VERTICAL INTERACTION FOR LUXURY BRANDS

Luxury brands utilising animal byproducts have long struggled to keep up with demand, as animal skins become more scarce due to endangered species, or a demand which hugely outstrips supply.  The response to this from many luxury brands has been to acquire farms from which to source their skins in a bid to control the supply chain, and capture a sustainable competitive advantage over competitors.  Additionally, this works to level out supply price fluctuations, which vary due to scarcity, as well as controlling the quality of the skins.  Chanel owns a lambskin business and Kering owns an exotic leather specialist.  While all of this may seem horrendous to animal rights activists, the upside of this vertical integration also means that luxury brands can more easily keep tabs on the animal welfare of their farms, which is harder when they do not have a significant controlling share of the farm.  The brands are also taking better control of endangered species, and working in a more sustainable manner - something which is vitally important for the Millennials and Generation Z who put a high value on sustainable supply chains.