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LBizMarketIntelligence_020925

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Leatherbiz Market Intelligence executive summary: • • • •

• • •

Chinese consumers are currently playing a decisive role for the leather pipeline Car sales there are developing very positively Leather plays a more important role in car interiors in China than in Europe If efforts to convince consumers to buy leather have yielded little or no result, the industry should concentrate on finished product manufacturers Plastic is rightly criticised Other products that do not use fossil-based raw materials are not usable at scale This should leave the door wide open for a renaissance for leather

MARKET INTELLIGENCE

A

fter the summer holiday, we are now transitioning into anticipation mode. In Europe in particular, it has become almost normal to expect major events to happen immediately after the holidays. But they never actually happen. The scenario for the next two weeks initially envisages the return of the leather industry in the Mediterranean countries next week. Added to this is the All China Leather Exhibition in Shanghai (September 3-5). It seems that fewer and fewer international exhibitors and visitors are attending this event. In terms of the international mood, there will be few impressions and reports to draw on, and the fair will become more of a national Chinese event. Only a tour of the halls that are not reserved for overseas exhibitors will probably give an impression of what to make of the exhibition. It is conceivable that a lot of exhibition space could be occupied by exhibitors who are not directly related to the leather pipeline. Added to this, of course, is the question exhibitors attending only so as not to give a negative impression on Chinese industry. Let us not forget that the Chinese government is currently doing everything it can to stimulate local consumption, and negative perceptions of exhibitions that are essentially related to private consumption would hardly be beneficial. Entrepreneurs are well aware of what they should and should not do to preserve good will. In two weeks’ time, we will be wiser. If we are lucky, things will turn out differently than expected and Chinese industry and the Chinese economy will once again be the catalyst for a trend reversal. Admittedly, it does not look like that at the moment, but we

should not be completely negative. Why? First of all, many statistical figures in China are not exclusively negative when it comes to the leather sector as a whole. Car sales are developing very positively, and we know that leather, although not essential, plays a greater role there than in Europe, for example. In addition, the Chinese stock market has developed very positively in recent months, and this has also been noted by private investors. The number of share portfolios is increasing again. For many years, only investments in real estate were attractive to investors in China because property prices had been rising steadily until the crash. After that, people were very cautious. As a result, there are now extremely high savings balances in China, and people are looking for investment opportunities. At the moment, the stock market is enjoying a certain degree of attractiveness again. A better stock market does not mean selling more leather products. However, Chinese consumers have always been very mooddriven in their consumption behaviour, more so than anywhere else. People are only willing to consume more again if there is more confidence in future prosperity. If the Chinese government can overcome this hurdle, the conditions would be relatively good. So here, too, we find ourselves in a state of anticipation, because the Chinese government’s further decisions and plans in October will certainly play an important role. We remain of the opinion that Chinese consumers are currently playing a decisive role for the leather pipeline. In general, there have been no particularly significant events in the last two weeks, which was ultimately to be expected. Of course, there have been a number of political decisions and events, but these have not had

a direct impact on our sector. The best news was the US president’s decision to suspend the increased tariffs on China for another 90 days. Otherwise, expectations remain unchanged. The coming weeks will see the usual signs of production picking up again and decisions being made about which new orders can be planned for the coming months. Decisions and information about this will probably not be available until mid-October. Like it or not, leather remains a product that is very much driven by consumption, but it is not among most people’s basic needs. This means that sentiment plays a decisive role, not only in China but also in other regions. In Europe, the situation for additional and nonessential consumption is definitely not positive, for many reasons. If the overall economic environment is currently insufficient to trigger a noticeable and effective improvement in demand from consumers, then once again the only option is to convince manufacturers to increase their use of leather in finished products. Unfortunately, there has been no real change in the fundamentals here either. Of course, we have written many times about the success of some brands, but unfortunately there are few signs of this success spreading. The properties and value of leather should speak for themselves, but other factors still dominate the decision-making of potential users of leather in their products. It remains completely inexplicable to us why it is not possible to agree on a common strategy in the leather industry. There is a need to move away from defending the material, sometimes seeming even to apologise for it. We should not always be discussing leather substitutes (and perhaps even fearing them). We should communicate openly that leather should substitute plastic. Plastic is rightly criticised; other products that do not use fossil-based raw materials are not really usable at scale, and this should leave the door wide open for a renaissance for leather. However, if we focus our efforts in the wrong direction and continue to devote more energy to certifications and audits that bring no increase in the use of leather, it will probably become even more difficult to fight the general trend. The huge obstacle remains the fragmentation of the global leather industry and the fact that, despite all the lip service, it is not possible to agree on a central strategy with a focus on the consumer. Unfortunately, all efforts in recent years to successfully position the value, production, sustainability


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