Meat of the Matter: A Billion-Dollar Bungle

Perhaps you’ve heard of these brands: Bugatti, Lumberjack and Benneton.

Bugatti offers a line of stylish dress shoes, plus business suits and casual wear marketed at leading retailers in the U.K. and elsewhere in Europe.

Lumberjack manufactures hiking boots and recreational shoes for children and adults, available from several online retailers.

Benneton is the often-controversial Euro-retailer more famous for its socially conscious ads — like the “Unhate” series from a few years ago showing world leaders who were ostensibly rivals kissing each other—than for its trendy shoes, clothing and apparel.

What do these major brands have in common? They all depend on a vast, labor-intensive leather processing industry based in India for their raw materials and much of their manufacturing. That network is now in jeopardy due to a new ruling from that country’s Environment Ministry that restricts the sale of cattle in public markets.

According to the Economic Times of India, the notification states that owners of cattle must declare in writing that animals brought to market are not for slaughter, but only for “agricultural purposes.” The order defines “animal market” to any sale yard of a packing plant or other public market. Furthermore, “cattle” are defined as “cows, bulls, water buffalo and camels.”

The new rules state that even cattle that have died of natural causes cannot be sold for leather.

As the Economic Times reported, “This makes the slaughter of cattle almost impossible unless they are directly purchased from a farm or a farmer.” Of course, the vast majority of cattle in India, as in every other country, are sold at public markets and auctions.

“This [ruling] is fatal for the leather industry,” Puran Dawar told the Times. Dawar is chairman of Dewar Footwear Industries, which exports more than 1.2 million shoes using 3.5 million square feet of leather a year and employs 1,500 workers. “If slaughter is stopped, where will we get our raw material from? We want the entire notification rolled back.”

Unreasonable Rules

This development is consequential, not only for India’s economy, but for the footwear and fashion industries across Europe and North America. According to the India-based Council for Leather Exports, the country’s leather industry produces nearly $18 billion in materials and products annually, including $5.85 billion in exports.

In the Calcutta area alone, there are close to 400 tanneries and some 750 leather-manufacturers producing leather goods.

Leather shoes and boots alone account for nearly $3 billion in sales each year, making India the world’s second-largest exporter of footwear, as well as leather garments, saddlery and harnesses.

Among the brands that rely on leather produced in India are a few companies with some visibility in the marketplace: Abercrombie & Fitch, Armani, Calvin Klein, Coach, DKNY, Guess, Nike, Reebok, Rockport, Tommy Hilfiger and Versace.

And that’s just a partial list.

India’s leather exports to the U.S. exceed $870 million a year, and that channel is now in jeopardy.

By the way, there are 200 million head of cattle in India, along with an estimated 105 million water buffalo, upon which the country’s leather industry depends. This is no marginal business sector.

So the question is why? Why did India’s Economic Ministry impose such draconian regulations on the sale of cattle? According to news reports, the decision was an attempt to curtail cattle smuggling and illegal slaughtering outside of regulated operations.

Of course, this new regulation is being imposed on a country whose majority population are Hindus who revere cattle and eschew eating beef. Much of the meat produced in India’s thousands of packing plants is exported across Asia and the Middle East to countries with Muslim majority populations, such as Egypt and Saudi Arabia, the Economic Times story explained.

All of that is in jeopardy, due to this new regulation, to the point that one executive of a large tannery quoted in the article said, point blank, “The future of the leather industry looks doomed with this notification.”

As always happens in commercial operations, restrictive rules won’t doom an entire industry.

The business will simply move elsewhere, and the loss will be felt by the very companies and the people the rules were intended to protect.

It’s a lesson to be learned.

Editor’s Note: The opinions in this commentary are those of Dan Murphy, a veteran journalist and commentator.