Adventures in the skin trade

THE headquarters of Kopenhagen Fur is an exercise in incongruities. It is a slice of 1960s brutalist architecture dropped into the homely Copenhagen suburb of Glostrup. It is also the nerve centre of a much-hated industry, nestled in the heart of European political correctness: it is the home of the Danish Fur Breeders’ Association, the world’s largest fur-auction house, and the heart of expertise about animal skins. As Hollywood is to films and Silicon Valley is to information technology, Kopenhagen Fur is to peddling the pelts of fluffy creatures.

Denmark is home to 1,500 mink farmers who together rear about 17.2m of the mammals a year—about one-fifth of the world’s supply. It also produces much smaller quantities of other furs such as white fox and chinchilla. Danish food companies produce the world’s most nutritious mink food, a mephitic, fishy concoction. Danish design firms drive fur fashions. And the auction house sells fur from all over the world: last year it auctioned 21m pelts and had a turnover of €2.1 billion ($2.8 billion).

Kopenhagen Fur has so many Chinese buyers at its auctions—about half of the 600 who typically attend—that it has a Chinese restaurant on the premises, produces a special Chinese edition of Fur Times, and even puts up discreet notices on how to use Western lavatories. Inside the building pop-up shops do a roaring trade in expensive watches and jewellery. Outside, Chinese fur traders in brightly coloured tracksuits wreathe the place in tobacco smoke. In all, Kopenhagen Fur accounts for about a third of Denmark’s exports to China.

How has Denmark turned itself into the hub of the global fur industry? Mink farmers point to the quality of their animals—which command a 20% premium over ones bred elsewhere—and to the advantages that keep that quality high. Denmark is an agricultural superpower, so the farmers have a constant supply of offal and fish waste to feed to the mink: their fur loses its lustre unless they are properly fed. Most Danes are inured to the animal-rights passions that make mink breeding impossible in other European countries, and its fur business has somehow escaped the attentions of foreign activists. The farms welcome visitors. Danish women happily wear fur coats in public.

Farmers use sophisticated machines that squirt exactly the right amount of mink food into each cage on the basis of the animal’s size and stage in the breeding cycle. They also boast that nothing is wasted. In Aarhus, Denmark’s second city, the local bus fleet powers itself with biofuel that is created, in part, from the bodies of slaughtered mink.

The breeders’ association plays a vital role. It keeps farmers informed on everything from new husbandry techniques to trends in consumer demand. And it does more than simply improve the efficiency of the business. It brilliantly conjured up the whole Chinese market in mink from nothing. In 1993 Torben Nielsen, now its chief executive, visited China and saw the future. Europe’s fur industry was in crisis: many consumers had come to see the whole business as ghastly, even those who eat meat and wear cow skin on their feet. Six years earlier the Hudson’s Bay Company of Canada, the world’s oldest fur firm, had sold its auctions business. But now the Chinese Communist Party was preaching that it is glorious to get rich and the Chinese were swapping their Mao suits for the fripperies of the West. Mr Nielsen set about persuading them that mink was the ultimate symbol of success, commissioning advertisements depicting powerful men with fur-clad girlfriends and staging fashion shows.

The association continues to put the shaping of Chinese taste at the centre of its strategy. It maintains a full-time office and design studio in Beijing. It has formed partnerships with Tsinghua and other universities to teach courses on fur and fashion. It frequently flies leading Chinese designers to Copenhagen. It also runs an innovation laboratory in the Danish capital that seeks to “push the skin to its limits”, encouraging designers to let their imaginations run wild: mink-covered motorbike helmets and iPad covers, for example. By incorporating the fur into all sorts of things, from key fobs to lampshades, it hopes to stitch it into the fabric of everyday life, not just in China but everywhere.

This strategy has produced rich rewards. The average Danish mink farmer has made €365,000 a year in profits for the past five years. Kopenhagen Fur expects the boom to go on: it is adding 12,000 square metres of floorspace to its existing 70,000 square metres and is installing new machinery to grade the skins faster. In a sign that the trade may be making a broader comeback, pop icons such as Beyoncé and Lady Gaga have taken to wearing fur.

A fur bubble?

There are nevertheless a few clouds on the horizon. Auction prices have fallen by 40% since they hit a peak last September, having risen threefold in the preceding five years. Chinese warehouses are said to be full to the brim with furs, and some towns where the craze has taken off, such as Harbin in the north of China, have hundreds of fur shops. There is talk of a fur bubble (or should that be a fur ball?) bursting.

Denmark’s breeders are nonchalant in the face of the latest auction. They talk bravely about an overdue market correction and a shake-out rather than a bubble. They argue that they have built up lots of reserves to keep them going. They say the people who will suffer are the newcomers from eastern Europe who have piled into the business. They also argue that a combination of having the world’s best pelts, the global industry’s most influential auction house and a vast network of suppliers and taste-setters together offers unbeatable defences against competition. Those who have built a global success out of a despised trade are convinced they can withstand a few lean years.

^{Economist.com/blogs/schumpeter}