The use of leather in the automotive sector is rising
Set up in 1953, Kanpur-based Super Tannery Limited is the oldest tannery in north India and is one of the leading buffalo leather tanneries globally. The company specialises in high quality leather for automotive and furniture upholstery, safety and lifestyle footwear, bags, belts, sporting goods and equestrian equipment. CEO Tanveer Amin discusses the opportunities and challenges that Indian leather industry faces.
What is the size of the global tanning industry? What is the percentage share claimed by India?
The global tanning industry is worth billions. India claims around 4-5 per cent of the share.
Which are your major markets for footwear, accessories, upholstery, sporting & equestrian goods?
Our main market for sporting & equestrian goods is the United States. The main market for us in leather has consistently been China, followed by Italy and Russia.
What are the latest innovations trending in this industry?
The important innovations are:
1. Processing leather with minimum water usage. It is something that every entity in our region is trying to achieve. They are researching various methods to reducing water usage.
2. Trying to re-use the water to minimise environmental impact of the industry.
3. The other sector growing in parallel with our industry is the automotive industry, i.e., leather for car seats. There are other tanneries in our region that are consistently supplying automotive leather to some important companies across the globe. Automotive is the 'in' thing in the leather industry. All the other product categories like furniture, footwear and leather goods are either stagnant or on a decline.
What is the expected growth rate by 2020?
The expected growth rate in the next 2-3 years should be over 10-15 per cent.
The government is targeting leather revenues of $27 billion by 2020. Do you think this can be achieved?
There is lot of scope to achieve this target. If the government policies are favourable to the industry and if the international market behaves well, which is a big factor beyond our control, then the target is achievable.
What are the latest trends in hides for footwear, accessories and upholstery?
The trends are mostly dictated to us by the fashion industry as they have the vision, exposure and know-how to try and incorporate leather into different kinds of fashion wear. We only follow what we are told. We are far from trend forecasting.
However, the demand that is coming from around the world is more towards natural-looking leather. There are times when people just want very coated, plain and heavy-finished leather, which can be mistaken for a piece of plastic. But over the years, especially in the last one and half years, most customers around the world are looking for more natural characteristics of the leather.
Do you have a design team?
In our footwear and belt factories, we have trained personnel who follow global trends and design products accordingly. We also work with designers who periodically keep looking at market trends to create prototypes and designs. We have about 10-12 people in our design team.
How has the Uttar Pradesh government's thrust on shifting tanneries to clean Ganga and the ban on cattle trade affected the tanning industry in Kanpur? Do you plan to move your operations?
The Uttar Pradesh government has been very proactive in assuring that none of the unauthorised or illegal activities concerning live animals take place in the state. It has been quite successful in eliminating lot of malpractices. For instance, the closures of unauthorised slaughter houses that were operating without proper permits in areas they were not supposed to. We have also been able to regulate the slaughter industry a lot to cut down on malpractices that could have potentially affected our reputation as niche suppliers globally.
At the moment, we don't have a designated site for shifting the tanneries. The government is also cooperating a lot in trying not to let the tanneries shift at all. Perhaps the idea is to modernise and upgrade the existing water treatment plants that serve the industry currently. Since the shifting may not be suitable for all the different entities that are processing leather in our region, the government is exploring possibilities to prevent shifting and we can continue smoothly with the existing setup, with some upgradation.
We hope we don't have to move our operations but if the shifting happens on pan-industry basis, then of course nobody will have a choice.
Has the goods and services tax (GST) impacted the tanning industry? What further revisions/steps does this industry require to help it bounce back to normal?
Initially, the tanning industry was affected just like every other sector in the country. But more than the impact, the lack of clarification on many issues and the passage of key information to the public in bits and pieces created confusion and some level of panic among consumers. But the Indian leather industry and the people involved in it are friendly, proactive in their accounting systems, procedures, and are fairly informed. The Council for Leather Exports (CLE), which is very proactive, ensures that any kind of changes in government policies is swiftly communicated to the industry. Because of the council's support, we were able to function normally despite the initial hiccups and panic.
Apart from the council, the Federation of Indian Exporters' Organisation (FIEO), which ensures Indian exporters across all industries are well informed about policy changes of the government, has extended excellent support.
What are the challenges that the leather industry in India faces? What would you propose to overcome them?
The biggest challenge is the uncertainty in the international market. The United States and the United Kingdom are our major markets and they have been quite unpredictable. There are times when we cannot meet their demands and there are times when there is actually no demand.
There is a cyclical challenge that we see during the summer months like I mentioned before. The availability of the raw material becomes a big challenge from the onset of spring until the mid of monsoons, i.e., from the beginning of April until the middle of July. The raw material availability really goes for a toss. It becomes challenging to the extent that the pricing of our leather becomes impractical for our customers. There are more aggressive regions like South America, which are very organised and united, who take our share in the market.
Have you been receiving competition from South America?
It wouldn't be right to say that. South America cannot be considered our competitor because the kind of raw material available in that region is completely different from ours. It is slightly superior or what the world considers best; at least that's what our customers tell us. Since, they are 15-20 per cent superior to us in terms of raw materials, they tend to dictate business terms indirectly to us. When they decide to become aggressive with their pricing, we are left with no choice but lower ours to maintain the difference. But the competition is within the industry and we don't actually compete with any country on a global level.
Tanneries, which use raw material from slaughter houses are witnessing a 20-40 percent increase in prices owing to shortage of supply. What do you have to say about it?
I don't think there has been an increase in 20-40 per cent in our raw material price. The raw material in our industry tends to play up and the movement of prices does become a little strange.
Since most of the tanneries in our region are serving the export markets, the behaviour in these markets have a big influence on our raw material.
The second influence is of local factors. For instance, the unavailability of animals in the summer months because animal transporters prefer not to transport them to long distances fearing they will not survive the heat. The farmers strongly believe that animals do not yield as much weight in summers. This discourages the farmers to sell during summer and wait until the monsoons. It is believed that animals start gaining weight as monsoon begins and yield more value.
These two are the main forces that have some impact on prices.
What is the status of the project that was launched, as part of a memorandum of understanding, to train workers for water conservation in leather processing?
It has fared well. It has served its purpose. Any amount of awareness that needs to be spread to the workers has surely added some value to the industry. There has been a tremendous change as far as water conservation at production level is concerned.
Leather is a highly polluting industry. A lot of tanneries have been banned. Eco-friendly processes cost a lot. What steps are taken to ensure a pollution-free environment in the manufacturing units?
There has been a growing trend of awareness within the industry to produce leather with lesser amount of water and steps are being taken to reuse the water. There have been various non-governmental organisations (NGOs) and international groups that have extended support to our industry to try and reduce the environmental impact of processing leather.
A lot of new technologies are helping us to do that. If you compare the industry that was functioning 10 years ago, there has been a massive change. We have examples in Italy and Turkey, which are very advanced and developed countries. Both the nations have a thriving leather industry, yet they ensure that environmental impact is quite less. So, there is a lot of learning, exchange of ideas and technology transverse between these countries and our region. Things are moving well in the right direction.
What are your future plans?
Our future plan is to try and explore possibilities in the automotive sector on a global scale and to keep upgrading our water treatment to ensure that they are in line with international standards.
Where do you source hides from?
We source our hides from mechanised slaughter houses that are engaged in the export of buffalo meat to various parts of the world.
What is the annual production capacity at your units? What percentage of the production accounts to exports?
It varies a lot. We have good installed capacities. Our production is well influenced by the demand of the international market. We produce about 1.5 million sq ft a month; so it comes to around 18 million sq ft a year. About 80 per cent of our production is exported.
What would be your concluding thoughts?
With respect to the leather sector, our country has enormous potential in terms of availability of raw material, entrepreneurship and skilled manpower to produce world class products. Still a lot of such potential remains unexplored. I think with favourable policies, procedures and assistance that we are receiving from the government, we will be able to scale good heights. (HO)
Which segment among footwear, accessories, upholstery, and sporting & equestrian goods generates the most revenue for your company?
Our biggest segment is furniture, i.e., upholstery, followed by footwear and leather goods, like bags and belts.
