Markets for Skins & Leather - Agrifutures Australia · Markets for Skins & Leather from the Goat, Emu, Ostrich, Crocodile & Camel Industries Publication No. 02/142 Project No DAQ-258A

Markets for Skins & Leather from the Goat, Emu, Ostrich, Crocodile & Camel Industries A report for the Rural Industries Research and Development Corporation by Kylie MacNamara Peter Nicholas Dennis Murphy Elysa Riedel Brendan Goulding Chris Horsburgh Tom Whiting Bronwyn Warfield January 2003 RIRDC Publication No 02/142 RIRDC Project No DAQ-258A

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© 2003 Rural Industries Research and Development Corporation. All rights reserved. ISBN 0 642 58541 5 ISSN 1440-6845 Markets for Skins & Leather from the Goat, Emu, Ostrich, Crocodile & Camel Industries Publication No. 02/142 Project No DAQ-258A The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report. This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone 02 6272 3186. Researcher contact details Bronwyn Warfield Rural Market Development Qld Department of Primary Industries 203 Tor Street PO Box 102 TOOWOOMBA Qld 4350 Phone: 07 4688 1251 Fax: 07 1688 1808 Email: [email protected]

In submitting this report, the researcher has agreed to RIRDC publishing the material in its edited form. RIRDC contact details Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6272 4539 Fax: 02 6272 5877 E-mail: [email protected]. Website: http: //www.rirdc.gov.au Published in January 2003 Printed on environmentally friendly paper by Union Offset Printing

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Foreword The project “Identification of market opportunities for skin products of emerging animal industries” has sought to provide Australian producers and tanneries with a clear understanding of the opportunities and market characteristics for skin and leather products from goat, emu, ostrich, crocodile and camel. The project was undertaken in partnership with industry and guided by a committee that included representatives from each of the five industries. As many of the skins and leathers from these industries were being dumped or sold at very low prices when the project was initiated in 1999, a need was identified to better understand the markets for them and determine how to improve the competitiveness of these industries. The report provides insight into the market drivers, market characteristics, and the issues that need to be addressed to increase industry viability. This market knowledge will enable businesses in these industries to better meet customer needs and identify the factors critical to successful market development. A number of case studies are presented which document feedback from along the supply chain and provide insight into what producers and tanneries need to do to improve their quality and therefore market success. The report includes an overview of the characteristics and supply capabilities for each of the skins, and of the world market in which these industries operate. Detailed in-market research was also conducted in Italy, France, Japan, China and the United States to determine the market requirements and gain feedback on Australian skins and leather. The report also includes a list of recommendations for each skin outlining the future research and market development directions that need to be taken to capitalise on the market findings. This project was funded by QDPI and from RIRDC Core Funds, which are provided by the Federal Government for program RIRDC’s program area of New Animal Products. This report, a new addition to RIRDC’s diverse range of more than 800 research publications, forms part of its New Animal Products R&D program, which aims to accelerate the development of viable new animal industries. Most RIRDC publications are available for viewing, downloading or purchasing online through its website: • downloads at www.rirdc.gov.au/reports/Index.htm

• purchases at www.rirdc.gov.au/eshop

Simon Hearn Managing Director Rural Industries Research and Development Corporation

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Acknowledgements

The authors thank the Skins Advisory Committee for its guidance and assistance throughout the course of this project. The committee members included Graham Packer, Packer Leather (goats); Jean Leonard, Tropical Ostrich Producers Association (Nenlake brand); Catherine Money, CSIRO Leather Institute; Peter Seidel, Ship of The Desert (camel); Barry Ryan, Ausgoat; John and Lillian Lever, Koorana Crocodile Farm; and John Dingle (UQ Gatton – Emu). Committee members gave considerable time to provide information for the benefit of the whole industry and to review the various milestone reports and the final report. Several case studies, based on overseas visits conducted by committee members, have also been included. The resulting insights will provide new and existing exporters with tips for undertaking business in export markets, as well as highlighting lessons that the committee members learnt from their in-market research and trade visits.

We are grateful to Peter McInnes (RIRDC) for his valuable input and guidance, and also appreciate the assistance of the Italian Chamber of Commerce and Industry in Australia (ICCA) in helping to organise research itineraries. Special thanks to Terry English and Dennis Saint (Australian Ostrich Association), and Novag (emu) for providing samples for in-market research and information for the report. Thanks too to Phil Glatz (South Australian Research & Development Corporation), Steve Peucker (DPI), Arthur Pederick (EIFA), and James Power (NOVAG) for reviewing grading guidelines and providing general feedback. Special thanks also to the Royal National Association and Eventmark for allowing inclusion of the skins in the Wool Fashion Parade at the 2000 Brisbane Show and for promoting the skins. Finally we thank Cherbourg Abattoir for processing the goatskins that featured in the fashion parade.

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Contents

Foreword .......................................................................................................................... iii Acknowledgements .......................................................................................................... iv Executive Summary ......................................................................................................... ix

1. Introduction .....................................................................................................................1 1.1 Purpose......................................................................................................................1 1.2 Methodology ..............................................................................................................1

1.2.1 Market Selection Rationale .............................................................................3 1.2.2 Exchange Rates ..............................................................................................4

1.3 Limitations..................................................................................................................4 2. The Skin & Leather Industry ..........................................................................................5

2.1 Terminology ...............................................................................................................5 2.2 World Overview..........................................................................................................5 2.3 Australian Overview ...................................................................................................6 2.4 Export Markets...........................................................................................................6

2.4.1 China...............................................................................................................7 2.4.2 France .............................................................................................................7 2.4.3 Italy..................................................................................................................8 2.4.4 Japan...............................................................................................................8 2.4.5 United States...................................................................................................9

3. Goat ................................................................................................................................10 3.1 World Supply in Skins & Leather .............................................................................10 3.2 World Trade .............................................................................................................11

3.2.1 Raw Skins .....................................................................................................11 3.2.2 Semi-Processed & Finished Leather.............................................................13 3.2.3 Manufactured Product ...................................................................................13

3.3 Australian Goat Industry ..........................................................................................14 3.3.1 Industry Overview..........................................................................................14 3.3.2 Australian Trade............................................................................................14 3.3.3 Australian Supply Chain ................................................................................16 3.3.4 Production & Processing Issues....................................................................17

3.4 Case Study: RNA Fashion Parade ..........................................................................17 3.4.1 Tanning Issues..............................................................................................18 3.4.2 Design Issues................................................................................................18 3.4.3 Competitive Issues ........................................................................................18

3.5 Export Opportunities ................................................................................................19 3.5.1 China.............................................................................................................19

3.5.1.1 Market Potential ...............................................................................19 3.5.1.2 Market Segments & Product Positioning .........................................19 3.5.1.3 Product Characteristics & Price .......................................................20 3.5.1.4 Competitors......................................................................................21

3.5.2 Italy................................................................................................................21 3.5.2.1 Market Potential ...............................................................................21 3.5.2.2 Market Segments & Product Positioning .........................................23 3.5.2.3 Product Characteristics & Price .......................................................23 3.5.2.4 Competitors......................................................................................25

3.5.3 United States.................................................................................................25 3.5.3.1 Market Potential ...............................................................................25 3.5.3.2 Market Segments & Product Positioning .........................................27 3.5.3.3 Product Characteristics & Price .......................................................27 3.5.3.4 Competitors......................................................................................27

3.6 SWOT ......................................................................................................................28

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4. Emu ................................................................................................................................29 4.1 World Supply............................................................................................................29 4.2 World Trade .............................................................................................................29 4.3 Australian Emu Industry...........................................................................................30

4.3.1 Industry Overview..........................................................................................30 4.3.2 Australian Trade............................................................................................30 4.3.3 Australian Supply Chain ................................................................................32 4.3.4 Production & Processing Issues....................................................................33

4.4 Export Opportunities ................................................................................................36 4.4.1 China.............................................................................................................36


4.4.2 United states .................................................................................................37 4.4.2.1 Market Potential ...............................................................................37 4.4.2.2 Market Segments & Product Positioning .........................................38 4.4.2.3 Product Characteristics & Price .......................................................39 4.4.2.4 Competitors......................................................................................39

4.5 SWOT ......................................................................................................................40 5. Ostrich............................................................................................................................41

5.1 World Supply............................................................................................................41 5.2 World Trade .............................................................................................................41

5.2.1 Raw Skins .....................................................................................................42 5.2.2 Semi-Processed & Finished Leather.............................................................42 5.2.3 Manufactured Product ...................................................................................42

5.3 Australian Ostrich Industry.......................................................................................42 5.3.1 Industry Overview..........................................................................................42 5.3.2 Australian Trade............................................................................................43 5.3.3 Australian Supply Chain ................................................................................44 5.3.4 Production & Processing Issues....................................................................44

5.4 Case Studies............................................................................................................45 5.4.1 RNA Fashion Parade ....................................................................................45

5.4.1.1 Tanning issues.................................................................................46 5.4.1.2 Education and Awareness ...............................................................46 5.4.1.3 Manufacturing ..................................................................................46 5.4.1.4 Fashion Designers’ Feedback .........................................................46

5.4.2 Industry in-market visit - Japan .....................................................................47 5.4.2.1 Market Entry Preparation .................................................................47 5.4.2.2 Key Issues .......................................................................................48 5.4.2.3 Outcomes.........................................................................................48

5.5 Export Opportunities ................................................................................................48 5.5.1 Japan.............................................................................................................48



5.6 SWOT ......................................................................................................................54 6. Crocodile........................................................................................................................55

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6.1 World Supply............................................................................................................55 6.2 World Trade .............................................................................................................55

6.2.1 Raw Skins .....................................................................................................57 6.2.2 Manufactured Product ...................................................................................57 6.2.3 Semi-Processed & Finished Leather.............................................................58

6.3 Australian Crocodile Industry ...................................................................................58 6.3.1 Industry Overview..........................................................................................58 6.3.2 Australian Trade............................................................................................59 6.3.3 Australian Supply Chain ................................................................................60 6.3.4 Production and Processing Issues................................................................60

6.4 Case Study: RNA Fashion Parade ..........................................................................61 6.4.1 Tanning Issues..............................................................................................61 6.4.2 Education and Awareness.............................................................................61 6.4.3 Manufacturing................................................................................................61 6.4.4 Fashion Designers’ Feedback.......................................................................62

6.5 Export Opportunities ................................................................................................62 6.5.1 France ...........................................................................................................62


6.5.2 Italy................................................................................................................65 6.5.2.1 Market Potential ...............................................................................65 6.5.2.2 Market Segments & Product Positioning .........................................66 6.5.2.3 Product Characteristics & Price .......................................................67 6.5.2.4 Competitors......................................................................................69

6.5.3 Japan.............................................................................................................70 6.5.3.1 Market Potential ...............................................................................70 6.5.3.2 Market Segments & Product Positioning .........................................72 6.5.3.3 Product Characteristics & Price .......................................................72 6.5.3.4 Competitors......................................................................................72


6.6 SWOT ......................................................................................................................75 7. Camel .............................................................................................................................76

7.1 World Supply............................................................................................................76 7.2 World Trade .............................................................................................................77 7.3 Australian Camel Industry........................................................................................77

7.3.1 Industry Overview..........................................................................................77 7.3.2 Australian Trade............................................................................................78 7.3.3 Australian Supply Chain ................................................................................79 7.3.4 Production and Processing Issues................................................................79

7.4 Case Study: RNA Fashion Parade ..........................................................................80 7.4.1 Tanning issues ..............................................................................................80 7.4.2 Design Issues................................................................................................80 7.4.3 Fashion Designers’ Feedback.......................................................................80

7.5 Export Opportunities ................................................................................................81 7.5.1 Italy................................................................................................................81


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7.5.2 United States.................................................................................................82 7.5.2.1 Market Potential ...............................................................................82 7.5.2.2 Market Segments & Product Positioning .........................................83 7.5.2.3 Competitors......................................................................................83

7.6 SWOT ......................................................................................................................84 8. Recommendations ........................................................................................................85

8.1 Goat .........................................................................................................................85 8.2 Emu..........................................................................................................................85 8.3 Ostrich......................................................................................................................86 8.4 Crocodile..................................................................................................................87 8.5 Camel.......................................................................................................................88

References ............................................................................................................................89 Appendices

Appendix 1: Grain Leather Tanning Process ..................................................................92 Appendix 2: Skin and leather definitions .........................................................................93 Appendix 3: Italy’s imports of goatskins by top ten destinations for 2000 and 2001.......94 Appendix 4: United States Import and Export Data ........................................................96 Appendix 5: Market Access - US ..................................................................................101 Appendix 6: Skin Grading Systems...............................................................................104 Appendix 7: RNA Fashion Parade 2000 .......................................................................110 Appendix 8: Designs by Emanuela Pili .........................................................................112 Appendix 9: 2001 Leather Fashion Trends ...................................................................117 Appendix 10: Media List for RNA Fashion Parade 2000...............................................121 Appendix 11: RNA Fashion Parade 2000 Media Coverage..........................................122 Appendix 12: Crocodile and Alligator species...............................................................123

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Executive Summary

Skin and leather industries compete within a complex global market, where raw skins are mainly produced as by-products of the meat industry. As a result, their production is largely unresponsive to changes in demand for leather, and more dependent upon forces driving the meat market. Consequently, imbalances between supply and demand of hides and skins often result in considerable price fluctuations. This business environment creates real challenges in the marketing of skins and the effective management of commercial relationships throughout the value chain.

This report helps to provide Australian producers and tanneries with a greater understanding of the opportunities for skin and leather products from five emerging animal industries: goat, emu, ostrich, crocodile and camel. The report provides insight into market drivers and market characteristics, and into the issues that need to be addressed to increase industry viability. This market knowledge will enable businesses in these industries to better meet customer needs and identify the factors critical to successful market development. The report presents a number of case studies that document feedback from along the supply chain and provide insight into what producers and tanneries need to do to improve their quality and therefore their market success.

The commercial viability of these industries relies on the returns from a number of products. Skins and leather represent differing proportions of the total return for each animal, and these vary according to prevailing prices. While the returns from goatskins and camel hides may remain secondary to those from the meat of these animals, for crocodile and ostrich they assume far more importance. Nevertheless, the future success of each enterprise will rely on the effective use of all marketable products. While opportunities to sell into the domestic market do exist, these are unlikely to support a sufficient scale of operation or generate the required returns, and all the industries discussed in this report depend on the development of profitable export markets.

Five international markets were targeted for the purposes of this project: Japan, China, France, Italy, and the United States. These five countries were chosen for two primary reasons — high usage of the relevant skins as indicated from export and import data, and the potential to use skin/leather at various stages of the value chain. Subsequently, in-market research was conducted for each of these countries. This research helped to identify those markets that offer the greatest potential for each skin. The findings are summarised in the following table; although opportunities are likely to exist in other markets, these countries represent the most favourable focus for market development efforts according to industry feedback from overseas in 2001–2002.

Export market information by skin type China France Italy Japan USA

Goat ! ! ! Emu ! ! Ostrich ! ! Crocodile ! ! ! ! Camel ! !

Although these industries are all relatively new to Australia, for many of the products, mature global trading markets are already functioning. The ostrich industry in South Africa has a relatively long history, and the goatskin trade has existed for centuries. As comparative newcomers in these markets, with often significant cost disadvantages, and without the benefit of a well established tanning industry, Australian businesses will need to develop highly efficient and productive operations to compete successfully. Export success will depend not only on market development but also on internal industry development and the ability to build effective supply chains. The implementation of some form of quality assurance (QA) throughout the value chain would help to increase uniformity of

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product and also provide additional promotional advantages. Key findings for each skin type are summarised below.

GOAT — Goat leather is considered all-purpose leather and is manufactured into a wide range of end uses, particularly footwear uppers. Compared with the output of large international goatskin producers, goatskin production in Australia is quite low and is a by-product of meat production from feral and feral–boer crossbreeds.

Importers have preferences for particular goatskins produced from certain regions, due to the significant variations in grain pattern associated with the breed and with the age and liveweight of the goats at slaughter. Goatskins with a fine grain appearance have the highest market value and are used mainly for good quality footwear uppers. Due to their coarse grain Australian skins compete at the lower end of the international market for goatskins.

Despite the current quality shortcomings of Australia’s goatskins, opportunities for a range of products have been identified in Italy and China. In order to maximise these opportunities, it is recommended that the following issues be addressed:

• Further research needs to be conducted on the specific characteristics of goatskins from different goat breeds and improved tanning technologies.

• The high variability of Australian goatskins calls for a very intensive tanning process. A refined selection process at the point of slaughter might create opportunities for higher returns by ensuring consistency at a given level of quality.

• Australian skins are currently graded on a size-of-skin basis, which is not acceptable to the majority of Chinese leather markets. To further develop opportunities in China, there is a need to grade Australian goatskins according to an internationally recognised grading standard that evaluates grain and scarring. However, Australian exporters are advised to ensure that buyers are willing to pay a premium sufficient to cover the extra cost before implementing new systems.

• Many Italian firms overlook Australian suppliers due to geographical distance. To facilitate supply chain development into Italian markets and the establishment of commercial relationships may require a number of overseas market visits and the hosting of Italian trading partners during corresponding visits to Australia.

• The research has also identified a number of alternative opportunities for goatskins due to natural properties that make them suitable for a range of industrial applications. Tanning trials and further market development work will be required to capitalise on opportunities in this area.

EMU — Although there is currently limited demand for Australian emu leather in the international market, it has potential in the US and Chinese markets if improvements in the current tanning process are made. Qualitative market research conducted in these markets has indicated its suitability for the handbag and purse lining markets, as well as the footwear market for leg leathers. While the United States and China have a preference to use the leather for similar end products, there is a distinct difference in the format in which they prefer to receive it. The United States has a preference for finished leather as it has limited exotic skin tanneries, while the Chinese market has a preference for wet-blue.

Major competition in these markets will probably come from within China and the United States, as both these countries have domestic emu stocks. Despite this competition there are still opportunities for small niche markets in both the United States and China. In order to access these markets it is recommended that:

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• Australian tanneries enhance their tanning to ensure the leather is soft and supple. The current product is stiff and several importers in the Chinese market thought it lacked the appropriate tactile quality that they sought and was similar to paper to touch.

• Chinese in-market research recorded strong feedback suggesting that Australian emu leather lacks the preferred textural qualities associated with ratite leathers and should be embossed to create a raised quill pattern. However, Australian industry experts have expressed doubts over the commercial viability of such a process and Australian firms are recommended to conduct their own careful appraisals regarding the appropriateness of adopting this idea.

• Australian emu leather exporters should research ways in which to make the leather stronger. This will require investigation of chemical recipes and techniques used in the tanning process.

• Australian exporters should ensure the leather is available in a wide variety of colours in order to meet market demand.

• In order to enter the lucrative footwear and accessory markets, creative promotional and branding strategies should be employed. Currently emu lacks a strong product identity.

• Based on the significant market demand for ostrich leg leather, coupled with the significantly lower price for emu leg leather (a product which looks similar to ostrich leg leather), it is recommended that emu leg leather be promoted to the footwear market as a cheaper alternative.

OSTRICH — While some opportunities exist in Europe, the most important international markets for ostrich leather are Japan and the United States. In-market research conducted for this report indicates that there are significant opportunities to target these markets, particularly with reference to specific preferences for quill size and pattern. These two markets also have differing preferences for particular end products, with the United States predominantly a ‘masculine’ boot market and Japan a more ‘feminine’ market for handbags and other fashion accessories. Japanese opportunities mainly exist for finished leather and/or manufactured product, while the US market has more opportunities for raw and semi-processed skins. Entry into both markets (particularly Japan) will require careful attention to the selection of trading partners.

Australia’s major competition comes from South Africa. The South African ostrich industry concentrates on skin production, and its tanning technology and expertise enable it to compete effectively and efficiently in offshore markets. South Africa is already the dominant player in the global ostrich skins market, and according to industry sources is moving to become the world’s low-cost supplier of ostrich skins and leather (Fowlds 2002). Its aggressive marketing strategies have created fierce price competition in world markets. Nevertheless, opportunities do exist for Australian suppliers and the following recommendations are made:

• Branding is often a significant determinant of purchase decisions for exotic leather products, and Australian exporters may wish to consider developing branding strategies in collaboration with foreign partners. Evidence suggests there may be opportunities to add value by promoting Australia’s clean, green image, and positioning Australian ostrich as environmentally sound product. However, producers are advised to carry out research specific to their chosen market before adopting this tactic.

• Australian ostrich skin marketers should consider gift market segments. These markets appear well suited for exotic leather products.

• Firms interested in exporting to Japan will need to be well prepared in order to function effectively with respect to Japanese business culture, and are advised to seek assistance from public and/or private sector experts.

• The American market’s primary use for ostrich leather is in the western boot, where high quality products can command high premiums. Australian producers should ensure that US trading

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partners have access to distribution channels appropriate for their target market. This may also include developing an internet presence servicing the US market, either in-house, through alliance partners, or via a third-party.

• Australian exporters should plan to undertake formal market testing of products prior to full-scale release. This will need to be done in collaboration with trading partners and resellers, and Australian firms will need to demonstrate a commitment to making the relationship worthwhile for all parties.

• Branding is often a significant determinant of purchase decisions for exotic leather products, and Australian exporters may wish to consider developing branding strategies in collaboration or with the assistance of foreign partners.

• Regardless of what marketing strategies Australian firms employ, ostrich leather product is still subject to demand and supply volatility. Subsequently, world prices are highly unpredictable. These effects are probably most noticeable at low levels of value adding (raw skin), and arguably become less problematic as products move closer to end-product status. However all firms marketing ostrich product are advised to consider price volatility as a factor in strategic planning.

CROCODILE — There are clear opportunities for crocodile skins and leather in Europe, particularly France and Italy. In France, the market potential for large salted skins of saltwater crocodile (Crocodyllus porosus) is strong and there is constant demand for 1st grade skins. Market signals are very clear – the greatest challenge for Australian crocodile producers is to increase the volume of 1st grade skins to this market.

Italy is a strong and relatively stable market for large, classic crocodile skins and leather, and offers challenges and opportunities for both salted crocodile skins and finished leather. Given that all Australia’s 1st grade skins go to France (for supply to the fashion house Hermes), achieving viable returns in the Italian market will rely on identifying suitable entry points for 2nd and 3rd grade skins and leather at a price that is viable for Australian producers. Success in the Italian market will also depend greatly on the development of strong relationships with suitable trade partners.

In order to further develop the markets for saltwater crocodile skins in these two key export markets, the following issues should be considered:

• Production should focus on improving the grading performance of salted porosus skins. Potential developments in this area include the introduction of single pens to ‘grow out’ the crocodiles prior to slaughter and the introduction of quality assurance systems throughout the industry. The objectives of these measures would include preventing the physical damage and biological degradation of skins from farm to tannery.

• Collaboration amongst producers in the Australian industry should be fostered to build stronger supply relationships with Italian importers. Consideration should be given to the development of an Australian crocodile marketing group.


• Opportunities exist to undertake contract tanning and the direct sale of finished leather to manufacturers in Italy. However, this process is complex and incurs significant risk and would require the constant presence of an agent to coordinate production and distribution.

• There is a lack of recognition of saltwater crocodile at a retail level, signifying opportunities for branding. However, given the strength of competition from alligator in these markets, significant attention would need to be given to product positioning with the assistance of foreign partners.

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• The weakness of the Australian crocodile industry in comparison to the alligator industry lies not only in volumes, but also in the lack of coordinated marketing efforts, including incentives to create supplier loyalty. Greater effort could be given to creating alliances with buyers and in ensuring coordinated marketing efforts deliver a consistent message to target markets.

• The Australian crocodile industry would benefit from the expansion of production capacity. There is sufficient market demand to support such expansion and the industry would stand to benefit significantly from improved economies of scale.

• An opportunity exists for crocodile skin marketers to form an alliance with camel hide promoters, such an alliance may help to reduce the collective costs of market development initiatives and help to consolidate a market presence in Italy for both industries.

CAMEL — There are approximately 200 000 camels in Australia, most of which are feral herds of dromedary (single hump) camels. Commercial producers in Australia are well centralised under a single industry association, the Central Australian Camel Industry Association (CACIA). At present CACIA is the only organisation responsible for the production of camel meat and hides in Australia.

While camel hides have a high tensile strength, a major concern for the development of the market for camel hides and leather products is the low volume of hides currently available, and the low yield of useable skin area resulting from commonly high levels of damage on the hides. In addition to concerns with the raw material, there is a lack of market awareness of camel leather in potential export markets. Because of this there is curiosity about camel leather, and research in Italy found genuine interest from both tanneries and manufacturers, while also highlighting a number of areas for further development:

• Although the current market for camel hides in Italy is small, buyers dealing with camel hides in both markets were impressed with the low level of damage on Australian hides in comparison with their current supply. The small quantity of hides available from Australia is the most significant constraint to the development of trade in raw camel hides.

• Lack of market awareness is a major factor inhibiting the use of camel leather in Italy and the United States. Significant resources would need to be devoted to promoting awareness of and interest in camel leather, preferably in conjunction with commercial partners in each of these key markets. Such initiatives could include the production of swing tags verifying the authenticity of the leather.

• The size, shape and strength of camel leather seem well suited to the market for belts in Italy, and trials need to be conducted with potential commercial partners to develop the most suitable leather for belt manufacture. Such an initiative will require significant commitment to the development of strong relationships in the Italian market.

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1. Introduction 1.1 Purpose The project ‘Identification of market opportunities for skin products of emerging animal industries’, funded by the Rural Industries Research and Development Corporation (RIRDC) and the Department of Primary Industries, Queensland, has sought to provide producers and tanneries with a clear understanding of the opportunities and market characteristics for skin and leather products from goat, emu, ostrich, crocodile and camel. The objectives of the project were:

• to understand the market opportunities for skin products of emerging animal industries; • to identify the Australian industries’ supply capabilities and product characteristics for raw and

semi-finished skins; • to understand the requirements of specific markets and market segments for these products; • to support producers, processors and tanneries in developing skin products which meet market

requirements; • to support producers, processors and tanneries in developing markets for skin products.

The five emerging animal industries targeted by this project are small but developing. Most of them are targeting export markets with their products, while selling a smaller proportion of their output on the domestic market. When this project was initiated in November 1999, skins from three of the industries (emu, goat and ostrich) were being either dumped or put in storage. This report is the first detailed industry study into the skin and leather markets for all five species, and provides insight into what are the market drivers, why the skins are mainly exported raw or semi-processed or dumped, and the areas that need to be addressed to increase industry viability.

This market knowledge will enable businesses in these industries to better meet customer needs, and help identify where to focus their efforts in developing markets. A number of case studies are presented which document feedback from along the supply chain and provide practical examples of what producers and tanneries need to do to improve quality and therefore market success.

1.2 Methodology This project was directed by industry through a advisory committee which provided input and feedback to the project team. Several of the industry partners (crocodile and ostrich) participated in in-market visits with the project team over the life of the project. The stages of the project are outlined below:

• Stage 1 – The project advisory committee was formed, incorporating all commercial partners and project team members, to guide the direction of the research.

• Stage 2 – Documentation of the primary characteristics of the skins from each of the five industries was undertaken to enable the development of grading guidelines and the identification of potential end uses.

• Stage 3 – Desktop research was undertaken to identify current and potential export markets for the five skins. This stage involved collection of import, export and production statistics for overseas markets and a review of literature relating to the marketing and trade of the five skins.

• Stage 4 – Trade interviews were conducted with designers, abattoirs, tanneries, manufacturers and producers in Australia to identify the supply capability and characteristics of each of the five industries and the qualities of the skins. A total of 61 interviews were conducted with companies involved with the five skins (refer table 1.1). One designer from TAFE was also interviewed and provided some general comments about working with the five skins.

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Table 1.1: Australian capability survey (sample size), 2001 Category Goat Camel Ostrich Crocodile Emu

Tanneries 2 2 4 2 3 Producers 2 1 6 10 5 Merchants 2 0 2 1 2 Manufacturers 0 0 5 8 4 Total 6 3 17 21 14 Source: Horsburgh 2001

• Stage 5 – Leather and value-added products were prepared in association with industry partners.

• Stage 6 – Potential export markets were identified and prioritised based on secondary research, trade interviews and input from the project advisory committee.

• Stage 7 – Research was conducted in selected overseas markets, which included interviews with importers, tanners, manufacturers, distributors, and buyers. Product samples (leather/products) from each of the five species were presented to buyers to obtain feedback on their quality, characteristics and level of interest.

Austrade (Vancouver) was commissioned to conduct research in the United States. It collected statistics and undertook secondary and primary research. Austrade conducted 321 interviews with tanneries, manufacturers, importers and distributors in the United States. Many of the companies tanned, manufactured and distributed products from several of the species. An interview was also conducted with an Internet company Ostrich On-Line (USA) which sells retail ostrich products including clothing, handbags, wallets, belts and jackets.

Table 1.2: United States market survey (sample size), 2002

Category Crocodile Ostrich Emu Goat Tanneries 3 5 3 2 Manufacturers 4 8 1 5 Importers/Distributors 5 8 7 Total 12 21 4 14 Source: Fowlds 2002

Dennis Murphy (DPI) undertook secondary and primary research in 2001 into the Japanese market for ostrich and to a lesser extent for crocodile, emu and goat. The Japanese sections in this report have mainly been taken from the report that he produced, entitled ‘Japanese Market Prospects for Skin and Skin Products from Ostrich, Crocodile, Emu, Camel and Goat in 2001’. Japanese in-market research was conducted in association with members of the Tropical Ostrich Producers Association (TOP). Thirteen interviews were conducted in Japan through direct appointments and with companies represented at the Tokyo Leather Fair (refer table 1.3).

Table 1.3: Japanese market survey (sample size), 2002

Category Crocodile Ostrich Emu Goat Tanneries 1 1 0 1 Manufacturers 1 1 1 1 Direct Marketing Companies 2 2 0 0 Finisher/Distributors 1 1 Total 5 5 1 2

Source: Murphy 2001

1 Figures in table 1.2 do not correspond as several companies interviewed covered more than one species

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Kylie MacNamara (DPI) undertook secondary and primary research in 2002 on the Italian and French markets. Austrade in Italy and France was commissioned to supply background statistics and contacts for the in-market research. Ten days were spent undertaking research and trade visits in the two countries. The research focused on crocodiles in France and on crocodile, camel and goat in Italy. John and Lillian Lever (Koorana Crocodile Farm near Rockhampton) participated in the in-market research. In Italy three trade shows were visited Mipel (accessories), Micam (footwear) and Modapelle (leathers). An additional two days were spent at the GDS Footwear Fair in Dusseldorf (Germany) where many Italian and French companies were exhibiting. A total of 37 interviews were undertaken for the three species (refer table 1.4).

Table 1.4: French, Italian markets survey (sample size), 2002

Category Crocodile, Goat, Camel Tanneries 17 Manufacturers 16 Leather Associations 4 Total 37 Source: MacNamara 2002

Elysa Riedel (DPI) undertook primary research with Chinese exhibitors during five days at the 2002 Hong Kong leather fair. Graham Packer (Packer Leather (goat)) exhibited at the fair and Novag (emu) also attended the fair. The research focused on emu and goat. Prior to the trip the Chinese Leather Industry Association supplied a brief report on the leather market in China (refer table 1.5).

Table 1.5: Chinese market survey (sample size), 2002

Category Emu, Goat Tanneries 6 Manufacturers 9 Importers 3 Leather Associations 2 Total 20 Source: Riedel 2002

• Stage 8 – Support was provided to commercial partners for development of opportunities. This phase also involved debriefing sessions with the industry committee following the in-market visits, and identification of funding sources and other services that will enable the industry committee to pursue market and product opportunities identified by the research.

1.2.1 Market Selection Rationale Five international markets were targeted for this project. Research on Japan was conducted in 2001, and four additional countries were chosen for in-market research in 2002 – China, France, Italy, and the United States. These countries were chosen for two primary reasons: ability to use the skin at all stages of the value chain and high usage of the project skins as identified from export and import data.

Japan is a major trading partner of Australia, and possesses a large consumer market for high quality leather goods. Japanese import data suggest a significant demand for exotic leathers, and opportunities appear most attractive for the highest quality ostrich and crocodile product.

The United States makes substantial use of all the five project skins at all stages of the value chain, and possesses a large consumer market for finished products. Its export and import data indicated high usage of crocodile, goat, and ostrich and limited use of camel and emu.

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Italy is the leather industry’s fashion epicentre. It deals with high quality leather from the raw to the finished product stage. This country was also chosen because statistics indicate that it does high trade in crocodile, goat and ostrich and limited trade in camel. Similar reasons dictated the choice of France, however the sole focus of this research was crocodile.

China was chosen because of its high usage of goat leather and its small yet significant use of emu leather, and because it deals in all facets of the value chain. It is also the world’s largest processing centre for leather.

1.2.2 Exchange Rates All foreign currency amounts have been expressed as their equivalents in Australian dollars (AU$). The currency conversions were made using the average Australian dollar exchange rate for the year when the foreign currency value was reported. For example when US dollar amounts for 1996 were reported, the conversion was made using the average US–Australian dollar exchange rate during the 12 months of 1996.

For the years 1995 to 2001 the exchange rates were obtained from the website of the Reserve Bank of Australia. In cases where the foreign currency amounts were reported for the year 2002, they were converted to Australian dollars using the average exchange rate for 2001.

1.3 Limitations Hides and skins are shipped in a number of raw and processed states (dry-salted, wet-salted and pickled, through to wet-blue, crust, and finished leather). Production and trade data are given variously in countries’ statistical series, in terms of number (pieces) or of weight. Considerable variation exists because of the different ways in which hides and skins are defined and the different data collection methods that are used. These inconsistencies undermine the accuracy of international trade data and make comparative analysis difficult.

Export data obtained from Environment Australia is a special case. This data actually records the information relating to the issuing of export permits and no guarantee can be made that the exports actually took place in the year that the permit was issued, or that they were ever shipped at all.

For these reasons the statistical information contained throughout this report, while drawn from reliable sources, should be treated with some caution. Comparing corresponding export and import figures may reveal inconsistencies that are regrettably unavoidable.

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2. The Skin & Leather Industry 2.1 Terminology The preparation of hides and skins and their subsequent conversion into leather involves increasingly sophisticated production technology, and many distinct processes are available. Organisations can be highly secretive about specific production technologies, and techniques can be very different for various skin types. Subsequently, there is no universal standard terminology that describes these processes. Figure 2.1 attempts to depict a generic flowchart outlining the major processing stages of skins through to leather. While this illustration represents a highly simplified model of what in reality is a diverse range of alternative production processes, it helps to explain some of the terminology used throughout the report. A more detailed flowchart documenting the processing steps for tanning is contained in Appendix 1 (p.92) while Appendix 2 (p.93) contains a list of definitions for skins and leather at these different stages of processing.

Figure 2.1: Basic processing flowchart

Skinning

Raw/Salted skins

Liming

De-liming

Pickling

Wet-blue Stage

Fatliquoring

Crust Leather

Dyeing & Finishing

Finished Leather

2.2 World Overview The processing of hides and skins for the production of leather and leather products is a traditional industry that has evolved since early civilisation. Advances in production, technology, and processing have resulted in a complex global commodity market. Hides and skins are mainly produced as by-products of the meat industry. As a result, their production is unresponsive to changes in demand for leather, and dependent upon forces driving the meat market. Consequently, imbalances between supply and demand of hides and skins often result in considerable price fluctuations.

In 2000, the global value of hides and skins production exceeded US$14.5 billion (AU$24.94 billion), and the value of world leather production was estimated at about US$28 billion (AU$48.16 billion). According to the Food and Agriculture Organization of the United Nations (FAO), developing countries have become the world’s largest producers of leather, mainly due to cost competitiveness in processing and manufacturing, and in some instances less strict environmental regulations. The growth of tanning activities in developing countries has resulted in a dramatic change in trade flows, with these countries using an increasing proportion of their domestic raw materials, and becoming net importers of raw hides and skins (FAO 2001).

Global export earnings from raw hides and skins, leather and leather footwear increased markedly in the eighties and mid-nineties, and in 2000 the aggregate value exceeded that of meat, reaching almost US$45 billion (AU$77.4 billion). During the past two decades developing countries have more than doubled their share of the world total, and this trend is expected to continue, most notably in China, India, Pakistan and Latin America (FAO 2001).

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Hides and skins are taken from an extremely diverse range of species, and there is increasing interest in exotic skins from game animals, reptiles, fish, etc., in addition to the traditionally sourced farm animals. While the footwear industry is the prime consumer of leather output, other uses include handbags, luggage, clothing, furniture, and automotive upholstery. Due to the unique characteristics of hides and skins from newer emerging animal industries, most of this ‘exotic’ leather is finished for the fashion industry for use in garments, handbags, small leather goods, footwear and luggage.

2.3 Australian Overview In 2000–2001 Australia’s exports in the skins and leather sector amounted to AU$1.3 billion, representing just over 1% of the country’s total export earnings (ABS 2002). Leather exports were valued at approximately AU$530 million. Australia’s shipments of skins totalled AU$790 million 95% of which comprised cattle and sheep hides. Australia is a dominant player in sheepskins, with 18% of the global trade (FAOSTAT 2002). Total skin exports accounted for about 6% of the global trade.

Of the five skins studied in this report only goat is recorded as a separate item in ABS statistical series. Goatskin exports totalled AU$2.8 million in 2000–2001, more than twice the figure for the previous years. The remaining four skins: emu, ostrich, crocodile, and camel are not recorded separately, although some trade data is available particularly emu and crocodile from data collected on the trade in these animals by the Convention on International Trade in Endangered Species.

2.4 Export Markets While export opportunities potentially exist in many countries around the world, this report concentrates on five of them: China, France, Italy, Japan and the United States. Italy, China, and France are significant importers of goatskin and together accounted for 45% of the world total in 2001 (refer table 2.1). These markets, where appropriate, are discussed in relation to each of the five species, in the corresponding sections of this report. However, more general observations about each country are presented in this section.

Table 2.1: Goatskin imports by value, 1996 – 2000 (US$1000)

Country 1996 1997 1998 1999 2000 Italy 11 731 11 431 12 598 5 442 9 077 Spain 10 232 10 071 10 166 3 169 4 046 India 3 545 4 721 2 806 1 804 3 993 Turkey 8 365 5 235 2 591 862 2 993 China 3 097 2 740 1 806 1 795 2 236 France 762 1 112 395 662 1 222 Other 9 540 9 171 6 728 4 605 4 675 World Total 47 272 44 481 37 090 18 339 28 242 Source: FAOSTAT 2002

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2.4.1 China China is a major player in the world’s leather industry. China’s leather industry covers four sectors: leather making, leather shoes (including sports shoes), leather goods (including garments), and furs. The industry numbers approximately 16 000 enterprises (excluding village enterprises, co-operatives, and businesses with annual sales less than one million Yuan) (AU$207 9002) with a work force of over two million people. These enterprises include approximately 2300 involved in leather production, 7200 in shoemaking, 1700 in leather garments, 1200 in furs and fur products, 500 in leather suitcases, and about 1500 in leather handbags (UNIC3 2001).

China is the world’s major leather producing nation, and the largest manufacturer of shoes, leather garments and bags. China annually produces more than 2 billion pairs of leather shoes, and more than 70 million leather garments. According to available statistics, China’s annual demand for light leather ranks first in the world – up to 450 million m2, among which imported finished leather accounts for 160 million m2, supplementing the supply of domestic finished leather (Bradford 2002).

Canton is the key centre of the Chinese leather industry, especially for the manufacture of footwear and leather goods. Canton is China’s most developed production base and the most active trading area of the Chinese leather industry, accounting for 50% of Chinese footwear production, and 62.5% of exports (UNIC 2001). It is also the distribution centre of most imported products. Taiwanese, Hong Kong-invested, and foreign-invested tanneries possess most of the market in Canton. These tanneries, lead the market in economies of scale, and generate strong demand for skin imports (UNIC 2001).

In 2000, the import value of leather and raw hides was US$2.8 billion (AU$4.82 billion), an increase of 26% over the previous year. While China possesses a local supply of small skins, cattle hides and calfskins need to be imported from abroad (United States, Australia and New Zealand). Consequently, the proportion of imported skins and leather in total consumption is high for bovine (approximately 80%), but relatively low for sheep and goat (around 22%).

The major high-volume market for Australia is in bovine skins and leather, where the local supply is not sufficient in terms of quantity or quality. Opportunities to supply goatskin are also present, with less scope for emu, ostrich, and crocodile. However, as the production of finished articles in China diversifies into more luxury products, demand for some of the more exotic leathers can be expected to increase (UNIC 2001).

2.4.2 France In 2000, the raw hides and tanning sector of the French leather industry comprised 574 companies, employing approximately 36 670 people. Approximately 25% of these companies are involved in the purchasing and tanning of skins, while the remaining 75% are involved in the downstream manufacture of leather products (shoes, gloves, luggage and other leather goods) worth about FF 19.5 billion (AU$5.13 billion) (Borgo 2002). In 2000, total imports increased by 16.4%, reaching 45.2 million euros (AU$78 million), and the total industry turnover for these activities represented 36.9 million euros (AU$63.6 million), which was a 5.2% improvement on 1999 (Eurostat 2001).

Research by Austrade Paris indicates that Australia’s main opportunities in the French market are probably in crocodile skins. While this premium niche market segment has been experiencing strong growth over recent years, it seems that Australia’s market share has failed to keep pace. However difficulties were encountered in obtaining comprehensive information. Fierce competition exists between market participants, and a strong sense of ‘secrecy’ pervades the industry.

2 Based on the average exchange rate in 2000 of Chinese renminbi 3 Unione Nazionale Industria Conciaria (Italy)

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2.4.3 Italy Italy has been described as the leather industry’s fashion epicentre. In 2000, the raw hides and tanning sector of the Italian leather industry comprised of about 2400 companies employing approximately 30 300 people. Total production included more than 168 million m2 of bovine leather and 46.5 million m2 of sheep and goat leather. Turnover for these activities was more than 6.3 billion euros (Eurostat 2001).

Apart from traditional bovine, sheep, and goat leather production, Italy is also the world’s largest consumer of reptile skins (including alligator from the United States, Nile crocodile and crocodile from Africa, Asia and Australia) and the imports of these skins supports Italy’s position as the largest producer of shoes and leather goods made from reptile leather (Regini 1998).

Italy’s tanning sector has a well-established reputation for high quality product. The locally tanned leather is used for the manufacture of primarily up-market fashion products. Italian importers pay close attention to the selection of raw material and to the production methods that support its supply.

2.4.4 Japan The modern Japanese leather industry is well established, with companies operating within the context of strong business relationships. Barriers will be put in place to avoid conflict or upset to any network member, and companies may refuse to deal with new entrants if they perceive that these entrants could create competition for their existing customers down the chain (Murphy 2001).

The South African Klein Karoo marketing group (the dominant player in the ostrich trade) demonstrates the level of commitment necessary to penetrate Japanese markets. Klein Karoo technicians spent 2–3 months in Japan with local technicians to develop and refine their processes and skills to suit the local market. In this way the group has succeeded in developing strong long-term relationships that underpin responsive leather production processes capable of matching demand requirements.

The success of South African efforts in this area is demonstrated by the fact that much of Australia’s ostrich product is sold through South African businesses. The market accepts this leather mainly on the basis that it is tanned in South Africa. Extensive efforts in relationship building will be necessary for Australian suppliers to develop this sort of market influence, and improve prospects for direct entry into Japan. This would require careful facilitation over periods of 12–18 months, with at least four visits per year initially and time spent in market to develop appropriate tanning specifications and skills, as evidenced by the Klein Karoo example.

Most Japanese imports are of processed leather, and only a very small proportion is in raw skins. Japan is a significant importer of exotic leathers and in 2000 imported nearly AU$66.9 million worth of ostrich and crocodile/alligator leather (JETRO 2001). As a relative unknown in the international leather industry, Australia’s tanning capabilities are regarded with suspicion, and some Japanese companies appear to consider Australian-made leather inferior to that of the more established players in the international trade (Murphy 2001). High fashion markets will be difficult to penetrate. The higher profiles of competing nations like Italy, France, and South Africa (in ostrich skin), and the advantages of the established and respected brands will be difficult to overcome (Murphy 2001).

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2.4.5 United States Home to 300 million people, the United States is the largest consuming nation in the world. American firms expect manufacturers of imported products to be aware of the American system of doing business in the market, and therefore to participate in much the same way as a domestic firm. Complicating matters for businesses seeking to enter the United States is the fact that the market is fragmented (Fowlds 2002).

The United States skin industry comprises six main sub-sectors: leather; leather footwear & leather products; luggage; gloves & mittens; handbags; and small leather goods. In 1999 these groups collectively exported goods to the value of US$3.23 billion (AU$5 billion) a figure dwarfed by the US$23.78 billion (AU$36.86 billion) imported into the country.

In 1999, US imports of skins and finished leather were an estimated US$1.52 billion (AU$2.35 billion), with Mexico, Argentina, and Italy the main suppliers. End product imports were dominated by leather footwear and luggage mainly imported from China, Thailand and the Philippines. Non-rubber footwear imports were US$11.5 billion (AU$17.83 billion), and luggage imports totalled approximately US$2.45 billion (AU$3.8 billion). China, with 39% of all imports, was the largest supplier, accounting for 95% of leather footwear imports.

While import/export data provides an idea of the total market size, information on the different species of the leather used in the production of end-products is incomplete. It would therefore be misleading to use such data to determine market size of leather goods that are made from exotic skins. However, the data suggest that footwear, handbags and gloves are the top three product categories in which goat, emu, ostrich, crocodile and camel leather are used.

The Louisiana State University Agricultural Centre recently conducted a survey designed to measure the receptiveness of the US market to products made from exotic leathers. The research identified the existence of a potentially viable and lucrative domestic market for apparel, accessories, and interior products made with exotic leathers. The findings suggest that exotic leather is increasing in popularity — particularly for merchandise of exceptional quality. Interestingly, evidence suggests that there is increasing potential for less-traditional products to be produced from exotic leathers, including wall and floor tiles, upholstery, pillow covers, lampshades, picture and mirror frame trims, and various small decorative items (Fowlds 2002).

Most exotic leathers, including most reptiles and ratite, are imported into the United States in a finished state, whereas wet-blue goatskins are brought in from India, China, and Pakistan. End products of exotic skins such as footwear, handbags, gloves, and small leather goods command high retail prices in the United States. These products appeal to affluent, brand-conscious consumers; market segments relatively insensitive to price (Fowlds 2002).

Discussion with industry experts suggests that the United States’ tanning industry is in decline and has witnessed the closure of many tanneries (Fowlds 2002). Most of the nation’s raw skins are exported to Mexico, Europe, Korea and China for tanning and finishing to take advantage of low labour rates. The remaining US tanneries operate mainly on a contract basis. Nevertheless, although Australia is regarded as having the potential to supply finished skins, Australian skin suppliers may choose to capitalise on the geographic position of an American tannery by forming a strategic alliance with such a firm and benefiting from its existing marketing channels (Fowlds 2002).

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3. Goat 3.1 World Supply in Skins & Leather During the past five years world goat numbers have fluctuated around 700 million head (FAOSTAT 2002). The largest stocks are to be found in China, India, Pakistan and Bangladesh (refer table 3.1).

Table 3.1: World goat stocks, 1997-2001 (x 1000 head) Country 1997 1998 1999 2000 2001

China 123 467 135 116 141 956 148 401 157 362 India 120 560 121 362 122 530 123 000 123 500 Pakistan 42 650 44 183 45 800 47 400 49 100 Bangladesh 34 478 33 500 33 800 34 100 34 100 Iran 26 000 25 757 25 757 25 500 25 200 Nigeria 23 160 23 700 24 300 24 300 24 300 Australia 230 220 200 200 200 Other 311 041 315 452 318 801 322 570 289 385 World Total 681 586 699 291 713 145 725 470 703 146 Source: FAOSTAT 2002

During the 1980s and 1990s the global output of goatskins grew by an average of 3.7% per year. Production in developing countries, which dominate goatskin production, rose by almost 4% annually, while the much smaller output of developed countries rose at an average annual rate of 1.5%. Asia is the major producer of goatskins, accounting for approximately 70% of the world total (FAOSTAT 2002). In 2001 world goatskin production was more than 837 730 metric tonnes, with output from China, India and Pakistan accounting for 60% of the total (refer table 3.2).

Table 3.2: World goatskin production 1997 - 2001

Production (Mt) 1997 1998 1999 2000 2001 China 200 675 232 823 261 579 282 934 268 324 India 126 000 126 720 127 800 128 340 128 880 Pakistan 90 300 93 740 97 180 100 620 103 200 Bangladesh 38 600 37 600 38 000 38 400 38 400 Nigeria 23 160 23 700 24 300 24 300 24 300 Australia 2 558 2 392 2 422 2 422 2 422 Other 287 459 288 734 285 073 273 949 272 204 World Total 768 752 805 709 836 354 850 965 837 730 Source: FAOSTAT 2002

Production of leather from raw hides and skins is a labour intensive and potentially polluting process. With lower labour costs, and in many cases less strict environmental regulations, developing countries have been able to compete with the tanning industries of developed countries (FAO 2001). Consequently, the output of sheep and goat leather in developing countries has expanded markedly, and their share in the total world output has grown from 44% in the early eighties to 66% in late nineties. Tanning of sheep and goatskins in the developed countries declined during this period (refer figure 3.1).

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The strongest production gains in percentage terms occurred in Africa and Asia, with Asia continuing to dominate production of sheep and goat leather (FAO 2001). Note that figure 3.1 refers to light leather, which is leather used for shoe uppers, as opposed to heavy leather used for soles. Currently the largest producers of sheep and goat leather are China, Italy, India, Spain, and Turkey.

3.2 World Trade During the past two decades significant structural changes have taken place in the international goatskin trade. Considerable investment has taken place in developing countries to expand tanning and leather manufacturing capacity, utilising an increasing proportion of their domestic raw materials.

Asia has become the most important exporting region among developing countries due to its success in processing and manufacturing. To an increasing extent developing countries import raw hides and skins from developed countries to be processed and re-exported as value added products.

3.2.1 Raw Skins The expansion of tanning activities in developing countries has resulted in a change in trade flows and net export availability has fallen with the increase in domestic processing. The proportion of goatskins entering trade channels fell from 23% in the early eighties to 7% at the end of the nineties (FAO 2001). In fact, exports of raw goatskins and kidskins have declined from an average of about 30 000 tonnes in 1985 to about 20 000 tonnes in 1995. Developing countries, where tanning capacity rose fastest, reduced their exports of raw skins by an average of 1.3% per annum (FAO 2001). A key trend in the trade of goatskins throughout late 1998 and 1999 was declining demand and lower prices in developed countries, primarily triggered by economic upheavals in Turkey and Russia.

As a major processing centre, Turkey is a large importer of raw sheepskins which are tanned for manufacture into finished garments. Many of these are then exported to Russia, which is a large consumer of leather products such as coats. Following the devaluation of the Russian rouble in late 1998, a decline in the demand for finished leather garments sparked a corresponding reduction in the volume of Turkish imports and the market for sheepskins and goatskins virtually collapsed (Australian Farm Journal 1999).

0

2000

4000

6000

1982 1984 1986 1988 1990 1992 1994 1996 1998

Mill

Sq

Ft

World

Developed

Developing

World

Developing

Developed

Source: FAO Sub-Group on Hides & Skins 2001

Figure 3.1: Production of light Leather from sheep & goats

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The situation recovered in 2000/2001 with European footwear exports to Russia increasing by almost 50% to well over 8 million pairs (Leather International 2001). However, total EU production decreased 5% over the same period. Italy defied the trend by slightly increasing production, perhaps due to the strength of its tanning and manufacturing sectors, and the reputation of premium brands.

Although China, Pakistan, and India are among the world’s largest producers of raw goatskins (refer table 3.2), the demand for raw skins from domestic processors often outstrips production, and these countries are also among the biggest importers. Other important goatskin importers include Italy, Turkey and Spain (refer table 3.3). The major exporters of raw goatskins are Ethiopia, United States, France, Australia and Greece (refer table 3.4). The fact that the totals for tables 3.3 and 3.4 do not correspond is due to differing reporting methods used in different countries, and may also be affected by time delays (refer to Limitations, p.4).

Table 3.3: World raw goatskin imports 1996 – 2000 (Metric Tonnes)

Imports 1996 1997 1998 1999 2000 Italy 1 986 2 277 2 418 1 174 2 635 China 2 619 2 311 921 1 864 2 532 Turkey 3 873 2 274 1 593 677 2 294 Pakistan 1 127 873 783 958 1 913 India 873 1 138 850 875 1 432 Spain 1 593 2 084 2 115 959 1 108 Other 2 227 2 904 1 870 1 382 5 875 World Total 14 298 13 861 10 550 7 889 17 789 Source: FAOSTAT 2002

Table 3.4: World raw goatskin exports 1996 – 2000 (Metric Tonnes)

Exports 1996 1997 1998 1999 2000 Ethiopia 2 200 2 200 2 200 2 200 2 927 USA 1 264 3 974 2 716 1 190 1 833 France 386 684 699 292 1 778 Australia 1 231 953 425 499 1 028 Greece 766 1 034 1 268 194 953 Italy 58 314 88 82 587 Other 3 989 4 608 4 258 2 733 3 709 World Total 9 894 13 767 11 654 7 190 12 815 Source: FAOSTAT 2002

The WTO International Trade Centre (ITC) price indices for sheepskins and goatskins indicate an increase from the first quarter of 2000 to the first quarter of 2001 of about 30%. This increase was the result of stronger demand for leather, especially for that of superior quality, in the main leather producing and consuming countries. A resumption of a higher rate of economic growth in 1999 and 2000 in OECD countries (the major markets for leather products), contributed to the strengthening of demand, which was also stimulated by continued changes in fashion for leather shoes (FAO 2001). These fashion changes are reflected in the different raw skin attributes required by tanners.

Particular goatskins are best suited to certain end uses and are selected by importers for these purposes, according to the characteristics of grain pattern, general appearance and durability (Holst 1990). These characteristics are dependent on factors such as the breed, size, age, and weight of the animal at slaughter. Goats from different regions are also said to have particular characteristics suited to different end uses, and importers source supplies from certain regions on this basis (Holst 1990).

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The higher value goatskins are those that have a ‘fine’ grain appearance, a characteristic of what are usually smaller goat breeds found in countries such as India and Pakistan. Skins from younger goats also have a higher market value, as grain appearance deteriorates as live-weight and skin surface area increases (Holst 1987). Premium fine-grained skins usually come from goats with a live-weight of less than 25 kilograms (Holst 1990).

3.2.2 Semi-Processed & Finished Leather In terms of the volume of processed goatskin and leather (light leather), the major importers are Italy, China, Hong Kong and South Korea, however it should be noted that this data includes light sheepskin leather imports. At 15%, Hong Kong has the highest average yearly percentage growth in imports. Other countries with healthy import growth rates include China, France, and Spain.

Table 3.5: Light leather exports for sheep & goat 1996 Country Value (US$ millions) Italy 745.0 Hong Kong 274.6 India 205.0 Korea 193.4 Spain 190.0 France 120.0 Pakistan 110.0 United Kingdom 100.0 Source: FAO 1996 1996 AU$1 =0 .78US$

Although it is not possible to separate the data for goat and sheep exports in table 3.5, the figures suggest that several countries, such as Italy and China, are large importers of both raw goatskins and light goat leather, suggesting that significant levels of both the tanning and manufacturing process are occurring in these two countries. The largest exporters include Italy, Spain and France (refer table 3.5), reflecting the high occurrence of exports for value adding in countries with lower manufacturing costs or specific manufacturing expertise, such as China which has only a very moderate level of light leather exports (FAOSTAT 1999).

3.2.3 Manufactured Product Goat leather (not including kid leather) is considered a good general purpose leather and is used for a diverse range of softgoods including shoe uppers, gloving, bookbinding, linings, luggage and suede garments. Approximately 60-70% of goat leather is used in the manufacture of shoes, 20% in garments, and 10-20% in the other categories (Holst 1987).

Recent estimates show that the global output of shoes with leather uppers now exceeds 4.5 billion pairs, having increased by about 2% per year through the eighties and nineties. Production in developing countries rose by 6.6% annually, reflecting investment in manufacturing capacities, and the developing countries’ share of production rose from 35% in 1980 to 70% in the late nineties. This manufacturing expansion was most evident in the Asian region and in Latin America (FAO 2001).

World trade in leather shoes also expanded strongly with annual growth rates averaging 7% over the last two decades. Shipments from developing countries increased the fastest at 16.2% per annum, and their corresponding share of world exports rose from 20% to 65% over the same period. Asia now accounts for 56% of global trade (FAO 2001).

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3.3 Australian Goat Industry

3.3.1 Industry Overview Estimates suggest there are approximately 220 000 farmed goats in Australia, and a feral population of about 2.3 million. Although approximately 50% of stock for slaughter still come from feral populations, farmed goats represent an increasing proportion of total production. It is difficult to ascertain the number of tannable skins produced per annum, particularly as a large percentage of goat meat is exported with the skin on to Taiwan. Table 3.6 shows Australian slaughter numbers over recent years. Slaughter numbers for Western Australia and Queensland have continued to increase over the last 3 years.

Table 3.6: Goat slaughter numbers by state 1998 - 2001

State 1998 1999 2000 2001 Western Australia 162 277 192 657 259 476 217855 Queensland 289 851 156 412 168 916 193901 Victoria 79 064 166 612 219 288 188725 New South Wales 163 068 124 349 57 161 63356 South Australia 44 424 53 078 32 308 53190 Tasmania 7 66 109 53 Northern Territory 0 0 0 0 Total 738 691 693 174 737 258 717 080 Source: ABS 2002

The boer and feral-boer cross are the predominant breeds used for meat production and are generally slaughtered at anywhere between 2 to 6 years of age. The most suitable breed for skins has yet to be established, as most genetic research has focussed on meat production. However, Angora skins are considered inferior to all other breeds, due mainly to the high fat content in the skins and the coarse grain appearance (Holst 1987). Further study of the effects of breed, age, and liveweight at slaughter on grain appearance is needed in order to determine the most suitable end use for the skins from Australia’s goatmeat production.

The high level of variability in goatskins, particularly from pastoral areas, is a significant factor affecting supply and also creates a very intensive tanning process, due to high levels of damage on the skins and the differing amounts of hair on the goats (Kellaway 1999). Low quality skins represent a high proportion of production, with estimates of commercial-grade skins being as low as 30% (Horsburgh 2001).

3.3.2 Australian Trade Statistical data shows that exports of salted or pickled goat hides and kidskins declined consistently on a per annum basis from 1995 to 1998 (refer figure 3.2). Approximately 1.5 thousand tonnes worth about AU$3M were exported in 95/96 compared to 440 tonnes in 98/99 worth about AU$0.5M. Export levels have since recovered on the back of a low Australian dollar, with approximately 875 tonnes or AU$2.8M exported in 2000/2001 (ABS 2001). This result represents about 8% of global tonnage but only 4% of global value (FAOSTAT 2002), highlighting the lower than average prices that Australia’s goatskins command. This is due, at least in part to Australia’s feral stocks, and because Australia doesn’t export kidskin. Australia’s smaller domestic goats are usually exported ‘skin-on’ into Asia, and as such Australian goatskins do not compete with the smaller and more valuable kidskins from India and Pakistan (Whiting 2001).

15

Figure 3.2: Australian goatskin exports – fresh/salted/dried/pickled

Source: ABS 2002 Most goatskins are exported in the drum-salted state, with small volumes processed to the pickled, wet blue or crust stage (Topper 1999). Despite the dramatic increase in raw goatskin exports for 2000/2001, the potential for continued export growth is still constrained by volumes, as over 50% of processed goat carcasses are sold de-haired with the skin on (Horsburgh 2001). These skin-on exports exhibit high seasonality, with 80% of this trade occurring in the second half of the year. This creates seasonal constraints on skin supply and inconsistent processing volumes. Subsequently, Australian processors are at a relative disadvantage compared to international competitors who can enjoy greater and more consistent economies of scale.

Most of Australia’s goatskin production is exported to countries with large manufacturing capacity, such as China. These skins are absorbed into the local supply stream and the Australian seller does not retain ownership of the skins (Topper 2000). Very few skins are processed to a finished leather stage here in Australia, however some value adding does occur. Table 3.7 lists the value of Australian exports of semi-finished and finished leather by export destination from 1996 to 2001.

Table 3.7: Australian exports of finished & semi-finished goat leather 1996 – 2001 (AU$) Destination 1996 1997 1998 1999 2000 2001 Bangladesh 12 876 China 92 800Fiji 694 923 3 159 16 384Germany 5 146 7 702 Hong Kong 101 760 74 722 64 638 760 86 179 110 997India 6 917 27 177 5 739 31 635 Iran 1 096Israel 1 080 Italy 2 000 39 314 18 649 Korea 46 568 10 123Malaysia 650 500 New Caledonia 7 445 New Zealand 734 252 585 552 308 362 310 006 213 328 454 971Pakistan 36 129 Portugal 7 772 Singapore 21 201 Taiwan 7 530 Thailand 3 129 15 496 34 693 5 707United Arab Emirates 2 120 USA 2 000 7 667 3 922Total 767 978 777 920 427 672 415 364 337 859 696 000 Source: ABS 2002

0.0

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3.3.3 Australian Supply Chain In Australia goats are both farmed and feral harvested with the proportion of farmed goats estimated to be about 50% and increasing (Horsburgh 2001). The hide is regarded as a by-product of goat meat production, which if not processed or sold, would incur disposal costs. Removal of the skin is a preliminary step in the process at the abattoir, and currently, goats are not sorted prior to slaughter on the basis of hide quality or breed type (Whiting 2001).

Farmed boer goatskins promise improved hide characteristics compared to feral goatskins due to improved farm management from boer-cross producers; and less deterioration to the skins, as boer goats grow to the desired weight requirement in less time than feral goats (Ryan 2001). According to Horsburgh (2001) the greater quality consistency of farmed goatskins, and the fact that they represent an increasing proportion of the total supply, should provide better market opportunities for value adding than presently exist. However, Australia’s high cost of labour relative to international competitors make it difficult to realise acceptable margins for product where labour represents a significant proportion of total cost. Consequently, Australian prospects appear limited to the salted and pickled stage, which are likely to provide the greatest returns, at least over the short to medium term (refer table 3.8 & 3.9).

Table 3.8: Premiums for salted skins in AU$ 2001

Size ft2 Cumulative Cost

Market Price Difference Margin

Feral 5>7 $2.25 $4.00 $1.75 78% 7+ $2.50 $5.00 $2.50 100% Boer 5>7 $2.25 $5.50 $3.25 144% 7+ $2.50 $6.50 $4.00 160% Source: Whiting 2001

Table 3.9: Premiums for pickled skins in AU$ 2001 Size ft2 Cumulative

Cost Market Price Difference Margin

Feral 5>7 $4.50 $7.75 $3.25 72% 7+ $5.00 $8.50 $3.50 70% Boer 5>7 $4.50 $9.23 $4.73 105% 7+ $5.00 $11.15 $6.15 123% Source: Whiting 2001

The cost of value adding in Australia, plus the inferior quality of skins from feral stock has meant that Australia’s value added skins are not competitive on the international market. Higher quality skins can be produced at lower prices in countries such as India and Pakistan. In 2000/2001, processing costs of AU$2.50-$3.00 per skin for Australian operators, compared to approximately AU$0.60 per skin in India and Pakistan highlight the difficulties of competing with lower-cost countries (Topper 2000). It is likely that little has changed over the past two years.

Countries that import hides for processing impose import duties of between 25 – 40 percent on the Free on Board (FOB) price of hides at the wet blue stage (Topper 2001). It is considered that at this stage the hides are a finished good, whereas hides at the salted and pickled stages are considered raw products and exempt from import duties (Topper 2001). This factor makes it harder for Australian industry to export skins that have been processed to wet blue stage, and combined with Australia’s

17

higher processing costs makes the opportunities available for low-level value-adding appear limited. These factors are the major reason behind the prevalence of exporting raw, temporarily preserved skin for further processing in countries, which specialise in goatskin tanning.

3.3.4 Production & Processing Issues Presently, goatskins from feral stock form the bulk of Australia’s exports. However, these skins are considered inferior on the international market, due to coarse grain content resulting from the larger hair follicles on feral goats. Tanning trials of the feral-boer cross have been conducted which show significant improvements in the grain quality, however more testing on the specific effects of different breeds will be necessary before definitive recommendations can be made (MacNamara, Warfield, Twyford-Jones & Crowley 2001; Money 2002).

As already mentioned, Australia’s goatskins are regarded as a by-product of meat production, and goats are not sorted prior to slaughter on the basis of hide quality or breed type (Bentley 2001). As a result, skins of differing quality and size are grouped together. This ‘mixed bag’ of salted skins that tanneries receive, increases their costs and makes the request from clients for uniform quality and characteristics harder (more expensive) to realise. Subsequently, opportunities for value added product are constrained due to the inconsistent quality of skins available (Whiting 2001).

The requirements of the Italian market reinforce this point; importers and tanneries in the Italian market have a strong preference for fine grain skins at a consistent quality level. In order to develop opportunities in the market, tanning trials will need to be conducted with potential market partners and goat skins will need to be graded and selected at the abattoir. Australia skins are currently graded only on the basis of skin size, a practice unsuited to Italian buyers, and also regarded as unacceptable by the majority of Chinese leather markets (China interviews 2002).

The volatility of the commodity market can also threaten profit to be gained from further processing. While many goatskins were being dumped in 1999, the turnaround in the market during 2000 meant suppliers received much higher prices for the export of raw skins, and the returns from further processing were decreased. Hence, one of the greatest challenges for the production and processing of Australian goatskins is to bring the product to the market at a consistently competitive price.

3.4 Case Study: RNA Fashion Parade In 2000, Department of Primary Industries (DPI) officers in collaboration with Royal National Association (RNA) coordinators organised a skins fashion parade to be held in conjunction with the RNA wool fashion parade. The activity involved a leather fashion design competition for creations utilising goat, camel, ostrich and crocodile skins. Moreton and Gateway TAFES both participated in the competition and more than 80 entries were received. From these entries, ten clothing designs and two boot designs were chosen by a panel of established fashion designers and a fashion magazine editor to be exhibited in the fashion parade.

The activity enabled commercial partners to link with and interact directly with manufacturers and fashion design students. It also raised the students’ and their teachers’ awareness and understanding of new animal skins, and what is involved in the design and manufacture of garments and accessories from goat, crocodile, and ostrich. The commercial partners to the project have had the opportunity to develop more suitable garment leather through modifying their tanning processes and gained insight into the needs and expectations of fashion designers.

Approximately 240 goatskins were tanned as garment leather, in both a suede and nappa finish. Trial tanning conducted by Packer Tanning succeeded in creating suitable garment leather and also

18

revealed differences in the grain quality between feral and feral-boer cross skins. This highlighted the potential marketability of feral-boer cross leather, which has been branded as ‘Chevon Nappa’.

3.4.1 Tanning Issues Damage from hide removal drastically reduced the cutting area for garments. Inspection identified a consistent hole below the neck area in the skins, which appeared to be caused by knife cuts from hide removal. This appeared in more than 20% of the skins tanned for the fashion parade, however, it has not occurred in subsequent tanning. Subsequent tanning of skins has also revealed putrefaction damage to the hides resulting from inadequate preservation of the skins post-slaughter. There is an obvious need for quality procedures to ensure consistent hide removal and preservation.

3.4.2 Design Issues Chevon nappa received a very positive response from the TAFE students and several Australian designers. There was a conceptual interest in goatskins due to the recognition of them being an under utilised by-product, and the perception of making the most of our resources by using them in garments. Particular comments were made in relation to the texture, grain, and softness of the skins. There was a preference for finer skins, as skin thickness limited the suitability of the leather to a wide variety of garments. One of the most sought after characteristics was the leather’s ability to drape, which is only achievable from thinner skins in which strength must be compromised.

Consistency and precision of colour is another critical factor. It seems that many of the black skins were of different shades, and students matched them according to colour. In several cases, this also required a compromise in the use of other colours in the garment. Nevertheless, participants were impressed with the brightness and depth in the colour of the skins.

3.4.3 Competitive Issues Maintenance of linkages through to designers is critical in the further market development of ‘Chevon Nappa’. Market development work will need to be backed by a consistent quality product, which will require additional work on quality assurance of hide handling and storage. Further study will be required to ascertain the most viable domestic point of sale for Australian goatskins, whether it is at the raw, salted stage or at the tanned leather stage. This will require cost analysis and historical price trend comparisons, in addition to a strengthening of the supply chain links between suppliers, tanners, and potential customers (MacNamara et al. 2001).

Of related concern is the supply capability of Chevon Nappa, which relies on the supply of boer-cross skins. With a large proportion of exports still culled from wild harvested stock, consistent supply of these particular skins is a significant issue. In addition, as goatskins are a by-product of meat production, the supply of skins is largely unresponsive to demand. This is further exacerbated by the fact that a significant proportion (approximately 40-50%) of meat is exported skin-on (MacNamara et al. 2001).

19

3.5 Export Opportunities

3.5.1 China 3.5.1.1 Market Potential With increases in China’s leather product exports and a rise in domestic demand, China’s production of leather products has become the largest in the world. Demand for light leather reached 450 million square meters in 2001, of which 160 million square meters were imported. China’s charge to world leadership in leather production is evidenced by:

• producing over 5 billion pairs of shoes (of which, 2 billion pairs were leather); • producing 70 million pieces of leather in 2001; • increasing the industry’s worth to US$12.48 billion, (AU$24 Billion); • increasing sheep and goatskin imports to 130 000 tons; • increasing exports to 25 million pieces of goat leather product per year; • increasing raw leather imports by 21% each year for the past five years (US$770M in 2001)

(AU$1.49 Billion).

These impressive and growing leather trade statistics make China an attractive market. The China Leather Industry Association (CLIA) believes that in the next 5 to 10 years, imports of rawhide and finished leather will continue to increase (China interviews 2002). Australia’s distance from China is not likely to hinder trade; the Chinese look at the leather industry as a global market and are not deterred by geographical distance to clients, they are cost-driven and have little preference for local product or any specific country of origin. (China interviews 2002).

3.5.1.2 Market Segments & Product Positioning Historically, it has been argued that Chinese leather and in particular, footwear production, was low-cost and low-quality (World Footwear 2000). However, in 2002, with the high exposure that Chinese-made footwear enjoys in the international markets, Chinese manufacturers are increasingly aware of the need for consistent and high quality production. China’s leather industry is evolving from low-cost, quantity-focussed production to include more high quality goods and greater variety.

Chinese shoe and garment manufacturers already utilise goat leather in products that span the price and quality spectrum. China’s domestic consumer market can be segmented geographically into three broad markets: consumers in rural areas who largely purchase low-grade leather products; urban consumers who typically favour medium-grade leather products; and a more concentrated demand within large cities (Beijing, Shanghai, Shenzhen, Harbin, Dalin and Shenyang) for more expensive premium products. Goat leather is used in various applications according to attributes such as thickness, suppleness, strength and appearance.

According to in-market research Australian goat leather is best suited to five markets: 1) the lower-end ladies shoe upper market; 2) the upper-end shoe lining market; 3) the lower-end garment market (only if shaved to make it more supple); 4) the medium range shoe upper market (using the middle area of the goat leather only); 5) the lower-end children’s purse market (using the poor quality edge of the skin which has high

elasticity - rendering it unsuitable for normal use).

There are two finishes that are popular in the Chinese market. For the low and medium-end shoe and bag market, the Chinese favour a matt finish, soft tannage, and fine embossment. Whereas the high fashion shoe market favours a high gloss finish. Both markets require a wide array of colours (China interviews 2002).

20

Two new labelling developments in the Chinese market are emerging as successful differentiators. Firstly, the CLIA has introduced the ‘genuine leather’ mark. The profile of this mark is on the increase and products with this mark are experiencing price premiums (China interviews 2002). The second is the ecological leather mark. This is a certified mark of environmentally-friendly, high-quality leather, and will be implemented in leather manufacturing and production enterprises nationwide (China interviews 2002). If these developments translate into an increased expectation for suppliers to adhere to environmentally sound production methods, Australia may be well placed to take advantage.

3.5.1.3 Product Characteristics & Price Australian goat leather is regarded as low quality, largely due to the coarse grain pattern, scarring, elasticity at edges of skin, and thickness (China interviews 2002). Australian skins are too thick and have too coarse a grain for the retail garment market. However, this market would use the coarser grain in lower-end fashions if the product was softer and more supple (China interviews 2002).

Despite the perceived low quality of the Australian skin, there are still avenues for trade. However, Australian skins must be price competitive at the product’s perceived level of quality. While Chinese domestic skins are similarly priced as that of Australian skins, feedback from skin traders was that they believed the Chinese skins are superior quality for this price (China interviews 2002).

The Chinese equate Australian goat leather to the standard of leather currently imported from India. India sends finished leather to Chinese niche handbag companies at about 0.8 to 1 mm in thickness, with thicker skins of 1.2 to 1.5 mm remaining acceptable. These companies are not concerned with thickness as they shave the leather themselves. This leather costs US$1.05 (AU$2.03) for 0.8 mm medium grade finished leather of average skin size (China interviews 2002).

When exporting goat product to China it may be requested in a variety of formats from wet blue, to crust or finished leather. Some importers require goatskins to be sent, in the first instance, in the raw state so that shrinkage and the grain structure can be adequately assessed. However, niche market handbag companies are usually more interested in finished leather (China interviews 2002).

If Australian goat product is to succeed in the Chinese leather market, it must be competitive in terms of timeliness of delivery. On average, business between two Chinese companies can be completed in the following number of days:

• From day of order to delivery of raw skin is less than 15 days • From day of order to delivery of finished leather is less than 20 days • From day of order to delivery of finished product is 45 to 50 days

In-market research suggests that Australian skins should adhere to the guidelines of an internationally recognised grading scheme that evaluates grain and scarring. Australia skins are currently graded on the basis of skin size which is not acceptable for most Chinese leather markets (China interviews 2002). However, to properly evaluate grain quality and scarring requires the removal of the hair and would only be suitable for partly processed skins, while much of Australia’s goatskin exports are shipped in a raw, hair-on state. In addition, Australian experience in the sheepskin market suggests exporters should exercise caution before implementing costly grading schemes to satisfy the Chinese market. The sheepskin industry Australia have been advised by their Chinese customers to stop grading because the Chinese would rather pay less and perform the grading themselves (Money 2002).

Grading schemes are not affected by the goat breed, and promotion of Australian skins as boer-cross would have no real significance in the Chinese market. Chinese businesses consider the breed irrelevant, and markets exist for all grades of skins - what they are most concerned with is price. This is where the Australian goat industry’s greatest challenge lays. Currently Australia is perceived as providing a low-grade skin for a medium-grade price (China interviews 2002).

21

The second issue of most importance to Chinese importers is the standard of tannage (China interviews 2002). Criteria on which Chinese evaluate tanning quality include the smoothness of the finish, lack of elasticity around the edges of the leather, suppleness of the leather, and most importantly, the variety of colours in which the product is available. While Chinese companies are basically satisfied with the standard of Australian tanning, in order for Australian goat to position itself as a product of high quality tannage, the suppleness of the leather would need to improve and the elasticity around the edges of tanned skins reduced (China interviews 2002).

3.5.1.4 Competitors There are three major areas in which Australian goatskins and leather face competition: competing species, synthetics, and other goat producing countries.

Other species that compete with goat leather include pig, bovine, and sheep – like goat, the leather of these animals is used primarily in the garment and shoe industries. Although the type of leather used in these industries is driven by fashion, price remains the most important criteria for Chinese buyers. This is demonstrated by the Chinese reaction to the current calf leather trend. Although current world fashions are heavily skewed towards calf leather, the Chinese market is not so readily affected. Instead, they purchase pig, goat or sheep leather (selected by price), emboss the leather, and then market it as ‘calf-like leather’ (China interviews 2002). Goat leather is currently experiencing similar competition from pig leather, which is being marketed as ‘goat-like leather’ (China interviews 2002).

Another threat to the goat leather market is the growing use and sophistication of synthetic materials. These are significantly cheaper (about 50% cheaper) than leather, and increasingly similar in appearance. The primary competitor for the Australian goat industry however, is China’s domestic supply. This supply is very large, and fuels the majority of goat leather production in China (China interviews 2002). Goatskins are also imported from South America, Africa, and Kenya while finished leather is imported from South America, Italy, Spain, and Turkey, and India (China interviews 2002).

India supplies goatskins and kidskins to many niche-market bag manufacturers in China. In summer and spring these companies import around 10 000 to 20 000 skins each. India enjoys an excellent reputation for value amongst Chinese businesses. Indian goat leather is considered to exhibit a similar standard of tannage as Australian product, but at a cheaper price (China interviews 2002).

Although Australia’s goat industry is facing strong competition, it does have an advantage over the domestic supply. Reportedly, market research by Chinese companies has indicated that for upper-end products, the use of Chinese goats does not appeal to consumers, who perceive imported leather to be more glamorous. However, in order to capitalise on these perceptions the quality of Australian goat leather would need to improve or prices become more competitive (China interviews 2002).

3.5.2 Italy 3.5.2.1 Market Potential Research in the Italian market for goatskins has highlighted a number of significant challenges, particularly in terms of competition from alternative sources of supply, and the shifting preferences of buyers as they focus on fashion cycles. Despite these challenges, several tanneries were interested in using Australian goatskins for tanning in garment leather applications and for footwear lining. Figures 3.3 – 3.5 on the following page depict the top ten exporters into the Italian market in 2001 for various categories of goatskins, from raw skins through to unfinished leather. Although Australia exports the greatest volume of raw skins, these exports only represent the fourth highest in terms of value, which suggests that Australian exports mainly consist of lower quality and correspondingly

22

lower priced skins (refer figure 3.3). The major exporters of more value-added goatskins to Italy include China, Saudi Arabia, Ethiopia and Nigeria among others (refer figure 3.4 & 3.5).

Figure 3.3: Top 10 exporters of goat/kid raw hides and skins to Italy 2001

050,000

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aSud

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Figure 3.4: Goat or kid skin leather, without hair, pretanned 2001

0

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Figure 3.5: Goat or kid skin leather without hair on, tanned or retanned but not further prepared 2001

Source: ISTAT

Source: ISTAT

23

0

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3.5.2.2 Market Segments & Product Positioning Goat leather is a general-purpose leather that is used widely in a variety of applications including footwear, garments, and luggage. Italy’s pre-eminence as a producer of high quality, fashion leathers means that the demand for goat leather fluctuates with fashion trends and seasonal cycles. This was evident in the footwear sector for the last winter/autumn and the coming spring/summer cycle.

Footwear – The use of goat leather in the Italian footwear sector appears to be particularly seasonal, with the majority of footwear leather on display for both the winter and summer seasons being calf leather. In-market research identified very little goatskin being used for footwear. Most companies interviewed said that they had used goat leather last season and that each season they like to change. One very large manufacturer was stamping calf leather for a goat leather effect as a casual winter shoe, but was not actually using goat leather in any of their product lines.

Overall, more interest was shown from Italian companies for importation of raw or semi-processed skins versus the finished leather for use in footwear linings. A few companies differentiated between high quality and low quality linings, and an interview was conducted with a supplier of high quality linings to the fashion footwear market (to companies such as Gucci, Prada, etc). This tannery was processing 80 000 skins per month, and claimed the Australian samples were of lower quality than they were currently receiving from Nigeria, where they had a cooperative arrangement to have the skins tanned to a wet blue stage and then imported into Italy for finishing. However, despite this claim the tannery was interested in receiving a large quantity of wet blue skins for trial purposes.

Garment leather – Samples of Australian goat leather were shown to tanneries exhibiting at the Modapelle fashion garment leather fair held in March 2002 in Florence. Several companies commented that the demand for goat garment leather was more stable compared to goat footwear leather because of goat’s suitability to nappa tanning, and its continual use in leather jackets.

3.5.2.3 Product Characteristics & Price The most important aspects for goat leather in the Italian market relate to quality issues, with the most important factor being grain size. Large grain size and inconsistent quality in the raw skins are major obstacles to Australia’s success in the Italian market. These problems appear to be related to harvesting from feral stock, which inhibits Australia’s ability to supply raw skins for quality footwear uppers and garment leather due to age factors and excessive skin damage.

Source: ISTAT

24

Companies at the Modapelle Leather Fair claimed that the grain of the Australian goat leather was too large for use in garments, and although the size of the skins was suitable, the skins were too thick. Another concern was whether consistent supply in terms of quantity and quality could be achieved if goatskins were preselected according to grain size.

Subsequently, there is very little selective demand for goat leather from Australia, which is exacerbated by the distance to the market and alternate fashion seasons. The perceptions amongst Italians of distance is strong, resulting in a lack of confidence that Australia can supply to the required quality, or provide desired levels of customer responsiveness. Despite these hesitations, several companies were experiencing difficulties sourcing constant supplies of raw, salted skins and indicated an interest in using Australian suppliers.

Despite the turn away from goat leather in the current fashion season, several fashion footwear companies interviewed at the GDS Footwear Fair held in Dusseldorf use high quality kid leather on a regular basis, particularly for the summer season. The reasons cited were that the kid leather was very lightweight and had excellent properties for a glaze finish. However they indicated that their preference was for kid leather sourced from Italy. Several Italian companies (when shown Australian leather samples), indicated that they thought the quality was comparable to that of leather sourced from India. Indian companies that were interviewed at the GDS footwear fair used goat leather all year round and particularly in winter because it is a heavier material. When shown samples of Australian goat leather, they commented that the quality was not good enough and that it would only be suitable lining material. Despite this, they were very interested in sourcing raw skins for this purpose.

The majority of companies indicated that Australia’s goat leather would be most suited for footwear linings4. Footwear linings are classified into high and low quality lining, with a preference for more compact grain in high quality linings. Feedback on Australian leather indicates that the quality is lower than that currently being used for high quality lining material. Nevertheless, one of Italy’s largest tanneries thought that it might be suitable for this purpose. Prices for this material are extremely competitive and are listed below in table 3.10. As there was no interest in sourcing raw skins for lining leather, the prices below are for semi-processed leather only.

Table 3.10: Prices of semi-processed goatskins for lining leather 2002 Product Price (US$)* Wet blue US$0.60/square foot Crust US$0.80/square foot

Source: MICAM Leather Fair 2002 *all prices are CIF Geneva 2001-AU$1 = 0.52US

One Italian tannery was already purchasing Australian goatskins and had been doing so for the past three years via an agent representing a consortium of tanneries. Although the Australian supply did exhibit skin damage and inconsistent quality, the goatskins were being tanned into fashion garment leather. This was achieved with a suede effect finish from the flesh side. The leather was also stamped in various prints (refer figure 3.6).

4 One company thought that the leather may be suitable for a lower quality range of garment leathers

25

Figure 3.6: Australian goat leather

Several comments were also received regarding the finished leather samples of Australian goat nappa. In addition to concerns regarding thickness, several companies commented on the stiffness of the leather in comparison to Italian nappa. Several industry experts also commented that the finish did not do justice to the raw material and that further work in the tannage was required in order to prepare samples that would be more appealing to the Italian market. Despite these comments, the majority of the feedback from Italian companies related to the low quality of the raw material in terms of age, skin damage and grain size.

3.5.2.4 Competitors There are two major forms of competition for Australian goatskins in the Italian market – competition from alternative commodity leathers such as calf leather, and alternative suppliers of goatskin. Figures 3.4 – 3.6 show the top ten exporters to Italy for different categories of goatskin in 2000.

Italy is a manufacturer of high quality fashion leather. Consequently, the demand for different animal leathers varies each season and is highly dependent on fashion trends. The current dominance of calf leather and synthetics in footwear uppers has resulted in reduced demand for goatskins in the short term. In addition to a lack of demand, it is clear that Australian goatskins do not match the quality required for the footwear uppers market in Italy. The result is that Australian exporters are competing on price with large volume countries such as Pakistan and Nigeria to supply tanneries for high and low quality footwear linings.

3.5.3 United States

3.5.3.1 Market Potential The majority of goatskins are imported into the US in a wet-blue state from Pakistan and India (Fowlds 2002). These two countries accounted for the largest share overall in quantity of United States goat/kid skin imports in 2001.

In 2001, China and Mali accounted for the largest quantity of raw goat/kid skins imported into the United Sates (refer figure 3.7). Semi-processed skin imports into the United States were dominated by Pakistan, Haiti, and India (refer figure 3.8), while finished skins came from Pakistan, India and Italy (refer figure 3.9). Notably, Pakistan’s skin exports are among the highest for all three skin categories.

26

Figure 3.7: Major exporting nations of raw goat/kid skins to the US – 2001

Source: Fowlds 2002 (compiled from tariff & trade data from the US Department of Commerce, the US Treasury, and the US International Trade Commission).

Figure 3.8: Major exporting nations of semi-processed goat/kid skins to the US – 2001


Figure 3.9: Major exporting nations of finished goat/kid skins to the US – 2001


010,00020,00030,00040,00050,00060,00070,000

Mali

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aChin

aPeru

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27

3.5.3.2 Market Segments & Product Positioning In the US, goat leather is mainly utilised in small leather goods such as work gloves (refer table 3.11). During in-market research, Charles L Hardtke (importers and distributors of finished kangaroo, goat, ostrich and alligator leather) indicated that there is currently strong demand for goatskins with the major end uses being shoes and handbags (Fowlds 2002).

Table 3.11: End uses of goat skins Goat leather end uses (in order of importance)

1) Small leather goods incl. gloves (work & dress) 2) Garments 3) Dressier garment linings 4) Footwear 5) Western boot shafts

Source: Fowlds 2002

3.5.3.3 Product Characteristics & Price In 2002, Austrade conducted interviews with a number of different firms operating in the US leather markets. One tannery that processes goat skins and cow hides for manufacture into work gloves indicated that they had worked with Australian goatskins in the past. This company advised that Australian goatskins have a thick grain layer, which makes them unsuitable for the type of leather they prepare. They suggested that Australian goat leather is more suitable for inexpensive work gloves, thereby putting it in direct competition with cowhide (Fowlds 2002).

Austrade also interviewed several end-product manufacturers, however none of these companies indicated that they were using Australian goatskins, so direct feedback could not be obtained. Despite this lack of feedback, a number of these organisations expressed interest in obtaining Australian goatskins for trial purposes (Fowlds 2002).

One importer and distributor of finished kangaroo, goat, ostrich, and alligator leather indicated that currently the demand for goat skins is strong, with the major end uses being shoes and handbags. Another firm that acts as an agent distributor indicated that they were currently looking for good quality, heavy goatskin for the footwear industry. This company currently sources goatskins from India and expressed interested in obtaining goat leather in a crust form to distribute to a large tannery in Mexico for which they have exclusive representation rights (Fowlds 2002).

3.5.3.4 Competitors In 2000, there were approximately 1.3 million goats in the US, up from 344 000 in 1994. An increased ethnic population in the United States has created a greater demand for goat meat, which, in turn, has seen a steady but relatively slow increase in goat farming. The main producing states are Arizona, New Mexico and Texas.

The strength of competition from domestic production is difficult to determine. However, there is a tendency within the US industry to segregate skins by country of origin and particular end uses. Similar feedback was received from several companies in relation to the grain thickness of both US and Australian goatskins, indicating that they may compete in the same market segments (Fowlds 2002). One company that purchase raw skins from the US, Caribbean and Australia and then subcontract the tannage of the skins for manufacture into work gloves indicated that they prefer Caribbean goatskins. They explained that the Caribbean product is thinner and stronger than both the US and Australian skins (Fowlds 2002).

Other producing countries also represent competition for Australian goatskins, particularly India and Pakistan. Australian goatskins compete with skins from these countries in all major markets, with the recurring issue being the inability to match these countries prices due to higher costs of production (mainly through higher wage costs).

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3.6 SWOT

Strengths Weaknesses

• Large size of Australian goatskins makes it suited to a wide variety of applications.

• Adequate supply levels (sufficient to meet minimum market demand).

• Supply is fairly centralised and coordinated amongst a few large players in the industry.

• Increasing demand for goatmeat should underpin future supply of skins

• Boer genetics being introduced in the industry have white, finer hair follicles that increase leather quality.

• Favourable reputation of Australian sheep and cattle industries in China and these companies also deal with goat.

• Inability to match lower cost structures in leather industries of some competing nations (particularly labour costs).

• Industry still primarily based on harvesting of feral goat populations.

• Little understanding of current and future supply capabilities by key stakeholders.

• Industry do not adhere to an internationally recognised grading criteria.

• Coarse grain prohibits use of skins in high value segments requiring fine grain appearance.

• Skins from feral stock are very inconsistent. • Lack of selection of skins on the basis of

customer specifications. • Quality assurance issues evidenced through

lack of control of hide handling and preservation methods.

• Seasonal demand for skin-on exports create seasonality issues for goatskin supply.

Opportunities Threats

• Supply shoe and bag markets in China and US.

• Supplying footwear linings for upper end of the market in Italy and China.

• China’s import tariffs are set to reduce. • Trends towards environmental labelling in

China could offer promotional opportunities. • Opportunities to produce and market leather

for industrial applications. • Implementation of QA measures in production

and processing systems should help to reduce skin damage and improve grading performance.

• Competition from sheep, goat and bovine leather in global commodity markets.

• Fashion trends lead to fluctuating demand and goat leather is currently ‘out of fashion’ in footwear market.

• Competition from synthetic materials which are significantly cheaper than leather and increasingly similar in appearance.

• Pigskin is sold as a substitute for goat leather in China.

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4. Emu Emus (Dromaius novaehollandiae) are a native Australian bird and belong to the large, flightless ratite family. Commercial production of emus has been based on their meat, oil, feathers, and leather. The meat and oil from the emu are the most profitable products for producers, contributing approximately 80% of the total return (Stubbs 1998).

Although the emu and ostrich are both ratite’s, their skins have significantly different qualities. The body skin from an emu has quill follicles that cover the entire skin surface, unlike the ostrich, which has a main diamond-area (crown) of raised quill follicles. However, the quill follicle on the emu is much smaller and less pronounced, being more similar to the skin of the South American Rhea.

The fibre structure of emu skin is also very different to the ostrich, resulting in a much more delicate skin suited to different end uses than those of the ostrich. It is a fine leather and industry assessments suggest that if skin damage could be minimised, emu leather would be most suitable for manufacture into lightweight garments (Verner 1999). Emu leg skin has a distinctive scale pattern and is used in leather accessories and as a highlight in other leather goods.

4.1 World Supply There is very little current information or statistical data on either global stock levels or skin production for emus. It is known that small pockets of emu production are spread worldwide. Outside Australia, other producers include New Zealand, the US, China, Canada and several European countries, including the Netherlands, Belgium, and France.

The United States of America has the largest population of farmed emus. Currently there are about 400 000 emus and approximately 2 000 producers in the US. According to the American Emu association, there has recently been a big increase in hatchlings and if this trend continues numbers could reach 500 000 by 2004 (Fowlds 2002).

4.2 World Trade Currently, there is no available data on world trade in emu skins and leather. From discussions with industry representatives in Australia, it appears that there is very little international competition, and trade in emu skins on an international basis is redundant (Pederick 1999). Product from other emu producing countries is typically consumed within their domestic markets.

The largest competition for the development of trade opportunities comes from the South American Rhea, which has similar skin to the emu and is often marketed as ‘emu’ in the United States. However there is no data to support the market size or the level of competitive intensity.

Table 4.1: Competitor analysis of world emu industry

Country Stocks Markets

South America Large stocks of the ratite called a ‘Rhea’ which is tanned in significant numbers and marketed as emu in the North American market

The US is the main market where the Rhea is sold as emu

United States 2001/2002 – 400 000 birds & 2 000 producers Very little market activity in the emu industry at this time

Source: Leather 1999; Fowlds 2002

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4.3 Australian Emu Industry

4.3.1 Industry Overview The commercial farming of emus began in Western Australia in 1987 and by 1994 all states permitted emu farming. Emus breed readily in captivity and the industry quickly developed an abundant supply of farm-bred birds. To date emu growers have operated mainly as individuals and have attempted to market their own products. While this was successful for an industry relying mainly on producing breeding stock, it has not assisted in the development of a long-term commercial emu industry, and by 1997 it became obvious that supply was exceeding demand.

In 1998 large reductions in the numbers of farmed birds occurred Australia-wide, and there has recently been a considerable contraction of the industry overseas as well (ENRC5 2002). Australian stock numbers have declined significantly since the mid 1990’s. In contrast to a total of approximately 850 000 in 1995, more recent estimates suggest that there are between 40 and 50 thousand farmed emus in Australia (ENRC 2002). The Emu Producers Association of Victoria describes this as the typical boom and bust cycle experienced by most sunrise industries (ENRC 2002).

Table 4.2: Emu stock numbers by state 1998 - 2001

State 1998 1999 2000 2001 New South Wales 5 000 23 000 29 000 25 000 Victoria 7 500 12 000 10 000 10 000 Western Australia 14 000 12 000 6 000 3 500 Queensland 10 000 1 500 2 500 3 000 South Australia 5 000 3 000 3 500 3 000 Tasmania 2 500 1 000 300 1 100 Northern Territory 0 0 0 0

Total 44 000 52 500 51 300 45 600 Source: EIFA 2002

Since the industry downturn, commercial production of emu skins has been limited. Total production in Australia for 99/00 and 00/01 has been approximately 2000 birds per year, well down from a peak of over 20 000 a few years ago. However slaughter figures for 01/02 show a increase to over 7500 birds (Pederick 2002), signalling an increase in meat and skin production, and although confirmatory trade data was unavailable at the time of writing, presumably exports also increased (McInnes 2002).

The emu industry faces significant marketing challenges. Considerable market development will be required in order to effectively position what are virtually unknown products (emu oil, meat and skin) in world markets. Other fledgling animal industries in Australia, such as the ostrich industry, have the benefit of substantial research and market development carried out in other countries. In a global sense, these industries are mature, whereas the emu industry is in its infancy (O’Malley 1998).

4.3.2 Australian Trade Australian exports of emu skins over the last 5 years peaked in 1998 when there were 3 760 emu leg skins and 4 709 emu body skins issued with permits for export, with almost the entire volume going to China. Other markets have included India, Singapore, and more recently Hong Kong. However trade data fails to show either consistent volumes or export destinations over time (refer table 4.3).

5 Environment and Natural Resources Committee

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Table 4.3: Emu raw skin export permits (no. skins) 1996 - 2000 1996 1997 1998 1999 2000 DESTINATION Leg Body Leg Body Leg Body Leg Body Leg Body

China 30 3 760 4 596 India 50 55 4 232 Singapore 1 374 1 529 Hong Kong 18 1 000 Japan 5 3 104 Switzerland 59 Indonesia 30 8 6 10 Italy 48 Thailand 10 5 10 10 9 France 20 Philippines 15 United Kingdom 10 United States 10 Total 1 384 1 751 68 4 320 3 760 4 709 0 8 1 006 10 Source: Environment Australia 2001

Aside from lacking consistency, international trade in emu skins is occurring at low volumes. While some interest has been shown from international tanners, they typically request very large volumes of high-grade skins – usually a container of about 14 000 A-grade skins, quantities which the Australian industry does not have the ability to supply (MacNamara et al. 2001).

The largest markets are in finished products such as belts, handbags, purses/wallets, and key rings. The largest importers are Japan, New Zealand, and the US. However export volumes are still small and inconsistent (refer table 4.4). The most popular items to Japan were handbags and wallets, while the highest number of key rings/holders were exported to New Zealand. The most consistent item is belts, which appear to be popular across a wide range of destinations (refer figure 4.1).

Table 4.4: Emu Manufactured product export permits (no. items) 1996 - 2000

DESTINATION 1996 1997 1998 1999 2000 Japan 201 130 3 165 New Zealand 31 63 112 United States 6 15 83 65 United Kingdom 98 Germany 52 30 Canada 60 China 55 Ireland 50 Hong Kong 43 United Arab Emirates 38 Indonesia 34 Great Britain 33 Sweden 30 1 France 30 South Africa 30 Total 207 0 467 183 601 Source: Environment Australia 2001

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Figure 4.1: Manufactured product exports by item 1996 – 2000

Throughout the period 1996 – 2000, there were about 10 different companies involved in the export of products manufactured from emu leather, with two of these companies conducting nearly 90% of the total export volume (Environment Australia 2001).

4.3.3 Australian Supply Chain The emu industry is represented by the Emu Industry Federation of Australia (EIFA). Whilst this is seen as a useful means of coordinating research and development and communicating with the industry, it is generally true that integration, communication, and cooperative partnerships are virtually non-existent along the supply chain (Horsburgh 2001). This problem is compounded by the dynamics of the market. With no trends and all markets dealing with only small numbers of finished product or skins, the emu market is extremely erratic.

In addition, the production, processing, and marketing aspects of the emu industry remain ill matched. Consequently, producers are unable to realise returns from value-adding; an activity that the emu industry considers essential for long-term industry viability.

Several factors have contributed to the current difficulties within the emu leather trade: • Lack of adequate market research and development; • The opportunistic production and harvesting of emus without adequate development of tanning

technology, resulting in the production of many skins not to a commercial standard; • The inability to supply large quantities of A-grade skins.

New leather, in particular, takes time to be accepted and emu leather has proved difficult to manufacture to a high standard. Furthermore, early attempts by individual farmers to have totally integrated ‘farm-to-market’ systems have suppressed cooperation within the industry and limited the involvement of people with expertise in the processing and marketing of products.

Leather Accessories

2%

Key Rings/Holders

19%

Purses1%

Belts45%

Handbags21%

Wallets12%

Source: Environment Australia 2001

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Nevertheless, a recent study commissioned by the RIRDC (O’Malley 1998) identified a number of positive signs for the industry:

• Moves towards an ‘Australian’ industry focus and the development of cooperative marketing arrangements

• Developments towards an industry quality-assurance program • Improvements in production technology

The supply of all emu products currently exceeds demand, although demand for emu oil has increased substantially over the first half of 2002 (Glatz 2002). In the past, emu farmers have been compelled to keep stock well past the preferred slaughter age due to the marketing problems (Evans 1999). While this situation appears to be improving, well-integrated market development required to ensure that improved sales of all products match production, is still not available.

4.3.4 Production & Processing Issues Although both body and leg skins have been successfully processed into high quality exotic leather, skin damage and tanning problems have stalled the development of the market. Poor demand for raw skins (particularly low-grade skins) and the subsequently low prices received have led to large quantities of skins being stockpiled (O’Malley 1998). Industry estimates suggest that some producers have up to 5000 skins in storage (MacNamara et al. 2001).

Average skin sizes are 7sq feet/hide and 0.4sq.feet/leg (MacNamara et al 2001). Although no formal grading system has been established, the number of defects or marks on the skin tends to be used as a grading method (refer appendix 6, p.105). An A-grade skin has only one mark; B-grade skins have two marks; and C-grade skins have a mark on every quarter of the skin (Horsburgh 2001).

Industry assessments of emu leather has found that the quality of emu leather varies in terms of size, thickness, durability, tear strength, and softness. These differences occur in individual skins but also correlate with different geographical locations and have been mainly attributed to the size of the bird at slaughter (Dingle & Coleman 1998).

There is also a significant difference in the quality of tannable skins depending upon whether the animal is slaughtered on-farm or at the abattoir, due to the high incidence of damage to the skins during transportation. According to one industry representative, approximately 99% of birds slaughtered on-farm have tannable skins with approximately 75% of those skins being A-grade quality. Conversely, only 70% of birds slaughtered at the abattoir have tannable skins, 5% A-grade (refer table 4.5), with the remaining skins having no commercial value (Glatz 2001; Horsburgh 2001).

Table 4.5: Effect of slaughter location on skin quality

Skin Grade Description On-farm Slaughter Abattoir Slaughter A One mark or blemish ~75% ~5% B Two marks 15% – 20% 10% – 15% C A mark on every quarter 5% – 10% 45% – 50% D More serious damage ~1% 30% – 40%

Source: Horsburgh 2001

These large variations in quality are reflected in the prices that farmers receive, with top prices reportedly about 100% more than the lowest (Glatz 2001). According to processors, on average around 90% – 95% of emu skins are damaged, resulting in significant price discounts. Skin prices typically range from AU$45 to AU$80/skin, with an average of AU$62.50 (Michael 2000), however prices for all skin grades exhibit considerable variation depending on the prevailing conditions of global supply

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and demand. In a recent study by Horsburgh (2001) producers quoted the following prices for raw salted skins: • A-grade skins varied from AU$80 to $140; • B-grade skins varied from AU$60 to $110 (recent prices $80); • Lower grade skins were often worthless (prices as low as AU$5 for raw skins).

The average distance to abattoir from the typical farm is about 200 km with outward freight costs to the abattoir ranging from AU$10 to AU$40 per bird. These costs, coupled with slaughter costs at some abattoirs as high as AU$90-$100, can render the recovery of meat totally unviable. In response to this situation some operators are slaughtering the stock on farm and discarding the meat, leaving only the oil and skin for sale (Michael 2000).

It appears that there is a need for more competition among processors, particularly in Western Australia where slaughtering fees have been some 50% higher than in the Eastern States (Michael 2000). But competition in the processing of emus is difficult to generate because of economies of scale and the small size of the industry.

Methods of addressing many of the production problems facing the emu industry are in development and include de-clawing chicks, reducing stock density for transport, or on farm killing. One option that has been suggested involves the use of an export accredited mobile abattoir to service more remote producers (Michael 2000), however further study would be required in order to properly assess the feasibility of such a venture.

Experimental results from an RIRDC study (Frapple, O’Malley, Snowden & Hagan 1997) found that de-clawing dramatically improved the quality of skins taken from emus (refer table 4.6). At prevailing prices the improvement in skin quality represents about a AU$30 increase in the average value received for the skins taken from birds with all toes de-clawed. However, de-clawing has animal welfare implications and cannot be endorsed as a recommended practice until it is included in the National Code of Practice for the Welfare of Animals - Husbandry of Captive Bred Emus.

Results to date indicate that de-clawing reduces fractious behaviour without compromising bird welfare (Glatz 2002), and the practice is recognised in the South Australian Code of Management for Emus, suggesting that a reasonable level of acceptance for de-clawing does exist. Nevertheless, significant opposition from animal welfare groups (and the probability of negative PR) in response to the adoption of de-clawing by the industry remains likely.

Table 4.6: Effect of de-clawing on skin grade at slaughter

Treatment A (%) B (%) C (%) D (%) E (%) Control 9 26 25 20 20 Mid-toe 26 10 16 22 26 All-toes 50 22 6 9 13 Source: Frapple, O’Malley, Snowden & Hagan 1997

Experimental results (Frapple et. al 1997) have also found that birds in single pens travel poorly and appear to attempt to join their pen mates. Moreover, the skins of the birds transported in single pens, were no better than those from birds carted at the higher densities.

However, experimental evidence did indicate that the skin of birds transported at the density of 7 birds per pen (0.48 sq meters per bird) was more heavily damaged than those of birds transported at the lower densities (refer table 4.7). Indications suggest that a pen area below 0.45 square metres per birds will result in increased skin damage. This is likely to arise because birds which sit or fall are less likely to get to their feet and are damaged by the feet of the other birds.

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Table 4.7: Effect of bird density during transport on skin grade Density A (%) B (%) C (%) D (%) E (%) Single 62 17 17 0 4 5/pen 61 15 18 3 3 6/pen 60 19 17 2 2 7/pen 39 25 20 8 8 Source: Frapple, O’Malley, Snowden & Hagan 1997

Skin damage can also occur post transport. When emus reach the abattoir and are first housed in the lairage, it is important that the birds quickly adapt to the holding area. Many abattoirs use misting to cool and calm the birds. Another suggested method to calm birds is through the use of low lux levels of blue light, but this is largely untested in practice (Glatz 2001). An important consideration at this stage is to avoid mixing unfamiliar birds together in the lairage pens because this will lead to fighting as the birds attempt to establish pecking orders.

While de-clawing will reduce the level of scratches and cuts associated with fighting, bruising remains a major cause of skin damage, along with loose and broken grain. Emu skin grain is very easily damaged due to the loose structure and loose connection to the dermis (Glatz 2000). Bruised areas become engorged with blood and destroy the skin structure in that area. The result will show as lifting or loose grain. This damage is not always obvious until late stages of processing, where areas of loose grain will result in low-grade leather (Glatz 2000).

Many skins show loose and/or flat grain at slaughter, which in the absence of other physical damage indicates genetic defects. Visual assessment of well cured green skins on arrival for tanning has shown 20% obvious loose grain, and 20% flat grain which do not plump up well. These skins will only produce low-grade leather (Glatz 2000). Salt grading indicates typical yields of 5% A grade skins, 10% B grade skins, 50% C grade skins and 35% D grade skins, with most downgrading due to grain damage. Skin defects due to bruising which may not be obvious on salted skins but can show in finished leather will further reduce the grading standard (Glatz 2000).

While injury before slaughter remains a major cause of skin damage, there is also considerable concern in the industry regarding practices which can cause skin damage after the bird is killed. There appears to be a growing awareness of the need for appropriate procedures to be adopted in order to minimize damage to the skin follicles, especially from inappropriate techniques used to remove feathers. A strong view has been expressed that QA documentation needs be developed to help train abattoir staff in the proper removal of feathers and skins so as to reduce flay cuts and general grain damage caused by improper handling methods (Glatz 2001).

Effort is needed to change the attitudes of abattoir staff so they understand that correct handling of skins is just as important as achieving high standards in the handling and processing of meat. However the competitive nature of the skin market has not been conducive to developing an industry QA approach toward abattoir practices.

There is no widely accepted standard tanning processes or finish types for emu leather. Discussions with industry representatives have revealed that many tanners perceive difficulties with processing the skin, and with limited commercial production taking place, considered that this situation is unlikely to change. Nevertheless, two tanners were mentioned, one overseas and another in Queensland, who are believed to have developed suitable processes (Horsburgh 2001).

A final issue that has important ramifications for Australia’s emu industry is the threat of exotic diseases. While emus have a high resistance to many endemic diseases, all ratites are carriers of newcastle disease. A current outbreak of Newcastle disease in poultry in Victoria is preventing the export of emu meat; this situation means producers are not processing their birds and so the supply of skins suffers (Glatz 2002).

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4.4.1 China 4.4.1.1 Market Potential Despite China’s massive leather industry, and an anticipated increase in demand for more exotic leather types, the current market potential for Australian emu skins appears to be very limited. While some opportunities do exist, they remain dependent on quality improvements, and more effective marketing. Interviews with Chinese industry representatives indicate that until tannage improves, there will be little demand for Australian emu leather.

4.4.1.2 Market Segments & Product Positioning Emu currently experiences a number of challenges that prevent it occupying a favourable market position - it is largely unknown to Chinese consumers and several potential buyers are not comfortable working with those in the Australian bird leather market (China interviews 2002). This stems from an incident that occurred 10 years ago when Australian ostrich interests, seeking to attract Chinese investors, conducted an extensive promotional campaign which was reportedly based on questionable information and statistics. This venture failed and with it many Chinese businesses suffered substantial financial loss (China interviews 2002).

As this promotional campaign was focussed on doing business with Australia and not individual businesses, Australia’s reputation in the bird leather industry has suffered. Many Chinese businesses are still wary of dealing with Australian bird leather. However, this reputation does not transfer to other leathers such as bovine, sheep, and goat where Australia is deemed to be a trustworthy trading partner based on successful existing relations (China interviews 2002).

Emu body leather is currently sold (in very small quantities) for decoration on purses, handbags, and purse linings. The size of the emu skin is especially suited to this market and while emu leg leathers do not have established markets, comments from Chinese industry representatives suggest they have great potential (China interviews 2002).

Emu leg leather is often confused with ostrich. With improved tannage, there is an opportunity to market the legs as a cheaper alternative to ostrich legs for the shoe and handbag markets (China interviews 2002).

4.4.1.3 Product Characteristics & Price Chinese leather merchants have mixed reactions regarding the emu body-leather characteristics. While most are unhappy with the evenness of the emu quill pattern, others believe the quill pattern distribution is above average for a bird leather (China interviews 2002). Nevertheless, most merchants agree that the quill is too flat. Chinese buyers place considerable emphasis on the tactile qualities of the quill pattern, and suggestions were received during the in-market research that the product could be improved by embossing the leather to raise the quill (China interviews 2002). However, Australian experience indicates that the process of lifting each quill would not be economically viable. While it may be feasible to print an entire pattern, this would be more appropriate for cheaper substitute leathers and it makes little sense to apply this process to genuine emu leather (Money 2002).

Probably more important than pronounced quill patterns are the perceptions regarding the quality of Australian tannage. Chinese buyers consider Australian emu skins to be poorly tanned and claim that the leather is quite stiff and feels like paper to touch. This coupled with the thinness of the leather, makes it very hard to market to the shoe and bag market – even for trimmings (China interviews 2002).

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Chinese leather buyers insist that the leather should be soft and supple to the touch and Chinese tanners believe that with improved tannage the skins can be stronger - eliminating the current trait of being easily stretched and ripped (China interviews 2002).

Emu leather is often confused with the leather of two other birds - chicken and ostrich. The Chinese view chicken leather as very low quality and not something they wish to be seen wearing (China interviews 2002). In the case of it being confused for ostrich, they view the emu as very poor quality ostrich skin. However, emu leg leather is viewed much more favourably, and could be marketed as a cheaper alternative to ostrich legs (China interviews 2002).

In terms of pricing, Australian emu skin (US$53) (AU$102.29) was rated as ‘acceptable’ to ‘slightly high’ by most Chinese leather buyers (China interviews 2002).

4.4.1.4 Competitors In the Chinese market, Australian emu skins and leather face competition from other exporting nations, substitute products and China’s domestic supply. China does have a small domestic emu supply, and currently, market demand for emu leather is small enough to be met from this domestic source. Because of this, the potential strength of competing nations is difficult to assess. However, should Australian emu exporters manage to secure trade with China, they could expect to experience competition from the United States, Canada, New Zealand, and some European countries.

Emu has a limited number of direct competitors (for body leather) as it is a specialty market niche. The thinness of the leather and small quill prohibits it from competing against ostrich despite emu’s price advantage being significant (emu US$53/AU$102 per skin and ostrich about US$350/AU$675 to US$400/AU$772 per skin).

‘Substitute’ leathers are probably the greatest competition in the emu leather trade. Two leathers which are sometimes being traded as emu are Rhea and Capincho. The Rhea has a similar quill pattern to the emu and the Capincho (a wild dog from Africa), has the grain buffed-off and the resulting pattern looks similar to that of the emu. However, this skin can only be made into suede as extensive scarring of the skin necessitates removal of the grain. The Chinese claim to be more impressed with these substitute products than with actual emu skin (China interviews 2002).

4.4.2 United states 4.4.2.1 Market Potential According to Austrade (Vancouver), the US emu industry is small but growing. Currently emu is primarily used as a source of meat although even this market is small. US trade data indicates that the US has imported small quantities of emu leather goods, shoes and garments or parts thereof. France Australia and Mexico are the only sources of small emu leather goods (ie notebooks, purses, wallet, watchbands and keyrings) (refer table 4.8). However imports of emu leather goods have continued to fall significantly over the last 3 years.

Table 4.8: US imports of small emu leather goods 1999 - 2001 1999 2000 2001

Country $US No. items Country $US No. Items Country $US No. items Mexico 60 262 590 France 15 718 33 France 9 569 19 France 53 576 134 Australia 241 5 Australia 44 1 Total 113 838 724 Total 15 959 38 Total 9 613 20 Source: US Fish and Wildlife Service

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Mexico has been the only source of emu shoes for the last three years. Emu shoe imports have fluctuated with a 26% increase in value in 2000 followed by a 40% fall in value in 2001 (refer table 4.9). Emu garments have followed a similar trend, with a rise in 2000 followed by a corresponding fall the next year. Exporters of emu garments into the US included France and Mexico, with Mexico using raw material sourced from the US (refer table 4.10).

Table 4.9: US imports of shoes made from emu leather 1999 - 2001 1999 2000 2001

Country $US Prs shoes Country $US Prs shoes Country $US Prs shoes Mexico 1 566 50 Mexico 5 971 508 Mexico 2 400 120 Total 1 566 50 Total 5 971 508 Total 2 400 120 Source: US Fish and Wildlife Service

Table 4.10: US imports of garments or parts thereof emu leather 1999 - 2001

1999 2000 2001 Country $US No Items Country $US No Items Country $US No Items France 14 501 26 Mexico 1 093 262 France 706 1 Mexico 2 039 161 Total 16 540 187 Total 1 093 262 Total 706 1 Source: US Fish and Wildlife Service

The data and research seem to indicate that the greatest potential for Australian emu products appears to be in the finished leather goods market. Most emu skins are currently imported in a finished leather or manufactured form. However the sporadic nature of imports indicates that emu may be only used for a particular design or season and may not have a constant market. American designers and fashion houses are known to periodically incorporate emu end products into their collections; however the majority of these are not manufactured within the US. Most specialised manufacturing takes place offshore – particularly in Italy and France. 4.4.2.2 Market Segments & Product Positioning Research carried out by the Louisiana State University Agriculture Centre (LSUAC) has identified potentially viable and lucrative US markets for emu leather in the apparel, accessories and interior products markets (refer table 4.11). Austrade found that although emu leather footwear is positioned as a quality item, US manufacturers, wholesalers and retailers out-source their footwear manufacturing to low labour cost producing countries such as China, India and Thailand. When quality is of particular importance however, manufacturing may take place within the US.

Table 4.11: End uses of emu leather

Emu leather end uses (in order of importance) 1) Handbags 2) Purses (from emu legs) 3) Belts 4) Billfolds 5) Boots (from emu legs)

6) Business card holders 7) Cheque book covers 8) Clothing with emu leather accents 9) Jackets

10) Keychains (from emu legs)

11) Sandals 12) Skirts 13) Vests 14) Watch straps 15) Wallets

Source: Fowlds 2002 The speciality uses of this leather, together with its need for unique tanning, means that there is a shortage of competition in the American emu tanning industry. There are only three tanneries of note that tan emu skins. These large tanneries are complemented with a few smaller tanneries that focus on very small runs, operating on a contract basis. The lack of tanning facilities explains why most emu leather is imported into the US in a finished state

.

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4.4.2.3 Product Characteristics & Price Currently, much of the unprocessed emu skins are sold to offshore tanneries, but the Louisiana State Government has realised that there is potential to value add to the skins – which may lead to greater employment and a strong potential for a vertically integrated industry. The Louisiana State Government is currently evaluating ways in which the skins may be used for a variety of end products (Fowlds 2002).

Currently the skin from emu legs is used to simulate skins from endangered reptiles. However, according to one western boot manufacturer, its application is limited as it is too weak and thin for the lucrative boot market. The weakness of the leather may also be a reason as to why it readily absorbs water. However, this problem is one that tanneries can readily control via water-repellent treatments in the tanning process. Although this process will not eliminate water absorption, it will substantially reduce it. Table 4.12 shows typical prices for finished emu leather.

Table 4.12: Finished emu leather price list Type Price per skin Colours Available Body skin $15 Cognac, Oak or Black Leg $6 Cognac, Oak or Black Source: Fowlds 2002

4.4.2.4 Competitors Australia faces strong competition in the emu skin market from China and the US domestic market. Currently the US has approximately 400 000 emus, and although the US emu market is still a fledgling industry it has reasonable potential for growth according to companies interviewed by Austrade in 2002.

Currently, most US emu skins are sent to Mexico for tanning. Mexican tanners are considered by the trade to be better at tanning emu skins than their American counterparts. While this may appear to be an opportunity for Australia, in reality Australia’s tanning does not enjoy a particularly good reputation and is unlikely to be considered any better than American tanning.

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4.5 SWOT

Strengths Weaknesses • It is a unique skin in the Chinese market. • Emu legs attract a lot of interest in the

Chinese market, similar in appearance to ostrich legs, and significantly cheaper.

• High resistance to many endemic diseases


• Current Australian standard of tannage for emu is considered unacceptable to the US and Chinese markets which require softer, more supple leather in a wide variety of colours.

• Emu leather is too thin and lacking in durability.

• Chinese buyers consider the emu quill pattern to be too subtle and lacking in tactility.

• The Australian emu industry suffers ill-will because many Chinese businesses associate it with a failed Australian ostrich promotion.

• Low awareness of emu in Chinese leather industry.

• Due to the scales, emu legs require hand-tannage, which increases labour costs.

• High levels of skin damage occurring on-farm, in-transit and during processing.

• Returns from emu leather unlikely to underpin long term industry viability and will probably remain supplementary to other products such as meat and oil.

Opportunities Threats • Enhanced tanning could improve the

strength of the skin. • If the leather is made more durable there

may be opportunities in the lucrative US boot market.

• Implementation of QA measures in production and processing systems should help to reduce skin damage and improve grading performance.

• Implementation of de-clawing should help to reduce skin damage.

• Chinese import tariffs set to decrease.

• Substitute skins in the form of Rhea and Capincho are being promoted as emu leather and offer superior tannage.

• Exotic disease (eg. Newcastle disease) could have negative impact on skin supply.

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5. Ostrich 5.1 World Supply Up until 1993 the global ostrich industry was highly regulated, and controlled by one organisation, the Klein Karoo Cooperative (KKC), located in Oudsthoorn, South Africa. Despite deregulation in 1993, the KKC remains responsible for approximately 50 per cent of global production (Murphy 1999). Since deregulation, ‘boom and bust’ cycles have characterised the global ostrich industry.

In 1998, total world production of ostrich skins was estimated at 320 000 (Leather 1998). South Africa remains the major world supplier with an estimated 200 000 – 250 000 farmed birds. Other suppliers include Israel, USA, Zimbabwe, China, various European countries, and Namibia (refer table 5.1).

Table 5.1: World ostrich stocks – 1995-1996 Producer Country Stock Numbers

South Africa 200 000 – 250 000 USA (1995) 250 000 Australia 50 000 China 70 000 Zimbabwe 33 000 Israel 25 000 Namibia 21 000 Europe (UK, Belgium, Holland, France) <10 000 Botswana 5 000 Estimated Total 714 000 Source: Murphy 1999; Leather 1999. Note: Ostrich numbers in China are for 1997.

Throughout late 1998 and early 1999, excess supplies eroded finished leather prices by up to 50% (Leather 1999). Factors leading to this situation included new market entrants competing on the basis of cheaper low-grade skins, increasing production in South Africa, and the Asian economic crisis (Van Zyl 1997). Since then however, there has been a decline in the number of farms in many countries, and the situation of over-supply has been slowly reversing (Burt 1999). Fresh demand resulting from economic improvements in the Asian region, particularly Japan, the world’s largest ostrich customer, has also helped to address the imbalance.

5.2 World Trade The ostrich industry is the largest in terms of volumes traded in the global exotic skins market. The South African industry has developed markets for ostrich leather in Asia (principally in Japan), and to a lesser extent in the US for the manufacture of cowboy boots. These remain the primary markets for ostrich leather today. Luxury goods made of ostrich leather have become a status symbol in Japan and ostrich leather has traded at prices ten times as high as bovine leather. However, little market development has been successfully carried out in other parts of the world (Adams & Revell 1998).

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5.2.1 Raw Skins South Africa is the largest producer and exporter of ostrich skins, responsible for over 80% of production and trade. Countries that produce ostriches but do not have the economies of scale, or quality and expertise in their manufacturing facilities, tend to export ostrich skins at the raw and crust stages. For example, most of Israel’s production is exported to Europe, particularly Spain and Italy. These markets have a preference for the quill pattern and skin size of the larger birds bred within this region. Other significant exporters of raw skins are South Africa, the US, Australia, Europe, Zimbabwe and Namibia (MacNamara et al. 2001).

5.2.2 Semi-Processed & Finished Leather Most ostrich skin is traded at what is termed the ‘crust’ stage and then finished according to customer specifications. World trade in ostrich hides has been conducted on the basis of varying grading systems, the use of which depends on the differing requirements of buyers. These grading systems are very stringent and appear to favour the buyer, particularly as damage is most evident on skins traded at the crust stage (Murphy 1999). The majority of the tanning to crust and finished stages is occurring in South Africa, although several companies are also importing significant quantities of skins into Europe and Bangladesh for finishing and manufacture (English 1999).

5.2.3 Manufactured Product Over 80% of ostrich leather is finished for the manufacture of handbags. The market for handbags and exclusive soft leather fashion items is well established and defined by strict specifications which are dependant upon the intended end use and the preferences of particular consumer market segments. Examples include Spain and Italy, which prefer the quill pattern and skin size of larger birds, and Japan, where the inclination is for quill patterns that are further apart, which is characteristic of older birds. China and South Korea are currently manufacturing shoes from ostrich leather and both have plans to target the Japanese market, while the US specialise in the boot industry, which utilises mainly third grade skins (Murphy 1999). While Europe is the most popular destination for the design and manufacture of fashion accessories, Bangladesh is also becoming an important destination for the tanning and manufacture of high quality fashion items (English 1999).

5.3 Australian Ostrich Industry

5.3.1 Industry Overview Modern commercial farming of ostriches in Australia dates from the late 1980’s. Stocks were built up from the descendants of birds that had been introduced last century plus some additional imports. The industry enjoyed a very buoyant breeding up phase through to the mid 1990’s, which has now been superseded by the production phase with, like other new animal industries, its attendant problems of significantly lower livestock prices, establishing suitable processing facilities, and securing sustainable markets.

The industry has had the advantage of having a national focus since 1988 through an active Australian Ostrich Association (AOA) which, under grower control, has liaised with and obtained funding from governments, organised an ostrich flock registry, and initiated research and residue monitoring. The AOA represents the majority of the industry, and in 2002 had approximately 100 registered producer members all involved in the production of ostrich skins (English 2002). This number is down from a total of 1500 producers in 1997 (English 1999).

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Flock sizes vary considerably, with the largest usually owned by investment companies which tend to act independently. More than two-thirds of the industry is located in southeast mainland Australia, with around 20% in Queensland and 10% in Western Australia. Currently, production returns are distributed evenly between the meat and the hides, although industry assessments suggest that ostrich producers derive a higher level of profitability from meat, despite the higher value of the skins (Stubbs 1998).

The Australian ostrich industry is still a relatively young and small industry in the international market and faces a number of problems: • Vulnerability to international market forces; • Declining hide values; • Inadequate supply of high-quality hides; • A lack of suitable tanning facilities; and • The absence of profitable and sustainable markets for the skins.

5.3.2 Australian Trade Currently, the total value of Australia’s raw skin exports is approximately AU$5.2 million. According to Australian Ostrich Association estimates, approximately 90% of Australian ostrich skins are exported raw, 9% wet-blue and 1% are finished domestically (Saint 2002). The majority (70%) of the raw exports go to South Africa for tanning and re-sale through South African export markets (refer table 5.2). The producer owns the skins throughout the entire process and commission is paid to the Australian marketing agent, South African tanner and South African distributor. Often the South African tanner will distribute the skins directly to their clients without the use of an intermediary agent. Skins from Australia are generally one or two grades poorer than South African skins as an average across production. The bulk of Australian skins are 3rd and 4th grade, whereas the bulk of South African skins are 2nd and 3rd grade. This is due to the higher incidence of damage on Australian skins, which is largely attributable to the intensive farming system used in Australia compared to the rangeland herding system in South Africa (Horsburgh 2001).

Table 5.2: Ostrich skin exports – product form & destination (approximate)

Export Form Export Destination Raw 85% – 90% South Africa 70%

Wet-Blue 5% – 10% Korea 20% Crust or Finished 1% – 2% Hong Kong 10%

Source: Horsburgh 2001

Although very little of Australia’s exports are processed to crust stage or higher, at least two Australian tanneries have recently developed the capability to do this with consistent quality, and more value added exports in the form of crust and finished leather should be possible in the future (Saint 2002). It is more efficient to export crust stage skins than raw skins in most cases. This is due to transport efficiencies obtained from the lower weight of crust skins compared to salted skins. In the crust stage, skins can be sent by airfreight without any refrigeration, which provides two significant benefits: faster deliveries and reduced costs (Horsburgh 2001). Costs are less because although sea freight is 1/5 the cost per tonne of airfreight, crust skin only weighs 1/9 the weight of a salted raw skin. A crust-stage skin will return between AU$40 and $380 based on the grade. Current average returns are estimated to be between AU$200 and $250 per skin (Horsburgh 2001).

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5.3.3 Australian Supply Chain

From discussions with industry representatives, the Australian ostrich industry appears to remain poorly integrated along its marketing chain, and fragmented within the various sectors with an absence of communication and partnerships (Horsburgh 2001). Existing firms are not investing significantly for planned growth, and participation in industry associations, understanding of industry issues and capacity for action on industry and market development is low (Horsburgh 2001).

The ostrich industry has a relatively strong and consolidated production base following the significant commercialisation and rationalisation that has occurred over the last five years. However it consists of operators working in isolation, without commercial economies of scale or branding opportunities, and often with strongly adversarial approaches to value chain suppliers, customers, and competitors (Horsburgh 2001).

There are very few leather garment designers in Australia. Most designers only have one or two leather products in their range but few specialise. Most include leather garments simply to complete their range. There are also few leather design courses compared to overseas, and it is very difficult to develop these skills given the relative lack of training opportunities. Even in the accessory sector, Australian design firms are going offshore and out-sourcing to get access to the skills required.

While the need to improve hide quality is still of major importance, this is balanced with the need for market education, export development and strengthening marketing relationships. In order to develop anything other than minor, scattered and potentially conflicting positions in international markets, greater integration and closer cooperation is required and should be a primary focus of export development.

5.3.4 Production & Processing Issues In Australia nearly half the farm gate value of ostriches is in the skins. However 58% of bird skins being processed are being downgraded by at least one grade because of skin damage. Estimates place the cost to the industry from these downgrades at about AU$70.00 per bird slaughtered (Glatz 2001).

Surprisingly, an industry survey funded by the RIRDC found that most producers reported defect rates of less than 1% for their own operations (Michael 2000). However, this was contrary to reports from processors who recorded significantly higher defect rates through bruising and skin damage. Similar research conducted by Horsburgh (2001) showed that although some damage occurs during processing, most skin damage generally occurs prior to the skin arriving at the tannery, resulting from intensive farm management and transport methods. These findings suggest that either producers are failing to recognise skin damage on farm, or transport related damage is a major problem. Whatever the cause, communication between producers and processors could be improved (Michael 2000).

This lack of effective communication appears throughout the industry and supply chain linkages are weak. While players are aware of each other, anecdotal evidence suggests there is little cooperation or integration (Horsburgh 2001). Moreover, at the business unit level, few companies appear to be committing adequate capital for planned investments, and typically exhibit limited research and development spending.

Many of the production problems facing the ostrich industry are similar to those facing the emu industry. Methods to address these issues include reducing stock density for transport, or using on-farm killing. One option that has been suggested involves the use of an export accredited mobile abattoir to service more remote producers (Michael 2000). However, as is the case for the emu industry, further study would be required in order to properly assess the feasibility of such a venture.

Methods for addressing skin damage that occurs post transport are also similar to those suggested for the emu industry. When birds reach the abattoir and are first housed in the lairage, it is important that

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they quickly adapt to the holding area. Many abattoirs use misting to cool and calm birds. Another method to calm birds is through the use of low lux levels of blue light, but this is untested in practice (Glatz 2001).

There is also considerable concern in the industry regarding practices which can cause skin damage after the bird is killed. There appears to be a growing awareness of the need for appropriate procedures to be adopted in order to minimize damage to the skin follicles, especially from inappropriate techniques used to remove feathers. A strong view has been expressed that Quality Assurance (QA) documentation needs be developed to train slaughter abattoir staff to remove feathers and skins correctly and reduce flay cuts (Glatz 2001).

Effort is needed to ensure that abattoir staff understand that correct handling of skins is just as important as achieving high standards in handling and processing of meat. However the competitive nature of the skin market has not been conducive to developing an industry QA approach toward abattoir practices.

Australian tanneries are small by world standards, and are yet to evolve to the scale of production that is common for overseas tanneries specialising in ostrich skin. In the past, the supply of skins has fluctuated widely, making investment by tanners risky. Most tanneries operate under contract arrangements and at no stage take ownership of the skins. Some industry players claim that this limits knowledge transfer across the industry, making it even more difficult for tanners to forecast production requirements (Horsburgh 2001). If ostrich hide production increases significantly, tanneries may struggle to process the increased volume of skins, and this could create a bottleneck to further growth.

A final issue that has important ramifications for Australia’s ostrich industry is the threat of exotic diseases. Ratites are carriers of newcastle disease. A current outbreak of Newcastle disease in poultry in Victoria is preventing the export of ostrich meat, this situation means producers are not processing their birds and so the supply of skins suffers (Glatz 2002).

5.4 Case Studies

5.4.1 RNA Fashion Parade In 2000, DPI officers in collaboration with Royal National Association (RNA) coordinators organised a skins fashion parade to be held in conjunction with the RNA wool fashion parade. The activity involved a leather fashion design competition for creations utilising goat, camel, ostrich and crocodile skins. Moreton and Gateway TAFES both participated in the competition and more than 80 entries were received. From these entries, ten clothing designs and two boot designs were chosen by a panel of established fashion designers and a fashion magazine editor to be exhibited in the fashion parade.

The activity enabled commercial partners to link with and interact directly with manufacturers and fashion design students. It also raised the students’ and their teachers’ awareness and understanding of new animal skins and what is involved in the design and manufacture of garments and accessories from goat, camel, crocodile, and ostrich. The commercial partners to the project have had the opportunity to develop more suitable garment leather through modifying their tanning processes and gained insight into the needs and expectations of fashion designers.

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5.4.1.1 Tanning issues The Tropical Ostrich Producers Association (TOP) donated finished hides for use in this project. This Association has an existing (although constantly developing) tanning function within its chain and as a result, the leather provided was not tanned specifically for this project. Colours were limited to a selection of browns (deep, tobacco and red) and black.

Because Ostrich leather is relatively expensive, it was not offered as an option to students as garment leather. Rather this leather was presented to the students for use as a highlight, a specific item trim or as footwear material.

5.4.1.2 Education and Awareness The texture of ostrich skin in terms of its natural attributes was a significant educational issue in itself. Most students and designers had never physically encountered or handled ostrich leather prior to this project.

Samples of skins including whole hides and leg leathers were provided to students during class time. Students were encouraged to handle and drape the leather and had the opportunity to pose a range of questions to Mrs Jean Leonard (TOP Marketing Director) who made herself available for this activity. The results of this exercise were very beneficial for the student body, TAFE instructors, and TOP with regard to idea generation and information exchange.

5.4.1.3 Manufacturing As stated previously, ostrich was not made available as garment leather. However, during the discussions with students, a Gateway Institute of TAFE student expressed an interest in creating a garment from what was viewed as a flawed hide (this hide had not been stretched correctly and consequently was viewed as unusable).

By chance the hide ‘fit’ or moulded across the shoulders, a feature the student exploited to make a cape. A cap and armbands from the same hide completed the ‘look’ and complimented a goat leather ensemble. The result was attractive and modern, and illustrates the fact that designers may see different attributes as attractive, useable, and desirable.

Students, instructors, and designers highlighted issues with the manufacturing of garments. Due to lack of experience and familiarity with use of leather in general, the majority of these issues are concerned with the mechanics of fashion design and garment assembly (including manufacturing and cutting techniques, rolling and splitting) rather than with the leather itself.

Within the context of the project, ostrich leather featured as: • A pair of boots designed by Natalie Boog and constructed by Pendragon Boot Company. These

boots featured brown ostrich leg leather teamed with pink goat leather. • Cape and accessories; (This outfit was not selected for the final parade and the ensemble was

provided to TOP as a promotional tool).

5.4.1.4 Fashion Designers’ Feedback Fashion designer awareness of ostrich leather was quite high (a number of European fashion houses featured ostrich leather designs in the 2000/2001 season releases), although most had not actually handled a hide previously. Responses from both students and established designers were very positive.

Designer feedback indicated that for the accessory market: • Design was critical to success; and

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• The products need to be designed and manufactured for specifically targeted market segments, particularly the ‘high end’ or couture and wealthy tourist markets.

Designer feedback also indicated that they believe that usage of ostrich leather as garment leather will be limited in Queensland and Australia due to: • The climate (too humid and hot); • The relative immaturity of Queensland and Australian fashion adherents; and • A very small domestic client base for high fashion leather clothing.

From another design perspective, the Pendragon Boot Company indicated that they enjoyed working with the leather, found it offered great opportunities due to the natural patterning, and were keen to pursue future work with TOP. The Pendragon Boot Company is well situated to utilise high end or expensive leathers such as ostrich as it is a small manufacturer of hand-made, exclusive, and innovative footwear. Designs are generally ‘one-offs’ and are made to measure using the client’s choice of materials. The use of ostrich leather complements Pendragon’s pricing strategy, target market, and image.

Ostrich leather accessories for the fashion parade were provided by Nenlake handbags. Nenlake is an exclusive retail brand developed by TOP to facilitate the entry of their high quality finished product into the international market. The four handbags, which were loaned for use in the parade, were design prototypes made from Bloomsdale ostrich leather.

5.4.2 Industry in-market visit - Japan Nenlake Pty Ltd is a manufacturer and marketer of Ostrich leather products who own the Nenlake brand. The supply of leather is from ostriches produced by the Tropical Ostrich Producers Association in Central Queensland. After scanning the domestic market for opportunities for its products and uncovering no real opportunities, export markets were considered for possible entry.

Nenlake chose to target the Japanese fashion market, as this was a large, high value market that suited the company’s supply capacity. Most of the ostrich leather produced worldwide is consumed by the Japanese market. Japan was also chosen as ostrich products are well known to Japanese consumers and the market is well developed with specific characteristics.

5.4.2.1 Market Entry Preparation Penetrating the Japanese leather goods market is often slow and the costs involved can be high. Potential exporters need to allocate sufficient resources to effect successful market entry. This involves building relationships with Japanese business partners and facilitating consumer acceptance for the exported goods. This process may take up to two years, requiring three to four visits per year.

Initial steps were taken to enter the Japanese market in February 2001 with a meeting between the executives of Nenlake and a Japanese direct mail order company. This meeting was to establish a relationship and discuss the possibility for Nenlake to supply the mail order company with ostrich products. From the initial meeting with the Japanese partner it was proposed that Nenlake products would likely appear in the catalogue (for sale in Japan) in approximately 11 months.

Following the initial meeting, a series of further meetings between February and August were undertaken where Nenlake and their Japanese partner discussed marketing objectives and learned about each others capabilities. Nenlake obtained feedback on its current ostrich products and how they could be adapted and refined to suit the Japanese market and the specific demands of Japanese customers. The costs for Nenlake were considerable with one in market visit to Japan costing approximately AU$19 000.

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5.4.2.2 Key Issues There were a number of key issues encountered for Ostrich products in the Japanese market. Firstly, the supply chain for exporting leather goods needs to be flexible and adequately developed prior to approaching business partners in Japan. This was a key area for Nenlake as small runs of products and the ability to adapt products ended up representing a significant advantage for Nenlake in servicing the needs of the Japanese business partner.

Potential exporters should also give due consideration to developing an appropriate brand name to be used in Japan. Translation of the brand name can construe the meaning of the brand negatively. Steps should be taken that such a situation does not arise. The Nenlake name translated to a Japanese meaning that was appropriate for all ages in any region of Japan.

Packaging is also an issue which should be considered by potential exporters. Nenlake had to ensure the packaging used met the requirements of Japanese partner. The labelling and bar coding were specific areas of importance as the packaging must allow the label to be applied without folding over the sides of the packaging. The bar coding had to contain three series of numbers to suit the inventory management system of the Japanese business partner.

5.4.2.3 Outcomes The outcomes of Nenlake Pty Ltd entering the Japanese market were that ongoing relationships were established between Nenlake Pty Ltd and the Japanese partners which allowed for significant competitive advantage to be developed through the transfer of market intelligence. This market intelligence allowed Nenlake Pty Ltd to be responsive to the market trends in Japan by developing the necessary linkages for change in the domestic supply chain. Nenlake believe that it is the collective response to market conditions exhibited by the whole chain that facilitates market penetration.

The supply chain skills acquired have been utilised in the entry of other new export markets for Nenlake Pty Ltd including the targeting of American companies participating in the Americas cup race to be held in New Zealand in 2002/2003.


5.5.1 Japan 5.5.1.1 Market Potential Japanese import statistics do not show a separate reporting category for ostrich skin in a raw state, as import quantities are not of sufficient volume. However, the statistics do report imports for leather in a crust or finished state. Trends in total imports from 1996 to 2000 show an overall increase of about 20%, while over the same period average prices per kilogram have decreased by approximately 40%, probably due to strong market competition and the influence of the Asian economic crisis. Australian market share is low, averaging about 0.6% (refer table 5.3).

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Table 5.3: Japanese ostrich leather imports (crust+finished) 1996 – 2000 Japanese Imports 1996 1997 1998 1999 2000

Quantity Imported (Kg) 90 574 100 587 132 472 182 939 108 576Value of Imports (Yen) 4 821 201 000 4 915 974 000 3 981 066 000 4 902 637 000 3 460 030 000Average Price (Yen/kg) 53 229 48 873 30 052 26 799 31 867Australian Market Share 0.43% 0.31% 0.91% 0.62% 0.59%Source: JETRO 2001

5.5.1.2 Market Segments & Product Positioning Australian companies considering entering the Japanese market need to be aware of the complete marketing channel of any prospective trading partner. A key characteristic of Japanese commerce is the strength of established business relationships, and a failure to understand the implications that immediate dealings might have on other business stakeholders can lead to difficulties (Murphy 2001).

One Japanese tanner, for example, confided that they would not service tan or finish ostrich skin for new customers unless separate specific techniques were required and these did not compete with its existing customers. This company did not wish to be seen creating competition for their established customers, by assisting new market entrants.

Product innovation is a strategy for market entry that may reduce the possibility of being viewed as a direct competitor. One example of innovation that may be attractive for Australian leather is the development of ‘eco leather’ or ‘enviro leather’ based on clean farming and production systems. Such innovation is being currently researched through the Japanese Manufactured Imports Promotion Organisation (MIPRO) with Australian company Nenlake Pty Ltd.

Probably the most attractive consumer market for Australian ostrich leather in Japan, is the corporate incentive gift market. At least one Australian company is already achieving repeat sales in corporate gift markets with leather goods from ostrich, crocodile and barramundi skin.

The act of gift giving holds particular significance within the Japanese culture. The value of the gift market is estimated at approximately AU$526 billion. Gift giving can be made within corporate or personal occasions. Corporate gifts are a segment that is particularly attractive for goods made from high value exotic leather like ostrich and crocodile. Leather goods for corporate gifts include wallets, document folios, business card holders, and personal organisers.

Corporate giftware can be purchased from specialist distributors, directly by companies or through retail outlets such as department stores and speciality stores. Trade fairs which target the gift market are held in Tokyo regularly and are recommended as one means of assessing demand for Australian corporate leather goods.

Australian made leather goods, if properly promoted, may be able to take advantage of the perception of Australia as a non-traditional leather goods manufacturer, and so highlight the uniqueness of an Australian leather gift, and allow Australian companies to capitalise on the novelty value of Australian leather. However, country of origin effects work against Australia too. As a relative unknown in the international leather industry, Australia’s tanning capabilities are regarded with suspicion, and some Japanese companies appear to consider Australian made leather as inferior to product from better established players in the international trade (Murphy 2001).

Ostrich is an established exotic leather and differentiated by a distinctive surface easily recognised by end users and regarded as symbolising success, wealth, and status. Australian suppliers should therefore try and communicate these images in product promotion. However, Australian companies will need to be very careful when targeting Japanese markets. High fashion markets will be hard to penetrate, and the advantages of the established and respected brands difficult to overcome.

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5.5.1.3 Product Characteristics & Price Japanese consumers can be fastidious about manufacturing quality, particularly where brand is not an important factor of purchase. It has been observed that Australian businesses have manufactured a range of leather goods, travelled to Japan, and have been unable to secure sales due to designs which were not adapted to Japanese consumer characteristics.

Japanese consumer dissatisfaction with imported goods provides valuable feedback for Australian suppliers. Some common observations include: • Men’s belts too long; • Yen wallets that don’t fit Japanese notes; • Credit card holders too narrow; • Handbag straps too long; • Carry bags handles too wide.

These problems highlight the need for careful in-market analysis to help guide product design. Product design issues such as incorrect sizing can lead to failure of market uptake. Initially a firm wishing to enter the Japanese market may develop a small range of samples to be presented in the context of further development through comment by Japanese buyers.

Serviceability and guarantees also play an important role, particularly in leather goods. Most Japanese outlets have an established system for goods return and replacement. Buyers expect that exporters will be able to manage defect returns without increasing loss to the Japanese seller/retailer.

Grading is based on the main quilled area divided into quarters and for a reduction in a grade for each quarter where defects are found: • Grade one has no defects in any quarter; • Grade two has one quarter only with defects; • Grade three has two quarters only with defects; • Grade four has three quarters with defects; • Grade five has all quarters with defects.

These grades may have no relationship to the quality of final goods manufactured. Generally the more quilled area used in a good, the more importance placed on grading by manufacturers. First grade is difficult to achieve and is near perfect with no defects. Third and fourth grade are the most popularly sought grades. Table 5.4 shows indicative pricing according to skin grade; Japanese companies supplied these prices in February 2001.

Table 5.4: Japanese ostrich leather prices 2001

Skin Type Grade Price (AU$) 1 6.60 – 7.00 per decimetre 2 5.20 per decimetre 3 5.00 per decimetre 4 4.20 per decimetre

Ostrich body

5 3.30 per decimetre Ostrich leg N/A 25.00 – 33.00 each piece

Note: Prices represent buying price of finished leather by leather merchants

Source: Murphy 2001

Prices for ostrich leather, like most commodities, vary from season to season according to supply and demand. Ostrich leather does not behave like a pure commodity however, and differentiation is

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achievable. This is evidenced by the significant variation in prices according to the country of origin recorded in Japanese import statistics.

Total imports for 2000 fetched an average price of 26 300 Yen (AU$419), per Kilogram, the price spread covered a low of 8200 Yen/Kg (AU$131) for imports from Thailand to 40 000 Yen/Kg (AU$639) for American imports. Australia’s prices were toward the low end, averaging about 14 300 Yen/Kg (AU$228), which suggests Australia produces relatively low-grade skins (JETRO 2001).

5.5.1.4 Competitors The main supplier to the Japanese ostrich market is South Africa. South Africa dominates the Japanese market, and in 2000 controlled over 86% of the market share. No other country holds more than a 3.5% share of the market. It is worth noting that much of the ostrich leather produced in Australia is exported to South Africa and then on-sold to Japan. However, this volume is not a significant component of the volume imported from South Africa.

Ostrich leather, as a product, faces competition from cheaper leathers and synthetics. At the Tokyo Leather Fair 2001 there were examples of fake leathers of ostrich, crocodile, and snake. These reproduced (faux) leathers may be from printed plain leather or printed materials such as synthetics. Reproductions have achieved a high level of development and surface characteristics such as raised quills and scales are stamped/pressed into the leather. These reproductions have a similar feel and appearance as genuine ostrich.

5.5.2 United States 5.5.2.1 Market Potential Research conducted on the US market by Austrade (Vancouver) has identified small, specialised niche markets for ostrich leather. Austrade believes the US ostrich industry is a growing concern but lacks sufficient research and development. Most US ostrich skins are sent to Mexico for processing to take advantage of cheaper rates of labour. The US prefers importing finished leather as it has a limited number of tanneries capable of processing exotic leathers. Most of the skins tanned in Mexico are used to manufacture western style boots for the US market.

American designers and fashion houses periodically feature ostrich products in their collections. As these end products are not usually manufactured in the US there would appear to be opportunity to enter this seasonal market. However, to enter this market, Australia would face stiff competition from specialised manufacturers based in Italy and France (refer table 5.5).

Table 5.5: US imports of large ostrich leather goods – top 6 players 1999 - 2001

1999 2000 2001 Country $US Items Country $US Items Country $US Items Sth Africa 225 882 660 Italy 654 091 1 949 Italy 1 149 107 2 271 France 246 760 167 France 498 875 348 France 834 386 625 Italy 136 046 389 Switzerland 246 300 502 Mexico 154 380 2 489 Korea 40 224 1 168 Sth Africa 168 530 785 Sth Africa 196 964 815 Mexico 34 516 884 Korea 112 020 1 475 Switzerland 112 752 155 Japan 24 169 5 Mexico 66 590 1 980 Philippines 112 387 1 502 Australia 355 15 Total 768 321 3 540 Total 1 985 561 9 611 Total 2 734 579 9 915 Source: US Fish and Wildlife Service

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5.5.2.2 Market Segments & Product Positioning Research carried out by the Louisiana State University Agriculture Centre (LSUAC) has indicated there are potentially viable and lucrative domestic markets for ostrich leather in apparel, accessories and interior products (refer table 5.6).

Table 5.6: End uses of skins in order of importance.

Ostrich leather end uses 1) Handbags & purses 2) Wallets 3) Footwear 4) Belts 5) Book cover 6) Briefcases

7) Business card holder 8) CD case 9) Day planner

10) Garments 11) Golf bags 12) Luggage

13) Make-up bag 14) Money clip 15) Totes 16) Agenda planners 17) Attaché cases

Source: Fowlds 2002

LSUAC research has indicated that ostrich leather has increased in popularity – particularly for exceptional quality, high value and correspondingly high-priced merchandise. This popularity has expanded to include non-traditional ostrich leather products such as upholstery, pillow covers, lampshades, picture and mirror frame trims, small decorative items, benches, tables coverings, sofas and wall and floor tiles (Fowlds 2002).

The American Ostrich Association commented, during discussions with Austrade, that ostrich leather’s quill pattern and suppleness make it a leather in demand by western boot makers, shoe manufacturers, clothing manufacturers, and makers of wallets, briefcases and accessories. Chrome tanned ostrich skins are more suitable for boots and shoes while vegetable tanned ostrich skins are used for purses and wallets.

Austrade found that although ostrich leather footwear is positioned as a quality item, US manufacturers, wholesalers and retailers out-source their footwear manufacturing to low labour cost producing countries such as China, India and Thailand. Where quality is of particular importance, manufacturing usually takes place within the United States.

5.5.2.3 Product Characteristics & Price Because of the specialised nature of ostrich skin, there are only three tanneries of note that tan exotic skins. These large tanneries are complemented with a few smaller tanneries that focus on very small runs, doing so on a contract basis.

Most ostrich leather is imported into the US in a finished state. This may explain America’s inability to tan specialised skins at a competitive price (refer tables 5.7 & 5.8). Export data indicates that the US sends around 30 000 to 40 000 ostrich skins each year to Mexico and South Africa with Mexico representing over 80% of exports. This would indicate that most of the skins are exported for tanning and or manufacture and than re-exported to the US (US Fish and Wildlife Service 2002).

Table 5.7: Contract tanning price list for ostrich leather (US$)

Quantity Price per ft2 Crust & Colour

Price per skin Crust & Colour

Deposit per skin Crust & Colour

Price per ft2 Crust only

Price per skin Crust Only

1-29 $ 7.50 $50 $ 5.00 >29 $100 $50 $70 Source: Fowlds 2002

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Table 5.8: Finished ostrich leather price list (US$) Description Price per sq. ft. Sold in Deposit up front Grade 1 $ 21 Choice of colours $100 per skin Grade 2 $ 18 Choice of colours $100 per skin Grade 3 $ 14 Choice of colours $100 per skin Source: Fowlds 2002 Colour matching is available (min order required)

Currently, much of the unprocessed ostrich skins are sold to offshore tanneries but the Louisiana State Government has realised that there is potential to value add to the skins — increasing employment and growing a vertical industry. The Louisiana State Government is currently evaluating ways in which the skins may be used for a variety of end products.

According to interviews conducted by Austrade in 2002, US industry participants doubt that Australian ostrich skins could compete on price with other skin producing countries, particularly South Africa. One company also believed that Australian manufacturers will find it difficult to fulfil orders and succeed in the US without on-shore replenishment facilities (Fowlds 2002).

5.5.2.4 Competitors Competition to Australian ostrich skins entering the American market can be identified from three quarters – France, South Africa and US domestic supply. However, because the United States industry is fragmented, individual firms are not necessarily the true competitors for Australian industry. Rather, the major competitors appear to be the nations of South Africa and France.

South Africa has an extensive history of farming, slaughtering, tanning and finishing ostrich skins for international trade. Their fierce competition on the world market has driven prices to as low as $SA8.00 per foot (Fowlds 2002). Their tanning technology and expertise enables them to compete effectively and efficiently in offshore markets. According to the trade, Klein Karoo, a South African cooperative, is known to have used aggressive methods to secure foreign customers.

US ostrich producers report a softening in demand due to competition from South Africa. US producers report that the South Africans have flooded the market with skins at prices below US production costs. Ostrich skins are now selling for $US50 (AU$96.50) whereas previously they were getting $US200 (AU$386) a skin. As a result many US producers contract tan and either on-sell the tanned skins to manufacturers or manufacture themselves and sell finished products (Fowlds 2002). In order to find a niche in the US market, Australia has to have the capability to compete on a level playing field in terms of quality, performance and price with South Africa.

Although South Africa poses the strongest competition by exporting 250 000 skins last year compared to the rest of the world’s 200 000 skins, Australia also experiences competition in the US market from other countries including Canada and Zimbabwe (refer table 5.9).

Table 5.9: United States imports of ostrich skins – top 6 players 1999 - 2001 1999 2000 2001

Country $US Units Country $US Units Country $US Units Sth Africa 14 799 630 85 669 Sth Africa 13 482 347 86 346 Sth Africa 14 396 165 100 664Zimbabwe 2 392 625 26 928 Zimbabwe 4 005 653 27 231 Zimbabwe 2 836 674 30 031Italy 358 491 3 180 Belgium 655 503 3 632 Mexico 865 937 4 046Mexico 333 566 4 894 Canada 478 705 1 751 Belgium 371 996 2 900France 329 123 8 556 Peru 434 285 1 400 Canada 114 399 962Belgium 320 554 2 586 France 297 133 1 651 Italy 79 630 441Total 18 519 904 132 174 Total 20 978 766 134 692 Total 19 414 707 143 850Source: US Fish and Wildlife Service

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The other main sources of competition to Australia are France and Italy in the leather goods market (refer table 5.5, p.51). France and Italy’s market share of the leather goods market has grown significantly over the three-year period from 1999 to 2001. France is known for it technical ability to process the skins and, as a result, many of the products sold in the United States are actually finished in France. French firms have established a strong presence in the US market and some companies have committed significant levels of investment in order to develop the US market for French leather products (Fowlds 2002).

The in-market research carried out for this project in France and Italy did not directly address the markets for ostrich leather. However, while researching for crocodile it became clear that compared to crocodile the ostrich leather industry fluctuates dramatically, and many manufacturers and tanneries commented on its cyclical nature. Currently, the market in Italy has an excess supply of ostrich leather. Previously, ostrich leather goods were priced similarly to crocodile leather goods, but now can be obtained at much cheaper prices. This situation occurs across all segments and was witnessed in the exclusive fashion houses in France. An example was seen in the Testoni store where an ostrich handbag retailed for only 60% of the price of an equivalent product in crocodile leather.

5.6 SWOT

Strengths Weaknesses • Australia’s environmentally friendly

production and growing system. • Improving Australian tannage. • High consumer appeal and product

recognition.


• Lack of supply chain development in Australian industry.

• Australia lacks reputation for high value prestigious leather goods.

• Difficulty understanding Japanese business culture and developing long-term business relationships.

• Ostrich products subject to unstable demand and evidence of declining prices and product status in consumer markets.

• South African market dominance effectively governs supply levels and hence price.

Opportunities Threats • Increasing consumer concerns for

environmental production issues may represent promotional opportunities.

• Strong demand for ostrich leather in US boot market.

• Profitable niches for ostrich goods in corporate gift markets.


• Implementation of de-clawing should help to reduce skin damage.

• Aggressive pricing strategies employed by South African suppliers could undermine future profitability of ostrich skin trade.

• Increasing sophistication of imitation ostrich leather.

• Declining prices for raw and semi-processed skins.

• Exotic disease (eg. Newcastle disease) could have negative impact on skin supply.

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6. Crocodile 6.1 World Supply In 1999, global stocks of crocodiles and alligators were estimated at 1 233 704 (FAOSTAT 2002). Over half of the world’s stock numbers of crocodiles/alligators are recorded in Colombia (771 456) and the United States (239 519). Other countries with large stocks of captive crocodiles/alligators include Zimbabwe, South Africa, Cambodia, Papua New Guinea and Venezuela (refer table 6.1).

Table 6.1: Global stocks of alligators & crocodiles – 1999

Country Stock Numbers Australia 8 185 Colombia 771 456 United States 239 519 Zimbabwe 63 064 South Africa 26 926 Cambodia 25 380 Papua New Guinea 24 867 Venezuela 24 640 Zambia 15 733 Guyana 10 559 Other 25 374

TOTAL 1 233 704 Source: FAOSTAT 2002

6.2 World Trade As many species of crocodiles are threatened or endangered, the world production and supply of crocodile skins and leather is regulated by the United Nations framework known as the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). There are over 100 countries that are signatories to the treaty. Signatories must abide to the provisions outlined on management, production and trade in crocodiles and crocodile products. Although the data is not an entirely inclusive representation of total world production and trade, the level of monitoring that is required provides valuable data that enables analysis of the international trade in crocodile skins, leather and manufactured goods between all signatory countries (Zajicek 1993). Table 6.2 outlines CITES classifications for crocodilian species. This information is also reproduced in appendix 11 (p.123) along with the distribution data for each type.

Table 6.2: Crocodilian species and CITES classification

Species Common Name CITES Classification Appendix Notes Alligator mississippiensis

American Alligator II

Alligator sinensis Chinese Alligator I Caiman crocodilus apaporiensis

Apaporis River Caiman I

Caiman. crocodilus crocodilus

Common Caiman, Spectacled Caiman

II

Caiman crocodilus fuscus (including Caiman crocodilus chiapasius)

Brown Caiman II

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Caiman latirostris Broad-nosed Caiman, Broad-snouted Caiman

I Excluding population of Argentina


II Population of Argentina

Melanosuchus niger Black Caiman I Excluding population of Ecuador Melanosuchus niger Black Caiman II Population of Ecuador, subject to a zero annual export

quota until a different quota has been approved by the Secretariat

Paleosuchus trigonatus Smooth-fronted Caiman II Crocodylus acutus American Crocodile I Crocodylus cataphractus

African Slender-snouted Crocodile, African Sharp-nosed Crocodile

I

Crocodylus crocodilus yacare (=Crocodylus yacare)

Yacare II

Crocodylus intermedius Orinoco Crocodile I Crocodylus johnsoni Johnson’s Crocodile II Crocodylus moreletii Morelet’s Crocodile I Crocodylus niloticus Nile Crocodile I Except those populations in App. II Crocodylus niloticus Nile Crocodile II Populations of Botswana, Ethiopia, Kenya, Madagascar,

Malawi, Mozambique, South Africa, Uganda, United Republic of Tanzania (subject to an annual export quota of no more than 1600 wild specimens including hunting trophies, in addition to ranched specimens), Zambia, and Zimbabwe.

Crocodylus novaeguineae

New Guinea Crocodile, Freshwater Crocodile

II Except subspecies in App. I.

Crocodylus novaeguineae mindorensis (also referenced as Crocodylus mindorensis)

Philippine Crocodile I

Crocodylus palustris Marsh, Broad-snouted Ormugger Crocodile

I

Crocodylus porosus Saltwater Crocodile I Except populations of Australia, Papua New Guinea, and Indonesia

Crocodylus porosus Saltwater Crocodile II Australia, Papua New Guinea and Indonesian populations

Crocodylus rhombifer Cuban Crocodile I Crocodylus siamensis Siamese Crocodile I Osteolaemus tetraspis (African) Dwarf

Crocodile I Except subspecies listed separately

Osteolaemus tetraspis osborni

Congo Dwarf Crocodile I

Osteolaemus tetraspis tetraspis

West African Dwarf Crocodile, Broad nosed crocodile

I

Tomistoma schlegelii Tomistoma, False Gavial

I

Gavialis gangeticus (Indian) Gavial, Gharial I * (ex) – Extinct ** (int) – introduced *** Appendix I – Commercial Trade of the species is prohibited **** Appendix II – Commercial trade of the species is allowed only with the issue of a permit Source: Environment Australia 2002, CITES 2002

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6.2.1 Raw Skins From 1997 to 1999, over 3 million crocodilian (includes alligator and crocodile) skins were traded worldwide (Caldwell 2002). Trade in crocodile skins can be divided by the trade in ‘classic’ crocodile skins versus other crocodile skins. Classic crocodile skins consist of all crocodile skins except for the caiman. Classic skins are recognised by the absence or presence of only a very few osteoderms (skin bones). The bones increase the difficulty of the tanning process and the risk of tearing the skins during tanning (Zajicke 1993).

Global trade in crocodile skins is estimated at US$500 million/annum (AU$775 million), with exports to Singapore, France, Italy and Japan accounting for approximately 70% of total trade (Crocodile Specialists Group 1998; Caldwell 1999). There are 23 species worldwide, with the most commonly traded skins being the American alligator and caiman. Together alligator and caiman skins accounted for 83% of world trade in 1999 (MacGregor 2002) with Colombia and the United States the two major suppliers in these markets. Other important suppliers of crocodile skins include Zimbabwe, Zambia and Papua New Guinea.

The caiman (usually harvested from the wild) is the most traded skin in terms of total volume (refer table 6.3), although not necessarily in value, as it is one of the least expensive of all crocodile skins. The smallest volumes of traded skins include the Australian freshwater crocodile, Morelet’s crocodile and the Siamese crocodile.

Table 6.3: World alligator & crocodile exports – 1997-1999 Producer Country Market Share (%)

Caiman 66.1 American Alligator 20.6 Nile Crocodile 8.7 New Guinea (freshwater) 2.5 Saltwater Crocodile 1.9 Others 0.2 Source: Caldwell 2002 (UNEP WCMC unpublished trade data)

6.2.2 Manufactured Product Crocodile leather is mainly used in shoes, handbags, small leather goods and watchstraps. Imports of all manufactured goods for 1997 totalled nearly 380 000 items, with over half of these items made from alligator skins (refer table 6.4). The majority of crocodile products are exported from Italy, Germany, United States, France, Spain and Great Britain.

Table 6.4: World imports of manufactured items - 1997 Manufactured Item Number

Watchstraps 178 417 Shoes (pairs) 111 054 Leather products (small) 81 665 Handbags 6 055 Belts 1 878 Leather products (large) 160 Wallets 85 Total 379 314 Source: Caldwell 1999 (UNEP WCMC unpublished trade data)6

6 Some industry members believe these figures significantly understate trade.

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A significant proportion of skin exports are re-imported in value added form by the original skin producing countries, indicating that tanning and manufacturing activities are occurring offshore. This is evidenced by the exports of alligator skin products from Italy to the United States. Similarly, there is a high flow of salted caiman skins from Colombia to Panama and a correspondingly high volume of finished caiman products being imported from Panama back to the United States (Caldwell 1999).

The most significant importers of manufactured crocodile products are Japan and the United States. Domestic alligator leather consumption is high in the United States, with most popular import items being watchstraps from Sweden (as a European transit port) and shoes from Italy.

The US market has been mainly focused towards the male consumer with the most popular items made from exotic skins being boots, wallets and belts. A recent study conducted by the Louisiana State University highlighted the opportunity to diversify the market into women’s apparel and accessories and interior furnishings (Belleau & Summers 1999).

Japan sources the majority of manufactured leather product imports from Italy, followed by Germany, Spain and the United States, most of which are made from caiman or American alligator. In 1997, Japan imported over 45 000 manufactured crocodile products, with the most popular items being watchstraps and handbags (Caldwell 1999).

6.2.3 Semi-Processed & Finished Leather Globally, the crocodile leather industry is small, with tanning and trade in finished leather dominated by five major players located in France, Italy and Singapore. Although all crocodile leathers are used in many of the same products, the market for finished leather to manufacturers remains highly differentiated by species. In contrast, there is little differentiation between crocodile skins at the retail level with many consumers unable to recognise different species.

Traditionally, crocodile leather has been finished as either glazed or matt finish and has not followed seasonal trends (Lever 1999). Three years ago, Japan imported 80% of all classic crocodile skin, however following the Asian crisis, the main markets have moved back to the traditional leather markets in Europe, which have led growth in the development of a wider range of colours and new tanning finishes (see France and Italy sections).

6.3 Australian Crocodile Industry

6.3.1 Industry Overview The lucrative potential of the international market for crocodile leather products was the primary catalyst in the development of the crocodile industry in Australia during the 1980’s. The crocodile meat and skin industry in Australia is estimated at AU$5M per annum, with the value of production estimated at AU$4M for the skins and AU$1M for the meat (Stubbs 1998). In 1998, there were 20 crocodile farms with a combined stock level of 60 000 crocodiles (Stubbs 1998). Currently estimates are that there are only 14 commercial crocodile farms in Australia (Lever 2002).

There are two breeds of crocodile present in Australia: crocodylus johnsoni (freshwater crocodile) and the crocodylus porosus (saltwater crocodile). The saltwater crocodile has the greatest value in terms of trade in the skins due to its size and the unique patterning of the skins. In comparison, the freshwater crocodile has a very plain scale pattern and osteoderms which makes the skin more difficult to process (Lever 2002).

The average skin size of the saltwater crocodile is 1.3 to 2 m in length and 32-42 cm wide across the belly, with age at slaughter and clutch effect being the main determinant of variations in size (Peucker 1999). Skins are traded by width across the belly, usually measured at the third row of scales from the front legs to the vent.

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The Northern Territory is the largest supplier of crocodiles producing 6500 skins/annum (Leather 1998). The Janamba Crocodile Farm in the Northern Territory is the largest producer and has approximately 10 000 crocodiles, sourcing most of these from the Gumatj Association in Gove (The Sunday Territorian, October 11th, 1998). The largest market they supply is France, mainly Hermes of Paris, which purchases approximately 3000 salted skins/annum (Leather 1998).

6.3.2 Australian Trade Salted skins account for approximately 63% of the total number of crocodile porosus items exported. In 2001, Australian export permits were issued for over 15 000 salted saltwater crocodile skins (refer table 6.5). The major export destinations are France, Japan, Singapore and Italy. Exports to France in 2001 accounted for nearly 40% of the total quantity of skin exports.

Table 6.5: Australian export permits for fresh/saltwater crocodile skins 1997-2001 (no.) 1997 1998 1999 2000 2001 Country

Fresh Salt Fresh Salt Fresh Salt Fresh Salt Fresh Salt France 5 828 6 509 1 644 7 572 5 866 Singapore 150 230 288 1 059 384 1 165 2 259 Indonesia 5 1 058 Japan 2 660 1 162 1 959 2 776 2 325 Thailand 1 40 1 050 50 Italy 55 58 1 060 379 1 793 USA 1 2 10 39 18 7 336 24 Others 43 10 6 7 4 35 3 168 2 749 Total 194 8 785 309 9 893 44 6 150 10 12 446 0 15 016 Source: Environment Australia 20027

Figure 6.1: Australian export permits for crocodile products 2000 & 2001

Source: Environment Australia 2002

7 Some industry members believe these figures significantly understate trade.

Key Rings13%Wallets

12%

Purses8%

Bags/Handbags3%

Other5%

Belts25%

Hat Accessories34%

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Figure 6.1 shows that exports of hat accessories and belts have been the best performing categories of value-added crocodile leather products in terms of volume over the 2000 - 2001 period. The US is the largest importer of both items. Other smaller, value added crocodile exports included key rings and wallets (Environment Australia 2002).

6.3.3 Australian Supply Chain Indications from industry members suggest that the crocodile industry in Australia is typified by few commercial partnerships amongst producers, and poor integration along the value chain. This situation is also related to Australia’s position of predominantly supplying salted skins, which reduces the need for a cohesive and well-developed supply chain.

In a recent industry survey conducted by Horsburgh (2001), comments from crocodile producers indicated that industry communication is perceived to be minimal or non-existent, with no industry body established and industry members who operate independently and in some cases, are openly suspicious of each other. Nevertheless, some scale economies in marketing are occurring, with at least two large operators selling skins from other farms. However, the suppliers in these arrangements believe that the benefits were skewed toward the larger operators who are operating as merchants (Horsburgh 2001).

Feedback from interviews with crocodile producers indicated a general belief that tanning capabilities in Australia were inadequate. Producers also indicated that more effective branding strategies are required for Australian skins to assist in the growth of the industry (Horsburgh 2001).

6.3.4 Production and Processing Issues Skins are the most valuable product from crocodile production. However, Australian producers are involved in producing multiple products including, meat, skins and tourism operations. This multiple product focus has frustrated the growth in skin production and has been exacerbated by the small number of players in the industry.

In terms of production, the constraint on the viability of the industry has been a lack of 1st grade skins. Current production methods are yielding a maximum of about 50% 1st grade skins (Lever 2002). A positive step in this area has been the recent introduction of single pens to ‘grow out’ the crocodiles, which reduces skin damage caused by animals fighting. If the trials currently underway are successful, then the single pen could provide higher yields of 1st grade skins. Trials at Koorana Crocodile Farm have reportedly shown that placing crocodiles in single pens for 9 – 12 months improves skin quality and provides increased growth rates (Lever 2002).

Australia has a large domestic supply of saltwater crocodiles, and is a significant supplier of salted porosus skins. Value adding of these skins by Australian industry is limited. The Australian tanning sector is in decline, with no tanners specialising in or developing the capability to tan crocodile skins to a level enabling them to compete on the global market. Those producers seeking to add value to their skins by further processing must therefore engage in significant overseas market development activity and be prepared for higher levels of risk.

Further confounding this situation is the lack of industry cohesion and collaboration, which hinders the development of new markets or improved products. The problem that this situation causes is particularly evident in the Italian market where consistent supply is very important. Joint industry efforts in both Zimbabwe and the United States have resulted in these countries being recognised as preferred suppliers by many Italian hide dealers and tanners. While the Australian industry remains fragmented, similar opportunities will not be created, and Australian suppliers will probably find themselves at a relative disadvantage.

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6.4 Case Study: RNA Fashion Parade In 2000, DPI officers in collaboration with Royal National Association (RNA) coordinators organised a skins fashion parade to be held in conjunction with the RNA wool fashion parade. The activity involved a leather fashion design competition for creations utilising goat, camel, ostrich and crocodile skins. Moreton and Gateway TAFES both participated in the competition and more than 80 entries were received. From these entries, ten clothing designs and two boot designs were chosen by a panel of established fashion designers and a fashion magazine editor to be exhibited in the fashion parade.


6.4.1 Tanning Issues The Koorana Crocodile Farm, which provided the crocodile leather for use in this project, has an existing tanning arrangement with an overseas provider. Therefore, the leather provided to students was not tanned specifically for this project. Although the colours made available by Koorana were not consistent with those chosen by the project team for inclusion in the project, the range of colour and finish options were impressive. Given the fact that crocodile is expensive leather, its use was limited to footwear design and manufacture.

6.4.2 Education and Awareness Student and designer awareness of crocodile leather was high, although most had never personally encountered or handled the product before. Sample hides in both matt and gloss finishes were provided for students during class time. These hides were also provided to a small selection of designers. The skins project team provided information on production and hide attributes.

The primary issue emerging from both students and designers was a misconception that it is illegal to use crocodile leather in Australia (retailers of fine clothing and footwear in Brisbane, in the course of informal conversations have echoed this belief).

6.4.3 Manufacturing Within the context of the project, a pair of crocodile leather boots were designed by Gateway TAFE student Annette Davis and manufactured by Pendragon Boot Company. This was the first time Pendragon had the opportunity to use crocodile leather, and being very aware of the cost of the product they approached it with a great deal of care and caution. Effective linkages were established between them and John and Lillian Lever (Koorana Crocodile Farm) in the course of the design and manufacturing process. This led to not only a successful product but also an ongoing relationship with Mr and Mrs Lever, which in turn has led to Pendragon subsequently undertaking further design and manufacturing work in developing retail products for Koorana Crocodile Farm.

As an adjunct, in the course of discussions with the Moreton Institute of TAFE, an agreement was reached which allowed the use of crocodile leather in the design and manufacture of a student entry for the Retail Association of Queensland (RAQ) competition and awards 2000. A crocodile leather

bustier was featured in an evening gown/ensemble. Although the entry was very well received, it was not selected for the final parade.

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6.4.4 Fashion Designers’ Feedback Students, TAFE instructors and designers were very impressed by the hides presented. It is possible that the combination of a high level of awareness and the traditional connotations associated with crocodile leather influenced reactions, as most expressed a desire to use it in some format, regardless of factors (climate, etc) that influence regular consumer demand patterns.

Designer feedback indicated that: • Although they would love to use crocodile, clients may not support the price of these products; • Design was critical to the success of any product; and • Products should be targeted at the ‘high end’, exclusive and couture markets.

The nature of the international market for crocodile leather makes it necessary for Koorana to develop its business in terms of finished premium fashion products. Accordingly, linkages throughout the international and domestic high fashion industry will continue to be developed.

Critical issues include: • Establishment of contacts and relationships with fashion entities (houses and retail outlets); • Establishment of contacts and relationships with suitable manufacturers; • Design; and fashion forecasting.


6.5.1 France 6.5.1.1 Market Potential France is predominantly a raw skin market for exotic skins, including crocodile. The market potential for large, salted porosus skins is strong, with constant demand for 1st grade skins. Market signals are very clear - the greatest challenge for Australian crocodile producers is to increase the volume of 1st grade skins to this market.

In 1999 the US dominated the French imports for crocodile/alligator skins, holding almost 60% of the market share. Colombia held approximately 19% of the market share, leaving the remaining 20% of imports to be shared among the remaining countries that export skins to France. Interestingly, Australia was the 6th largest supplier of skins to France with approximately 3% share of the skin imports in 1999, down from the 5th largest supplier in 1997 (refer table 6.6).

Table 6.6: Imports of crocodile/alligator skins to France in 1997 - 1999 Country 1997 1999

United states 116 043 120 021 Colombia 8 680 38 585

Switzerland 3 588 9 728 Singapore 15 259 7 900 Zimbabwe 8 735 7 123 Australia 5 557 6 450

South Africa 0 2 869 Madagascar 3 062 2 302

Panama 3 130 2 050 Japan 2 828 1 459 Others 4 205 3 674 TOTAL 171 087 202 161

Source: Caldwell 2002 (UNEP WCMC unpublished trade data) Based on importing countries’ statistics * 1998 data unavailable

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6.5.1.2 Market Segments & Product Positioning The exotic skins market in France is well established, and the players are well known throughout the industry. There are three major tanneries involved in exotic skins - Gordon Choisy, TCIM, and France Croco. Gordon Choisy is fully owned and TCIM is partly owned by Hermes. France Croco is an independent operator and competes with both of the other tanneries, who enjoy a collaborative relationship. France Croco processes the smallest volume of porosus skins, with their major involvement centred on tanning alligator skins for the watchstrap trade.

The common denominator for all three tanneries was the consistent and stable demand for large 1st grade skins to sell to the French fashion house, Hermes. In this segment it is a sellers market. All three tanneries can sell more 1st grade porosus skins than Australia can supply. It was estimated that Hermes could absorb approximately 10 000 1st grade skins/annum immediately, at 15 000 skins/annum they may begin to grade harder, but would probably take 20 000 skins/annum before price levels would be affected. Currently they take approximately 6000 skins/annum which suggests that there is significant room for increasing exports if reliable levels of supply can be ensured.

Although the market for 1st grade skins for porosus is highly dependent upon Hermes, none of the companies saw this as a problem for the future as there is no indication that the market would change, and demand for 1st grade skins has been constant for a long time. One tannery indicated that they have been unwilling to promote porosus leather to organisations other than Hermes due to the lack of supply of 1st grade skins, and would be interested in promoting the skins to other fashion houses such as Prada if increased volumes could be obtained.

All three tanneries provided prices for 1st, 2nd and 3rd grade skins, although only TCIM indicated that they had firm markets for 2nd and 3rd grade skins. TCIM has a trading company for the lower grade skins called Louisiane, which sells the majority of these skins throughout Italy. However, these skins are mainly competing with 1st and 2nd grade alligator and it was indicated that the buyers usually prefer alligator skins, due to the availability of a constant supply. Gordon Choisy were not enthusiastic for lower grade skins because the market was very competitive and they believed that profit margins were too thin.

The tanneries indicated that aesthetically there was a preference for the porosus skin because of higher number of rows of scales (32 rows) in comparison to alligator (23-25) and other crocodile species. Nevertheless, the largest production for all three tanneries was in alligator for the watchstrap trade into the US market.

In terms of finishes, all three tanneries cited an increase in the volume of tanning in matte finish, mainly for the European market. It accounts for approximately 70-80% of both TCIM and France Croco’s production, and approximately 40% of Gordon Choisy’s production. In addition to the trend towards matte finish is the increased focus on the importance of colour. Although the trend towards a wider variety of colours is due to the alligator watchstrap trade, each of the tanneries focused on the importance of being able to produce an increased range of colours for the handbag trade as well. This was borne out by visits to trade fairs where a large range of different colours for handbags was witnessed. On the other hand, there is also strong demand for traditional colours such as brown, black and tan for traditional consumers of small leather goods such as belts, wallets, and purses.

6.5.1.3 Product Characteristics & Price Each of the tanneries is buying directly from the farm, with the exception that Gordon Choisy also sources crust leather from Japan. The most common specification is 80/20 1st grade skins, although it was indicated that in reality they often only receive 70/30 1st grade in a shipment. There was no preference for quantity, as they are all interested in receiving as many 1st grade skins as possible. However, France Croco indicated that their minimum order is for 150-200 skins due to the drum size at their tannery and their preference not to mix skins from different supply sources.

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Airfreight is the preferred mode of transportation to ensure that salted skins can be processed as quickly as possible. Grading criteria was similar across all three companies, with the focus of a 1st grade skin being a blemish free belly area from around the neck area down to the vent. France Croco indicated that they also grade the tail area due to the preference for European cutting of belts by lengthways along the skin. TCIM also indicated that they look at cuts around the head area and any open cuts means that the skin will be downgraded.

Table 6.7: Prices per centimetre for salted crocodile skins (+36cm) in $US

Species 1st grade 2nd grade Alligator $4.50 - $5.00 N/A Niloticus $3.70 $2.50 - $3.00 Porosus $9.00- $9.50 $3.50 - $4.00 Source: MacNamara 2002 2001 AU$1 = 0.52 US$

The French tanneries are paying twice the price for 1st grade porosus skins compared to other skins, with the market currently paying US$9/cm (AU$17.28) for porosus skins larger than 36cm (refer table 6.7). As mentioned, this is driven by the demand from Hermes to secure a strong and constant supply of 1st grade leather. The preference is also for larger skins between 35-50cm in width for the handbag market. As shown in table 6.7, the price for 2nd grade porosus skins is less than half that of 1st grade and is comparable to prices being paid for 1st- grade alligator and niloticus skins.

Some common problems cited by the tanneries was lack of adequate preparation of the skins and an example of a rejected Hermes skin was shown where the glazing of the skins was slightly blurred on one scale in the belly area and was thus rejected by Hermes. The reason for the blurring was inadequate salting.

All skins are re-graded at the crust and finished stages, here manufacturers are particularly thorough, and tend to negotiate over the price of each skin individually. The tanneries were reluctant to provide prices for the finished leather, particularly for 2nd and 3rd grade skins as these tended to be negotiated on a client-by-client basis. Table 6.8 shows a list of prices for leather goods obtained from visits to retail stores and exclusive fashion houses.

Table 6.8: Prices for crocodile leather goods in France

Product Brand Price (Euro) Longchamps 225 Pierre Cardin 361 Amboise (tail cut) 131 Amboise (alligator) 297 Testoni 450

Men’s Belts

Hermes 1 060 Alligator watchstraps All brands 100

Hermes 5 000 – 60 000 Longchamps 4 250 Ladies handbags Testoni 3 500 Hermes 1 850 Men’s wallets Testoni 580 Hermes 14 600 Briefcases/Attaché cases Testoni 7 500

2001 AU$1 = 0.58 Euro

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Store visits also revealed the branding of Louisiana alligator on exclusive leather goods. However, when requested, very few stores could produce certificates of authenticity. In cases where documentation was provided, the documents were clearly not related to CITES certification and are obviously a branding strategy to differentiate Louisiana alligator leather in the finished leather goods market.

6.5.1.4 Competitors The main competitors in the market for crocodile in France are alligator and niloticus, however, this is only relevant for 2nd and 3rd grade porosus skins which currently compete with these skins in finished leather markets. As mentioned, there are no inhibiting factors (in terms of competition) limiting the market for 1st grade salted porosus skins.

TCIM and Gordon Choisy tanneries also indicated that they would be willing to conduct contract tanning, although the price for this was quite high (US$2/ AU$3.86 per cm) for fully finished leather. Alternatively, the tanneries indicated that they would be willing to receive 1st grade skins in payment for tannage costs. If Australian producers were to market their own 2nd and 3rd grade finished leather, it is these tanneries that they would be competing with.

6.5.2 Italy 6.5.2.1 Market Potential As the manufacturing nexus for exotic skins in Europe, the Italian market for Australian saltwater crocodile skins offers both challenges and opportunities. Italy is a strong and relatively stable market for large, classic crocodile skins and leather. Key challenges in the market arise because of complex and long-standing business relationships, market entry issues, the distance to market, and strong competition from alternative crocodile/alligator species.

Given the strength of demand for salted 1st grade porosus skins in France, the challenge lies in maximising the value received for 2nd and 3rd grade salted skins and finished leather in the Italian market. From this perspective, in-market research in Italy focused on identifying suitable market entry points for these skins.

In 1999 the US and Colombia collectively held over 75% of the market for Italian imports of crocodile/alligator skins, with 50% and 26% of the market share respectively. Australia was the 7th largest of exporter of skins to Italy over the same period (refer table 6.9).

Table 6.9: Imports of crocodile/alligator skins to Italy in 1995 - 1999

1995 1996 1997 1999 United States 37 931 29 251 29 806 46 062 Colombia 155 650 74 847 44 046 23 106 Venezuela 27 074 8 161 21 082 10 489 Madagascar 252 500 2 000 Zimbabwe 190 836 1 869 1 835 Panama 11 895 5 205 14 437 1 793 Australia 102 1 178 Switzerland 30 491 10 102 8 064 1 620 Singapore 3 091 7 737 1 000 100 Others 17 447 2 837 17 037 29 Total 284 021 139 578 137 341 88 212 Source: Caldwell 2002 (UNEP WCMC unpublished trade data) *Based on importing countries reporting figures *1998 data unavailable

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6.5.2.2 Market Segments & Product Positioning Italy is a classic crocodile skins market, with a strong focus on quality. The major use for crocodile leather in Italy is in handbags, belts and small leather goods, with many manufacturers specialising in the production of these goods. There was little evidence of crocodile use in fashion footwear displayed for the current season, although crocodile leather shoes tend to be constant lines in particular fashion houses.

Discussions with manufacturers highlighted a number of both positive and negative perceptions about porosus skins. There is a preference for the porosus in terms of aesthetic appeal because of the higher number of rows of scales (32) in comparison to other species such as alligator, which has 23 – 25 rows of scales. The higher number of rows of scales creates a more interesting scale pattern and is considered more appealing than the larger and more uniform scale pattern of the alligator. Several manufacturers also commented that the leather of porosus handled better than other species.

However, there were repeated comments that the shape of the porosus skin, particularly the highly valued belly area, was too round. This results in higher wastage levels and 25% appears to be the common average percentage of wastage calculated by manufacturers. Manufacturers explained that they gained greater yields from the alligator skin due to the length and shape of the skin, which makes it particularly suited to greater yields of watchstraps and belts.

It was discovered that the main reason for the perception of porosus skins being too round is derived from the way porosus skins are sold at the salted stage, versus the finished leather stage. It appears to have become industry practice to buy and grade salted porosus skins based on a measurement point at the third row of scales beneath the front leg.

However, when selling all species of finished crocodile leather, it is common practice to measure across the widest part of the belly. Hence, tanneries are buying 32cm porosus skins from producers and selling them as a 40cm piece of leather to manufacturers. Research revealed that this practice is exclusive to porosus skins and is common industry practice in both France and Italy. As a consequence of this practice, producers are losing money and manufacturers perceive that the belly of the porosus is too round. If manufacturers were to purchase the leather in the same manner as the salted skins were sold, manufacturing yields from porosus skins would increase for stated skin sizes and perceptions of wastage levels would be reduced.

As can be seen from figure 6.2 below, the roundness of the porosus belly is accentuated and contrasts with the more uniform width and length of the alligator skin. Some industry participants have suggested that skin shape can be manipulated by stretching (Lever 2002), however this practice reduces the strength of the leather and is not recommended for high quality leathers (Money 2002).

Figure 6.2: Black alligator skin beside blue porosus skin

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6.5.2.3 Product Characteristics & Price Salted skins – Most salted crocodile skins are being sold directly to tanneries, with the exception of one or two large hide dealers. While the majority of European crocodile tanning occurs in France, Italy is also a large crocodile tanner and imports a significant quantity of salted skins. Price specifications for salted skins do not differ significantly from those outlined in the section on crocodile in France (see table 6.7, p.64). Unlike France however, Italy predominantly imports classic crocodile skins, mainly alligator, niloticus, and porosus, with little interest in caiman skins.

Most crocodile skins are purchased as whole skins and are often individually selected according to the end use of the manufacturer. Individual orders for crocodile skins are not large, with one company commenting that a large order is 20 skins of the same colour. In the case of long-term supply relationships, many tanneries select skins according to the requirements of specific customers.

Finished leather – It was difficult to gather a clear indication of finished leather prices in Italy, as other than measuring the size of the skin, there is a tendency to negotiate price on individual lots. Price is negotiated directly between the buyer and the seller and is based upon the buyer’s inspection of the skins. Tanneries and manufacturers commented that manufacturers are renown for critical scrutiny of the leather in order to discount the price. A very broad indication of the price of finished leather is double the price of the salted skin before negotiated discounts. Table 6.10 below, is a list of finished leather prices provided by one tannery at the Modapelle Leather Fair.

Table 6.10: Finished leather prices in Italy ($US* –1st grade leather)

Species 30-34cm 35-39cm 40+cm Alligator 10.85 12.39 13.43 Niloticus 9.30 10.30 11.36 Porosus 14.46 15.49 15.49 Siamensis 11.88 13.43 14.46 Source: Fowlds 2002 *2001 AU$1 = 0.52US

Several manufacturers are interested in purchasing finished leather directly from the producer. In some cases where they have affiliated tanneries, manufacturers also purchase the salted skins, although vertical integration is not common in Italy. On the contrary, the leather industry is very fragmented and manufacturers specialise in production of particular articles, such as belts, and in some cases even further subcontract this work to artisans.

There are several key trends currently witnessed in the market for finished crocodile leather. Traditionally, the market for crocodile leather was based mainly on glazed finishes. However, matte leather has grown in popularity, with several tanneries estimating that it accounts for between 70-80% of their production.

There is also a strong focus on technical research and development, particularly in terms of an increasing variety of colours produced. The importance of colour has arisen mainly to service the watchstrap trade, which is the largest volume area for alligator skins. One tannery, which specialised in leather for watchstraps, produced over 230 different colours. While manufacturers were interested in sourcing finished porosus leather from Australian producers, a concern was the availability of colours and turnaround time.

It is common practice for manufacturers to order specific quantities of skins in particular colours, and tanneries offer a 2-3 week turnaround from the time of ordering. This is a significant challenge for Australian producers wanting to sell finished leather in the Italian market. In addition to an increase in the variety of colours available, the number of types of finishes has also increased. There are now five main types of finish, which include glazed, matte, millennium, safari and wild or what was referred to as ‘stressed’ finish.

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Finally, an important issue for the Italian market was provision of authentic CITES certification, with several companies remarking that they had thought Australian saltwater crocodile was not covered by this certification. Australian porosus marketers would therefore be well advised to ensure that these misconceptions are clearly debunked. In addition to CITES certification, it was also recommended that all skins and finished leather were sent into other European countries such as France, as CITES certified skins and leather can often take up to 2-3 weeks to clear through Italian customs.

Leather goods - In terms of leather goods, the most apparent trend is the growth in popularity of the sportive cut for modern handbags and leather goods. This is demonstrated in figure 6.3 below, which shows a sportive cut coin purse in front of a long ladies purse in the traditional ‘centre cut’ design. The ‘centre cut’ design displays the centre piece of the belly in the middle of the purse with the flank of the skin positioned symmetrically on either side

Figure 6.3: Crocodile accessories

The trend towards the sportive/casual and modern handbag designs corresponds with an increase in the overall size of handbags. This has generated demand for larger scales and skin sizes. Numerous requests were received for skins larger than 70cm and manufacturers were willing to pay US$13-14/cm (AU$25) for anything larger than 50cm. Manufacturer cited difficulty in sourcing a reliable supply of these skins and were buying mainly wild harvested alligators to obtain this size due to lack of availability of farmed stock. This represents a potential niche market opportunity for producers willing to farm stocks of larger crocodiles, particularly as the majority of alligator producers specialise in smaller skins for the watchstrap market. Wholesale prices for leather goods vary greatly, table 6.11 is indicative of the range of leather good prices collected at the MIPEL Leather fair 2001.

Table 6.11: Wholesale prices for crocodile leather goods

Item Euro Handbags (small – medium) 568 – 826 Ladies purses 149 – 232 Men’s wallets 70 – 175 Coin purses 43- 98 2001 AU $1 = 0.58 Euro

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6.5.2.4 Competitors Competition in the Italian market comes from classic crocodile skins, in particular the Nile and Alligator skins, and alternative exotic skins. The strongest competition for porosus skins in Italy comes from the US alligator industry. Alligator production was quoted in excess of 250 000 skins per annum compared to Australia’s production of porosus skins estimated at approximately 8000 skins per annum in 1999 (refer table 6.1, p.55). The strength of this supply position is bolstered by repeated comments that fashion houses with global distribution networks are specifying that they will only work with alligator. The US is a major market for finished product with a strong consumer preference for alligator skin8.

A number of industry players indicated that US customs authorities are influencing the ease of trade of alternative crocodile species in the US. The result is that exporters are not willing to risk having high value goods destroyed or customer relations damaged by having goods held at customs for an extended period.

Strong government support programs have also strengthened the position of alligator in the marketplace. One Italian designer working exclusively with alligator showed an 8 page advertisement in Vogue costing approximately US$80 000 (AU$154 400), half of which had been paid by the US alligator association. On the bottom of each page large captions stated that all product had been manufactured using US alligator leather.

Manufactured alligator products and the leather are beginning to sell for more than porosus because of this demand. 2nd and 3rd grade porosus is now going for less than alligator, with one company claiming that they could purchase 1st grade porosus for less than alligator.

Competition from alternative exotic species has been another significant issue for crocodile leather in Italy. The trade fairs in Italy indicated a strong demand for reptile skins, particularly snake skin for footwear and ostrich skin for handbags. Unlike the market for crocodile, the ostrich leather industry fluctuates dramatically, with many manufacturers and tanneries commenting on its cyclical nature. What has changed in the market however, is that ostrich leather no longer directly competes with crocodile in terms of price.

Currently, the market in Italy has an excess supply of ostrich leather. Previously, ostrich leather goods were priced similarly to crocodile leather goods, however, they can now be obtained at much cheaper prices (Lire 22 000/square foot) (AU$201 based on 1998 lire AU$ exchange rate). This situation occurs across all segments and included prices in exclusive stores of the fashion houses in France. An example of this was seen in the Testoni store where an alligator handbag retailed for Euro 3500 (AU$6 034) and the same style in ostrich was Euro 2000 (AU$3 448).

The biggest factor cited as the reason for the reluctance to import finished leather from Australia was the distance for shipment. This disadvantage was highlighted by the ordering method for exotic skins where skins are individually selected at the crust stage and turnaround time for finishing is 2-3 weeks. Concern was also expressed regarding Australia’s ability to supply the wide range of colours now available in the Italian market.

8 US consumers think that the follicle point on the porosus scale is a fault.

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6.5.3 Japan 6.5.3.1 Market Potential Over the 1996 to 2000 period, Japanese imports of crocodile skins and leather have shown significant fluctuations (refer table 6.12). In 1998 imports dropped significantly, this drop was probably related to the Asian financial crisis in 1997. Corresponding with the reduction in import volumes has been a continual decline in the prices paid (refer table 6.13).

Table 6.12: Trends in imports of crocodile/alligator skins and leather 1996 - 2000.

Import Volumes & Import Value (Kilograms & Yen) 1996 1997 1998 1999 2000 Skins 88 616 110 223 66 655 56 019 63 602 Leather 13 467 19 233 11 210 27 784 30 201 Total Kg 102 083 129 456 77 865 83 803 93 803 Total yen 1 354 984 000 1 593 332 000 812 984 000 816 074 000 820 303 000

Source: Murphy 2001

Table 6.13: Price trends for crocodile/alligator skin and leather 1996 - 2000.

Average Price In Yen Per Kilogram 1996 1997 1998 1999 2000

Skin 10 692 10 855 8 417 7 307 7 132Leather 30 261 20 637 22 475 14 638 12 142Source: Murphy 2001 2000- AU$1 = 62.64 Yen

The top three countries for Japan’s crocodile/alligator skin and leather imports are Papua New Guinea, Colombia and Zimbabwe respectively. Collectively these nations were accountable for nearly 54% of the imports of crocodile/alligator skin and leather imports to Japan in 2000 (refer table 6.14).

Table 6.14: Market share by value of crocodile/alligator skin and leather imports 2000.

Country Market Share % Country Market Share % Papua New Guinea 20.06 South Africa 0.89 Colombia 16.85 USA 0.86 Zimbabwe 16.82 Mexico 0.81 Singapore 12.75 Brazil 0.48 Indonesia 11.86 France 0.40 Thailand 9.03 Zambia 0.22 Australia 4.71 Guyana 0.17 Venezuela 3.95 S Korea 0.10

Source: Murphy 2001

Japanese crocodile and alligator skin imports have witnessed some notable shifts in country-of-origin market shares over 1996 – 2000. In the earlier years the US had dominated the market, with South Africa and Thailand also possessing large market share. All three countries had significantly reduced market shares by 2000. Conversely, nations that had appeared to benefit by increasing market share for crocodile skins include Indonesia, Colombia and Zimbabwe (refer table 6.15).

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Table 6.15: Trends in market share of crocodile/alligator skins by origin 1996 - 2000 Market share skins (Kg) Country 1996 1997 1998 1999 2000

Papua New Guinea 27 059 50 480 35 071 21 924 22 755 Zimbabwe 5 389 9 264 8 360 9 765 14 681 Indonesia 0 0 0 1 035 9 146 Colombia 605 2 203 11 589 6 983 6 550 Australia 2 162 3 675 1 689 5 246 4 275 Singapore 2 584 659 1 938 342 2 610 Mexico 0 0 0 0 1 300 S Africa 12 664 13 966 390 2 022 803 USA 31 049 20 337 1 770 4 406 584 Thailand 5 602 7 353 5 848 3 936 478 Guyana 480 0 0 0 320 Zambia 0 591 0 0 100 Tanzania 937 745 0 0 0 Malawi 0 950 0 0 0 Madagascar 0 0 0 360 0 Venezuela 85 0 0 0 0 Total 88 616 110 223 66 655 56 019 63 602

Source: Murphy 2001

Over 1996-2000 Colombia has dominated the market for imports of crocodile/alligator leather. Other prominent nations include Indonesia, Thailand and Singapore. In 2000 these four countries together accounted for 92% of the imports of crocodile/alligator leather (refer table 6.16).

Table 6.16: Trends in market share of crocodile/alligator processed leather 1996 -2000 Market Share Leather (Kg) Country

1996 1997 1998 1999 2000 Columbia 8 021 12 014 4 079 8 882 10 466 Indonesia 250 0 2 615 5 047 9 653 Thailand 991 2 028 521 697 5 486 Singapore 1 743 1 237 1 871 3 403 2 312 Brazil 0 622 1 302 2 626 900 Venezuela 1 615 1 601 589 2 205 825 Zimbabwe 465 307 12 10 439 S Africa 4 0 0 22 51 France 16 130 15 243 23 USA 260 20 0 0 19 Mexico 0 0 0 0 10 S Korea 0 72 0 0 10 Nicaragua 0 0 0 0 7 Australia 0 15 0 0 0 Papua New Guinea 12 426 0 4 477 0 Italy 67 88 201 172 0 Hong Kong 0 6 5 0 0 Germany 0 500 0 0 0 Paraguay 0 140 0 0 0 China 23 43 0 0 0 Total 13 467 19 234 11 210 27 784 30 201 Source: Murphy 20019

9 Some industry members believe these figures significantly understate trade, particularly for Australia and PNG.

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6.5.3.2 Market Segments & Product Positioning Traditionally, crocodile leather has been associated with high priced products. Japanese retail stores supplying crocodile products included department stores, specialty boutiques in hotel arcades and specialty stores. In most cases, these stores focused on the higher end of the market for crocodile products, with prestigious brands featured across all three retail store types (Murphy 2001). Crocodile products are purchased for a number of occasions in Japan. These occasions include giving crocodile products as gifts or for personal use (Murphy 2001).

6.5.3.3 Product Characteristics & Price In 2001 at the Tokyo Leather Fair, first grade finished crocodile was selling for AU$20/cm to manufacturers. At the retail level, finished crocodile leather products sold for AU$1080 to AU$4100 and a range of Comtesse branded products retailed for AU$13 000 to AU$14 500 (Murphy 2001).

Nicoh inc, a direct marketing mail order company, was also found to be offering crocodile products through its catalogues, also targeted at the higher end of the market. Items offered through the catalogue are typically unique to Nicoh. The prices ranged from AU$960 to $1600 (Murphy 2001).

6.5.3.4 Competitors In 2000 Australia had the 5th largest share of the Japanese market for crocodile /alligator skin imports. Australia’s strongest competition in skins came from Papua New Guinea, Zimbabwe and Indonesia (refer table 6.14). Competition in finished leather in Japan included Colombia, Indonesia and Thailand (refer table 6.15) (Murphy 2001).

6.5.4 United States 6.5.4.1 Market Potential The imports of crocodile skins have experienced a decline in the last three years with the numbers of imported skins dropping by approximately 33% and the value of crocodile skins declining by approximately 31% over the 1999 to 2001 period. The countries with the largest share of US imports of crocodile skins have been Singapore, France, South Africa and Zimbabwe, with the market share of imports held by France waning considerably during the same period (refer table 6.17). Most of the skins from France were traded through the TCIM tannery, which has a subsidiary tannery, Roggwiller Tannery of Louisiana.

Table 6.17: United States imports of crocodile skins 1999 - 2001

1999 2000 2001 Country US$ No. skins Country US$ No. Skins Country US$ No. Skins

Singapore 685 952 7 096 Singapore 668 631 8 065 Singapore 676 077 6 924France 662 898 4 529 Zimbabwe 324 429 4 260 Sth Africa 184 651 1 755

Sth Africa 345 002 5 405 Sth Africa 191 536 2 717 Zimbabwe 173 086 3 061Zimbabwe 212 380 4 051 France 163 631 592 PNG 168 766 1 413

PNG 79 398 641 Brazil 110 538 1 851 Australia 69 393 631Switzerland 11 079 42 Australia 20 654 71 France 56 588 113

Australia 1 733 6 Italy 9 769 351Total 1 999 252 21 779 Total 1 513 735 18 364 Total 1 387 039 14 594

Source: US Fish and Wildlife Service 200210

10 Some industry members do not agree with the data reported for Australia, France and Singapore.

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Only limited numbers of large leather goods have been imported by the US in the last 3 years, however this category has grown by approximately 87%. Large leather goods include products such as brief cases, furniture, handbags and suitcases. Italy and France have featured heavily, and account for a significant proportion of the market share over the last 3 years (refer table 6.18).

Table 6.18: United States imports of large leather goods crocodile skins 1999 - 2001

1999 2000 2001 Country US$ No. items Country US$ No. items Country US$ No. items

Singapore 120 365 224 France 188 742 61 Sth Africa 782 662 429Italy 45 544 100 Japan 167 000 215 France 659 814 183

France 23 306 19 Sth Africa 55 857 109 Italy 400 667 518Switzerland 7 585 5 Italy 49 709 111 Japan 25 709 3Zimbabwe 6 449 25 Mexico 13 200 176 Philippines 20 790 261Australia 3 998 18 Hong Kong 2 634 15 Singapore 19 148 120

Australia 1 264 38 Australia 12 286 213Total 226 266 633 Total 495 021 763 Total 1 953 619 1 817


The numbers of imports of small leather goods made from crocodile to the US have fluctuated in the last three years, however the value of these imports have continued to grow strongly throughout the period. Small leather goods include products such as notebooks, purses, wallet, watchbands, and keyring holders. The countries contributing the largest numbers of small goods imports to the US over the 1999 – 2001 period were Singapore and Italy. Of particular interest is the growth of Australia’s market share (refer table 6.19).

Table 6.19: United States imports of small leather goods crocodile skins 1999 – 2001


Mexico 83 996 1 326 Switzerland 189 431 1 123 Switzerland 247 704 1 467Singapore 66 720 5 183 Singapore 64 145 2 423 Italy 105 103 1 322Switzerland 45 751 587 Italy 50 158 742 Singapore 67 938 2 954France 44 125 12 France 39 525 51 France 65 579 39Italy 33 295 258 Australia 30 974 694 Australia 63 452 2 424Australia 27 454 490 South Africa 21 585 360 Mexico 49 405 2 183Zimbabwe 6 628 622 Mexico 18 782 817 South Africa 46 001 956Total 338 106 8 681 Total 439 383 6 416 Total 672 721 11 725


There were only isolated imports of garments made from crocodile skins to the US however the number of garments has grown significantly over the past 3 years. In 2001 nations accountable for the greatest share of garment imports to the US were Italy and South Africa (refer table 6.20). Table 6.20: United States imports of garments made from crocodile skins 1999 – 2001


Italy 22 629 7 Italy 2 699 2 Italy 51 229 73UK 11 324 1 Mexico 800 8 Germany 13 242 2Mexico 450 6 South Africa 351 10 South Africa 8 618 85 Mexico 420 7 Australia 15 1 Australia 145 1Total 34 403 13 Total 3 865 22 Total 73 654 168


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Table 6.21 suggests a significant US market exists for shoes made from Crocodile. Mexico, Spain and Italy are the main exporters of shoes made from crocodile to the US. In 2001, the value of US imports fell significantly due to a dramatic cut in imports from Mexico of almost 50 per cent. Imports from the other two main suppliers (Spain & Italy) have continued to grow over the last three years.

Table 6.21: United States imports of shoes made from crocodile skins 1999 - 2001

1999 2000 2001 Country US$ Prs shoes Country US$ Prs shoes Country US$ Prs shoes

Mexico 714 023 6 779 Mexico 1 125 285 11 034 Mexico 555 522 6 002Spain 237 168 3 945 Spain 301 700 3 660 Spain 432 569 6 615Italy 174 354 1 867 Italy 282 726 2 516 Italy 320 132 3 206Mozambique 55 575 510 UK 2 205 6 UK 17 989 62South Africa 60 750 540 France 9 264 4 436Indonesia 40 836 492 Portugal 4 740 40Total 1 286 045 14 171 Total 1 713 316 17 246 Total 1 356 643 20 505Source: Fowlds 2002

6.5.4.2 Market Segments & Product Positioning Most of the United States’ domestic supply of exotic skins is exported for processing. Currently within the United States, the western-style boot manufacturers have evolved to become the major users of crocodile leather. End products of exotic skins such as footwear, handbags, gloves, and small leather goods command high retail prices in the United States. These products are known to appeal to affluent consumers who possess high disposable incomes. Consumers of high end products are known to be brand conscious and price is relegated to secondary consideration (Fowlds 2002).

Table 6.22: End uses of crocodile skins

Products (in order of importance) 1) Boots (western style) 2) Shoes 3) Handbags 4) Wallets

5) Belts 6) Watch bands 7) Jackets 8) Furniture upholstery

Source: Fowlds 2002

6.5.4.3 Product Characteristics & Price Indicative pricing for crocodile skin in the US market appears as follows.

Table 6.23: Desert finish Nile crocodile hornback skins pricing (US$/cm)

Size Grade I Grade I/II Grade II/III 30/34 cm $6.00 $5.00 $4.00 35/39 cm $7.00 $6.00 $5.00 Source: Fowlds 2002 2001 AU$1 = 0.52$US

6.5.4.4 Competitors In 2001, Australia held the fifth largest market share for US crocodile skins imports. The strongest competition is from Singapore, the African region, and Papua New Guinea. Australia is in the top seven for market share of small and large leather goods imports to the US. South Africa, Singapore Italy and France are Australia’s main competitors (Fowlds 2002).

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For the general consumer, products produced from alligator leather closely resemble those made from crocodile leather. This can be seen as a potential competitive threat for crocodile products produced in Australia and exported to the United States. Although difficult to prove, anecdotal evidence suggests that end products made from caiman and alligator skins are being labelled as crocodilian in order to command a higher price. Though it appears that the consumer is willing to pay more for crocodile leather products, the question is: can the consumer tell the difference (Fowlds 2002).

Other competitive pressures come from caiman skins, as they are less expensive than alligator or crocodile skins. One industry specialist estimated that about half of the finished crocodilian goods imported into the American market were made from caiman (Fowlds 2002).

6.6 SWOT

Strengths Weaknesses • Higher number of rows of scales creating

aesthetic appeal. • Australian saltwater crocodile leather

enjoys good reputation as a premium product.

• Ongoing productive research into reducing skin damage.

• Recognition as an environmentally responsible industry and positive relationship with environmental lobby groups.


• Lack of cohesive supply chain for the coordinated supply and promotion of saltwater crocodile skins.

• Low supply numbers, particularly yields of 1st grade skins.

• No Australian supply chains formed with producers, tanners and manufacturers.

• Sporadic commitment of industry to market development and in-market visits.

Opportunities Threats • Surplus demand for 1st grade porosus skins

in Europe. • Form supply chains with foreign

manufacturers/tanners to develop Australian product.

• Develop niche markets with corporate gift lines.

• Strong interest in direct supply relationships with manufacturers in Italy.

• Branding and promotion of saltwater crocodile at a retail level.

• Demand for larger crocodile skins in Europe.

• Stable and constant market for high quality skins creating profitable returns in France.


• Expansion of the number or size of production enterprises could attract more investment and provide greater economies of scale for Australian industry.

• Competition from other reptile species, particularly alligator and niclotus.

• Commercial sizing/measurement systems for salted skins versus finished leather is prejudiced against porosus.

• Low prices and strong competition for 2nd and 3rd grade skins in Italy.

• Lack of awareness of different species at a retail level.

• Reliance on one main customer for high price for 1st grade skins and leather.

• Possibility of increased pressure from environmental lobby groups.

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7. Camel 7.1 World Supply There are an estimated 20 million camels worldwide, with the majority of these are in Sub-Saharan African nations of: Somalia, Sudan, Mauritania, and Ethiopia (refer table 7.1).

Table 7.1: World Camel Stocks 1997 - 2001

1997 1998 1999 2000 2001 Somalia 6 300 000 6 100 000 6 000 000 6 100 000 6 200 000 Sudan 2 936 000 2 974 000 3 031 000 3 108 000 3 200 000 Mauritania 1 162 000 1 185 000 1 206 000 1 230 000 1 230 000 Ethiopia 1 030 000 1 040 000 1 050 000 1 060 000 1 070 000 India 1 030 000 1 030 000 1 030 000 1 030 000 1 030 000 Kenya 880 000 890 000 870 000 850 000 830 000 Pakistan 800 000 800 000 800 000 800 000 800 000 Chad 677 085 695 000 715 000 715 000 715 000 Nigeria 392 000 398 000 404 000 410 000 410 000 Saudi Arabia 426 015 415 000 400 000 400 000 400 000 Other 3 204 105 3 119 075 3 221 111 3 245 926 3 252 526 World Total 18 837 205 18 646 075 18 727 111 18 948 926 19 137 526 Source: FAOSTAT 2002

Although figures for production are unavailable, it seems reasonable to assume that the higher the rate of slaughter, the greater the capacity for camel skin production. Slaughter figures for the past five years suggest the largest camel skin producing countries are probably Saudi Arabia, Somalia, Sudan, and Mauritania (refer table 7.2).

Table 7.2: World Camel Slaughter Figures 1997 - 2001

Camel Slaughters (Head) 1997 1998 1999 2000 2001 Saudi Arabia 244 000 231 000 218 000 218 000 218 000 Somalia 200 000 210 000 200 000 210 000 210 000 Sudan 120 000 125 000 130 000 133 000 137 000 Mauritania 98 000 98 000 99 000 100 000 100 000 Ethiopia 88 800 89 000 89 200 90 100 90 100 Egypt 83 000 82 000 110 000 112 000 85 000 China 48 000 61 000 67 000 70 000 75 000 Other 404 070 404 971 421 984 426 170 427 749 World Total 1 285 870 1 300 971 1 335 184 1 359 270 1 342 849 Source: FAOSTAT 2002

It is very difficult to obtain statistical verification of the quantity of camel leather produced, although it is known that camel skin tanning is quite common in the Middle East in places such as Saudi Arabia and Egypt (Yassa 1999).

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However, the quality of camel skins produced from these countries is poor according to Shalash (1983) for the following reasons:

• Older camels were more likely to be used for skins than younger camels. Generally, skins are poor in quality usually due to scarring and insufficient care taken when processing;

• Main consumers are desert nomads who use the camel for trade and transport. Generally, – Younger camels are a prized means of transport and usually not processed (younger

camels have better skins); – Live camels may be considered more important to the economy and culture; – Camel meat and skins are perceived as being inferior and considered fit for only

poverty-stricken urban societies; • The camels’ ability to produce milk, meat, wool and skin were of a secondary importance; • Camel processing is low because camel meat can be easily substituted by other meats.

7.2 World Trade There is very limited statistical data on the world production or trade in camel hides and leather. Most production, tanning and consumption occurs in the Middle-East (Yassa 1999). The fragments of information available on the market for skins suggest that large quantities are available as a by-product of meat production and are mainly tanned for manufacture into shoes and sandals. Other uses include fashion items, luggage, garments and bed covers (Nawawy 1998). Freely available information is very limited, but table 7.3 outlines two of the major players in the Saudi Arabian leather industry.

Table 7.3: Saudi Arabia Camel Leather Industry

Major industry players Markets

Al-Dagal – 1000 camel/cow hides/week to service local garment market Al Ahli Leather Factory – 250 camel/day processed and 5 000ft² of finished leather for manufacture into shoe uppers and leather goods

Large proportion of finished products are consumed within the producing region

Source: Leather 1999

7.3 Australian Camel Industry

7.3.1 Industry Overview The Australian camel population is estimated to be approximately 200 000, most of which are feral (CACIA 2000). Although originally introduced to this continent as domesticated livestock, Australia remains the only region throughout the world where wild herds of dromedary (single-hump) camels continue to exist. Camels are scattered through the arid interior of Australia (refer figure 7.1) with an estimate of:

• 50% in Western Australia; • 25% in the Northern Territory; and • 25% in Queensland and northern South Australia.

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Figure 7.1: Distribution of Australia’s feral camel

7.3.2 Australian Trade In recent years, camel harvesting has averaged 350 per year and approximately 50% of the animals are wild harvested and the other 50% are farmed under a rangeland extensive production system (Horsburgh 2001). Most commercial producers in Australia are centralised under the one industry association, the Central Australian Camel Industry Association (CACIA 2000). Presently, the CACIA is the only organisation responsible for the production of camel meat and hides in Australia. Camel skin production has averaged between 200 and 300 skins/annum, equivalent to approximately 80% of all camels slaughtered (Seidel 1999).

The total yield is used, however no grading system is applied to the skins. Due to the hump, the hide is split into two ‘sides’ and sold on a per side basis. Current prices are US$5 a side (AU$9.65). Most animals are approximately six years old at slaughter, with the average size of a side, which is half of the total hide size, ranging between 0.8m² and 1.4m². Skin thickness varies from 2.5 mm at the belly through to 6mm at the ridge (Scott 1999). Camel leather has a very high tensile strength, however the majority of skins are very badly scarred (Horsburgh 2001).

Currently skins are generally low quality and used for a range of products such as small accessories (belts, handbags, and wallets) and harness leather. Whilst the high tensile strength of the leather is an advantage, the currently high degree of scarring is a critical disadvantage to the industry. Increased domestication and farming rather than wild harvesting will increase the quality, but the industry also needs to develop improved husbandry and management practices as farming systems develop.

There is significant demand for live exports of camels from Australia. These exports are primarily sourced for the meat and trading partners have indicated a willingness to cooperate in a scheme whereby the hides of these animals are shipped back to Australia (Seidel 2002). This development could help to ensure more consistent supplies of hides are available for processing. It is generally anticipated that camel meat market development will lead to increased skin production and drive the need to develop markets and/or products for the skins.

Source: Cental Australian Camel Industry Association 2000

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7.3.3 Australian Supply Chain The Central Australian Camel Industry Association has adopted a vertically integrated approach from production to wholesaling finished products, in order to better manage industry development. The producers sell their skins to a marketing business, ‘Ship of the Desert’ that has the skins tanned and manufactured under contract, and wholesales the finished products throughout Australia.

The camel industry is more integrated than the other industries associated with the project. Communication channels are well developed and the industry association functions effectively. Production and marketing operations are well linked, however the industry needs assistance to develop export markets for its products (Horsburgh 2001). Industry discussions have identified the need for micro-marketing to match the characteristics of the leather, with market needs. Generic marketing is unnecessary due to low production volumes and the uniqueness of the product. Specific customers are required, so that the industry can tailor its products to those customer’s requirements.

There is only one tannery in Australia that has developed the technical capability and know-how to tan camel hides. At present, all camel skins are tanned at this tannery, which is located in South Australia (Horsburgh 2001). Finished leather is sold for AU$75 per square meter, with tanning costs approximately AU$40 per side (Seidel 1999).

There are numerous design issues relating to the use of camel leather in garment manufacture. Excessive hide damage means the skin is better suited for accessories because of the reduced cutting area, and the thickness of the skins also prohibits use in a wide array of garments due to the leathers inability to ‘drape’, an attribute that is sought after by many designers.

Finished hides are exported for manufacture into high quality fashion accessories in Bangkok. Manufactured items are then re-imported for sale in the domestic market, mainly at duty free stores. Most hides are manufactured into fashion items, such as women’s handbags, purses, men’s wallets, and belts. To date, none of the manufactured camel leather products have been exported overseas, although market development is currently being undertaken in the United States and Japan (Seidel 1999).

The camel leather tanned in Australia is manufactured into belts, satchels, handbags, wallets, footwear, hat accessories, and harnesses/saddlery. Camel leather is also suitable for use in the upholstery industry, although at present, the yield of useable leather from feral camels is quite low due to the high levels of hide damage. Camel leather is also suited for use in garments, although the skin consists of very tight fibre bundles, which restrict the making of very soft leather. The tight grain structure of the skins also hampers absorption, hence increasing the difficulty of finishing the skins (Scott 1999).

The distribution of camel hides and finished leather products in Australia is controlled by CACIA. All hides are presently sold by the Association to one company, which organises the tanning, manufacturing, and distribution of the finished goods into domestic retail outlets.

7.3.4 Production and Processing Issues Camel leather is difficult to process due to the awkward shape of the hide and is a low-value leather in world markets. There are also issues in relation to colour, softness, and texture, which need to be addressed in the tanning process. If camel leather is to find increasing applications in garment manufacture processors will need to improve the leather’s ability to drape. These constraints will need to be addressed if the skins are to provide attractive commercial returns as volumes increase.

As mentioned, another significant production issue is the high levels of hide damage. The development of improved livestock handling and the use of domesticated animals have the potential to reduce hide damage and increase usable yields.

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Case Study: RNA Fashion Parade In 2000, DPI officers in collaboration with Royal National Association (RNA) coordinators organised a skins fashion parade to be held in conjunction with the RNA wool fashion parade. The activity involved a leather fashion design competition for creations utilising goat, camel, ostrich and crocodile skins. Moreton and Gateway TAFES both participated in the competition and more than 80 entries were received. From these entries, ten clothing designs and two boot designs were chosen by a panel of established fashion designers and a fashion magazine editor to be exhibited in the fashion parade.


7.3.5 Tanning issues

Camel leather was utilised in the RNA parade as accessories. Although no accessories were manufactured specifically for the parade, an existing range of handbags from Ship of the Desert were paraded with garments where suitable.

A total of 8 camel hides were also tanned for use as garment leather. Unfortunately, these skins were not considered suitable for garment leather and were returned by the designer. The major reasons cited for not wanting to use the skins was the ‘stiffness’ of the hides and smeared, inconsistent colouring of the leather. Significant problems occurred in the tanning process, including inadequate hair removal and lack of ‘colour-take’ in the dyeing process.

7.3.6 Design Issues As has been mentioned, acceptance of the leather by designers is critical in the development of market opportunities for the leathers of the five skins. In the case of camel leather, there are significant issues in relation to the colour, softness, and texture, which need to be addressed in the tanning process.

The suitability of leather to garment is also questionable due to thickness and hide damage on the skins. In particular, the hide damage means the skin is more suited to accessories due to reduced cutting area. The thickness of the skins also prohibits their use in a wide array of garments due to the compromise in ‘drape’ that is sought after by many designers.

7.3.7 Fashion Designers’ Feedback Significant consultation with regard to tanning expertise is required to ensure a consistent supply of leather that meets market requirements. Feedback from customers at the design end of the chain would assist with the achievement of a more desirable leather product.

Further work is also required to initiate and facilitate linkages to fashion market in product categories most suited to camel leather. Potential areas would include accessories and upholstery. Economic analysis is required to determine the most viable point of sale along the value adding chain for the camel hide supplier.

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7.4.1 Italy 7.4.1.1 Market Potential Indications from the in-market research suggest that few Italian companies have seen camel leather or considered using it. There was a lot of interest in the potential of the leather, particularly for luggage (because of the size of the sides), and particular interest in the grain pattern of camel, with one organization suggesting that perhaps the leather had been stamped to create the grain effect because of its raised appearance.

7.4.1.2 Market Segments & Product Positioning In-market research located two Italian tanneries importing camel skins. These tanneries were tanning camel leather for use in garments, accessories, and footwear. Samples of garment leather from one of the tanneries were on display at the Modapelle leather fair (refer figure 7.2). This company had been working with camel leather for 3 years and reported that each year the market for their products was growing steadily larger because of its novel appeal. The company had also designed a swing tag indicating that it is genuine camel leather (refer figure 7.3).

Figure 7.2: Camel leather Figure 7.3: Camel Swing Tag

When shown samples of Australian leather, the tannery was impressed at the relatively low level of damage on the Australian hides compared to the hides they currently imported. They were surprised to know that the samples were average hides from feral-harvested animals, however the low volumes currently being produced in Australia inhibit the development of trade, and they prefer to source camel hides from farmed animals. If adequate supplies of farmed camels could be built up, Australian camel could be positioned as a reliable high-quality product in the Italian market.

Interest in finished camel leather was also shown by a number of manufacturers, particularly because of the size of the skins and their potential for use in luggage. Here however, the damage on the hides was a significant deterrent, although one company (one of Italy’s largest belt manufacturers) was less concerned about the level of damage and displayed a genuine interest in the product. This interest was mainly due to the size and shape of the hides, which would be very suitable to the European method of cutting lengthways along a hide to produce long belt strips with no joins. Although the damage was

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commented on, it was not seen as a deterrent, and requests were received for colour samples of both the finished leather and raw hides. This company also requested that tags authenticating that the leather was genuine camel also be provided.

7.4.1.3 Product Characteristics & Price Both Italian tanneries were currently sourcing hides from North Africa, with one organization sourcing approximately 10000 skins/month. Wastage from the damaged hides from each container was estimated at approximately 10%. Pricing information received from this tannery was US$5/side (AU$9.65) for salted hides of mixed grade. Prices for finished leather were quoted at approximately 42 euro/square metre (AU$72) for garment leather.

Both tanneries were interested in new sources of supply, due to the level of damage associated with their current supply. Because of this damage, the hides needed to be heavily finished, and one tannery commenting that the major cost relating to camel leather production was in the finishing.

7.4.1.4 Competitors Competition in the market for Australia’s supply of camel leather comes from alternative suppliers, mainly in Africa, where adequate levels of skin supply at very low prices can be sourced. Australia’s supply capabilities cannot match the volumes of alternative suppliers.

While camel leather is novel and branding opportunities exist for quality hides, the leather competes amongst a variety of novel leathers. The Italian market is constantly seeking new leather concepts, and branding opportunities exist for quality hides. However, despite the growth in the market in recent years, camel leather competes against a variety of novel leathers and its sustainability in the market remains unknown.

7.4.2 United States 7.4.2.1 Market Potential Camel leather is not widely used in the United States, nor is there a significant domestic industry for camel. Imports of raw skins are nominal, with a once-off shipment of only 400 skins from Zimbabwe in 2000. Overall, imports of value added products made from camel leather are sporadic, although the volume of garments and garment pieces made from camel leather has increased between 1999-2001 (refer table 7.4).

Table 7.4: Imports of garments or parts thereof made from camel leather 1999 - 2001

1999 2000 2001 Country $US No items Country $US No items Country $US No items UK 14 599 29 Italy 52 092 184 Italy 100 478 399 Italy 7 728 8 Saudi Arabia 434 2 France 125 379 10 625 Peru 4 074 7 Peru 371 9 Switzerland 1 758 1 Arab Republic 210 3 Total 26 401 44 Total 53 107 198 Total 227 615 11 025

Source: US Department of Fish and Wildlife 2002.

The main US importers of garments and garments pieces made from camel leather were Bergdorf Goodman, Chanel and Neiman Marcus. There has been one shipment of imports of large camel leather goods (ie. brief cases, furniture, handbags, suitcases) from India in 1999 valued at US$3 500 (AU$5 425) with no follow up imports. Similarly there was one shipment of 96 pairs of shoes made from

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camel leather recorded in 2000 from Italy valued at US$6 000 (AU$10 320) (US Department of Fish and Wildlife 2002).

Despite the presence of only three major importers in the US, in-market research conducted by Austrade has found that several importers have received enquiries for camel leather, particularly for the manufacture of boots. Further interest was also shown by Hoyt Gloves and Sun City Leather.

Hoyt Gloves is a manufacturer of work gloves, primarily using leather from deer, goat and crocodile. They currently purchase raw skins directly from suppliers in the United States, the Caribbean and Australia and subcontract tanning to Quirs Hawtan. Hoyt Gloves is interested in procuring raw camel skins from Australia.

Sun City Leather is a hide dealer that imports and distributes finished kangaroo, ostrich, alligator, python, goat, and caiman leather. Sun City Leather, Inc. is interested in finished camel leather from Australia.

While there is market potential for both raw camel skins and leather in the United States, research suggests that there is little market awareness of camel. Further comments from one importer emphasised that the US market would not know what to do with the leather, and that without market education and promotion, the US market would be ‘tough to crack’ (Fowlds 2002).

7.4.2.2 Market Segments & Product Positioning The most popular use for camel leather in the US is for garments, although other end uses include wallets and footwear.

7.4.2.3 Competitors At present, there is no evidence of any competition from domestic production in the United States, as there appears to be no significant local industry for camel. The Austrade research also pointed out that the United States Department of Agriculture has no data on camel stocks, and industry personnel did not wish to estimate the American camel population (Fowlds 2002).

As there is not a strong market for raw camel skins in the United States at the present time, there is very little competition from existing sources of import. The strongest source of competition comes from suppliers of value added product from Italy and France (refer table 7.4).

Generally, the United States is a significant importer of finished leather products. In the case of camel leather products, there are only three major importers, all of whom have established brands in the market.

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7.5 SWOT

Strengths Weaknesses • High tensile strength and is stronger than

bovine leather. • Shape, strength, size and length of the sides is

attractive for a range of manufacturing applications, particularly belts and luggage.

• Centralised and cohesive industry structure. • Disease free production areas. • Costs of production relatively low thanks to

suitability for co-grazing on existing beef producing properties.

• Industry showing steady growth.

• Inability to match lower cost structures of tanning industries of some competing nations (particularly labour costs).

• Low level of supply to expand export development initiatives.

• High level of hide damage and similar grain pattern creates difficulty in competing with large hides such as bovine.

• Mainly feral camels, few domesticated stock and transport costs are significant.

• Industry based on opportunistic harvesting of feral herds.

• Little investment in leather tanning research and development.

• Hides are by-product of meat and live trade, with inconsistent focus on quality and development of hide and leather trade.

• Lack of export accredited meat processing facilities with capability to process camel.

• Lack of human resources focused on market and industry development.

Opportunities Threats • Low level of hide damage in comparison to

hides from competitor countries. • Camel leather has a novel appeal in large

markets such as Italy. • Potential demand for camel hides with less

damage. • Securing the return of skins from live exports

could help to ensure more consistent supply. • Opportunities to market raw hides and

finished leather to manufacturers in Italy. • Branding of Australian camel products may

help stimulate selective demand.

• Low prices of raw hides offered in the international market.

• Competition from high volume suppliers in North Africa and Middle East.

• Low level of awareness of camel leather hinders growth in demand.

• Competition with bovine leather due to similar grain pattern.

• Competition from other novel leathers and short product life cycle of novel leathers.

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8. Recommendations 8.1 Goat Goat leather is considered an all-purpose leather and is manufactured into a wide range of end uses, particularly footwear uppers. In comparison to the large goatskin producers, goatskin production in Australia is quite low and is a by-product of meat production, mainly from feral and feral-boer breeds.

Importers have preferences for particular goatskins produced from certain regions, due to the significant variations in grain pattern resulting from the breed, age and liveweight of the goats at slaughter. Goatskins with a fine grain appearance have the highest market value and are mainly used for good quality footwear uppers. Due to the coarse grain of the skins, goatskins from Australia are considered an inferior skin and compete at the lower end of the international market.

Despite the current quality issues concerning Australia’s goatskins, opportunities for a range of products have been identified in Italy and China. In order to maximise these opportunities, the following recommendations have been made:

• Further research needs to be conducted with the aim to improve Australian tanning technology and better understand the specific characteristics of goatskins from different goat breeds.

• The high level of variability in goatskins, particularly from pastoral areas, is a significant factor affecting supply and also creates a very intensive tanning process. A refined selection process at the point of slaughter may create opportunities for higher returns where consistency at a given quality level can be assured.

• Australian skins are currently graded on a size basis, which is not acceptable to the majority of Chinese leather markets. To further develop opportunities in the Chinese market, there is a need to grade Australian goatskins according to an internationally recognised grading standard that evaluates grain and scarring. However, Australian exporters are advised to ensure that buyers are willing to pay a premium sufficient to cover the extra cost before implementing new systems.

• Importers and tanneries in the Italian market have a strong focus on quality, with preferences for fine grain skins at a consistent quality level. In order to develop opportunities in the market, tanning trials should be conducted with potential market partners, and goatskins will need to be graded and selected at the abattoir.


• The research has also identified a number of alternative opportunities for goatskins due to natural properties that make them suitable for a range of industrial applications. Tanning trials and further market development work will be required to capitalise on opportunities in this area.

8.2 Emu Although there is currently limited demand for Australian emu leather in the international market, it has potential in the US and China markets if improvements in the current tanning process are made.

Qualitative market research conducted in the US and Chinese markets has indicated its suitability for the handbag and purse lining markets as well as the footwear market for leg leathers. While the US and the Chinese markets have a preference to use the leather for similar end products, there is a distinct difference in the format in which they prefer to receive the product. The US has a preference for finished leather as they have limited exotic skin tanneries, however, the Chinese market has a preference for wet-blue, due to their belief that their tanning is of a higher standard than that of Australia.

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Major competition in the emu leather market appears to come from the domestic industries within China and the US. Both these countries have significant emu stocks. Despite this competition there are still opportunities for niche marketing in both the US and China. To facilitate access into these markets it is recommended that:

• Australian tanneries enhance their tanning to ensure the leather is soft and supple. The current product is stiff and several importers in the Chinese market thought it similar to paper to touch.

• Chinese in-market research recorded strong feedback suggesting that Australian emu leather lacks the preferred tactile qualities associated with ratite leathers and should be embossed to create a raised quill pattern. However, Australian industry experts have expressed doubts over the commercial viability of such a process and Australian firms are recommended to conduct their own careful appraisals regarding the appropriateness of adopting this idea.

• Australian emu leather exporters should research ways in which to make the leather stronger. This will require investigation of chemical recipes and techniques used in the tanning process.

• Australian exporters should ensure the leather is available in a wide variety of colours in order to meet market demand.

• In order to enter the lucrative footwear and accessory markets, creative promotional and branding strategies should be employed. Currently emu holds virtually no product identity.

• Based on the significant market demand for ostrich leg leathers, coupled with the significantly lower price for emu leg leather (a product which looks similar to ostrich leg leathers), it is recommended that emu leg leathers be promoted to the footwear market as a cheaper alternative.

8.3 Ostrich While some opportunities exist in Europe, the most important international markets for ostrich leather are Japan and the United States. In-market research conducted for this report indicates that there are significant opportunities to target these markets, particularly with reference to specific preferences for quill size and pattern. These two markets also have differing preferences for particular end products, with the US predominantly a ‘masculine’ boot market and Japan a more ‘feminine’ market for handbags and other fashion accessories. Japanese opportunities mainly exist for finished leather and/or manufactured product, while the US market has more opportunities for raw and semi-processed skins. Entry into both markets (particularly Japan) will require careful attention to the selection of trading partners.

Australia’s major competition appears to come from South Africa. The South African ostrich industry concentrates on skin production, and their tanning technology and expertise combined with their well established reputation enables them to compete effectively and efficiently in offshore markets. According to industry sources South Africa is moving to become the world’s low-cost supplier of ostrich skins and leather (Fowlds 2002). Their aggressive marketing strategies have created fierce price competition in world markets. Nevertheless, despite this competition, opportunities do exist for Australian suppliers, and to help secure these export markets the following recommendations are offered:

• Evidence suggests there may be opportunities to add value by promoting Australia’s clean, green image, and positioning Australian ostrich as environmentally sound product. However, producers are advised to carry out research specific to their chosen market before adopting this tactic.

• Australian ostrich skin marketers should consider gift market segments. These markets appear well suited for exotic leather products.

• Firms interested in exporting to Japan will need to be well prepared in order to function effectively with respect to Japanese business culture, and are advised to seek assistance from public and/or private sector experts.

• The American market’s primary use for ostrich leather is in the western boot, where high quality products can command high premiums. Australian producers should ensure that US trading

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partners have access to distribution channels appropriate for their target market. This may also include developing an internet presence servicing the US market, either in-house, through alliance partners, or via a third-party.

• Australian exporters should plan to undertake formal market testing of products prior to full-scale release. This will need to be done in collaboration with trading partners and resellers. Australian firms will need to demonstrate a commitment to making the relationship worthwhile for all parties.

• Branding is often a significant determinant of purchase decisions for exotic leather products, and Australian exporters may wish to consider developing branding strategies in collaboration or with the assistance of foreign partners.

• Regardless of what marketing strategies Australian firms employ, ostrich leather product is still subject to demand and supply volatility. Subsequently, world prices are highly unpredictable. These effects are probably most noticeable at low levels of value adding (raw skin), and arguably become less problematic as products move closer to end-product status. However all firms marketing ostrich product are advised to consider price volatility as a factor in strategic planning.

8.4 Crocodile There are obvious opportunities for crocodile skins and leather in Europe, particularly France and Italy. In France, the market potential for large, salted porosus skins is strong, with constant demand for 1st grade skins. Market signals are very clear – the greatest challenge for Australian crocodile producers is to increase the volume of 1st grade skins to this market.

Italy is a strong and relatively stable market for large, classic crocodile skins and leather. The market offers both challenges and opportunities for the salted crocodile skins and finished leather. Given that all Australia’s 1st grade skins go to France for supply to Hermes, achieving viable returns in the Italian market will rely on identifying suitable entry points for 2nd and 3rd grade skins and leather at a price point that is viable for Australian producers. Success in the Italian market will also depend greatly upon the development of strong relationships with suitable trade partners.

In order to further develop the markets for saltwater crocodile skins in these two key export markets, the following recommendations are offered:

• Production should focus on improving the grading performance of salted porosus skins. Potential developments in this area include the increasing use of single pens to ‘grow out’ the crocodiles prior to slaughter and the introduction of improved preservation techniques and quality assurance systems throughout the industry. The objectives of these measures would include preventing the physical damage and biological degradation of skins from farm to tannery.

• Collaboration amongst producers in the Australian industry should be fostered to build stronger supply relationships with Italian importers. Consideration should be given to the development of an Australian crocodile marketing group.


• Opportunities exist to undertake contract tanning and the direct sale of finished leather to manufacturers in Italy. However, this process is complex and incurs significant risk and would require the constant presence of an agent to coordinate production and distribution.

• There is a lack of recognition of saltwater crocodile at a retail level, signifying opportunities for branding. However, given the strength of competition from alligator in these markets, significant attention would need to be given to product positioning with the assistance of foreign partners.

• The weakness of the Australian crocodile industry in comparison to the alligator industry lies not only in volumes, but also in the lack of coordinated marketing efforts, including incentives to

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create supplier loyalty. Greater effort could be given to creating alliances with buyers and ensuring coordinated marketing efforts deliver a consistent message to target markets.

• The Australian crocodile industry would benefit from the expansion of production capacity. There is sufficient market demand to support such expansion and the industry would stand to benefit significantly from improved economies of scale.

• An opportunity exists for crocodile skin marketers to form an alliance with camel hide promoters, such an alliance may help to reduce the collective costs of market development initiatives and help to consolidate a market presence in Italy for both industries.

8.5 Camel There are approximately 200 000 camels in Australia, most of which are feral herds of dromedary (single hump) camels. Commercial producers in Australia are well centralised under the one industry association, the Central Australian Camel Industry Association. Presently the CACIA is the only organisation responsible for the production of camel meat and hides in Australia.

While camel hides have a high tensile strength, a major concern for the development of the market for camel hides and leather products is the low yield of useable skin area resulting from commonly high levels of damage on the hides. In addition to concerns with the raw material, there is a lack of market awareness of camel leather in potential export markets. Because of this lack of awareness, there is a curiosity about camel leather and in-market research in Italy and US found genuine interest from both tanneries and manufacturers, whilst also highlighting a number of areas for further development:

• Although, the current market for camel hides in Italy is small, buyers who are dealing with camel hides in both markets were impressed with the low level of damage on the hides in comparison to their current supply. However, the small quantity of hides available from Australia is the most significant constraint to the development of trade in raw camel hides.

• Lack of market awareness is a major factor inhibiting the use of camel leather in Italy and the United States. Significant resources would need to be devoted to promoting awareness and interest in camel leather, preferably in collaboration with commercial partners in each of these key markets. Such initiatives could include the production of swing tags verifying the authenticity of the leather.

• The size, shape and strength of camel leather seems well-suited to the market for belts in Italy, and trials need to conducted with potential commercial partners to develop the most suitable leather for belt manufacture. Such an initiative will require significant commitment to the development of strong relationships in the Italian market.

• An opportunity exists for camel hide marketers to form an alliance with crocodile skin promoters, such an alliance may help to reduce the collective costs of market development initiatives and help to consolidate a market presence in Italy for both industries.

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Glatz, P.C. 2002, (SARDI/PIRSA Coordinator,

RIRDC), personal communication. Holst, P.J. 1987 ‘The World Production and

Utilisation of Goat Skins’, Proceedings; 4th International Conference on Goat Production, Brazil, p. 145-52.

Holst, P.J. 1990, ‘Pretanning factors that affect

the grain appearance of goat leather’, NSW Agriculture & Fisheries, Technical Bulletin 36.

Holst, P.J., Peters, D.E., Allan, C.J. & Pervez, M.

1987, ‘Properties of Leather Produced from a Sample of Australian Feral Goats’, Journal of the Society of Leather Technologists and Chemists, vol. 71, p.134-8.

Horsburgh, C. 2001, Identification of market

opportunities for skins and leather products of newly emerging animal industries in Australia, Queensland Department of Primary Industries.

Japanese External Trade Organisation 2001,

Imports of Commodity by Country Extracts: 1996-2000, Sydney.

Kellaway, J. 1999, (Manager, Sheep and Goat Meat Services, Meat and Livestock Authority), personal communication.

LaPelle 1999, Nappa leather still reigns

supreme, [online], Available: http://www.leonet.it/leather/lapelle/page03uk.html, [Accessed 1 December 1999].

Leather 1998, ‘Exotics: a niche business’, 31st

December, [online], Available: Global News Alert database. Vendor: The Dialog Company.

Leather 1999, ‘Small but profitable’, 31

December, [online], From Global News Alert [database], Vendor: The Dialog Corporation.

Leather International 2001, ‘Progress in the past

two decades’, November, pp. 58-62. Lever, John 1999 – 2002, (Manager, Koorana Crocodile Farm), personal communication. MacGregor, J. 2002, ‘International trade in

crocodilian skins’, Leather International, April, p30-3.

MacNamara, K., Warfield, B., Twyford-Jones, P.

& Crowley, C. 2001, Desktop analysis of the export and domestic market for the skins leather products of newly emerging animal industries, Queensland Department of Primary Industries.

Michael, D, 2000, Benchmarks for New Animal

Products: Emu & Ostrich Production, Rural Industries Research & Development Corporation - Publication No 00/136, Canberra.

Money, C. 1999 – 2002, (Officer in Charge,

CSIRO Leather Research Centre), personal communication.

Murphy, D. 2001, Japanese Market Prospects

for Skin and Skin Products from Ostrich, Crocodile, Emu, Camel and Goat in 2001, Queensland Department of Primary Industries.

91

Nawawy, E. 1998, Advanced development of camel products, paper presented at the First International Conference on animal production and health in semi-arid areas, El Arish, Egypt, 1-3 September, 1998.

O’Malley, P. 1998, ‘Emu Farming’, in The New

Rural Industries - A Handbook for Farmers and Investors, ed. K.W. Hyde, Rural Industries Research & Development Corporation, Canberra.

O’Malley, P. & Snowden, J.M. 1999, Emu

Products: Increasing Production and Profitability, Rural Industries Research & Development Corporation - Publication No 99/143, Canberra.

Pederick, A. 1999 – 2002, (Secretary, West

Australian Emu Farmers Federation), personal communication.

Peucker, S. 1999 – 2002, (Experimentalist, DPI Queensland), personal communication. Regini, F. 1998, Market Brief – Product Italy:

Alligator Skin, US Department of Agriculture, Foreign Agricultural Service, US Embassy, Rome.

Ryan, B. 2001, (Ausgoat Co), personal

communication. Saint, D. 2002, (Australian Ostrich Association),

personal communication. Scott, Tony 1999 – 2000, (Southern Tanners), personal communication. Seidel, P. 1999 – 2002, (Executive Officer,

Central Australian Camel Industry Association), personal communication.

Shalash, M. R., 1983, ‘The Future Role of

Camels in Overcoming World Meat Shortage’, Egypt Journal of Veterinary Science, Department of Animal Production and A. I., National Research Centre Dokki, Cairo.

Stubbs, A. 1998, Information systems for new

animal industries, Rural Industries Research & Development Corporation - Publication No 98/139, Canberra.

Topper, B. 1999-2001, (A.I. Topper and Co),

personal communication. Unione Nazionale Industria Conciaria 2001,

Study Report: Market Survey on China, [online], Available: http://www.asia-invest.com, [Accessed: 22 April 2002].

US Department of Fish and Wildlife 2002, US

Trade Data, quoted in Fowlds, H.M. 2002, The United States Exotic Skins Market, Austrade, Vancouver, pp. 52-8.

US Fish and Wildlife Service 2002, US Trade

Data, quoted in Fowlds, H.M. 2002, The United States Exotic Skins Market, Austrade, Vancouver, pp. 52-8.

Van Zyl, P. 1997, A description of the current situation in the Ostrich Industry, [online], Available: http://www.nopsa.com/p0000465.htm, [Accessed 20 September 1999].

Verner, R. 1999, (Cherbourg Tannery), personal

communication. Whiting, T. 2001, Economic Assessment of

Australian Goatskins: focussing on the viability and competitiveness of the domestic industry, Queensland Department of Primary Industries.

World Footwear 2000, ‘Phenomenal growth puts

China on top’, vol. 14, no. 6, pp. 27-30. Yassa, Y. 1999, (Department of State

Development), personal communication. Zajicke, P. 1993, ‘Limited Markets Trap The

Alligator Industry’, Aquaculture Magazine, November/December, p 50-9.

Remaining references yet to be completed

92

Appendix 1: Grain Leather Tanning Process

Source: Money 2002

Flesh

Soak

Unhairing/Dewoolling (Sulfide, Lime) Hair/Slipe Wool

Delime (Ammonium Salts or CO2)

Bate (Enzyme)

Pickle (Salt, Acid) Vegetable-Tan Veg-tanned leather

Chrome Tan Wet-blue

Sam, Split (if appropriate)

Retan, Dye, Fatliquor

Dry Crust leather

Finish (Polymers) Finished Leather

93

Appendix 2: Skin and leather definitions Light leather – leather made from small animal skins.

Heavy leather – generally understood to include vegetable-tanned sole, belting strap and mechanical leathers made from unsplit cattle hides.

Chrome tanning – tanning of leather with chromium compounds. Chrome tanned leather is often distinguished from other kinds by its greenish colour, particularly of a cut edge.

Vegetable tanning – the conversion of rawhides into leather by treating with water solution of tannin extracted from materials of vegetable origin. Quebacho, Mimosa, Chestnut, Oak are typical examples.

Semi-finished leather – leather that has been partially finished however still not to the final product

Finished leather – materials applied to the grain and sometimes the split surface of the leather to cover blemishes, create smoothness, and give uniformity of colour and appearance which may vary from dull to glossy.

Semi-processed leather – usually refers to wet blue or other undried materials.

Tanned – the point at which a skin or hide is converted in to leather.

Retanned – a modifying secondary tannage applied after intermediate operations following the primary tannage.

Pretanned – to give a usually incomplete and more or less superficial tannage to pelt with some special tanning agent before the main tannage in order to facilitate this.

Vegetable Pretanned – a superficial tannage given to pelt with an agent that would best facilitate a vegetable tannage.

Parchment dressed – traditionally alum-tanned sheepskin or slunk used for special documents, drumheads, lamps etc.

Rawhide (Raw/Green/Salted) – hide that has been dehaired, limed, often stuffed with grease and has sometimes undergone other preparation, but has not been tanned. (See also ‘Green’ and ‘Salting’).

Green – a term is used to describe fresh hides and skins, after removal from the animals. The word ‘fresh’ is seldom used. Green is a term which is commonly used for crocodilian skins.

Salting – a process of curing hides by treating them with salt on the flesh side and stacking in piles to cure for a period of ten days or more.

Liming – soaking of hides in lime and sulphide to remove hair and to open the fibrous structure.

De-liming – removing the lime from a pelt or reducing its pH to, or near, the isoelectric point of collagen

Pickling – treating unhaired hides with a solution of salt and acid in order to prepare them for tannage or for temporary preservation until they reach the tannery.

Wet-blue – hides or skins which have been processed to, but not beyond, the chrome tanned stage.

Fatiliquoring – using an emulsion of oils or greases in water, usually with an emulsifying agent, to lubricate the fibres of the leather.

Crust leather – leather that has been tanned and dried but not finished with top-coats.

Dyeing & Finishing – the process following the wet blue stage that gives leather its final properties. Dyes are added to give the leather its final colour and finishing agents are added to cover blemishes etc. (See ‘finished leather’).

94

Appendix 3: Italy’s imports of goatskins by top ten destinations for 2000 and 2001

Table A3.1: Goats or kid skin raw, salted, dried, without hair or in pieces (excluding goat/kid skin with hair and goat/kid from Yemen, Mongolia, Tibet) 2000 – 2001

2000 2001 Exporting country Value in (Euro) Qty (kg) Exporting country Value (in Euro) Qty (kg) Spain 4 330 718 523 566 Spain 4 163 934 402 905Portugal 1 129 768 207 260 Portugal 1 265 112 173 078Australia 935 902 972 519 France 715 133 52 226France 832 230 92 212 Australia 701 590 441 309Greece 403 898 71 851 Malawi 276 656 64 758Malawi 284 569 65 618 Argentina 218 300 32 662Argentina 240 782 36 827 United States 178 408 103 985United States 200 498 112 744 Bulgaria 99 768 35 409Bangladesh 165 773 6 000 Senegal 88 656 39 558Switzerland 131 896 15 044 Chad 76 020 2 400Total Imports 8 887 570 2 269 214 Total Imports 8 074 340 1 474 260Source: ISTAT (Item code: 41031010) Table A3.2: Goat or kid skin raw, salted, dried, treated with lime, pickled or otherwise preserved, without hair or in pieces (excluding fresh, salted dried or parchment dressed or finished, goat/kid

with hair from Yemen, Mongolia, Tibet), 2000 – 2001 2000 2001

Exporting country (Value in Euro) (Qty kg) Exporting country (Value in Euro) (Qty kg) Spain 314 912 49 492 Yemen 564 303 124 483Yemen 304 949 104 080 Greece 343 636 18 850France 199 555 113 584 Libya 318 457 84 755China 196 741 15 430 China 228 025 15 870Greece 140 675 12 646 Sudan 226 247 45 477Sudan 122 690 44 630 Egypt 222 243 32 650Iran 58 939 18 323 Argentina 170 770 24 055Libya 40 967 19 760 Syria 166 821 41 095New Zealand 26 441 22 349 Turkey 105 566 20 000Switzerland 20 687 1 490 Kuwait 105 045 32 624Australia 0 0 Australia 0 0Total Imports 1 514 397 419 281 Total Imports 2 609 162 465 911Source: ISTAT (Item code: 41031090)

95

Table A3.3: Goat or kid skin leather, without hair, pretanned, 2000 – 2001 2000 2001

Exporting country Value (in Euro) Qty (kg) Exporting country Value (in Euro) Qty (kg) China 13 313 811 1 222 932 China 25 958 378 2 156 486Nigeria 11 590 211 1 424 369 Nigeria 12 978 347 1 378 390Benin 10 603 506 1 475 045 Benin 9 451 119 868 420Ethiopia 7 006 735 2 520 463 Ethiopia 9 402 268 2 009 268Saudi Arabia 5 701 703 1 636 087 Spain 4 470 045 148 589Burkina Faso 4 267 844 915 102 Saudi Arabia 3 503 251 724 789Kenya 4 189 095 1 714 613 Kenya 2 585 237 755 774Spain 3 078 596 144 035 Burkina Faso 2 162 138 345 164Brazil 1 424 435 123 550 Brazil 1 593 426 132 920Sudan 1 301 548 555 987 Senegal 1 205 655 227 525Australia (27th) 66 815 21 500 Australia (40th) 21 920 16 335Total Imports 68 085 760 13 182 127 Total Imports 82 194 338 10 681 637Source: ISTAT (Item code: 41061200)

Table A3.4: Goat or kid skin leather without hair on, tanned or retanned but not further prepared, 2000 – 2001

2000 2001 Exporting country (Value in Euro) (Qty kg) Exporting country (Value in Euro) (Qty kg) Benin 8 886 871 1 627 000 Saudi Arabia 2 213 694 500 881Brazil 1 695 262 161 990 China 1 804 855 144 125Saudi Arabia 1 504 462 512 024 Brazil 1 691 589 129 995China 807 097 65 006 Egypt 1 332 177 112 415Nepal 793 679 106 342 Ethiopia 949 758 226 105Spain 750 946 57 309 India 838 171 89 816Syria 603 046 216 543 Tunisia 520 074 144 596Nigeria 576 635 71 439 Nigeria 478 094 35 755Pakistan 499 997 90 913 Nepal 459 668 92 585India 465 836 33 368 Burkina Faso 424 286 111 966Australia 0 0 Australia 0 0Total Imports 18 789 525 3 487 123 Total Imports 13 074 163 1 961 253Source: ISTAT (Item code: 41061900)

96

Appendix 4: United States Import and Export Data Table A4.1: Imports - Goat or kidskins, fresh, or salted, dried, limed, pickled or otherwise

preserved, but not tanned, parchment-dressed or further prepared, 1998 – 2001

1998 1999 2000 2001 (YTD Nov-Jan) Exporting

Country Value in US$

Qty (Pieces)

Value in US$

Qty (Pieces)

Value in US$

Qty (Pieces)

Value in US$

Qty (Pieces)

Pakistan 28 000 5 049 419 000 56 984 160 000 19 983 158 000 15 991 Mali 12 000 2 760 235 000 63 504 127 000 45 548 129 000 63 597 Canada 53 000 18 407 38 000 9 522 18 000 15 202 21 000 9 583 United Kingdom 70 000 1 560 29 000 416 14 000 153 1 000 33 Peru 144 000 26 591 0 0 8 000 1 728 47 000 12 775 China 0 0 0 0 8 000 10 420 32 000 50 000 France 1 000 60 0 0 6 000 1 030 11 000 1 800 Ghana 0 0 0 0 6 000 735 1 000 421 Italy 8 000 54 2 000 72 2 000 21 9 000 43 Guinea 3 000 622 6 000 812 1 000 130 0 0 Argentina 0 0 0 0 0 6 31 000 7 500 Hong Kong 0 0 0 0 0 0 1 000 5 Spain 0 0 5 000 900 0 Turkmenistan 0 0 0 300 Sub total pieces 55 103 132 210 95 256 161 748 Other exports 3 220 2 492 0 5 531

Total Imports 320 000 58 323 733 000 134 702 351 000 95 256 441 000 167 279 Source: Fowlds 2002 (compiled from tariff & trade data from the US Department of Commerce, the US Treasury, and the US International Trade Commission; item code: 4103100000)

Table A4.2: Imports - Goat or kidskin leather, without hair on, pretanned except vegetable pretanned but not further prepared, 1998 – 2001



Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Pakistan 881 916 85 000 215 364 25 187 86 111 13 411 272 198 27 606 India 119 058 13 155 36 084 2 364 35 297 2 439 25 429 1 633 Philippines 0 0 7 263 900 14 518 1 800 3 501 450 Italy 6 279 374 0 0 5 400 130 22 114 594 United Kingdom 0 0 463 5 2 535 128 3 274 409 Brazil 0 0 0 0 2 231 188 0 0 Dominican Rep 0 0 1 450 50 1 261 54 0 0 Peru 0 0 0 0 1 140 342 6 140 1 738 Mexico 980 27 0 0 599 1 6 961 197 France 0 0 0 0 255 10 1 456 20 Kenya 12 525 1 029 0 0 0 0 0 0 Sub total pieces 99 585 28 506 18 503 32 647 Other exports 28 557 327 0 0

Total Imports 1 150 716 128 142 262 764 28 833 149 347 18 503 341 073 32 647 Source: Fowlds 2002 (compiled from tariff & trade data from the US Department of Commerce, the US Treasury, and the US International Trade Commission; item code: 4106120000)

97

Table A4.3: Imports - Goat or kidskin leather, without hair on, tanned or retanned but not further prepared, wet-blue, 1998 – 2001



Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Pakistan 2 511 807 239 702 1 884 358 225 909 1 294 665 126 598 1 499 810 140 134 India 0 0 811 291 49 485 495 438 30 201 0 0 Philippines 0 0 0 0 4 004 125 0 0 Italy 0 0 0 0 2 079 201 0 0 United Kingdom 0 0 14 614 2 741 900 450 0 0 Brazil 0 0 3 910 186 0 0 0 0 Dominican Rep 0 0 5 769 1 300 0 0 0 0

Total Imports 2 511 807 239 702 2 719 942 279 621 1 797 086 157 575 1 499 810 140 134 Source: Fowlds 2002 (compiled from tariff & trade data from the US Department of Commerce, the US Treasury, and the US International Trade Commission; item code: 4106192000)

Table A4.4: Imports - Goat or kidskin, without hair on, tanned or retanned but not further prepared, 1998 – 2001



Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Pakistan 39 149 11 316 242 509 40 600 310 999 31 827 305 562 43 431 United Kingdom 39 591 2 490 512 245 75 127 259 549 32 406 70 079 5 877 Italy 135 592 10 017 104 552 13 724 83 325 4 266 155 704 6 591 Indonesia 0 0 0 0 52 618 2 438 1 437 70 France 1 828 70 7 113 145 42 932 2 071 57 859 7 414 India 132 407 71 134 81 118 27 051 26 245 1 924 112 921 84 769 Spain 25 958 923 564 1 22 314 711 0 0 Canada 0 0 0 0 5 072 286 0 0 Peru 0 0 0 0 3 425 570 15 841 1 322 China 11 969 1 068 0 0 990 28 2 304 97 Korea 660 77 0 0 975 195 0 0 Germany 0 0 18 320 415 605 9 340 10 Afghanistan 0 0 975 6 0 0 0 0 Turkey 0 0 0 0 0 0 713 4 Sub total pieces 97 095 157 069 76 731 149 585 Other exports 142 80 0 1 900

Total Imports 389 530 97 237 976 081 157 169 809 049 76 731 738 073 151 485 Source: Fowlds 2002 (compiled from tariff & trade data from the US Department of Commerce, the US Treasury, and the US International Trade Commission; item code: 4106193000)

98

Table A4.5: Imports - Goat or kidskin leather, without hair on, not fancy, parchment-dressed or prepared after tanning, 1998 – 2001



Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Pakistan 952 057 64 784 1 451 839 129 619 1 314 514 151 451 1 093 706 114 064 United Kingdom 1 214 406 73 030 409 616 22 139 704 559 33 396 420 360 19 058 India 960 497 59 894 755 478 43 854 263 696 15 500 256 575 26 437 Italy 135 513 5 966 153 392 5 670 72 540 2 344 234 347 8 655 France 4 748 81 24 088 962 29 879 5 814 78 906 3 337 Indonesia 0 0 277 35 11 500 529 69 988 8 503 China 776 53 0 0 6 623 213 0 0 Peru 0 0 0 0 4 485 444 1 190 99 Singapore 0 0 0 0 4 214 201 55 204 1 903 Spain 18 116 715 22 858 1 021 4 146 90 382 165 Nigeria 44 234 2 961 0 0 2 749 133 0 0 Germany 8 346 197 1 161 20 2 598 19 5 345 135 Slovenia 0 0 0 0 2 572 487 7 322 793 Canada 81 270 2 806 0 0 1 866 780 0 0 Mexico 2 372 334 1 522 496 854 52 0 0 Subtotal 210 821 203 816 211 453 183 149 Other Exports: 1 192 0 0 20 536


Table A4.6: Imports - Goat or kidskin leather, without hair on, fancy, parchment-dressed or prepared after tanning, 1998 – 2001



Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

Value in US$

Qty (Sq Metres)

India 2 602 826 166 069 1 592 630 112 871 1 979 524 153 889 1 434 854 92 499 Italy 595 169 20 570 251 539 8 702 1 035 490 40 039 1 099 103 40 063 Pakistan 5 762 961 252 032 1 933 700 108 631 212 483 23 865 530 133 44 987 France 70 017 2 548 103 257 4 369 189 239 9 323 140 921 5 446 United Kingdom 72 127 6 204 45 772 1 091 93 506 5 316 249 997 5 280 Indonesia 0 0 10 952 591 69 784 3 608 59 218 2 688 Spain 128 712 5 127 15 493 743 23 412 995 48 792 880 Argentina 0 0 0 0 11 182 85 0 0 Germany 1 414 45 23 843 1 514 7 726 263 14 162 204 Korea 0 0 0 0 4 800 209 0 0 Singapore 0 0 0 0 3 576 94 11 008 472 Netherlands 3 601 145 0 0 0 0 0 0 Tunisia 0 0 0 0 0 0 59 917 4 281


99

Table A4.7: United States Exports of emu skins, 2000 – 2001

2000 2001 Importing

country (Value in US$) (No. of Items) Importing country (Value in US$) (No. of Items)

0 0 Italy 18 000 30 0 0 Mexico 800 200

Total Exports 0 0 Total Exports 18 800 230 Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

Table A4.8: United States Exports of Ostrich Skins – Top 6 players, 2000 – 2001

2000 2001

Importing country (Value in US$) (No. of Items) Importing

country (Value in

US$) (No. of Items)

Mexico 2 040 628 24 975 Mexico 3 119 154 35 338South Africa 330 170 2 974 South Africa 613 752 2 587Zimbabwe 175 512 1 093 Italy 50 647 2 887France 102 619 613 UK 23 941 93Italy 14 796 154 Zimbabwe 9 452 37Israel 10 854 611 Total Exports 2 724 003 30 661 Total Exports 3 847 907 41 129Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

Table A4.9: United States Exports of Large Leather Goods made from Ostrich skins –Top Players, 2000 – 2001

2000 2001 Importing


Japan 154 096 54 Japan 307 664 109Singapore 8 400 30 France 13 750 51UK 4 240 5 Italy 13 256 13Taiwan 2 837 11 Taiwan 8 550 1France 1 540 9 Total Exports 171 113 109 Total Exports 352 174 187Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

Table A4.10: United States Exports of Crocodile Skins, 2000 – 2001 2000 2001


country (Value in US$) (No. of Items)

Mexico 461 332 3742 Panama 123 795 1098Zimbabwe 135 476 1376 France 77 796 1398Italy 94 417 1898 Mexico 33 220 308France 71 040 625 Japan 24 758 70Japan 9 072 20 Zimbabwe 3 510 234South Africa 7 581 60 Total Exports 783 717 7785 Total Exports 264 059 3241Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

100

Table A4.11: United States Exports of large leather goods made from crocodile skins, 2000 – 2001 2000 2001


country (Value in US$) (No. of Items)

Singapore 115 400 215 Japan 249 405 25UK 12 000 1 Zimbabwe 10 600 1Japan 11 445 2 Taiwan 10 600 1Taiwan 3 563 7 France 9461 24 Papua New Guinea 1 612 32Total Exports 142 408 225 Total Exports 271 087 82Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

Table A4.12: United States Exports of small leather goods made from crocodile skins, 2000 – 2001

2000 2001 Importing


France 10 079 1 Panama 5 183 1Japan 3 975 95 Papua New Guinea 1 740 99Switzerland 1 159 6 Italy 1 575 18China 675 50 Switzerland 1 006 10 Japan 400 1Total Exports 15 978 161 Total Exports 9 904 129Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

Table A4.13: United States Exports of shoes made from crocodile skins, 2000 – 2001 2000 2001

Importing country (Value in US$) (Pairs of Shoes) Importing

country (Value in US$) (Pairs of Shoes)

France 10 079 1 Panama 5 183 1Japan 3 975 95 Papua New Guinea 1 740 99Switzerland 1 159 6 Italy 1 575 18China 675 50 Switzerland 1 006 10 Japan 400 1Total Exports 15 978 161 Total Exports 9 904 129Source: Fowlds 2002 (compiled from unpublished trade data from the US Fish and Wildlife Service).

101

Appendix 5: Market Access - US There are no specific tariff codes under the US Department of Commerce Harmonised System relating to the skins covered in this study. Most of the data for skins or leather are collated under a broader classification such as reptile skins, bovine, equine, or ‘other’. There are no separate classifications for camel, emu, crocodile or ostrich skins.

The following table gives the closest possible HS description of the various skin types entering the US market along with their duty rates. Products from Australia qualify for the general rate of duty.

Skins, hides & leather HS Code Article description General Rate

of Duty 4103 Other raw hides and skins (fresh, or salted, dried, limed, pickled

or otherwise preserved, but not tanned, parchment-dressed or further prepared), whether or not dehaired or split

4103.10.10.00 Of goats or kids: not pretanned Free 4103.10.20.00 Other, Vegetable pretanned Free 4103.20.10.00 Of reptiles, not pretanned Free 4103.20.20.00 Other, vegetable pretanned 5% 4106 Tanned or crust skins of other animals, without wool or hair on,

whether or not split, but not further prepared:

Of goats or kids: 4106.21.10.00 Wet blues 2.4% 4106.22.00.00 In other wet state (incl. wet-blue) 2.4%

4106.22.00.00 In the dry state (crust) 2.4% 4106.41.00.00 Of reptiles Free 4113 Leather further prepared after tanning or crusting, including

parchment-dressed leather, of other animals, without wool or hair on, whether or not split:

4113.10.30.00 Of goats or kids, not fancy 2.4% 4113.10.60.00 Of goats or kids, fancy 2.8% 4113.30.30.00 Of reptiles, fancy and not fancy Free

Finished product made from skins, hides, and leather HS Code Article description General

Rate of Duty 4202 Trunks, suitcases, vanity cases, attaché cases, briefcases, school

satchels, spectacle cases, binocular cases, camera cases, musical instrument cases, gun cases, holsters and similar containers; travelling bags, insulated food or beverage bags, toiletry bags, knapsacks and backpacks, cigarette cases, tobacco pouches, tool bags, sports bags, bottle cases, jewellery boxes, powder cases, cutlery cases and similar containers:

4202.21.30.00 Of reptile leather 4202.31 Articles of a kind normally carried in the pocket or in the handbag with

outer surface of leather or composition leather or of patent leather: 5.3%

4202.31.30.00 Of reptile leather 3.7%

102

Regulatory Environment The Convention of International Trade in Endangered Species of Wild Flora and Fauna (CITES) regulates trade in hundreds of different animals and plants through a system of permits. More than 150 nations including Australia and the United States uphold this treaty, which applies to trade in living wildlife and plants as well as parts and products made from them.

Animal skins or finished skin products from species listed in CITES Appendix I must not enter commercial trade. Shipments of skins from species listed in CITES Appendix II must be accompanied by a CITES permit from the country of export or re-export. All crocodiles for example, receive some level of protection (either Appendix I or II under the CITES treaty). The species relevant to this report that appear in Appendix I and II are listed below:

Appendix I: (cannot enter commercial trade)

• American crocodile • African slender-snouted crocodile • Orinoco crocodile • Morelet’s crocodile • Nile crocodile (except for those populations in Appendix II) • Philippine crocodile • Mugger crocodile • Saltwater crocodile (except populations of Australia, Papua New Guinea and Indonesia) • Cuban crocodile • Siamese crocodile • Dwarf crocodile • Ostrich (populations of Algeria, Burkina Faso, Cameroon, Central African Republic, Chad, Mali,

Mauritania, Morocco, Niger, Nigeria, Senegal, and Sudan) Appendix II: (must be accompanied by a CITES permit) • Johnson’s crocodile • Nile crocodile (populations of Botswana, Kenya, Malawi, South Africa, Zambia, and Zimbabwe

subject to ranching provisions) • Nile crocodile (populations of Ethiopia, Madagascar, Mozambique, Tanzania, and Uganda, subject

to annual export quota) • New Guinea or Freshwater crocodile • Saltwater crocodile (Australia and Papua New Guinea populations) • Saltwater crocodile (Indonesian population subject to ranching provisions)

Further details may be obtained from Australian CITES management authority.

U.S. Requirements for Wildlife Trade In addition to enforcing the CITES treaty, the United States also prohibits the importation and interstate sale of species listed as endangered or threatened under the Endangered Species Act. This U.S. law protects many international species as well as animals and plants native to the United States.

The following species, for example, are listed under the US Endangered Species Act and must not be commercially imported into the United States:

• Arabian ostrich • West African ostrich • African dwarf crocodile • African slender-snouted crocodile

103

• American crocodile • Ceylon mugger crocodile • Congo dwarf crocodile • Cuban crocodile • Morelet’s crocodile • Mugger crocodile • Nile crocodile • Orinoca crocodile • Philippine crocodile • Saltwater (estuarine) crocodile (endangered except from Papua New Guinea and Australia and

governed by special rules under section 17.42(c) • Siamese crocodile • Bactrian camel

Companies exporting wildlife and wildlife products to the United States must also be aware of the following requirements:

• All wildlife shipments must be declared to the US Fish and Wildlife Service and presented for inspection. Shipments must be cleared by the service for legal entry into the United States. Declaration forms are available from the service or via the Internet at www.le.fws.gov.

• Shipments should enter the United States via a designated port for wildlife trade. These ports are: Anchorage, Atlanta, Baltimore, Boston, Chicago, Dallas/Fort Worth, Honolulu, Los Angeles, Miami, New Orleans, New York/Newark, Portland, San Francisco, and Seattle.

• Use of other ports requires a permit from the US Fish and Wildlife Service. To obtain such a permit, a company must show that using a designated port would result in substantial deterioration or loss of the wildlife, or would cause undue economic hardship

• The importer of record must hold a wildlife import/export licence issued by the US Fish and Wildlife Service. A licence costs US$50.00 per year.

• Commercial importers using designated ports must pay an inspection fee of US$55.00 for each shipment. Additional fees are charged for inspections conducted outside normal work hours and for inspections at non-designated ports.

Further details about US wildlife import/export requirements may be obtained from the US Fish and Wildlife Service at the address below or by contacting the wildlife inspection offices at designated ports at www.le.fws.gov.

US Fish and Wildlife Service Telephone: 703 358 1949 Division of Law Enforcement Fax:: 703 358 2271 4401 N. Fairfax Drive Arlington, Virginia 22203 United States of America

Tariffs Specific tariff item numbers for the skins in this study are not defined. According to US Customs, imports and exports of a value less than US$1 million are not allocated a specific tariff item number and that item is therefore aggregated under the ‘other’ category.

Quotas

There are no quotas applied to these products from Australia.

104

Appendix 6: Skin Grading Systems Goat

Grading criteria & guidelines – pickled pelts Grain: Pickled goatskins show evidence of variation in the grain appearance of the

pickled pelt. Grain can be described as fine, medium or coarse. Substance: Pickled goatskins also show evidence of variation in substance. Substance can

be described as light, average or heavy. Grain damage: Grain damage can occur in a number of different ways. Commonly occurring

grain damage includes terms parasite damage, healed scars, open scars/scratches, sun spots, stubble, enamel loss and draw.

Pelt damage: Pelt damage is usually caused by activities undertaken in slaughtering and pelt

processing. Such damage includes butcher flays and fleshing damage. Processing damage: Damage evident from the processing includes draw, which may result from a

lengthy liming process, necessary for effective de-hairing, and the incidence of stubble, which is hair that is left remaining after the liming process is completed.

Minor damage: " Healed scarring

" Smaller open scratches/unhealed scratches " Light parasite damage " Flays outside of the main panel " Sun spots " Light draw

Major Damage: " Heavy, extensive healed scarring in the main panel

" Extensive parasite damage in the main panel " Larger numerous open scratches/unhealed scars in the main panel " Flays in the main panel " Torn skins with loss of some of the main panel " Heavy draw in the main panel

Grade types: " 3-5 feet (small) run grade

" 5-7 feet (medium) run grade " 7+ feet (large) run grade " Under 7 feet, 4ths & rejects " Over 7 feet 4ths & rejects

Run Grade: " Minor and major damage allowed on the pelt perimeter (the area 100mm

from the edge of the pelt). " Minor damage allowed in the main panel. " Main panel to be free of major damage.

4ths & rejects: " Pelts that are not able to comply with run grade guidelines. Source: Crowley 2000

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Emu

Grading criteria & guidelines

Size: Skins can be segregated into chick and adult. An average adult skin will yield approximately 5-7 ft2 of finished leather.

Grain damage: Grain damage may be apparent in the form of holes, scratches, scabs, healed wounds, loose grain, damaged quills and bacterial damage. Enamel damage may also be detected.

Pelt damage: Pelt damage can occur during the slaughtering process and includes butcher flays, torn skins and incorrect take off. Further processing damage can include fleshing damage.

Quilled area: As the quills on an emu skin cover the entire skin surface, the main panel of the skin could be considered as the maximum cutting area of a well flayed skin. The quilled area does not segregate readily into four quarters and skins are often assessed according to damage in the entire main panel. Other companies are purchasing emu skins along similar grading guidelines as to ostriches.

Defects: A defect is a hole, tear, scratch, loose scab, a healed wound or extensive bacterial damage.

Grade types: A Grade leather is required for garment leather; B Grade leather suits fashion accessories; C Grade leather is minimum standard for bag leather and accessories; D Grade and lower grades are not required by manufacturers and have no commercial value. Skin defects due to bruising may not be obvious on salted skins and can show in finished leather further reducing the grade.

Grade

Shape

Healed Scars

Open Scars

Holes

Bruising, Loose Grain, Bacterial damage

Full skin, good shape

Light to medium healed scars

Nil open scars Nil open holes Nil A

Prime cutting area free or nearly free of defects. Good grain pattern, 5 to 7 sq. ft area. Full skin, good shape

Medium to heavy healed scars

Light open scars Up to 2 small holes

Nil B

Prime cutting area free of holes and light defects only. Good grain pattern, 5 to 7 sq ft area Full skin, irregular shape, almost whole skin

Heavy healed scars

Medium open scars

More than two holes

Light to medium defective areas

C

Defects in prime cutting areas, at least 50% of skin useable. Grain patterns less prominent, 5 to 7 sq. ft area. Whole skin irregular Part skins

Heavy healed scars

Heavy open scars Large holes torn Extensive damage D

Less than 50% of skin useable, no large areas of skin unblemished. No commercial value.

Leg skins graded to the same standards as body skins with regard to all standards except skin area. C grade leg skins may have limited commercial use. D grade leg skins have no commercial value.

Source: Glatz 2000

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Ostrich

Grading criteria & guidelines

Size: Skins can be segregated by age between chick and adult. Chick skins to about 9-

10 months can be too thin while older breeder skins can be too thick, each will suit limited markets. Generally accepted size is approximately fifteen ft2; often a price penalty will be incurred if below this size.

Grain: The grain may show evidence of hair follicles (filoplume) around the quill;

extensive occurrence in at least two quarters can result in downgrading by one grade. Buyer reaction to evidence of filoplume depends on supply-demand factors at the time of purchase. Improved flock management and bird genetics have reduced incidence of filoplume in Australian flocks.

Grain damage: Grain damage may be apparent in the form of holes, scratches, scabs, healed

wounds, damaged quills, bacterial damage, or loose grain (where the grain is separated from the base of the leather).

Pelt damage: Could be evident as an outcome of the slaughtering process and would be butcher

flays, torn skins and incorrect take off. Further processing damage could include fleshing damage.

Crown: The crown is the main diamond shaped area in the middle of the skin with quill

patterns evident. The four quarters of the crown are defined by dividing lines. The dividing lines divide the crown area into four quarters and they are approximately 25mm wide. The vertical line is from the base of the neck to the bottom of the crown. The horizontal line crosses the crown at its widest point.

Defects: A defect is a hole, tear, scratch, loose scab, a healed wound, extensive bacterial

damage, or obvious vein marks if they cover a substantial area of the skin. Grade types: Note: Detailed grading is often only effective after crusting – when many

imperfections are highlighted and market value can be negotiated according to commercial market demands.

" Grade 1: Minimum three-quarters of the crown free of visible defects. 1 quarter able to have a 40mm by 40mm defect. There may be defects on the dividing lines and the area outside the crown (surrounding area). " Grade 2: Two quarters of the crown free of visible defects. Two quarters able to have a 40mm by 40mm defect. There may be defects on the dividing lines and the area outside the crown (surrounding area). " Grade 3: One quarter of the crown free of visible defects. Three quarters of the crown able to have a 40mm by 40mm defect. There may be defects on the dividing lines and the area outside the crown (surrounding area). " Grade 4: All four quarters of the crown able to have a 40 by 40mm defect. There may be defects on the dividing lines and the area outside the crown (surrounding area).

Source: Crowley 2000; Glatz 2002

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Crocodile

Grading criteria & guidelines – salted skins Measurement and skin types: All crocodile skins from Australia are traded on the basis of width, not length. Crocodiles can be skinned in two ways resulting in differing hides for differing uses. An explanation of the different types and their individual measurement systems follows:

Belly skin: These skins come from animals that have been skinned to leave the belly and flank area of the skin entire, by removing the rough back skin (backstrap) from the main skin. Measurement of this skin is taken three rows of scales back towards the vent from the front legs.

Horny-back: These skins are removed by making a full length cut from the chin, along the underside through the cloaca, to the tip of the tail. The skin is taken off the animal with this singular cut to the skin only, leaving an entire skin with the backstrap running down the centre of the skin. Measurement is taken across the skin at the third row of raised scutes along the backstrap.

Backstrap: The backstrap is produced from the skinning process described in ‘Belly Skin’ above. The backstrap is the sector of the skin that lies predominantly along the back (on the top of) of the crocodile. These skins are sold on the basis of length from tip to tip.

Breed: Only one of the two Australian species of crocodile is considered commercial. The freshwater crocodile (Crocodylus johnsoni) produces only a few eggs, is slow growing and has a low value skin. In Australia crocodile skin exports are of the salt-water variety only. The scientific name for this animal is Crocodylus porosus, which has protected status in the wild. Only farmed or ranched skins from these animals can be produced and traded commercially.

Skin damage: Can be evident in the following forms: • Scars • Scratches • Brown spot • Scale slip • Knife cuts

Grade types: 1st Grade; 2nd Grade & 3rd Grade. The grading of crocodile skins is highly subjective. Grading often depends on the price the buyer is prepared to pay for the skins, and the desired end use. A 1st grade skin must be blemish free around the belly area, but may be downgraded if there is damage in other areas of the skin. There are no formal criteria to create a distinction between 2nd and 3rd grade skins, except that the presence of any holes in the skin renders it immediately as a 3rd grade skin. The perception of the quality of the skin is also an important consideration and relies on qualitative measures such as the ‘feel’ of the skin. A common way to assess this is to scrunch the salted skin in the fingers.

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Size: Saltwater crocodile skins are traded worldwide on their belly width measurement. The term belly width is determined in Australia by the measurement system as explained above under grading criteria.

Source: Lever 2002

The collar and vent is the most important area and should be left

blemish free. However, a small mark near the collar or on the flank may still pass as grade 1 depending on

the grader and need.

Collar

Measure

Vent

Marks on legs do not cause downgrading

Marks on the tail will reduce overall value and utilisation of skin and may cause downgrades.

Small marks on the neck or throat may render this part of the skins useless and cause downgrades.

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Camel

Grading criteria & guidelines – hand salted

Ringworm: While ringworm is active, evidence of it can be noticed on a live animal or salted hide. If the activity has ceased and the wound has healed it will not be noticed until the hair is removed in processing.

Mange: Healed Mange cannot be noticed on the live animal or salted skin. Animals showing evidence of extensive mange are not processed, therefore these skins are kept out of the selection. Enamel damage seems to be the major fault of mange effected skins.

Callous pads: Callous pads are found on the ‘elbows’ and brisket of the animal (the callous on the brisket is called the pedestal). The pedestal is trimmed off, whilst the ‘elbow’ callous and the entire leg of the skin below the callous are trimmed off.

Hide presentation: Because of the hump in the skin, skins that are being processed into volume production are ‘sided’, which means that the skin is halved along the centre of the skin where it lay over the backbone of the animal. During this splitting the hump is split and remains on the sides of camel skin produced. Some skins are tanned whole for decorative purposes and/or tanned with the hair on for decorative and other purposes. During slaughter and skinning the neck of the animal is cut entirely off, therefore the neck leather of the animal is not left on the hide.

Butcher damage: During the skinning process skins may be cut during take off.

Hide area: Animals are slaughtered to attain an average hot standard carcase weight (HSCW) of 250 kg’s. The animals processed to achieve this average range from 200 kg’s to 300 kg’s HSCW. Therefore skins are processed with a consistent area, consistent with the carcase weight guidelines in place.

Bulls: Some of the camel skins produced are taken from bulls. After hair removal, these hides may show evidence of scarring on the lower flank and bellies from fighting. Large bull skins (from animals in excess of 300 kg HSCW) are noticeably thicker.

Grade types: At this stage of development of the Australian camel industry there is only one major purchaser of the salted hides, and for this reason a grading system has not yet been developed. Skins are currently purchased as ‘a run’ from the abattoir, with only torn skins being rejected.

Proposed grading guidelines: As the industry is not yet producing hides in big volumes or selling hides to a

number of clients, it is perhaps premature to be developing guidelines. However it can be assumed that the following criteria will be assessed: " percentage of hides showing evidence of mange. " percentage of hides with butcher damage. " presentation of the hide (eg. sided or whole; neck on or off). " estimated average area in square feet per piece. " pedestal removed/not removed. Leg callous pads removed/not removed. " percentage of heavy bull component.

Source: Crowley 2000

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Appendix 7: RNA Fashion Parade 2000

Crocodile boots by Pendragon Moreton TAFE design students

Flawed ostrich hide used to make cape and ostrich leather cap

Finalist outfit of goat leather with boots made from ostrich leather

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Finalist outfits made of goat leather

112

Finalist outfits made of

goat leather

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Appendix 8: Designs by Emanuela Pili (Emanuela was a fashion student sponsored to attend Polimoda Institute of TAFE, Italy)

Figure A8.1: Emu maternity design

According to Emanuela, the use of emu created a style which was comfortable yet flattering and stylish - it is sensual and celebrates the female form.

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Figure A8.2: Goat daywear

Funky colours cut into small strips utilise the goatskin’s small size.

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Figure A8.3: Goat daywear

Funky colours cut into small strips utilise the goatskin’s small size.

Figure A8.4: Camel bag

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Emanuela used camel in her travel accessories designs. She described the bags as sleek yet functional and fitting with a casual lifestyle.

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Appendix 9: 2001 Leather Fashion Trends

These bags, shoes and accessories were predominant in Italy in 2001. Ostrich leather was also seen in men’s shoes for a smart casual look, not just formal wear.

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2001 fashion trends included the use of ostrich leather as a highlight against other leathers, and a gathering leather to create a pleated look.

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More trends in leather: Leather cut out to produce floral design for eye catching hat,

and…

leather shirt with raw edge, and leather bag with adjustable strap and reinforced base – clean, stylish, functional and modern.

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the “quilted look” in garments, bags and boots

New trends for 2001: Tattoo effect on leather boots and bag – painted shapes or writing; and…

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Appendix 10: Media List for RNA Fashion Parade 2000

Television coverage Channel 7 • News coverage 4 August

Channel 9 • Saturday Extra 29 July • Brisbane Extra, 9 August • News coverage 4 August • News science report 24 August

Channel 10 • News coverage 4 August • Totally Wild September

ABC • News Coverage 4 August • News coverage 9 August • Landline 3 September

Radio coverage • 4VL Charleville • ABC Statewide

Print coverage • Western Times • Balonne Beacon • Queensland Country Life • Sunday Mail • South Burnett Times • Gold Coaster • Western Sun • Blackall Leader • Departmental coverage • DPI Today • Food and Fibre • Message of the Day • Queensland Table • Industry coverage • Aussie Goat Net • Central Western Newsletter • Goat Breeders Newsletter

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Appendix 11: RNA Fashion Parade 2000 Media Coverage BRISBANE RNA SHOW EXPOSURE FOR ROCKY OSTRICH PRODUCTS

OSTRICH and crocodile leather clothing and accessories grown in Central Queensland will be modelled at this year’s Wool Fashion Parade at the Brisbane Royal National Association Exhibition starting on August 9. It puts a whole new perspective on ‘long-legged birds’ and ‘snappy dressers’ when these products go on show thanks to an innovative promotion undertaken by the Department of Primary Industries Rural Market Development Group and the Queensland Sheep and Wool Institute.

Rockhampton-based DPI marketing officer, Dennis Murphy, said Brisbane Institute of TAFE fashion design students were given the challenge to design fashionable, yet wearable garments to be modelled in a ‘skins’ section of the Year 2000 RNA Wool Fashion Parade. The 10 best garments from the TAFE student design competition would be paraded together with luxurious accessories in ostrich and crocodile leather. There would also be Chevon Nappa leather garments made from the hides of Boer meat goats.

Ostrich leather used by the TAFE design students was supplied by Tropical Ostrich Association, a 10-member group of Rockhampton district farmers and investors founded in 1998. Crocodile leather was sourced from John and Lillian Lever’s Koorana Crocodile Farm on the Capricorn Coast.

Tropical Ostrich Association president, Jean Leonard, Bloomsdale Ostrich Farm, Alton Downs, said the students had designed skirts, tops and even a cape from locally produced ostrich leather processed by a Melbourne tannery. ‘It is an exciting development to see our locally-grown ostrich leather being made into garments and a range of accessories such as handbags, belts, shoes, purses, wallets and brief cases,’ said Mrs Leonard. ‘Our Association has now registered the product brand name, Nenlake, and we are in a position to establish our own domestic and export markets and set market prices for our Australian made products,’ said Mrs Leonard.

Bloomsdale Ostrich Farm was founded seven years ago and maintains purebred strains of African Black and Zimbabwe Blue ostrich breeding lines crossed with Australian Greys.

To advance the Tropical Ostrich Association’s marketing objectives, Mrs Leonard was liaising with DPI marketing officer, Dennis Murphy and Department of State Development export advisor, Howard White, Rockhampton.

Mr Murphy said Japan and Europe were considered a premium markets where suppliers of finished products virtually set the market.

‘There are three-year waiting lists for some exclusive ostrich leather products. The leather from the bird’s legs and body is a unique commodity ranked at the top end of the fashion industry where handbags sell for $3000 to $5000 and men’s wallets are priced from $300 to $800,’ said Mr Murphy.

Mr Murphy conceded this was a very difficult market for Australian industry to gain a foothold but it was not impossible.

***************************************************************************

Further information: Dennis Murphy, Marketing Officer, Rural Industry Business Services, Rockhampton Ph 4936 0235 Mrs Jean Leonard, President, Tropical Ostrich Assn, Bloomsdale, Alton Downs Ph 49341164 Russ Boadle, Public Affairs Officer, Rockhampton Ph (07)49360320 Mobile 0418 789939 Department of Primary Industries Public Affairs Central Region Office, Box 6014, Rockhampton Mail Centre, Q 4702 Fax (07) 49360 317.

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Appendix 12: Crocodile and Alligator species

Species Common Name Distribution CITES Classification Appendix Notes

Alligator mississippiensis American Alligator United States II Alligator sinensis Chinese Alligator China I Caiman crocodilus apaporiensis

Apaporis River Caiman

Colombia I

Caiman. crocodilus crocodilus

Common Caiman, Spectacled Caiman

Bolivia, Brazil, Colombia, Costa Rica, Cuba (introduced), Ecuador, El Salvador, French Guiana, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Panama, Peru, Puerto Rico (introduced), Suriname, Trinidad and Tobago, United States (introduced), Venezuela

II

Caiman crocodilus fuscus (including Caiman crocodilus chiapasius)

Brown Caiman Bolivia, Brazil, Colombia, Costa Rica, Cuba (introduced), Ecuador, El Salvador, French Guiana, Guatemala, Guyana, Honduras, Mexico, Nicaragua, Panama, Peru, Puerto Rico (introduced), Suriname, Trinidad and Tobago, United States (introduced), Venezuela

II


Argentina , Bolivia, Brazil, Paraguay, Uruguay

I Excluding population of Argentina


Argentina, Bolivia, Brazil, Paraguay, Uruguay

II Population of Argentina

Melanosuchus niger Black Caiman Bolivia, Brazil, Colombia, Ecuador , French Guiana, Guyana, Peru, Venezuela

I Excluding population of Ecuador

Melanosuchus niger Black Caiman Bolivia, Brazil, Colombia, Ecuador, French Guiana, Guyana, Peru, Venezuela

II Population of Ecuador, subject to a zero annual export quota until a different quota has been approved by the Secretariat

Paleosuchus trigonatus Smooth-fronted Caiman

Bolivia, Brazil, Colombia, Ecuador, French Guiana, Guyana, Peru, Suriname, Venezuela

II

Crocodylus acutus American Crocodile Belize, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Peru, United States, Venezuela

I

Crocodylus cataphractus African Slender-snouted Crocodile, African Sharp-nosed Crocodile

Angola, Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Equatorial Guinea, Gabon , Gambia (extinct), Ghana, Guinea, Guinea-Bissau (extinct), Liberia, Mali, Mauritania, Nigeria, Senegal (extinct), Sierra Leone , Tanzania, Tog , Zambia

I

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Crocodylus crocodilus yacare (=Crocodylus yacare)

Yacare Argentina, Bolivia, Brazil, Paraguay, Uruguay

II

Crocodylus intermedius Orinoco Crocodile Colombia, Venezuela I Crocodylus johnsoni Johnson’s Crocodile Australia II Crocodylus moreletii Morelet’s Crocodile Belize, Guatemala, Mexico I Crocodylus niloticus Nile Crocodile Angola, Benin, Botswana, Burkina

Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti (extinct), Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Israel (extinct), Kenya , Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, South Africa, Sudan, Swaziland , Tanzania, Togo, Uganda, Zambia, Zimbabwe

I Except those populations in App. II

Crocodylus niloticus Nile Crocodile Angola, Benin, Botswana, Burkina Faso, Burundi, Cameroon, Central African Republic, Chad, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti (extinct), Egypt, Equatorial Guinea, Eritrea, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Israel (extinct), Kenya, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Namibia, Niger, Nigeria, Rwanda, Senegal, Sierra Leone, Somalia, South Africa, Sudan, Swaziland, Tanzania, Togo, Uganda , Zambia, Zimbabwe

II Populations of Botswana, Ethiopia, Kenya, Madagascar, Malawi, Mozambique, South Africa, Uganda, United Republic of Tanzania (subject to an annual export quota of no more than 1600 wild specimens including hunting trophies, in addition to ranched specimens), Zambia, and Zimbabwe.

Crocodylus novaeguineae New Guinea Crocodile, Freshwater Crocodile

Indonesia : Irian Jaya, Papua New Guinea

II Except subspecies in App. I.

Crocodylus novaeguineae mindorensis (also referenced as Crocodylus mindorensis)

Philippine Crocodile

Philippines I

Crocodylus palustris Marsh, Broad-snouted Ormugger Crocodile

Bangladesh (extinct), India, Iran (Islamic Republic of), Nepal, Pakistan, Sri Lanka

I

Crocodylus porosus Saltwater Crocodile Australia, Bangladesh, Brunei Darussalam, Cambodia, India, Indonesia, Malaysia : Sabah, Sarawak, Myanmar, Palau, Papua New Guinea, Philippines, Singapore (extinct), Solomon Islands, Sri Lanka, Thailand (extinct), Vanuatu, Vietnam

I Except populations of Australia, Papua New Guinea, and Indonesia

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Crocodylus porosus Saltwater Crocodile Australia, Bangladesh, Brunei Darussalam, Cambodia, India, Indonesia, Malaysia : Sabah, Sarawak, Myanmar, Palau, Papua New Guinea, Philippines, Singapore (extinct), Solomon Islands, Sri Lanka, Thailand (extinct), Vanuatu, Vietnam

II Australia, Papua New Guinea and Indonesian populations

Crocodylus rhombifer Cuban Crocodile Cuba I Crocodylus siamensis Siamese Crocodile Brunei Darussalam, Cambodia,

Indonesia : Sulawesi, Sumatera, Lao People’s Democratic Republic , Malaysia, Myanmar, Thailand (extinct), Vietnam

I

Osteolaemus tetraspis (African) Dwarf Crocodile

Angola, Benin, Burkina Faso, Cameroon, Central African Republic, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Nigeria, Senegal, Sierra Leone, Togo, Uganda

I Except subspecies listed separately

Osteolaemus tetraspis osborni

Congo Dwarf Crocodile

Africa I

Osteolaemus tetraspis tetraspis

West African Dwarf Crocodile, Broad nosed crocodile

Africa I

Tomistoma schlegelii Tomistoma, False Gavial

Indonesia , Malaysia : Peninsular Malaysia, Sarawak, Thailand

I

Gavialis gangeticus (Indian) Gavial, Gharial

Bangladesh, Bhutan , India, Nepal, Pakistan

I

Appendix I – Commercial Trade of the species is prohibited Appendix II – Commercial trade of the species is allowed only with the issue of a permit

Source: Environment Australia 2002; CITES 2002

Markets for Skins & Leather - Agrifutures Australia · Markets for Skins & Leather from the Goat, Emu, Ostrich, Crocodile & Camel Industries Publication No. 02/142 Project No DAQ-258A

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