Hermès buys d'Annonay tannery to secure supplies

PARIS - Hermès is taking over d'Annonay tannery, one of its key providers of calf leather, becoming the latest luxury brand to buy up a supplier in an increasingly competitive environment for quality raw materials.

Hermès, which already owns two tanneries in France, one in Italy and a reptile tannery in Louisiana, on Thursday said it had acquired the d'Annonay business in the Rhone Valley from its 80 staff for an undisclosed amount.

"This acquisition is in line with the strategy of... preservation and development of sources of supplies and know-how related to them," Hermès said in a statement.

Rival luxury groups such as Chanel and LVMH have been stepping up their investments in recent years in prized leather workshops and artisans as well as accessories specialists to secure supplies.

As a result, luxury brands are boosting vertical integration - owning most of the production chain, from the raw material provider to the shop where the product is sold, industry analysts say.

Crisis-defying demand for luxury goods, coming mainly from Asia, has put pressure on production capacity and on supplies of high quality raw materials, leading brands to fight for them and even buy some of them up to secure their needs.

In Oct. 2011, LVMH acquired control of Heng Long, a crocodile skin tannery in Singapore, and bought in May last year the Roux tannery, a supplier of the luxury group's fashion brands Christian Dior, Louis Vuitton, Loewe and Celine.

In October last year, Chanel bought the Scottish cashmere specialist Barrie Knitwear and the previous month, it acquired the glove-maker Causse, bringing the number of specialist suppliers under its wings to more than a dozen.

Chanel says it allows its specialist production units, which also include the prestigious embroiderer Lesage and hat maker Maison Michel, to work for rival brands to stimulate creativity.

In the watchmaking world, top brands have been buying suppliers of movements, dials, springs and other parts in response to threats from the industry's biggest provider Swatch to cut off supplies to rivals.