Non-Asian leather suppliers struggle to hold prices
By Joan Gunin -- Furniture Today, January 12, 2004
HIGH POINT — HIGH POINT — Leather sources in the United States, Italy and South America are struggling to keep prices steady until fall, but a stronger euro and increased competition from China are making that difficult.
Leather suppliers showing at Showtime here last week were hoping China's focus on volume business will leave a niche for their own better-priced, fashion-driven specialty goods.
Meanwhile, the strong euro — hovering at $1.26 last week and forecast to head even higher — is bedeviling Italian producers by making their products more expensive outside Europe.
"The Italian tanneries are struggling to maintain price," said Max Lapegna, president of Lapegna & Semeraro, a supplier to Italian Leather USA, which introduced its cut-and-sew program here. "Fortunately, the price of raw materials is stable. Many tanneries buy raw materials with dollars — but many buy with euros too."
A price increase could alienate customers, Lapegna said. The pressure is on suppliers now to set pricing that will remain unchanged through the 2004 market cycles.
At Prodital Italia, a high-end line, owner Franco Arena said the company buys raw materials in euros and has seen margins shrink because of the weakening dollar.
"We try to make the best price we can to work with customers, and although our margins are very small, we are building for the future," said Arena.
Price hasn't been an issue for Anthem Leather because it sources most of its hides from Brazil and Argentina, according to company President Bob Wilson.
"We're positioning ourselves as an alternative to China," Wilson said. "Pricing — particularly out of Brazil — is very competitive as compared to China."
South American resources such as Anthem, Indigo, Oclas and others look to new products, new looks and shorter lead times, as well as better logistics, shorter transport, lower freight and less time zone issues, to stay ahead of their Asian competition.
Mike Tennis, national sales manager for North America at Oclas Leather, said the company is "prepared to hold our prices for the calendar year." Oclas is among those working to "quell the rush to China and to promote South American resources," he said. Among the 18 new leathers it introduced at Showtime, featured values included full-grain silicone-coated hides selling at $1.95 a foot.
"We can't beat China on labor," Tennis said, "but our lead time is shorter and our pricing comparable."
Trio Leather, which deals in U.S.-grown hides, keeps labor costs in check with its Mexican tannery, said Bud Caywood, the company's newly appointed national sales and marketing director.
"We can do things others cannot do as well, such as sophisticated waxy pull-ups," Caywood said, "but it still boils down to being competitive price-wise. Likewise, China can do things we cannot do only because we can't hit that price point."
Indigo, the residential upholstery division of Buenos Aires-based Sadesa, has been able to lure some cut-and-sew programs out of China and into Argentina, according to Eduardo Andres, the division's director of sales and marketing. Argentina can be "close" to China on price, he said.
Leather Services of America, meanwhile, has pared its selections, gone deep into color and applied decorative finishes to base grade leathers to create higher perceived value — not higher pricing.
"It's a look at a (good) price," said Joelle Young, president of LSA. "We offer some extremely competitive pricing out of Brazil."
Similarly, Arpel Leather is eyeing more colors at a better price, said Eklain England, director of sales and marketing. "We're priced as sharp as we could be. The big thing we have to push is style, stocking and service."
DeNovo Leathers also is "trying to stay as firm as we can (on pricing), but if (costs) go much higher, we're going to have to do something," said Tonya Skinner, president.
"We are all trying to compete with China and South America," she said.
DeNovo is stocking 150 colors at its Hickory warehouse. "Doing business in the contract/hospitality area allows us to bring more to the residential side," Skinner said.
Americraft Leather has no plans to adjust its pricing, barring market fluctuation. "We are holding now," said Luke Reed, sales director.
Tiger Imports is working with its partners in Italy. "There's been a bit of an upswing on Italy's prices," said Frank Toledano, president, "but we'll review all of our pricing before High Point market."
Italian-based Nicopel offered 12 mid- to upper-priced leathers, while Duma/Gruppo Mastrotto is seeking a U.S. sales agent.
As for fresh color, Moore & Giles highlighted such festive hues as coral, grape and robin's egg blue. "Everyone is receptive to this little taste of color borrowed from ready-to-wear," said B.J. Kavanaugh Jr.
