Tom Hogarth
Deputy Editor
International Leather Maker
2022 was a tough year for the leather industry, one which promised to be a break away from the troubles of the last few years and, in particular, the Covid-19 pandemic. Instead, the last year has continued to challenge the global leather supply chain across the board.
While Covid hasn’t been as much of an issue for the majority of the world, lockdowns in China have reverberated through the supply chain, and manufacturers have been forced to shift focus and upturn the balance of imports and exports, while the Russian invasion of Ukraine has had dramatic effects on life not only for businesses in every country, but for the lives of ordinary people around the world.
Luxury beats the odds
However, the problems that hit many industries seem to have had little effect on some, such as the luxury industries, particularly fashion. The most viewed story on the ILM website in 2022 was Chanel’s 2021 financial results, released in May, where the brand revealed that it achieved revenues of US$15.6 billion, an increase of 49.6% over 2020 and 22.9% over pre-pandemic 2019.
This performance was mimicked across the board for the luxury industry, with fashion companies reporting record financial results for 2021 and throughout 2022, continually increasing revenues regardless of supply chain issues, labour shortages and ongoing cost crises for energy and living.
Difficulties for automotive brands
In the automotive world, manufacturers were held back by semiconductor shortages, and the lasting effect of these issues, throughout a good portion of 2022, but we are now seeing a return to normal for many of the largest brands and groups, and even some record breaking figures. However, it seems that brands were only held back from these record results by component shortages and supply chain issues, still managing to achieve growth in 2021 and 2022 despite many problems. In March, Volkswagen Group reported that it actually increased revenue in 2021 despite a drop in sales volume.
Elsewhere in the automotive sector, leather found itself fighting automotive brands throughout 2022 as key stakeholders at many brands decided that leather was not the right choice for their sustainability narrative and the focus of their consumers. While this continues to be a problem, with Polestar claiming in December 2022 that “the need to replace leather with a more sustainable option is clearer than ever”, some brands appear to be taking more time to second guess their moves and reconsider leather as the material of choice.
Norwegian Tesla owners showed their disappointment in the company’s decision to opt for poor-quality interior upholstery with a hunger strike in the latter half of the year, complaining that the synthetic “vegan leather” seats bubble and deform in response to cosmetic products, heat and other factors. Tesla Hunger Strike spokesperson Erlend Mørch said at the time: “We are hoping to get Elon’s attention so he will start to pay attention to his Norwegian customers. Customers that love the car and many who want to continue being Tesla customers but are plagued with endless repairs and in many cases unresponsive support centres.”
However, sustainability has not ruled out leather for some automotive manufacturers. In the sixth most-read story of 2022 on the ILM website, Mercedes-Benz announced that it would offer only “sustainably produced and processed leather” from 2023, focusing on sourcing leather tanned with vegetable or “alternative sustainable” tanning agents, completely free of chromium.
Worries amid success for beef
In March of 2022, Brazilian meatpacker JBS announced its financial results for the full 2021 year and revealed that net income jumped by a shocking 345.5% to R$20.5 billion (US$4.23 billion). This does appear to have been a result of the company diversifying away from majority production of beef and Brazilian production. Gilberto Tomazoni, Global CEO of JBS, said: “JBS, previously a Brazil-focused company specialising in one type of protein, has evolved into a global food company with a diversified footprint that includes a vast portfolio of strong brands and value-added products. Within this context, 2021 has set the stage for JBS’s trajectory in the coming years.”
Despite this strong result for JBS, and other meatpackers in South America and around the world, analysis from corporate investment bank Itaú BBA in March of 2022 showed us that the ongoing crisis in Ukraine could have consequences for the Brazilian meat industry and global meat supply.
The seventh most read story on the website, this analysis looked at how Brazil is a net exporter of corn and, as Ukraine provides 35% of the corn supply for China as of 2021, any disruption to this supply could have significant implications for cereal prices in Brazil, the bank said. According to its analysis, every 10% increase in corn prices results in a 2% rise in unit cost of production for food processor BRF, which would spill over into Marfrig, which currently has a 33% stake in the company.
Developments in leather
Finally, we saw some leather supply chain specific stories among our top 10 articles of 2022, indicating the areas that resonated most with the leather industry audience last year.
Our third most-read story of 2022 was the news that leather chemicals business TFL had crossed US$0.5 billion in sales, one year after it acquired the Lanxess organic leather chemicals business. In a statement in July, the company said: “The two leather chemicals portfolios are proving to be a perfect fit; both regionally and in terms of product portfolio, both businesses are largely complementary. The leather technicians are particularly enthusiastic about the merger, as the competencies complement each other so well. We now want to transfer this enthusiasm to our customers.”
Elsewhere, the leather industry was keenly interested in the work of the Leather Working Group and Leather Naturally, which joined forces to introduce World Leather Day, bringing the story to the fourth most-read spot in our list. World Leather Day is a new initiative from the two organisations to encourage the industry to positively promote leather, and the first edition took place on March 30, 2022. Following the success of this event, the organisations then confirmed that it will take place again in 2023.
The eighth most popular story of 2022 involved one of ILM’s own events from last year – the Future trends in a post-Covid leather industry conference, which took place at APLF Dubai, a Special Edition of the trade fair. At the event, Gustavo Defeo, CEO of Italian analytical laboratory Ars Tinctoria, revealed the results of the company’s biomass carbon content research, answering the question “How does genuine leather compare with other so-called vegan materials?”
Ahead of the event, readers were keen to know more, bringing this story to eighth place in the rankings and learning about the company’s investigation into the quantification of Carbon 14 specifically in SCAR spectroscopy as a consistent way to determine the ratios of fossil based and biomass carbon content in any material or chemical.
Moving on to a new year
The last few years have been awash with challenges for the leather industry, both recurring problems and entirely new ones. While we may hope that 2023 is significantly quieter, it’s hard to expect much except new puzzles and obstacles to overcome. The silver lining in this ominous cloud on the horizon is that difficulty breeds innovation. While the leather supply chain may find itself fighting on all fronts in the year ahead, we can expect these fresh problems to force companies to develop faster, become more efficient and continue on stronger than ever.
