DARIUS RAFIEYAN, HOST:
A couple of weeks ago, Cardiff, you and I found ourselves at the Wickett & Craig leather tannery in Curwensville, Pa., staring at a pallet of cow skins.
There's a distinctive smell here. I kind of like it. It's not bad, but it's distinctive.
MATT BRESSLER: It's - you know, it's funny because I've been here 28 years. I actually started here as a laborer. But I guess I don't smell it anymore.
CARDIFF GARCIA, HOST:
Well, we smelled it.
RAFIEYAN: Oh, yes. It was pungent.
GARCIA: That was Matt Bressler, the vice president of sales and operations at Wickett & Craig. He started on the tannery floor as a hide shaver when he was just 19 years old, and so he knows just about everything there is to know about the skin business. It's his job to take these cow skins and then turn them into premium-grade leather that can be sold to designers like Louis Vuitton, Coach and Ralph Lauren.
RAFIEYAN: So you mean to tell me that this pile of slimy, blue flesh here is going to become a designer handbag?
BRESSLER: Absolutely.
GARCIA: In the next room over, we watched as these burly men in rubber aprons lifted up these massive cow hides, one guy on each end, as if it was some kind of slimy, meaty blanket that needed to be shaken out after a picnic, and then fed them one by one into a giant flushing machine which sliced off the inner layer of fatty collagen.
(SOUNDBITE OF MACHINE WHIRRING)
BRESSLER: They're full hides right now. They're 50 square-feet, well over a hundred pounds. And they're slippery. And they're wet.
RAFIEYAN: Yeah, this was very impressive work, and way more labor-intensive than I would've expected.
And, you know, to us, this was just a pile of slimy flesh. But when Matt looks at this pile of slimy flesh, what he sees is an investment, and a risky one. By the time that hide is tanned, dyed, fat-liquored, sammied (ph), dried, finished and finally shipped out to a designer, that could take six months. That's six months of waiting before Matt will see a return on his initial investment.
GARCIA: Yeah. And in the meantime, he's making a gamble that leather prices will stay high enough that he'll be able to turn a profit. Back when times were good for the leather industry, that wasn't really much of a gamble at all.
BRESSLER: Actually, we used to get calls where, literally, buyers would fight over it to the point where we'd have to ration it out. OK, you can have this shipment. You can have the next shipment.
RAFIEYAN: But today, Matt worries about the possibility that he might not even be able to break even on this hide. And that's because leather prices have completely tanked. According to the U.S. Hide, Skin and Leather Association, an industry trade group, a hide that might've sold for $120 five years ago is going for about $33 today.
GARCIA: Which means that producers like Matt are having to make tough decisions. For some, prices have gotten so low that they've decided it makes more sense to just send hides to a landfill - to just throw them away, essentially - rather than turning them into leather.
BRESSLER: Do I worry about the high market (ph)? Yeah, I'm not sure what's going to happen. We've never seen these types of numbers before.
GARCIA: Leather has been a major industry in the United States since before there even was a thing called the United States. The first tanner set up shop in Jamestown in 1616. In the 1950s, the leather industry employed more than 300,000 people. Today, that number's more like 25,000, and it's dropping every year. Matt worries that the American leather industry may be disappearing.
This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia.
RAFIEYAN: And I'm Darius Rafieyan. Today on the show, how an industry that once formed the backbone of the American economy came to teeter on the edge of collapse and what it has to do with America's love of hamburgers.
(SOUNDBITE OF MUSIC)
RAFIEYAN: So how did the leather industry get into the predicament it's in now? Well, the story starts back in 2014. Years of record-breaking drought had brought U.S. cattle inventories to a six-decade low. Beef prices were skyrocketing, and so people started switching from hamburgers and steaks to pork chops and chicken fingers. That meant fewer cows being slaughtered and fewer cow skins on the market.
GARCIA: And this is one of the ironies of an interconnected economy. What you decide to eat for lunch might be affecting what your shoes are made out of. Leather is a byproduct of the beef industry. When people eat less beef, there's fewer cow skins to go around, which means that tanners, like Matt Bressler, have to pay more to get their hands on those skins. And that drives up the price of leather. In 2014, leather prices were at an all-time high.
RAFIEYAN: And this was generally a good thing for leather producers. Sure, they were paying more for hides, but they could also charge a lot more for their finished goods. But Stephen Sothmann, president of the U.S. Hide, Skin and Leather Association, said that those high prices had an unintended consequence. It caused many designers to switch from expensive real leather to much cheaper synthetic leather.
STEPHEN SOTHMANN: Designers got really good at taking leather out of their products, basically, because they saw those high prices and said, we need to find some alternative. And, you know, fast forward five years later, and now leather's lost all that market share.
GARCIA: Meanwhile, the drought subsided, and the cattle industry came roaring back. Today, Americans are eating more beef than ever, and that means that there is an abundance of cow skins on the market.
But unfortunately, demand for leather has not come back in the same way. And for a lot of companies that switched to fake leather when the prices were high, it doesn't really make sense for them to switch back now. The fake stuff is more predictable. And besides, it has become so convincing that many consumers can't really tell the difference between the fake and the real leather anyways.
RAFIEYAN: Matt Bressler at Wickett & Craig tannery in Pennsylvania says that even with today's rock-bottom prices, fewer and fewer companies are willing to pay for real leather.
BRESSLER: I mean, you take a look around. Leather products are being used less and less. And even high-end leather products, you know, by some of the biggest designers may have a leather handle on it.
RAFIEYAN: So even though prices are low, Matt is having to offer discounts to entice customers, which is further cutting into his already-thin margins. And as if all that wasn't bad enough, last year, the leather industry ran smack-dab into a trade war.
GARCIA: Yeah, hides and leather are among the goods that were slapped with new tariffs last year. And since then, there has been a 35% decrease in the exports of hides to China. That is bad news for tanners like Matt who were kind of hoping that demand from China, with its growing middle class, might offset the flagging demand here in the United States.
Stephen Sothmann from the Hide, Skin and Leather Association - he says that all these factors - decreased demand for leather, increased supply of cow hides and the trade war - have combined into a perfect storm for the leather industry.
SOTHMANN: You know, there's always been this idea that leather's going to sell itself. You know, there's always going to be a place for it. And no hide will go unused has kind of been the saying historically. But the industry woke up to that and realized that that's not true.
RAFIEYAN: Back at Wickett & Craig, Matt walked us through the warehouse where he keeps all of the finished leather. And he was showing us how an experienced tanner can tell when a piece of leather is just right.
BRESSLER: You wet your finger and you touch the leather with some saliva. And you're looking at the water absorption rate.
RAFIEYAN: That warehouse contains 6,000 sides of high-grade leather, each one like a giant cow-shaped gingerbread cookie just waiting to be turned into a designer handbag or a high-end shoe or a custom saddle. But Matt says it could be months before this leather finds a buyer. And in the meantime, prices stay stubbornly low.
BRESSLER: Every day that the hides drop, the inventory that we bought eight weeks ago is now worth less.
GARCIA: Matt has already started offering steep discounts on every square-foot of leather he sells. In some cases, he's even giving certain types of leather away for free just so he does not have to pay someone to haul it to the landfill. He worries that the industry may never bounce back - that the kind of high-end, artisanal, labor-intensive leather production that he has spent the last three decades mastering could be a dying art.
BRESSLER: We're trying to get that across to people that, you know, with a high-end bag or high-end product comes with a story of this is where it started. And the leather comes from a 150-year-old tannery in the middle-of-nowhere, Pa., that do it the old way.
But when somebody comes up to me and says, Matt, why should I buy an $80 wallet made out of Wickett & Craig bridle leather that will literally last you probably the rest of your life when I can buy a wallet at Walmart for $12? If they ask that question, then, honestly, we don't really need to finish the conversation. You know, if they can't see it, then I'm not going to convince them.
RAFIEYAN: This episode was produced by Leena Sanzgiri. Our intern and fact-checker is Nadia Lewis. Our editor is Paddy Hirsch. And THE INDICATOR is a production of NPR.
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