The Leather Global Value Chain
&
The World Leather footwear market

Introduction

Evolution of the Leather Value Chain

Footwear Industry in Central and Eastern Europe

Components of the Value chain

Global distribution of Footwear production

The role of Developing Countries in the value chain

Policies & References

Association of Romanian Leather and Footwear Manufacturers

In the process leading to the enlargement of the EU, particular attention is being paid to the opportunities and risks for the European footwear industry among both West European and the Transition countries.

Source: SATRA

Of the CEE countries applying to join, the largest producer of footwear in 2000 is Romania (64 million pairs, compared with 52.7 million pairs in 1998), followed by Poland (57 million against 70 million in 1998), the Czech Republic (10 million against 12.2 million in 1998), Hungary (13 million against 14 million in 1998) and Slovakia (9 million against 10 million in 1998).

The leading CEE countries for apparent footwear consumption in 2000 are Poland (141 million), Hungary (50 million), Romania (40 million)

Source: SATRA

In terms of international trade in 2000, the main exporting applicant country is Romania (44 million pairs), followed by Poland (30 million), Hungary (23 million), Slovakia (17 million) and the Czech Republic (12 million). The largest importing country is Poland (108 million pairs), followed by Hungary (57 million) and the Czech Republic (31 million).

Source: SATRA

Romania is the only country in CEE Europe whose Footwear production and export levels are showing significant increases, strong relationships with Italy - Europe's leading producer have resulted in dynamic growth of Romanian Footwear production increasing penetration of European markets by 27% and Worldwide markets by 21%.

Much of the production in this region has been based on Lohn contracts (Labour only) - but there is an emerging trend among Romanian manufacturers to provide 100% of Footwear content, rather than supplying low cost labour contracts for 'uppers manufacture' . At the same time Romanian manufacturers are establishing 'Own brand' products with a significantly higher revenue return.

Global evolution of the Footwear Industry with a focus on the Countries of CEE

The Global Footwear industry has undergone major transition during the 1990s, resulting in the transfer of global footwear production from traditional producing countries to China, Brazil, Indonesia and to Central & Eastern Europe.

It is noteworthy that Taiwan & Hong Kong are no longer leading producers in their own right, but mainly sub-contract production particularly to Thailand and Vietnam. These changes reflect the Footwear manufacturing sensitivities to 'labour cost'.

In Europe, Romania is the only major footwear producer with competitive labour costs to the world's leading producer countries.

Source: SATRA

The key factor behind this transition is the relatively high level of labour content involved in the footwear manufacture processes. Changes within the European footwear industry have occurred rapidly over the last half of the 90s.

During the second period, from 1993-1995, following the global recession of the previous 5 years, growth gradually returned in these countries. However the footwear sector remained fragile in most candidate countries and production continued to decline – especially in Latvia and Lithuania.

For 2-3 years, production started to rise in Poland and Hungary - but only for such gains to be lost again during the period from 1998-2000.

The following table details of the Winners and the Losers in the footwear production industry during the period from 1998-2000.

The leading Footwear producers of Europe in the 1980-90s period have found it increasingly more difficult to remain competitive on the world stage. Some countries such as Italy have more successfully defended a high quality / high fashion market segment, whilst losing a small percentage of 'popularly priced' product.

Italian and Portuguese producers have also implemented the 'dispersed manufacturing' production strategy that has successfully maintained the position of some leading asian producers, particularly in Hong Kong and Taiwan. This strategy involves outsourcing the 'high labour' stages of footwear production to countries with low labour costs. In Europe, Romania, in particular, has been the major beneficiary of this strategy, by recently becoming a focus for European outsourcing of footwear production, adding to its established strengths as a significant player in the 'Needle industries'.

Other countries, particularly United Kingdom, France and Germany have been slower to respond to the opportunities to outsource production, and their footwear industries are shrinking more or less uncontrollably.