In the first quarter of 2019, the French leather sector maintained a positive trade balance, with a coverage ratio of 116% (up 8 points). Against the first quarter of 2018, exports increased by 13%, all sectors considered.
As a general rule, premium and luxury finished goods in leather made a good showing during the first quarter of 2019. In contrast, the upstream elements of the sector have seen a slowdown in their activities. The reason for this is an ongoing decline in demand from their main client, Italy.
FRENCH LUXURY SECTOR REMAINS BUOYANT
French exports of finished goods continue to increase: +15%, representing nearly 1 billion euros more than in 2018. The main clients are Italy (12%), Hong Kong (11%) and the United States (11%). France exported some 6 billion euros of finished goods (+15%) while imports slowed to 5.1 billion euros (+4%). Its savoir-faire, embodied by the leading luxury houses, continues to have international appeal.
Leather goods are leading the trend, on a market representing some 4 billion euros (+16%). Hong Kong (14%), Singapore (13%) and the United States were France’s three main clients, closely followed by Italy (9%) and the United Kingdom (8%). Once again, handbags are leading sales. They represented 59% of exports of leather goods items, a rise of 23% against 2018. On a market worth 2.4 billion euros, 10.2 million bags were sold, of which 2.5 million were made of leather. The rise is even more substantial in terms of average transaction value, which increased by 15% for handbags of all types of materials and 22% for leather bags, reaching 690 euros.
France has also seen an increase in its leather goods imports: + 8%. These products come mainly from China (35%) to meet domestic demand for mid to low-range fast fashion items, from Italy where some of the major houses have their production facilities and Spain (11%), a country whose savoir-faire is appreciated by young designers. France imported almost 1 million more handbags than the previous year. This situation can mainly be explained by the 8% drop in domestic production of women’s handbags.
The same observation has been made for shoes and other footwear. Exports progressed by 12% in value terms, reaching 1.9 billion euros, with a 5% increase in sales volume, for a total of 62 million pairs during Q1 2019. A similar trend can be seen with the average transaction value, up 7%. This price rise concerns all products including shoes with leather uppers (+9%) exported for an average price of 63 euros. Of the 62 million pairs of shoes and other footwear exported, 90% are sold within the European Union (55.7 million pairs). The main countries are Spain, which purchased 11.4 million pairs, Italy with 9.5 million, Germany with 8 million, Belgium with 5.8 million and Poland with 5.3 million.
France saw its imports shrink 6% in volume terms and increase 2% in value. In other words, it imported fewer pairs of shoes and items of footwear but at a higher price, presumably of better quality. For example, one in every two pairs of shoes still comes from China, but the volume is decreasing (down 12%, meaning 18 million fewer pairs) while prices have increased by 11% to reach an average price of 6 euros. Vietnam is the country benefitting most from the decline in Chinese imports, with an increase of 1% in volume and 4% in value (19 euros). Lastly, Italy remains a key partner for France, as we imported nearly 15 million pairs from our neighbour (+9%) with an average cost of 45 euros per pair.
Another notable figure: 6%, representing the fall in French production and sales by volume in shoe stores. The “yellow vest” protest movement had severe consequences for retailing in France and did not spare high-street shopping, particularly on Saturdays, which represent 30% of monthly sales figures for retailers.
SALES OF TANNED AND FINISHED LEATHERS ARE UP BY 9.1%
During the first quarter of 2019, the tanneries sector saw its turnover increase by 9.1% thanks to sales of finished calf leathers, recognised the world over for their exceptional quality and in high demand. Exports of finished calf leathers grew by 10% in value terms and the volume of French production increased by 4%. But France alone cannot meet the strong demand from luxury houses for first-choice leathers. Furthermore, a number of leather goods workshops have opened recently in France, and are driving the demand for quality leather. This explains the 5% increase in imports, coming mainly from Italy (44%) and Spain (15%).
Sales of finished leathers remained stable in Europe, representing 63% of French exports: we note a fall in certain countries such as Spain (-2%) and Belgium (-32%), compensated by an increase in others such as Italy (+2%), Switzerland (+29%), Portugal (+8%) and the UK (+11%). On the African continent (17% of exports of finished leathers), the drop in demand for French finished leathers stood at 12% in Morocco and 9% in Tunisia. Lastly, it is important to highlight the tensions between the United States and China, which had a direct impact on the activity of tanneries specialised in lamb leather for clothing: -5.3% in production and -5% in exports (-35% of sales to China and Hong Kong).
CONSUMER LESS BUT BETTER, THE REASON FOR THE DROP IN UPSTREAM ACTIVITY
Nobody can deny the fall in meat consumption in Europe and the new modes of consumption – less but better – which are directly affecting the upstream sector of our industry. On the whole, the trend is for few animals sent to slaughter and thus a drop in the number of raw hides. Nevertheless, stocks are still high compared to the slowdown in international demand. Exports have experienced a sharp reduction of 33%. To compound matters, Italy, France’s largest client (73% of French exports), reduced its demand for raw leathers and hides by 35%! The same situation can be seen in China (7% of French exports) where demand has shrunk by 26%, as well as Spain (6% of exports) down 21% and Germany (5% of exports) down 38%.
Frank Boehly, President of the CONSEIL NATIONAL DU CUIR: “The French leather sector is delighted by the recent wave of new workshops being opened by luxury houses throughout France. With the quality of our leathers, products that are 100% made in France are now possible. At the 1st Sustainable Leather Forum, the entire profession committed to a responsible approach. The circular economy is therefore the key to the future of our companies and we must raise awareness of this with the French public. Our future depends on it!”
The Conseil National du Cuir, with its Economic Observatory, is tasked with providing information to all the players in the French leather sector. Throughout the year, output includes: a brochure and country data sheets on global trade in the leather sector, a study on France’s External Trade, annual surveys of the economic context by sector of activity (leathers and raw hides, tannery, footwear and leather goods), monthly economic context briefings on the global activity of French companies in the industrial leather sector and their external trade, data sheets on the annual activity of tanneries, footwear and leather goods as well as studies of the trade sector.
All this data is published on the website www.conseilnationalducuir.org