Historical background to the sector
Economic transformations such as the loss of the markets of the socialist countries and the collapse of the domestic market starting in the 1990s had an extremely negative impact on the leather and shoe industry. As a consequence, production fell by about a half in value terms. Those enterprises which were able to utilize their surplus capacity through hourly wage labour activities were those which managed to survive the changes.
Dynamic growth both in production and in exports was registered between 1993 and 1998. This period witnessed significant privatization, the influx of high volume foreign capital investments and the formation of new markets resulting in significant restructuring of the sector. The structure of production was also transformed: production of bags and women’s footwear was reduced, while the manufacturing volume of automotive industry upholstery and men’s footwear increased. Products made from low value artificial leather were virtually excluded from the production process in Hungary.
Between 1999 and 2001, the industry stabilized, and there was modest growth in the areas of production and employment. During this period, a negative trend arose: Hungarian shoe manufacturers gradually began to be excluded from the domestic market, and this trend is continuing today.
Situation of the sector in 2010/2011
Globalization has not left this sector of industry unaffected either. It has been increasingly difficult for players on the domestic market to survive in the midst of increasing competition. The countries of the Far East enhanced their market dominance significantly as a consequence of the ever increasing degree of liberalization in international trade. This contributed to the declining role of the sector on the domestic market. At present approximately 85% of domestic production is sold on foreign markets.
Aside from global difficulties, enterprises active in this sector must also struggle with such difficulties as the poor situation of professional training and new skilled labour. The sector is characterized by a lack of labour in many areas. The extremely low wage levels represent a bar to new professional recruits joining this sector.
There are roughly 2000 enterprises operating in the Hungarian leather and shoe industry. The number of people employed in the sector can be put at around 10,000. The vast majority of these are small- and medium-size enterprises. The proportion of workers in the industry on hourly wages is high; a small proportion of enterprises have their own brands.
From among the Hungarian enterprises, those dealing with the manufacture of healthcare and work safety footwear have a better competitive advantage on the European market, and there is considerable demand for one-off luxury and fashion items made by Hungarian furriers and leatherworkers.
Sub-sectors/technologies/products with potential from an export aspect
work safety boots,
one-off and luxury fashion items (fashion gloves),
fancy leatherwork products,
car and vehicle industry upholstery (textile leather).
Key target markets
The most important target market of the leather and shoe industry, as well as the fur industry, is the European Union, and within this Germany, Italy, the Czech Republic, Austria and Romania. 95% of all Hungarian exports of these products go to these markets.
In addition to the European Union, Russia is also an important non-EU target market for the leather and shoe industry, as well as the fur industry. Hong Kong remains extremely important as regards the fur industry.
Clusters and associations
1. Association of the Hungarian Leather and Shoe Industry (BCE)
The Association of the Hungarian Leather and Shoe Industry (BCE) was founded in 1978 through a joint capital investment coming from Hungarian leather and shoe industry companies. The members represent approximately 80% of producers supplying critical elements for the manufacture of Hungarian leather and shoes.
The main activities of the association include professional interest representation, the organization of coordination between members, the voluntary regulation of relations between producers and the trade, and improvements in the standard of services provided to members.
2. Hungarian Fur Trade Association
The goals of the association include increasing the reputation of the furrier profession, improving the attraction and standing of the association, reinforcing the protection of the interests of the profession, developing the ethical practice of professional players, strengthening professional practice, and developing the skills and abilities of experts in Hungary.
Most important activities carried out by the Hungarian Fur Trade Association: establishing or reviving professional forums, strengthening the media presence of the association, broadening the international system of relations of the association, reclaiming the role of regional leader, reinforcing the professional base of the association, developing communications within the association, distributing and widely promoting the latest professional news and know-how, and creating the financial system of conditions necessary for the association’s proactive social role and professional organizational management.
Sector consultant: Nikolett Szász, firstname.lastname@example.org