Leather Demand Steady Despite Higher Prices
Larry Thomas -- Furniture Today, June 16, 2011
HIGH POINT - Despite rising prices and a sometimes unpredictable supply chain, leather suppliers at Showtime said demand for their goods remains strong as furniture manufacturers reposition leather upholstery as a premium product.
Leather suppliers at the fabric fair here last week said their prices were typically 10% to 40% higher than a year ago, but buyers weren't deterred by the higher costs. Instead, they saw it as an opportunity to essentially eliminate promotional price points for leather upholstery and boost margins.
"There's no reason to complain about it because (all suppliers) are in the same boat," said Sackett Wood, president of supplier Moore & Giles. "Everyone's raw materials costs keep going up."
Wood and other executives said hide prices will continue to rise for the foreseeable future because demand for leather used by the footwear and automotive industries is soaring while hide supplies worldwide are declining in the wake of reduced beef consumption.
And buyers of leather for footwear and automotive are willing to pay virtually any price for their hides because - unlike with upholstery - the leather accounts for a relatively small percentage of the product's cost, executives said.
"It doesn't matter if their Mercedes costs $1,000 more because of the (more expensive) leather. They know they can still sell it," said Rick Colford, president of Hulshof Leather USA, a unit of Royal Dutch Tanneries.
A year ago, entry-level grades of leather were selling for less than $2 per square foot. But at this month's Showtime, entry-level prices were at least $2 to $2.50 per square foot, and upper-end products topped $4 to $5 per square foot.
"The hide market seems to have leveled off, but it is so unpredictable," said Bo Stadler, national sales manager for Germany-based Heller-Leder. "The problem now is that tanneries can't fill orders quick enough."
Universal Leather is one of several suppliers that source goods from multiple tanneries, and President Ken Kochekian is convinced that business model better insulates suppliers from shipping issues.
"We have goods from 10 tanneries in five countries," he said. "We think we're more diversified than anybody out there."
A similar strategy allows Moore & Giles, which also gets leather from several tanneries, to stay attuned to the latest fashion trends and react quickly as they change, according to Wood.
"It doesn't change our approach at all," he said of the recent pricing fluctuations. "We still emphasize research and development ... and try to follow the lead of readyto- wear, footwear and handbags."
Executives said Showtime buyers were especially interested in leathers that deliver a more sophisticated, elegant look. That meant more matte finishes and less of the glossy, waxy look that often is found on promotionally priced sofas.
Plus, exhibitors reported continuing interest in soft colors such as teal and terra cotta, as well as weathered finishes similar to those on some case goods.
"It's easier for a manufacturer to add new colors instead of new models," said Juan Diego Casaretto, managing director of Zenda Leather, which operates a tannery in Uruguay. "We're seeing more people who want to do that."
However, the increased interest in fresh looks hasn't diminished the demand for traditional leather upholstery colors, executives said.
"We have 47 colors, but the big sellers are still brown, black and white," said Kurt Schweizer, president of Wipelli USA.
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