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NOR T H A ME RIC A N F UR AUC T IONS

NAFA NEWS

January 2012

President's Message

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Three percent profit sharing dividend paid to consignors

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Beijing Fair opens the 2012 fur season

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NAFA campaign receives outstanding media coverage

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China's NAFA Cup winners announced in Beijing New NAFA marketing agent for China

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NAFA Furs dazzle at Korean design competition

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Economic Update

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New look at NAFA auction house 65 Skyway Ave. Toronto, ON  M9W 6C7  Canada  | tel: +1.416.675.9320  |  fax: +1.416.675.6865  |  www.nafa.ca


P r esiden t's message Dear Rancher, The February auction is right around the corner and NAFA has been working around the clock, preparing for this important event which signals the beginning of the North American auction season. The year has begun in spectacular fashion, with a record distribution of $6.7 million in profit sharing dividends to our loyal shippers and a promise of an historic 3.5 percent guaranteed dividend for the 2012 season, also for our loyal shippers. More on this unprecedented distribution on page 2 of this newsletter. Our aggressive buyer solicitation program has been in full swing since the close of last year’s May auction and we are expecting another strong buyer turnout. We have also been keeping tabs on market conditions in key fur markets and monitoring international economic news. A full economic report is included in this newsletter (page 7). As indicated in NAFA’s November market report, retail sales were sluggish at the beginning of the fall season and cold weather has been elusive so far this year. Despite the warmer than usual weather, we are still optimistic. The recent auctions in Scandinavia were very positive, signaling the potential for another strong selling season ahead. NAFA is very proud that this year we will be offering in excess of six million mink – approximately 3.3 million in February and 2.8 million in May. This is a substantial 20 percent increase over last year. This is a result of increased market share because of the competitively high averages we obtain for your mink and our increased profit sharing dividend for loyal shippers, which makes our selling costs the lowest possible. If you are planning to attend the auction, please book your trip as soon as possible as hotel space fills up quickly. Our popular and well-attended Lobsterfest takes place on Thursday February 16th and there are plenty of entertainment options in Toronto on subsequent evenings if you are planning to attend. Extensive renovations have taken place at NAFA’s headquarters over the course of the year – a fresh, contemporary look has been given to the front lobby, existing office space, cafeteria and auction room. The upscale, modern look reflects the fact that NAFA is the market leader in selling the highest quality furs in the world. I look forward to seeing you at the February auction and look forward to another positive selling season.

Sincerely,

Michael Mengar, President & CEO

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THREE PERCENT PROFIT SHARING DIVIDEND PAID TO CONSIGNORS As we announced in June 2011, the Board of North American Fur Auctions has authorized a three percent loyalty-based profit sharing dividend. This dividend has now been mailed out and is being well received by the ranching community.

“The profit sharing dividend comes at the right time for me,” said Gerard Trimberger, a rancher from Wisconsin. “Not only do I get more money for my mink but I also received this huge dividend in cash.” NAFA takes great pride in being able to provide our producer owners with this annual profit sharing dividend. We are the only auction company that pays all of our dividends out in an immediate cash distribution. We have now distributed an historic $20 million in profit sharing dividends since NAFA became completely producer owned and we look forward to being able to generate even more value for our producer owners in the years to come. We are also increasing our guaranteed loyalty-based profit sharing dividend to a minimum of 3.5 percent for the 2012 auction season, up from the previously announced figure of 3 percent. This guaranteed dividend is in addition to NAFA’s normal volume rebates, making the cost of selling this year with NAFA at an all-time low. “NAFA is extremely proud that this profit sharing dividend has been distributed to our loyal ranchers and looks forward to another large distribution next year,” said Michael Mengar, President &CEO of NAFA.

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Beijing fair opens the 2012 fur season

The 38th annual China Fur & Leather Products Fair was held in Beijing January 10-13, 2012. This was the third year that this major international fur fair was held in the massive China National Convention Center. Just over 300 exhibitors filled the main exhibition halls. Although the official attendance figures show a slight drop in visitor registration, most of the major Chinese exhibitors and many of the foreign companies represented stated that their business was as good or even slightly better than last year. The history of this fair began in Guangzhou as an export fair focusing on commercial and low-end fur carpets and accessories. After the move to Beijing several years ago, the quality level of exhibitors began to improve remarkably. The 2012 fair featured more fashion garments than ever before and attracted a number of European and American wholesalers looking for better commercial fashion garments and accessories. Fur accessories played a major role at this fair, as did small fashion pieces produced mainly in wild furs. It is important to note that the primary fur at the Beijing Fair is not mink but a wide variety of wild furs. The amount of wild fur exhibited at the Beijing Fair shows the growing importance of many species, particularly muskrat, beaver, coyote, red fox and raccoon within fashion industry, this being outside of the traditional fur retailer. Mink was to be found in the collections of some of the major domestic manufacturers and, increasingly, within the offerings of foreign exhibitors. The participation in the fair by Greek manufacturers has been steadily increasing in the last two years. There is believed to be an opportunity here to become a supplier to the top end of China retail. Overall, the 38th Beijing Fur & Leather Fair was a success. According to many of the foreign buyers, the mild winter has not negatively impacted the sale of fur accessories. These fashion items continue to be sought after by all levels of consumers. Whilst the economic issues of the world and a warm winter are affecting the sales of mink and other luxury fur garments in Europe and North America, the young and trendy looks of vests, boleros and other small pieces along with accessories have actually seen an increase in sales. The Northern Lights collection and marketing campaign have contributed considerably to this trend. The number of Chinese domestic wholesalers and retailers at the fair clearly demonstrated that China, whilst feeling some effects from the global economic problems, as well as experiencing a relatively mild winter, still shows no sign of slowing down in 2012 in the fur sector. Mink sales have regained momentum following the November slowdown and wild fur sales are experiencing an upward movement.


NAFA CAMPAIGN RECEIVES OUTSTANDING MEDIA COVERAGE Media is a powerful tool in any country. Whether print, traditional radio and television programming or new electronic device applications, reaching the retail consumer through media is a must for success. The marketing campaign at NAFA for 2011 had a very strong focus on media exposure both through advertising and editorial coverage. The advertising campaigns in key markets were a combination of both co-op advertising with strategic partners and generic advertising for brand recognition. According to Diane Benedetti, NAFA’s Senior Vice President for Marketing, “To us garnering editorial coverage is even more important than traditional advertising. This is third party endorsement and coming from a fashion editor at a high-end fashion magazine or the producer of a Fashion TV program, it is an invaluable commendation. What NAFA has achieved in this arena in 2011 is nothing short of extraordinary.” The Black NAFA Limited Edition Collection launch alone received over 50 full pages of dedicated editorial in Russia’s top 12 fashion publications. Korea ended the year with Black NAFA editorials in both fashion magazines and the very prestigious membership magazines of major department stores. The media coverage in China reached literally tens of millions through the extended fashion TV coverage and editorials in international fashion magazines and high end domestic publications. Although 2012 has just begun, NAFA’s marketing department continues to pursue new and exciting ways to ensure that the NAFA brand will be the most sought after fur label in the world.

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CHINA’S NAFA CUP WINNERS ANNOUNCED IN BEIJING Grand prizewinners in China’s national student design competition, which is sponsored by NAFA and known as the “NAFA Cup” were announced on January 10, 2012 in a pre-show presentation at the Beijing Fur & Leather gala show. The twenty finalists from around the country traveled to Beijing to make their final presentation to the panel of international judges the preceding day. The panel included fashion industry representatives in design, manufacturing and marketing as well as fashion media. All judges agreed that the selection was very difficult this year as the design and craftsmanship of so many of the garments exceeded expectations. In the end, the final three were chosen and the results sealed.

The level of excitement intensified as all twenty designs were presented to the VIP guests, media and fur trade in attendance at the gala night festivities. The audience showed their appreciation for the remarkable designs with enthusiastic applause as models paraded the designs down the catwalk. NAFA’s Sr. VP for Marketing, Diane Benedetti, presented each of the winners with a trophy, official certificate and an oversized air ticket to represent their award of an all expense paid trip to Toronto, Canada, to take part in a special session of Studio NAFA in June.

New NAFA Marketing Agent for China China is a major focus for NAFA’s buyer solicitation program because of its magnitude and on-going love affair with North American fur. NAFA currently has three marketing agents in China and is now adding a fourth to make continued progress in this important market and to give buyers the best service possible. Ms. Si Yang Wang officially joined NAFA in November after the completion of her bachelor degree at Beijing’s Wuzi University. Ms. Wang has previous experience with NAFA through her work on Canadian visa applications for the 2010 and 2011 auction seasons. She has been an integral part in this season’s work as well. Based in Beijing, Ms. Wang works closely with Lumin Yao, Marketing Director for China, along with Dragon Hu and Gianni Jiang. All of NAFA’s agents are available to assist buyers with visa applications and general marketing information to drive demand for your exclusive furs.

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NAFA Furs Dazzle at Korean Design Competition

The Joong Ang Design Contest, Korea’s most prestigious student design competition, was staged on November 23rd, 2011, at the trendy Patio Nine complex in Seoul. Over 250 guests, including renowned fashion designers, journalists and students, gathered to celebrate the finals of this annual event. NAFA was once again proud to be the sponsor of the fur category. This year, six finalists were chosen from the hundreds of entries. Their designs clearly reflected the current trends of rich, warm colors in chic lifestyle garments with a touch of glamour. NAFA Northern wild furs were used in abundance to capture the spirit of youth. The first and second prizewinners will receive an all expenses paid trip to Toronto to participate in a special Studio NAFA workshop.

NAFA'S auction schedule February 16 – 22, 2012 May 29 – June 4, 2012

(on show Feb. 11) (on show May 24)

6 5 S k y wa y A ve . T oronto , O N , M 9 W 6 C 7  canada Page 6


Economic Update China

China’s economic growth has been very good for several years and the forecast for this year is equally optimistic. The consensus is that 2012 growth in China will be right in line with the country’s long-term growth potential of about nine percent per year. This is a growth rate that western economies can only dream about. In the latter half of 2011, China did experience an inflation problem as inflation peaked in July at 6.5 percent but has now declined to approximately 4.2 percent.

Korea

South Korea’s economy expanded more than the central bank initially estimated in the third quarter as exports of cars and metal products increased. Gross domestic product grew 0.8 percent over the three months through September from the second quarter, compared with an October estimate of 0.7 percent. However, the worldwide economic outlook has moved from a sense of general uncertainty to one of greater pessimism as reflected in the ongoing stock market turmoil, poor U.S. economic news, and the unresolved European sovereign debt crisis. Under such difficult circumstances, South Korea’s economy, Asia’s 4th largest economy, is expected to grow 3.8 percent in 2012, down from the 4.5 percent projection made in May, 2011.

Canada

Experts are predicting that Canada will experience growth in 2012 – the consensus of major forecasting houses see the Canadian economy continuing to grow at about two percent next year, within a range of 1.5 percent on the low side and 2.5 percent on the high. The Bank of Canada is almost in the middle at 1.9 percent. This means that jobs will be created but fewer than needed – salaries are not expected to increase and are not expected to keep up to inflation and may even fall below. The news however isn’t entirely pessimistic as forecasters do expect growth in the coming year; it may be slower than what people want, but it will mean that the economy will likely experience some modest expansion.

U.S

It is expected that the U.S will probably avoid a recession this year. Consumers are spending, albeit modestly. Forecasters now believe the U.S. economy will grow between 1.5 and 2 percent. The debt crisis in Europe is one of the biggest threats to the U.S. economy at this point and the long term outlook hinges on how the U.S. handles its sovereign-debt problems.

NAFA NEWS is published by

North American Fur Auctions 65 Skyway Avenue, Toronto, ON, M9W 6C7, Canada www.nafa.ca

Toronto, ON Tel : 1.416.675.9320 Toll Free : 1.800.745.0693 Fax : 1.416.675.6865

Stoughton, WI Tel : 1.608.205.9200 Toll Free : 1.800.872.3877 Fax : 1.608.205.9210


NAFA News 2012-01  

NAFA News 2012-01

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