By Eric Smith
Business is booming at ISA TanTec, the Macau-based leather supplier whose tanneries around the world produce material for brands such as Timberland, Wolverine, Deckers, Keen, Clarks, Danner/LaCrosse, Rockport, The North Face and more.
CEO Uwe Hutzler recently spoke with SGB via email about the company’s latest expansion news—a fifth tannery that will help the company increase production and meet those brands’ growing demands for leather.
According to Hutzler, the addition of new customers and increased sales from existing ones drove the need to build the tannery in Vietnam, which will be the company’s second in Vietnam and fifth overall, joining facilities in China, the U.S. and Italy.
The new tannery, TransAsia TanTec, will be built on a 60,000-square-meter site, located in the Tay Ninh Province, close to TanTec’s existing tannery, Saigon TanTec, and also to Saigon, Vietnam’s business hub.
The announcement—which comes just a few months after the company’s agreement to acquire the Auburn Leather brand, business and assets—is further proof of ISA TanTec’s rapid growth.
ISA TanTec—an eco-friendly leather manufacturer that is majority owned by the company’s founder, management team and Navis Capital partners, one of the largest private equity firms in Asia—is seeing a surge in orders for sustainable leather.
Hutzler’s Q&A with SGB ranged from what’s driving demand for the company to what the new facility means for production to how ISA TanTec—whose mantra is “the brand behind the brand”—works to stand out in a marketplace where its customers garner more name recognition. He also spoke about how the ongoing trade war between the U.S. and China will impact business.
What’s driving demand right now? We have experienced a significant increase in customers’ orders over the past few years. Brands globally are consolidating their tannery supply based upon consumer expectations of sustainable leather production. Our LITE (Low Impact To the Environment) technology is the centerpiece of our company’s vision of sustainable leather production. We are adding new brand customers that are purchasing our LITE sustainable leathers.
Is most of your growth coming from adding new customers or are existing customers growing—or both? Our share of our existing customers business is growing, and we are adding new customers.
What is the company’s production level right now, and how much will it increase with the second tannery in Vietnam? We are above 8 million square feet per month, and the new tannery will give us additional, significant volume after ramp-up.
Why Vietnam and not China, the U.S. or elsewhere? What is it about Vietnam that is conducive to investing in a second tannery there (and fifth overall)? Facing increasing demands and the number of customers located in Vietnam, we decided to build a second tannery. TransAsia TanTec will be located in the Tay Ninh Province, with a close geographical proximity to our existing tannery Saigon TanTec and also to Saigon as business hub in Vietnam. Considering Vietnam’s numerous free trade agreements with different countries, we are able to accelerate our further growth ambitions and consolidate our global presence in Vietnam, which is believed to be one of the most dynamic regions in the world. The current trade situation with China answers the question already of why further capacities in China are at high risks and costs. In the U.S., we concentrate on the military market, and the visa situation does not allow us to bring the necessary expertise to the country for a larger variety of leather types.
Your company touts itself as the “brand behind the brand.” Even though your name isn’t on the products that you supply material for, do you take as much pride in the finished items as the companies whose names adorn them? How do you build that into the company culture? Our mission is to bring additional value to the end products with our premium-quality, ecofriendly LITE leather. Our trademarked LITE concept was designed 15 years ago to increase production and energy efficiencies while allowing brands to make their products more sustainable. And because LITE is a branded initiative, it also adds values to our customers’ products. We create added value through an optimized supply chain. Our recent acquisitions of Scabrenta and Auburn Leather’s lace business support our strategy in diversifying the supply chain and bringing additional value-added services, which further strengthen our product range and customer relationships.
What changes are happening in the tanning industry on the supply side in terms of pricing, sourcing, material availability? We anticipate many changes, influenced by the political climate and stricter compliance rules in the different countries. We work hard with dedicated staff to better cope with those challenges than many others.
Are there any concerns with the escalating trade war that additional tariffs will hinder trade with your business partners? We expect a reduction of volumes in China, a faster shift to other countries, difficulties to import hides to China on the supply side. How much the customers can absorb the higher tariffs and how much is expected from the supply chain to support increasing costs of shoes and how much the consumer can absorb in the shops are questions, but too early to have a clear answer. Bottom line is that everybody is affected and there are no winners in a trade war.
Photos courtesy ISA TanTec