Doing an about-face on China

Mossel Bay, SA – It’s vital for the ostrich industry to find new markets.

There are, as with all industries, very specific challenges for the ostrich industry. An important aspect is the changing  purchasing patterns of customers that is more focused on experiences than to buy stuff. A holiday on an exotic island is more alluring than an ostrich handbag especially if you can purchase a holiday package for €600 on an exotic island in the Pacific than buying a branded  ostrich leather  handbag  for  €2000+. That’s what the luxury industry has to contend with in recent times. 

 

The US Western boot market previously purchased 80-90 000 ostrich skins per year. That has dropped to around 35- 40 000 skins per year. Mexico, as a separate market, has grown, but the combined market is still probably less. Western boots and general footwear are about 40% of total ostrich leather consumption – but it was 40% of 250 000 annual skin production 5-7 years ago compared today with 40% of 180 000 annual skin production.

 

China is the market where we hope to have a complete about-turn from an ostrich product exporter to local consumption market. It’s the market we’re really hope to grow in the medium to long term. They have manufacturers who know how to work with ostrich leather, and they recently order more fashion colours than other markets. They’ve also got to the point where they understand that they have to pay a higher price for better quality ostrich leather. At the moment, the ostrich leather they import is mostly produced for product export to Japan and the rest of the Orient.

 

A major obstacle for local consumption of ostrich leather products in China is an import duty of 14% on the leather itself as well as 17% VAT. The ostrich industry is in discussion with DTI to assist with scrapping of at least the 14% import duty.

All BRICS countries are potential markets. We export to Brazil, Russia and India   from time to time, it is however not sustainable business at this stage due to high import duties. Recently India stopped the importation of South African ostrich leather. No reason was given for this decision.

 

Korea, Mexico, China – are all emerging markets which are starting to demand better quality, but they can’t always afford the premium grades.

 

One of the challenges with ostrich leather is that you can’t radically change the look. You have to preserve the natural look, if not you eliminate its unique differentiation from other leather. We offer around 40 finishes – customers look at anything new we offer, but they purchase the known finishes, especially the saddle finish which is natural looking full aniline leather.

There is consistent demand for leg skins, but because it is the most exposed part of the bird, there is very little grade 1 leg skins. We however have to find ways of exploiting more value from the leg skin.    

The last 2 years there is, from Europe, an increased demand for crust leather rather than finished leather; as it allows European customers to respond quickly to ever changing demands from fashion houses.

 

Currently South Africa produces 180 000 birds a year, while other countries produce another 75 000. There are definitely alternative sources – and Iran is a concern, with about 25 000 birds per annum. China and Vietnam both have ostrich flocks which results in very low price competition. Unfortunately customers use these prices to bargain with the South African industry, but the message is low price low quality and some are now realizing that there is a definite difference in quality. The biggest problem is that the large volume of low quality leather from these countries and the product that is made from that does have a negative impact on the image of ostrich leather in general.  

There is a constant push from Europe for better quality ostrich leather despite the volatility in demand. It is a very fine line for the industry to push farmers for better quality but consistency in demand is lacking. Maybe in future there will be fewer ostriches, but they will all be of higher quality and supply/ demand will be in balance. 

 

My observation is that the ratio of higher quality/lower quality leather in the ostrich industry is better than in the case of crocodile leather. The market is now flooded with lower quality crocodile leather and the crocodile producers do not have the benefit of their own marketing and processing facilities as in the case of the ostrich industry. This will have an impact on how many farmers will survive the current market condition. 

The ostrich industry had the same experience following deregulation and production dropped from 450 000 plus birds per annum to the current 180 000. 

Exotic leather in general is experiencing slow demand and it is not clear to what extend it is being replaced by non-exotic leather. It is however a fact that the recent decision making around exotic leather changed and at present the reason for this change is not clear. – [+27 (0)44 606 4500, fkriek@mosstrich.co.za]