Rise in prices of raw materials puts pressure on luxury companies

Natural disasters such as the floods in Australia, draught in South America, coupled by the political and economical instability of many regions such as North Africa is driving major price increases in cotton and leather, especially exotic leather such as crocodile or snake. Italian brands Gucci and Ferragamo indicated this week they were not so much worried about the increases as parts of their accessories collections are not made of leather. With an opposite view came Hermes, whose CEO Patrick Thomas told WSJ that the 25% increase in price of crocodile leather is worrying.

The increse in price of raw materials such as cotton and leather as well as the increased pressing demand from key markets such as China might result only only in a price increase of luxury goods but also in a drop in profitabiity for the luxury brands in the near future (CPP).