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Executive Summary
The report – its reason and purpose
The purpose of this report is to facilitate the development of trade in skins from camel, crocodile, emu and goat.

Target
The targets include camel, crocodile, emu and goat producers, processors, exporters, importers and value added enterprises particularly in Italy and US.

Background
Currently the skins and leather of crocodiles, camels, goats and emus are traded in the global market at a level which could be termed niche. Skins or hides from species other than crocodiles are traded as a by-product. Traditionally, their production has been largely unresponsive to demand for skins and leather and more dependent on forces driving the market for the primary products (that is, oil or meat) derived from each species—with price fluctuations arising from imbalances between supply and demand.

The aims of the research project
The aim of the current project is to identify new export opportunities for skins, hides and leather products from crocodiles, camels, goats and emus so that they can be commercialised through supplychain relationships between producers, exporters and buyers. It also further investigates market segments identified by the previous skins project as having potential for skin and leather products from each species. The report presents an economic analysis to assist in assessing the economics associated with exporting and also outlines business-specific communication and promotional strategies.

Method
Two international markets were targeted in this project—Italy and the US. They were chosen based on the findings of the preceding Rural Industries Research and Development Corporation project ‘Identification of market opportunities for skin products of emerging animal industries’, as well as direction from the project’s industry Advisory Committee. Research included liaison with most parts of the supply chain, both domestically and internationally, and culminated in members of the Advisory Committee and researchers participating in market visits. This research identified links in the supply chain that should be targeted or further researched for potential trade with Italy and the US.

The complex global market for skins, hides and leather is fiercely competitive. Export success will be dependent on the time and energy expended on networking and relationship-building in target markets and ensuring that the Australian industry develops the capability to meet export customers’ supply requirements through effective export supply chains. Key findings for each skin or hide type are summarised below.

Results
Camel
Between 2002 and 2005 world camel stocks have remained relatively stable, at around 19 million. In 2005, the largest stocks existed in the African nations of Sudan, Mauritania, Chad and Kenya and the subcontinent countries of Pakistan and India. Although data for the production of camel hides is unavailable, slaughter figures for the past four years suggest that the countries with the greatest volumes of camel hides available are Sudan, Saudi Arabia, Egypt, Mauritania, the United Arab Emirates and China, which collectively accounted for almost 53% of world camel slaughters in 2005.

In Australia there are now about 500,000 feral camels, with the majority in the arid inland areas.

Although the camel industry is only a fledging one, it has developed well over the past few years and is now supplying export markets with live camels and camel meat.

Camel hide’s high tensile strength and the perception held (particularly in Italy) that Australian camel hide has less scarring than camel hide supplied from other countries may present some opportunities in the lucrative Italian and US leather industries.

Despite limited consumer awareness and no promotional campaign (Chand 2005a), camel hide and leather have made some promising inroads into the US market in recent years. In general, the US leather supply chain believes that Australian camel is best suited to the Western-style boot market, but the participants in the supply chain believe that an extensive promotional campaign is needed for success in this market.

Italy shows more promise for the fledgeling camel leather industry than the US. The Italian industry believes the hides are best suited to accessories, belts, jackets, shoes and upholstery. The industry also indicated that natural scarring is not detrimental to quality, because it makes each hide unique.

Currently at A$40 per hide, camel is priced competitively in the Italian market. However, it should be noted that the market sees bovine hide as a direct competitor and exporters are therefore encouraged to monitor the price of bovine.

Crocodile The leather from Australia’s saltwater crocodile (Crocodylus porosus) has a reputation as one of the best skins in the world for high-quality fashion goods. However, research conducted during this project found that retail personnel do not distinguish between this species and its competitors, particularly alligator and caiman. This highlights the importance of promoting Crocodylus porosus leather as a high-quality skin and thus justifying the premium price it commands in the market.

In 2002, Crocodylus porosus accounted for only 2.2% of the total world trade in crocodylia skin.

Australia and Papua New Guinea accounted for 81% of world trade in Crocodylus porosus—a powerful position, considering the high demand by European fashion houses.

Crocodiles are harvested throughout northern Australia. Crocodile operations in Western Australia and the Northern Territory involve ranching (that is, captive breeding supplemented with wild harvesting).

In Queensland, however, it is illegal to capture wild crocodiles unless, in special circumstances. The trade in products derived from Crocodylus porosus is controlled by the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES). Permits are issued by the Commonwealth Department of Environment and Heritage.

The market potential for crocodile skin and products in both the US and Italy appears positive, with opportunities evident for first-grade skins in Italy and second-grade skins in the US. The Australian industry is facing two challenges on which the success of the industry could hinge. They are, first, the need for the industry to create the capacity to supply quality first-grade skin to satisfy export demand and, second, the need to successfully promote Crocodylus porosus skin as the world’s leading exotic skin to export markets in a way that will stimulate product demand and justify its price premium.

Emu In Australia, emu skin and leather are a by-product of oil and meat production and account for approximately 13% of total production revenue. It is estimated that one emu can produce 0.75 square metre of body skin. Only about one-third of emu skins are used from all birds slaughtered, which means that significantly more supply is available if markets can be identified and developed.

Australian emu skin and leather are largely unknown in the US and Italian markets. These markets showed some interest in emu skin for use in garments, in footware and as a lining in leather goods.

However, it is the lack of profile in these markets that is possibly the greatest impediment to the development of export business.

Australian goat skins and leather have limited opportunities in the US and very little potential in Italy.

Although goat leather is not unknown in the Italian market, research conducted as part of this project found that Australian goat is not in demand. It is likely that the lack of interest from the leather supply chains in Italy is a result of obtaining cheaper and better-quality goat skins and leather from other countries such as China, India and Pakistan.

In the US, goat leather is perceived as a common species—putting it at a disadvantage compared with other species investigated as part of this study. In Australia, goat skins and leather are costly to produce and market, but affluent consumers in the US are unwilling to purchase them as exotic products. There is a small amount of US interest in goat skin as suede, but it is likely that the potential for goat is limited to niche segments such as the Western boot market and/or the garment market.

Implications for relevant stakeholders
There is potential demand in Italy for leather accessories manufactured from combinations of Australian exotic leathers. The Australian industry may have the opportunity to build a unique competitive position in this market niche with a product mix which could be difficult for competitors to emulate. It is suggested that Australian exotic skin producers could collaborate with each other and with market partners in the Italian leather industry, such as tanneries and/or manufacturers, to further investigate the production of multi-species leather products and determine their technical and commercial feasibility.

It is also recommended that suppliers of exotic skins and leathers from the species covered in this report consider partnering with global fashion supply chains to penetrate export markets. In many cases, high-value luxury fashion markets are dominated by international fashion houses with global supply chains. To penetrate the US market beyond supplying it directly with skins and/or leather, the Australian industry could consider trying to form a partnership with an international fashion house (such as an Italian fashion house) that holds a strong competitive position in the US as another strategy for entry into this market.

Recommendations
To further develop the Italian and US markets for camel skins, the industry should consider the following recommendations:

• Further explore the market demand for camel leather and Australia’s ability to meet the demand.
• Based on the interest expressed in camel during the in-market visits, significant volumes may be required to meet potential demand in the US and Italy.
• Undertake marketing activities. Because of the lack of awareness of camel leather in the US and Italian markets, it is suggested that the industry devises a marketing campaign that focuses on the product’s strengths and creates a unique ‘product story’. This should be developed in consultation with the export buyers.
• Identify suitable product applications for camel. Potential uses could be explored with companies in the Italian and US leather supply chains to determine if camel leather lends itself more readily to some product uses over others. For instance, the high tensile strength of camel may make it more appropriate for use in Western boots than in garments. This may influence the marketing strategy.

To meet these challenges and to further develop the Italian and US markets for Crocodylus porosus skin, the industry should consider the following recommendations:

• Explore the introduction of a wild egg harvesting program in Queensland. The establishment of a trial research program for crocodile egg harvesting in an environmentally responsible manner should be considered and explored by all industry stakeholders as a means of increasing the supply of crocodile eggs and thus the number of crocodiles farmed in Australia to meet the apparent export demand.
• Develop greater collaboration among the operators in the Australian crocodile industry. A producer alliance or a similar process whereby Australian crocodile industry participants promote the entire industry collectively under one brand, and combine the marketing efforts of all or many farms, instead of acting individually, could increase product awareness and market demand. As well, collaboration between farms to jointly supply export markets could allow consolidated shipments and the sharing of production-related information, resulting in improved efficiencies in logistics and in the production of skins to meet export customers’ requirements.

To successfully establish emu leather, the industry should consider the following recommendations:

• Clearly identify uses for the leather in order to determine appropriate market segments to target.
• Establish a market entry promotion strategy which creates awareness of emu’s product characteristics and educates the targeted distribution channels and consumers about these characteristics.
• Introduce an internationally recognised skin grading system to ensure clear communication in trade negotiations and to aid consistency in pricing.

In the US and Italian markets, the Australian industry could consider exploring the potential for goat to be used as a secondary material (for example, as lining) in leather product manufacturing.

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Last updated: June 2007
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http://www.rirdc.gov.au/reports/NAP/07-089sum.html