Added value
An article we published five years ago put at 2000% the figure for the added value that tanners and leathergoods manufacturers can give to hides. As this follow-up article shows, if you put the material in the right hands, the figure can now go much higher.
In spite of war, trade tensions, macroeconomic pressures and climate change, the volume of cattle hides that farmers and meat and dairy companies around the world produce continues at a steady level. The most recent figures from the United Nations Food and Agriculture Organisation (FAO) show that, for each of the early years of this decade, global production of raw cattle hides was around 300 million. In 2020, the figure was 297 million. In 2021, it was 299.8 million, rising to 304 million in 2022 and 309.8 million in 2023, the most recent year for which a number is available from FAO.
Its figures are, of necessity, estimates, but they are among the most educated estimates available. The most obvious omission is, perhaps, that the FAO figures include no estimate for India, a country with a cattle population of close to 200 million head and a busy leather industry.
We can keep this caveat in mind and still stick to 300 million as a good, round figure for cattle hide availability. The point is not to give an exact number for this, but to illustrate something else. At the end of 2024, we published the analysis of these figures that the Leather and Hide Council of America (LHCA) had carried out. Its conclusion was that 40% of the available cattle hide resource is going to waste at the moment.
Environmental benefits
LHCA embarked on its analysis because it wanted to illustrate the huge environmental penalty that the world pays by failing to turn millions of hides into leather. Does tanning have an environmental impact too? Yes, of course. LHCA’s point is that the environmental cost is much greater if you let the hides go to waste. Again, for the sake of illustration, we can put some figures on this. What LHCA said at the time was that a 25-kilo cattle hide going to waste would generate emissions of 300 kilos of CO2-equivalent.
Figures for 2023 that Italian tanning industry body UNIC published suggested that its member companies can achieve emissions of 2.03 kilos of CO2-equivalent per square-metre of finished leather. If we calculate 4.5 square-metres of finished leather from one of the 25-kilo hides LHCA talked about, it would give an emissions figure of just over 9 kilos of CO2-equivalent per hide. This indicates that it is more than 30 times worse for the environment to let a hide go to waste than to hand it over to Italian tanners. Sometimes, observers point out that UNIC’s figures can be skewed by the predominance of leather manufacturers in Italy starting from wet blue, missing out wet-end processing and the emissions associated with it. Scottish Leather Group carries out its own wet-end processing and calculates its emissions at 1.4 kilos of CO2-equivalent per hide. This means its work to make leather from hides has an environmental impact that is more than 200 times lower than letting the material go to waste.
Economic gains
This feels a little like going over old ground, but these figures remain jaw-dropping. This new article, however, has a different purpose: to show not the environmental benefit that we miss if we mismanage the circular resource that cattle hides constitute, but the potential economic benefit. Hides can generate huge economic gains. Not to use them to make leather is to miss out on making money.
In 2020, we published an article that calculated at 2000% the value that tanners and finished product manufacturers are able to add to hides. This follow-up article shows that, five years on, this percentage is now much higher.
In July 2020, LHCA had said 5.5 million US hides had failed to make it into the leather value chain the year before. It blamed the low economic value of the raw material, saying that it was no longer economically viable for traders to collect hides from smaller abattoirs, preserve them and ship them to tanneries.
The price of hides has not recovered, nor, for the most part, has the price of leather. However, the prices of many finished products are now substantially higher than they were at the start of the decade. This suggests the added value that the leather industry can bring must also be higher now.
High fliers
It is in France, home to the biggest luxury groups, that many of the world’s highest-value leather products are made. In this issue of World Leather, we have a separate article about the $10 million bag; an original prototype of the Hermès Birkin bag, presented by the company to Jane Birkin and owned and loved by her for years.
Abattoirs in France slaughtered 3 million head of cattle in 2024 and just under 1 million calves. The material is of high quality and the supply chain is efficient; we can safely assume the vast majority of the hides and calfskins that accrued as waste at the abattoirs will have found buyers. If may seem strange to focus on France if these particular hides and skins seem to face no danger of going to waste, but we used to say that about the US, too. It is also true that most leathergoods brands around the world cannot add the same value to the raw material as their French counterparts. And, of course, the $10 million Birkin bag is a real outlier. However, if 40% of global cattle hide resources are going to waste, it is worth pointing out the full extent of the potential economic benefit that those resources could bring. For this, France and the detailed statistics that industry body Alliance France Cuir is kind enough to make public serve our purpose well.
In the raw
To start at the beginning, Alliance France Cuir has told World Leather that the price of cattle hides in France has fallen by 47% in the last ten years. Now, large, male hides sell for between €50 and €60 each. Female hides (from beef cattle breeds) fetch prices of between €30 and €40. Dairy cattle now make up a larger proportion of the national herd in France than in previous years; hides from those animals currently cost between €15 and €22. Calfskins are becoming scarcer, as an article in World Leather December 2024-January 2025 makes clear. It is a special material for which prices have not followed the same dynamic. The upshot is that the spend for the domestic leather manufacturing sector on these local raw hides and skins was €84.5 million in 2024.
Alliance France Cuir has said 74 companies were involved in collecting and trading raw hides in 2024. They do so primarily to make money, of course. Collectively they generated revenues of €269.4 million. They brought in more than 75% of these revenues, €203.7 million, from exports of French raw material, demand for which is high (among Italian tanners in particular). Our focus here will be on the €84.5 million worth of raw material that stayed in France.
Leather manufacturers in France also imported raw hides and skins from elsewhere. This material had a value of €148.2 million. If we add the domestic and import figures together, we can see that tanneries in France spent a total of €232.7 million on bovine raw material in 2024. This figure is, therefore, our starting point in working out added value.
Return on investment
From this material, according to Alliance France Cuir, these manufacturers made 2,295 tonnes of finished leather and sold it for a total of €424 million. At this stage in the value chain, hides that cost €232.7 million had generated added value of 82%. Not bad at all, but downstream supply chain partners, all the way to the expensive shops on Paris’s Rue du Faubourg Saint-Honoré and Avenue des Champs-Élysées, were able to keep adding economic value to the material every step of the way.
France had 387 companies making leathergoods on home soil at the end of 2024. The number of manufacturing companies is down slightly on the previous year’s figure of 392. However, the total number of people involved in leathergoods production in 2024 was up, increasing by 4% to reach 32,011. Their hard work generated a collective turnover of €5.9 billion for the finished product manufacturers. Again, insisting that our aim here is to offer an illustration of the added value rather than pin-point accuracy, we can say that the outlay of €232.7 million on raw material had, by this stage, achieved an impressive added value of 2435%.
Conservative estimate
Of course, distributors, wholesalers and retailers add their margins on top of this, as we can see from the figure Alliance France Cuir has given for the value of leathergoods exports from France in 2024. Citing the country’s customs authorities, it said these exports generated €13 billion.
There are two things to point out here. A proportion of the leathergoods that French companies export are made outside France, most notably in Italy and Spain. If these items come back to France for export from there, which some do, they contribute to the €13 billion figure. However, because many of the factories that make those products use French hides and calfskins, we can still include them as part of our added value calculation. A figure of €13 billion takes the value-add percentage to 5486% (five thousand, four hundred and eighty-six per cent).
This may seem a very precise number for what is, as we keep saying, an illustrative exercise. This is a fair criticism. It is worth bearing in mind, however, that the €13 billion is only for exports from France. It does not reflect the fact that a large proportion of the output from France’s leathergoods factories do not go for export, but are sold to consumers in France and to tourists visiting the country. This is a difficult number to work out, but we know is not a small one. This means 5486% is a conservative estimate. The true figure must be even higher.
A Hermès Kelly bag on the streets of Paris.
Credit: Shutterstock/Photo Lime
