The global tanning industry is characterized by small and medium – sized family businesses, mainly concentrating in South Korea, Taiwan, China and Indonesia. However, many enterprises are now facing the lack of materials and have to import large amounts of leather materials.

In the past years, the growth rate of global leather consumption is contributed mainly by cow leather, but the increase was not significant, while consuming sheep and goat leather has dropped 2%/year over time. In contrast with the decline in consumption in North America and Europe, the demand for rawhide in developing countries tends to rise sharply. In the Far East, which is the largest exporter of cowhide, improvements of income and tanning capacity have boosted the demand for footwear products. Meanwhile, Latin America is expected to become the biggest importer of cow and buffalo hides in the coming time.

The global footwear production reached 23 billion pairs in 2015, decreasing 5.3% compared to 2014. Contributing the most in this output is China, India and Vietnam, which are three footwear factories of the world with the total production output occupying 70% of the global quantity.

Global footwear consumption was estimated to reach 19.9 billion pairs in 2015, equivalent to the average rate of 3 pairs/person/year, increasing 2.5% over the same period. This result was mostly contributed by high demand in Asia. Intra-Europe footwear trade accounts for one-third of global export volume in the world.

The tanning sector of Vietnam is still facing issues in terms of materials, environment, technology and human resources. In 2015, domestic production reached 67.5 milliom m², but it only met 40% of leather demand for exported products. In 2014, leather import reached US$1,171.1m, increasing 41.9% compared to 2013. The largest exporters to Vietnam include South Korea, China, Taiwan, Thailand, Italy and India.

Footwear production is a key industry of Vietnam. Production is still under export processing form with the material supplied from abroad and designed assigned by foreign customers. Therefore, even though the footwear export value is high, reaching over US$12.01bn in 2015 but the added value for each item is low. The localization ratio in the leather and footwear sector is merely 50%, which is not enough for satisfying fully the rules of origin in trade agreements that Vietnam has signed. Footwear import of Vietnam reached the value of US$63.43m in 2014, equivalent to 4.2% of domestic consumption.

With the advantage of cheap labour coupled with policies to attract investment, leather-footwear production of Vietnam has grown sharply in recent years. Being beneficial from the yuan devaluation of China, foreign investment has continued to increase recently after many famous shoe brands switched their orders from China to Vietnam to avoid invesment risks.

 The majority of typical enterprises in the leather and footwear industry of Vietnam is foreign invested ones. Domestic businesses account for very small shares, mainly producing for local demand and processing for orders from abroad. Thai Binh Shoes is the only Vietnamese brand having the revenue of over VND2,000bn, becoming the partner for many famous footwear brands from the US and Europe.

The “Vietnam Leather and Footwear Industry Report Q3/2016” elaborated by Vietnam Industry Research and Consultant Jsc. (VIRAC) draws an all-around picture about the leather and footwear sector in Vietnam, brings to readers a clear insight about the historical and current developingg trends of the industry by categories: materials, production – consumptiom, export – import, price movement and distribution system. Specifically, the report analyzes the economic situation in general and the leather and footwear industry in particular through the latest data updated to Q3/2016, beside the forecasts about the output, scale and expanding trend of the sector in the future. The report also mentions about related products such as leather shoes, bags, suitcase, hat, gloves, etc. It also give detail information about large businesses in the industry such as Pou Yuen, Chang Sin or Thai Binh Shoes through analyzing their financial statements, technology status and market shares in order to position and identify the level of competitiveness among firms in the market.

Executive Summary 5
1.      Business Environment 7
1.1.Macroeconomics Situation 7

Figure 1. GDP growth and CPI, 2010 – 6 months/2016

Figure 2. Monthly CPI Fluctuations, 2014 – 6/2016

Figure 3. Disposable income and household spending, 2008 – 2017f

Figure 4. Average population and growth, 2004 – 2015

Figure 5. Export – Import turnover of Vietnam, 2010 – 6 months/2016

Figure 6. Distribution structure of the Leather – Footwear Industry in the export turnover, Jun 2016

Figure 7. VND/CNY Exchange rates

Figure 8. FDI attraction by sectors in the first 6 months of 2016

Figure 9. Retail sales in Vietnam (billion USD)

Figure 10. The share of modern retail in total retail revenue, 2014

Figure 11. Consumer Confidence Index (Q1/2014 – Q2/2016)

 
1.2.Legal Barriers 14
Table 1. Legal documents related to leather quarantine  
1.3.Trade Agreements 18

Figure 12. Footwear export structure of Vietnam, 2014

Table 2. Current leather – footwear import taxes of some countries

Table 3. Tax reduction schedule for footwear products and footwear materials of Vietnam

Table 4. Some regulations of EVFTA and GSP

Table 5. Some regulations of the EU with imported leather – footwear products

 
2.      Global Leather and Footwear Industry Overview 27
2.1.The Leather and Footwear Industry Value Chain 27
2.2.Production Methods 30
2.3.The Leather Industry 32
2.3.1.      Raw Materials 33

Figure 13. Number of cow, buffalo, sheep, goat and other animals providing soft leather, 2010 – 2014

Figure 14. Cowhide, buffalo hides, sheepskin and goat skin, 2010 – 2014

 
2.3.2.      Production 34
Figure 15. Leather production, 2010 – 2014  
2.3.3.      Consumption 35

Figure 16. Consumption of leather, 2010 – 2013

Figure 17. Leather consumption structure by products, 2013

 
2.3.4.      Export – Import 36

Figure 18. Leather export, 2010 – 2014

Figure 19. Leather export, 2010 – 2013

Table 6. Top export – import countries, 2014

 
2.3.5.      Price Movement 37
Figure 20. Price movement of rawhide in the US, 2011 – 6 months/2016  
2.3.6.      Some Typical Countries 38
2.4.The Footwear Industry 39
2.4.1.      Raw Materials 40

Figure 21. Footwear material import, 2010 – 2014

Figure 22. Top importers of footwear materials

 
2.4.2.      Production 41

Figure 23. Global footwear production, 2010 – 2015

Table 7. Top 10 footwear producers, 2015

Figure 24. Footwear production structure by region, 2014 – 2015

 
2.4.3.      Consumption 42

Figure 25. World footwear consumption, 2010 – 2014

Figure 26. Consumption by region, 2015e

Table 8. Top 10 footwear consuming countries, 2014 – 2015

 
2.4.4.      Export – Import 43

Figure 27. Footwear export, 2010 -2015

Table 9. Top 10 exporters by value, 2015

Figure 28. Import structure by region, 2015

 
2.4.5.      Footwear Price 46

Figure 29. Global export price of footwear, 2004 – 2015

Figure 30. Footwear CPI in the urban areas, 2011 – 6/2016

 
2.4.6.      Some Typical Countries 47
2.4.7.      Famous Brands 48
3.      Vietnam Leather and Footwear Industry Overview 50
3.1.History of Formation and Development 50
3.2.Industry Scale and Features 53
Figure 31. Localization ratio by enterprises and sectors (%)  
3.3.The Leather Industry 56
3.3.1.      Raw Materials 57

Figure 32. The number of buffalo, cow, goat and other animals supplying soft leather, 2010 – 2014

Figure 33. Unprocessed hides, 2010 – 2014

 
3.3.2.      Production – Consumption 58
Figure 34. Leather production value of domestic enterprises, 2010 – 6 months/2016e  
3.3.3.      Export 59

Figure 35. Leather export, 2010 – 2015e

Figure 36. Leather export structure by country, 2014

 
3.3.4.      Import 60

Figure 37. Leather import, 2010 – 2015e

Figure 38. Leather import structure by country, 2014

 
3.3.5.      Inventories 61
Figure 39. Inventory by leather types, 2010 – 2015e  
3.4.The Footwear Industry 62
3.4.1.      Raw Materials 64

Figure 40. Raw material import, 2010 – 6 months/2016

Table 10. Materials supply capacity, 2015

Figure 41. Raw material import structure, 2015

Figure 42. Raw material export, 2011 – 6 months/2016e

Figure 43. Raw material export, 6 months/2016

 
3.4.2.      Production 66
Figure 44. Domestic production volume of main products, 2010 – 6 months/2016e  
3.4.3.      Consumption 68

Figure 45. Footwear consumption, 2010 – 2015

Figure 46. Consumers structure by spending, 2015

Figure 47. Footwear consumption, 2014

Table 11. Competitive comparison between Vietnamese and Chinese products

Figure 48. Consumption structure by value, 2013

Figure 49. Consumption structure by quantity, 2013

 
3.4.4.      Export 72

Figure 50. Footwear export, 2010 – 6 months/2016e

Figure 51. Footwear export structure by country, 6 months/2015 – 6 months/2016e

Figure 52. Contribution structure of enterprises in leather – footwear export, 2010 – 2015

Table 12. Top 10 footwear export FDI enterprises, 2015

Table 13. Top major import markets of the EU, 2010 – 2014

Table 14. Top major import markets of the US, 2010 – 2014

Table 15. Export value divided by HS Code, 2010 – 2014

Table 16. Export price by HS Code in some countries, 2014

 
3.4.5.      Import 76

Figure 53. Footwear import, 2010 – 2015e

Figure 54. Footwear import structure by country, 2014

 
3.4.6.      Footwear Price 77

Figure 55. Footwear average export price, 2014

Table 17. Price of some major footwear types, 2012

 
3.4.7.      Inventories 78
Figure 56. Inventories, 2009 – 6 months/2016e  
3.4.8.      Distribution Channels 79
3.5.Some Other Leather Products 83

Figure 57. Suitcase, bag, wallet export, 2010 – 6 months/2016

Figure 58. Export structure by enterprise, 2013 – 2015

 
3.6.Machinery/Technology 85

Figure 59. Machinery import, 2010 – 2014

Figure 60. Machinery import structure by country, 2014

Table 18. Tanning technology in Vietnam

Table 19. Tanning technology in Europe

 
3.7.Risks and Challenges 89
3.8.Industry Planning 94

Table 20. Products output

Figure 61. Products output growth rate, 2011 – 2020

Figure 62. Total investment capital, 2011 – 2020

 
3.9.Driving Forces and Forecasts 98

Figure 63. Labour cost comparison between some major footwear producer countries

Figure 64. Global footwear consumption forecast, 2015e – 2020f

Figure 65. Footwear sector scale forecast, 2010 – 2020f

 
4.      Enterprise Analysis 103

Table 21. 10 enterprises having the highest revenue in the leather and footwear industry

Figure 66. Net Revenue, 2014 – 2015

Figure 67. Gross Profit, 2014 – 2015

Figure 68. Taxes, 2014 – 2015

Figure 69. Pou Yuen’s profits

Figure 70. Sales cost, 2014 – 2015

Figure 71. Business Management Cost, 2014 – 2015

Figure 72. Assets, 2014 – 2015

Figure 73. Liabilities, 2014 – 2015

Table 22. Cash turnover, 2015

Figure 74. Profitability indicators, 2014 – 2015

 
Appendix 112

– Pou Yuen Vietnam Company Limited (Ho Chi Minh City)

– TaeKwang Vina Industrial Joint Stock Company (Dong Nai)

– Chang Shin Vietnam Company Limited (Dong Nai)

– Pou Chen Vietnam (Dong Nai)

– Thai Binh Shoes Production and Investment Joint Stock Company (Binh Duong)

– Hwa Seung Vina Company Limited (Dong Nai)

– Vietnam Dona Standard Footwear Company Limited (Dong Nai)

– Vietnam Dona Orient Company Limited

– Dong Nai Viet Vinh Shoes Company Limited (Dong Nai)