneries have tried to find new niches,'' she said. ''That's the secret, to find a niche, a specialization in the market.''
