Ostrich: Its future as an exotic leather

27 October 2009

All the talk about the current economic situation tends to be a good reason to succumb to chronic depression and the more you talk about it the worse it gets. Recently some smart guy said: “Never allow a crisis to go to waste”, which challenges us to think positively about our industry and, in particular, ostrich leather.

In contemplating the current market, we certainly aren't in a uniquely bad situation, but there are some days when you're forced to wonder whether it could get any worse. Several practical thoughts go through your mind if clients are pushed to purchase and they are just not up to it.

One of the questions that you ask yourself is whether the customers will change their purchasing patterns to such an extent that exotic leather goods and footwear will no longer form part of their shopping list in the near future. Is it a far-fetched idea? My personal opinion is that there is no chance that exotic leather generally will become 'obsolete', but there is good evidence in the industry that one of the other exotic leathers may.

There are several circumstances that can cause an exotic leather to fall out of mainstream manufacturing. The most important one is if a species is classified as endangered, as in the case of sea turtles, where all the species are endangered. No trade in turtle products is allowed. Fortunately that is not the case with ostrich. In fact of all the exotics, ostrich leather has the fewest constraints relating to importing and exporting across the globe.

There are also species that lost their position as mainstream exotic leathers because of commercial activities by industry players. A good example is teju lizard. Here market players manipulated the price to such a level that it became uncompetitive compared with other exotics, and once manufacturers stopped buying, prices collapsed to such an extent that for the past 15 years this product has not been able to recover to its former position. There are many warehouses across Europe and the USA where you can find lizard stock untouched in its original packaging.

Another aspect that contributes to the above situation is price volatility. If there is no stable price in the market, manufacturers lose their confidence in the product, as they do not know whether the price they are paying is high or low – and there will always be rumours of lower prices. A good example here is python, which sees price movements of 60% from low to high and back to low in one season.

Ostrich leather, and in particular South African ostrich leather, cannot afford a situation where its future is in doubt because of the actions by industry role players. With one channel marketing, it was relatively easy to manage ostrich leather in the market, with Klein Karoo being the custodian of the industry. Today that function is fulfilled by industry organizations like NOPSA and SAOBC of which role-players can become voluntary members.

Although all of us who make and market ostrich leather compete with each other both to buy raw material and to sell finished leather, we have a joint responsibility to ensure a stable future for the industry. Achieving long-term stability is not an easy task as the industry is totally integrated, with the ostrich farmers also being the owners of the processing and marketing organisations.

In current economic conditions there is a lot of pressure to generate a stable income for farmers. This puts substantial pressure on the margins and cash flow of tanneries, which in turn results in selling becoming somewhat unorthodox in some instances. This is where the thin line between long-term stability and disaster is drawn.

The future of the industry will be ensured if the role-players jointly and independently focus on the following aspects:

Industry quality standards:
In selling leather, role-players should ensure that they adhere to the basic industry grading norm for the respective grades. As an example, they should not sell a grade 1 skin as a grade 2 so as to meet a specific price point. They should rather change the price and tell the customer he is getting a grade 1 at a grade 2 price.

The integrity of the grading norm should be protected at all costs. Customers should know what the cutting yield is for a specific grade, irrespective of which South African tannery from which he buys his leather.
Price stability:
As an industry we cannot 'fix' prices, as it is against the law, but individual role-players should try to stick to their price structures, whether they are at the high, medium or lower end of the general price range. There is a place for everybody in the price spread that the market is prepared to pay.
Positioning of ostrich leather in the market:
The industry must have a clear picture of where it wants ostrich leather to be positioned in relation to other exotic leathers.

Good progress was made this past year with generic promotion of ostrich leather. There is, however, a need for further fine-tuning to maximise available funds, but this will come with time as we progress with this project. The reality is that this process must be actively managed and not left to chance.
Relationship with Fashion Brands
The importance of fashion brands is that they create a pull effect and industry efforts are focused to achieve this for ostrich leather. The individual tanneries need to capitalise on this effort by industry structures like the SAOBC.

Tanneries should, in their respective marketing strategies, complement industry activities by working with fashion brands and of course the other way around. It is therefore important that contact with fashion brands should be absolutely professional and that we should build an image of ostrich leather as a niche product. We also need to talk to the decision makers within the fashion organisations and not a shop assistant or the person in the warehouse taking the deliveries.

It is a fact that South African tanneries and traders approach these organisations with a myriad of prices, not knowing the quality demands these brands require and misjudging the impact on their available raw material and processing capabilities. Once a price is agreed upon, which will normally be lower, the tannery or trader cannot supply the desired quality the brands specified and they lose confidence in ostrich leather.

There have been enough examples of this situation over the last few years, which resulted in one premium fashion house not using ostrich leather for five years. When they wanted the look of ostrich leather, they used a printed version to manufacture handbags!

To conclude, we as ostrich industry role-players have a joint responsibility to ensure long-term sustainability and in particular ostrich leather which must be promoted as a premium material. Times like we are currently experiencing unfortunately force short-term decisions which may result in us losing our grip, to the detriment of our future.

Frik Kriek
Tel: +27 (0)44 606 4500
Email: fkriek@mosstrich.co.za

Frik Kriek is marketing director of South Cape Ostrich Tanning. Immediately after writing this article, he set off on a four-day motorcycle tour to refresh his soul.

Source: S&V African Leather Magazine