Thomas Schneider: Tanner aims to turn the tables on vegan alternatives
Founder and executive chairman of leather manufacturing group ISA TanTec, Thomas Schneider, makes it clear that his company’s recent announcement that it will produce plant-based alternative materials alongside leather is for a simple reason. It wants to replace plastic, not leather.
How would you sum up the effect, so far, of covid-19 on the leather business in general?
In the leather industry we are talking three sectors: automotive, furniture and the third is shoes and handbags. Automotive had a dip but has recovered amazingly well. We have a joint-venture with a producer of automotive leather in China [Heshan Bestway] and it’s nearly full. The furniture side is one we’re not involved in but I have a lot of friends there and that business seems to be okay. What really suffered a lot was the shoe and handbag business, consumer goods. In covid times, people were still buying furniture, but maybe not a pair of shoes. In athletic stores, business is okay because people are going out and buying bicycles and jogging. But if you go into a casual shoe store, their business sucks.
What has been the effect on ISA TanTec’s activity in particular?
This is our main business, the shoe business. What happened also is that hide prices dropped dramatically and inventory built up. There is a saying that a crisis shows character. In general, I have to say brands were very fair. Most of our prices are negotiated at a certain pace and there is an index on raw materials. Most of the brands said they would not renegotiate prices this year because they know how much inventory is in the factory. We easily had 1,000 containers of wet blue in inventory, including on the water or in the harbour. There were some brands that wanted to renegotiate, but not many. Generally the brands were really good. Inside ISA, we started cutting investments in February. We had no travel costs any more, which was an advantage, of course. Everything switched to Zoom and it’s an advantage for it to be normal to visit a customer on a virtual basis. In the future, no one will want to go back to the pre-covid times with a lot of travelling. Zoom calls are more effective. You can meet the relevant people directly on the screen, the meeting starts on time, it’s a different meeting mentality. It’s really good. But, to come back to what we did, we kept 100% of the workforce and that’s not easy when you have 1,200 people. We were inventive. We cut overtime, but we paid everyone for 40 hours a week, even if they were only able to work 20 hours. Then people knew they were working for the right company. Furthermore we saved money on all management and indirect levels and nobody argued against that. But what we didn’t do was cut the budget for research and development. In fact, we increased it.
How are things now in mid-October?
Our business has recovered. It’s not at 100%, but, when I calculate the year-to-date figures, it’s at about 70% recovered. This is also to do with brands consolidating [the number of suppliers they want to work with]. They see it as a necessity to work with suppliers that can deliver, who have the financial strength and the research and development capability to deliver in different locations.
As an experienced and knowledgeable leather industry leader, what do you foresee for 2021?
When you see reports from EY, KPMG, PwC or the Harvard Review, they are all saying the same thing. Consumer behaviour is changing and that covid means the change is happening even faster. With people in lockdown and working from their home office, you are able to see all of the garbage you create, because it’s all in one place. This is shocking. It is making people wake up and they want to rethink and slow down their lives. They want to know more about the products they are buying. Sustainability will be a big change in 2021 and beyond; you will see a push from a lot of companies for sustainable products. But, specific to 2021, I must say I think it will be worse than 2020. We’ll see more unemployment, more bankruptcies and consumption will go down. Yes, 2020 has been tough, but in many countries there are programmes like the one we have in my home country, Germany, called Kurzarbeit, or short-time working, in which the government pays enough money for people to work some of the time and receive about 80% of their salaries. That’s very different from being unemployed.
What do you foresee specifically for the tanning industry?
Consumers want products from clean factories and that means our industry needs to change too. I forecast that some tanneries will not invest and that some will go out of business. Ten or twelve years ago, I stood before 600 tanners in China and told them that, within ten years, 50% of them would be out of business. I was wrong: within five years 60% of them had gone.
Looking further ahead, what do you think the future holds for the relationship between tanners and footwear manufacturers and brands (in general)?
As I mentioned, brands are consolidating their suppliers and they are selecting carefully. They want suppliers who have a good story and can deliver. We have 12 brands who already do co-marketing with us. It helps that some of them want a one-stop shop and that we can make leather, but also do cutting, make labels, trims, laces and other products for them too. They need companies that invest in new products because in 2021, brands will need stories just to maintain, not gain, market share.
Last year at a major conference in Guangzhou, you warned shoe industry executives that hides would go into landfill if there was too little demand for leather. Since then, we have had confirmation that millions of hides are, indeed, going into landfill. If the reasons you presented in Guangzhou were coherent, correct and well explained, why wasn’t that enough?
What would you tell the same audience today?
The question, really, is why is demand decreasing? The leather industry is partly guilty for this. We have to recognise that because if you excuse everything you can’t change it. Yes, there have been inaccurate messages, but the leather industry didn’t do anything about them. I was on the executive committee of [multi-stakeholder body] the Leather Working Group for many, many years and I always pushed for the LWG to take a stand and advertise the good things that the leather does. The leather industry doesn’t have a voice really, and this is the issue. Leather Naturally [an industry-funded campaign group] is trying to change the image of the tanning industry. Companies should be a part of that, even if only passively by contributing finance. There are great people doing it and working very hard. This is late, but it’s not too late. We can, at least, slow down the process [of companies choosing alternative materials], even if we are not winning the battle. In the meantime, tanners everywhere need to make sure they clean up their own factories. We don’t need to give the [buyers] more reason to reject leather. When you Google tanners it’s bad images that come up immediately. It’s time to reverse this.
It’s more than 10 years since you began presenting ISA TanTec’s leather as LITE, highlighting its low impact on the environment. How would you sum up the benefits that has ISA TanTec gained from this?
It’s been 16 years of LITE, actually. We celebrated its fifteenth anniversary last year. It started with the concept that it would be good to reduce energy, water and impact and that this would be better than recycling. Avoidance is very difficult, but recycling is not as good. As to the benefits, LITE can identify the carbon footprint of every single one of our products; it was amazing what we found out. Sometimes only a slight difference in the formulations made a big difference. We have benefited from reducing energy and water and we’ve also made our production more consistent. Defining all of that was a lot of work but there have been massive savings. For brands, LITE has been an advertising tool. Compared to LWG, there are water usage levels that you need for a gold rating and we are at half that. So they ought to give us a platinum rating.
What are the pros and cons of having as part of your group tanning operations in such diverse countries as China, Vietnam, the US and Italy?
We have five operations: China, two in Vietnam, the US and Italy. Four of the five work from wet blue and have more or less the same lay out, use the same chemicals and serve the same customers. So much footwear is produced in China, Vietnam and Bangladesh and the customer wants the same leather in all three places. The second advantage is risk management. At Saigon TanTec, we have 600 people. If local authority officials come in and find just one person not wearing a mask, they can shut down the whole operation. TransAsia TanTec [completed in 2019 and only 50 minutes away] is a good back-up.
How do you view alternative materials?
We all talk about sustainable products. Leather is a sustainable product. The carbon footprint of leather is lower [than that of rival materials]. It’s renewable, it’s a by-product, not a co-product, and all of this is proven now. We are also involved in a project to prepare alternative material, made from natural resources, for brands to use. These are mushroom-based products that are commercially usable and 100% natural. We are not saying that this is an alternative to leather. No. Absolutely not. I don’t want to have an alternative to leather. I want to have an alternative to the vegan materials, to the polyurethane stuff. That is the crucial part. The materials are already being tested by a big-name brand who may order a million or several million square-feet of the new materials next year, but it will be to replace plastic. It’s not replacing leather. It’s not our target to cannibalise our product but to offer customers additional products, ones that have a good story behind them and are available from a supplier that brands have worked with for 20 years already.
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