Alpaca Industry of Peru-March 2019 - South Africa ...
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Alpaca Industry of Peru –
Research Report
March 2019
2
INTRODUCTORY OVERVIEW
The following report aims to provide insight into the alpaca industry of Peru
The report has consulted with a number of sources in order to provide an
understanding of the existing landscape, pertaining to how the industry has grown and
developed, as well as to Peru’s role within the broader global alpaca industry
The following elements have been considered within the research:
- Historical Context of Alpacas in Peru
- Global Alpaca population
- Global Alpaca production
- Peruvian Alpaca Value Chain
- Social and Economic Roles of Alpaca farming in Peru
- Alpaca del Peru: A National Brand
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HISTORICAL CONTEXT OF THE ALPACA INDUSTRY IN PERU
• Improved Infrastructure
• Motorisation First efforts to vertically-
1910 • Puno & Cusco become integrate Peruvian alpaca 1945
key for fibre trade value chain seen by
• Mills open in Arequipa Michell
Michell and Grupo Inca
First Alpaca-specific textile 1950s –
dominate the Peruvian
mill established by Michell alpaca industry –
1980s
1947
through the use of imported contributing over $50
equipment million to Peru’s
economy
Smaller alpaca processing China shows increasing
operations establish – seeing interest in Alpaca
1990s greater volumes of finished farming – threatening 2000s
alpaca product exported to Peru’s hegemony as
Chile & Bolivia global leader
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THE DOMINANCE OF MICHELL AND GRUPO INCO
Despite the emergence of smaller players within the industry, Michell and Grupo Inca continue
to dominate the local Peruvian alpaca industry – seeing a presence across the value chain, from
farming and the spinning of tops and yarn, to product development, whilst further enjoying
strategic partnerships with local retailers
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THE GLOBAL CONTEXT
Globally, Peru is regarded as the leader of Alpaca farming, seeing both the greatest
population of Alpacas as well as production of fleece
The following may be understood as being a breakdown of Alpaca population per
region:
COUNTRY POPULATION
Peru 2 500 000
Bolivia 150 000
Chile 75 000
United States 46 701
Australia 39 068
England 10 000
Canada 7 098
Source: NorthWest Alpaca Association
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THE GLOBAL CONTEXT
Countries with an alpaca population of less than 3000 include:
Germany Netherlands Switzerland France Belgium
Italy Spain Portugal Japan South Africa
Source: NorthWest Alpaca Association
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THE GLOBAL CONTEXT
Furthermore, Peru sees the greatest production of Alpaca fleece in comparison to
its global counterparts, coming to comprise a total of over 80 percent of total
global production
COUNTRY PRODUCTION
Peru 4000 tons
Bolivia 240 tons
Chile 120 tons
United States 75 tons
Australia 63 tons
England 16 tons
Canada 11 tons
Source: NorthWest Alpaca Association
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GROWTH OF THE PERUVIAN INDUSTRY – APPAREL AND TEXTILES
2011 TO 2015
180
160
140
120
100 Textiles
80
Apparel &
60 Garments
40
20
0
2011 2012 2013 2014 2015
Source: Alpaca del Peru
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KEY MARKETS FOR PERUVIAN ALPACA FIBRE
18% USA
Germany
4% Japan
4% 49% France
UK
5%
Mexico
5% Australia
Other
5% 10%
Source: Alpaca del Peru
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THE STEADY GROWTH OF THE INDUSTRY
As indicated, Alpaca production in Peru has grown steadily over the course of the
past thirty years – from lows of 0.859 metric tons in 2000, to peaks of 2.948 metric
tons in 2017.
It becomes necessary to better understand the influencing variables which have
potentially had an impact on the described growth.
Source: National Institute of Statistics and Information Science11
THE STEADY GROWTH OF THE INDUSTRY
A number of contributing factors may be attributed to the industry’s
steady production growth over recent years, these may be identified as
being:
• Extensive Local Investment into the Industry
• Foreign Direct Investment
• The Marketing and Positioning of Alpaca Fibre
• The Growth of the Luxury Sector’s Demand for Alpaca Fibre
• Research Programmes and Subsequent Industry Improvements12
EXTENSIVE LOCAL INVESTMENT INTO THE INDUSTRY
There is without doubt that the industry has benefitted from extensive
local investment into the production sphere of the value chain
Coopecan, a cooperative body founded in 2011, was established with the
sole purpose on driving an increase in the production of alpaca fibre
Involved in 3 of the 5 regions in Peru, the body directly benefited 5000
producers
In collaboration with a number of local institutions, such as the Peru
Opportunity Fund, Project Puquio and Sichuan was implemented, aimed
at improving the production and quality of alpaca fibre, increasing income
of producing partners
A direct result of which saw the strengthening of production capacities
and management of producers13
EXTENSIVE LOCAL INVESTMENT INTO THE INDUSTRY
The project has seen an injection of US$ 530 000 worth of machinery and
equipment – ensuring uninterrupted quality of the fibre offered, as well
as the continuity of its sales
In addition, Peruvian trading agencies, such as Sierra Exports and SPAR,
along with representatives of Peruvian Agronomists, have begun offering
technical support to producers in recent years, assisting in the use of
advanced production and processing methods for increased volume and
quality14
FOREIGN DIRECT INVESTMENT
In addition to the extensive local investment the Peruvian Alpaca
production industry has seen, foreign investment has also played an
essential role, with noticeable impact upon the local context
This is exemplified by the role that Washington-based entity Technoserve
has played
From the onset of 2000, the company has worked single-handedly with
nearly two thousand herders, improving animal nutrition and health-care
practices, facilitating increased shearing and parasite control, producing
not only greater quantities of fibre, but fibre of a higher quality15
FOREIGN DIRECT INVESTMENT
By the end of Technoserve’s assistance over five years, farmers added
more than $230 000 of value to their annual alpaca fibre production
What’s more, is that growing demand from a greater degree of new export
markets has been seen over the past five years, particularly the likes of
China and Italy
The end of 2017 saw record export figures to both regions – with China
seeing a 390% increase and a total 217% increase in value (approximately
US$48 million), whilst Italy saw an 86% increase in exports and a 43%
increase in value (approximately US$15 million)
Increased global demand for the fibre is fuelling the need for a consistent
supply of quality production16 THE MARKETING AND POSITIONING OF PERUVIAN ALPACA FIBRE There is further evidence to suggest that extensive marketing and active positioning of Peruvian Alpaca fibre has played a considerable role in increasing international demand for the fibre, which has subsequently been met by increased production The likes of Alpaca del Peru, Andean, Ayni, as well as the Peruvian Government Certification Programme* has successfully come to position Peruvian Alpaca fibre as not only a world-class commodity, but one that is produced under ethical and sustainable guidelines * The Peruvian Government Certification Programme was implemented in 2013 through the National System of Evaluation, Accreditation and Certification of Education Quality, which involves training and certification programmes for Alpaca producers, shearers and sorters, providing technical skillsets in order to ensure the highest quality of Alpaca fibre output possible
17 THE MARKETING AND POSITIONING OF PERUVIAN ALPACA FIBRE 2014’s Alpaca del Peru, launched by the Ministry of Foreign Trade and Tourism, PromPeru and the Peruvian Institute for Alpaca, have promoted exports through international fairs and trade missions, such as Alpaca Fiesta, which has been key in driving international demand for the fibre in recent years What’s more, is that the national branding efforts have successfully driven and enforced the perception of Peruvian Alpaca fibre as inherently soft, and furthermore, of an unrivalled quality – further ensuring continued international demand
18 THE GROWTH OF THE LUXURY SECTOR’S DEMAND FOR ALPACA FIBRE As indicated, increased international demand has been incremental in driving production figures within the Peruvian Alpaca industry Essential to this increased demand has been the role that the international luxury sector has played specifically 2013 saw the launch of specific strategic campaigns undertaken by the Peruvian government to position Alpaca fibre within the global luxury market Global luxury brands including the likes of Chanel, Burberry, Prada and MaxMara are all utilising Peruvian Alpaca fibre within the manufacturing of their garments
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ALPACA GARMENT EXAMPLES
MaxMara20
ALPACA GARMENT EXAMPLES
Prada21
ALPACA GARMENT EXAMPLES
Kenzo22
ALPACA GARMENT EXAMPLES
Burberry23
ALPACA GARMENT EXAMPLES
BERGDORF GOODMAN – PASSPORT TO PERU CAMPAIGN24 THE GROWTH OF THE LUXURY SECTOR’S DEMAND FOR ALPACA FIBRE Reports indicate a result of the international success within the luxury sector has resulted in agreements with major international manufacturing companies, such as the Italian company Fratelli Piancenza (which saw exports to the value of $125 000) The success of the positioning campaigns has subsequently seen the government of Peru commit to investing approximately US$ 28.7 million to improving the Alpaca fibre production process
25 RESEARCH PROGRAMMES AND SUBSEQUENT INDUSTRY IMPROVEMENTS Extensive research has been conducted relating specifically to genetic improvements of Alpacas in order to enhance breeding practices as well as the overall quality and quantity of fibre output A number of private business-funded research projects established in 2009 have founded experimental ranches which have undertaken assisted reproduction using embryo transfer through state-of-the-art techniques in animal science Furthermore, software has been developed to streamline production in terms of the processing of production and reproduction data for producers In addition, training courses for farmers have been consistently organised with the aim of sharing research findings and best practice techniques in order to ensure consistent and improved output
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THE STEADY GROWTH OF THE INDUSTRY
The research thus demonstrates that a number of variables have come to
play a considerable role within the steady growth of production within the
local Peruvian Alpaca industry
The variables range from extensive investment from both local sources as
well as abroad, the role that the active marketing and positioning of
Peruvian Alpaca fibre has come to play, increased commitment from the
luxury sector, combined with extensive research into improvements to
the production process itself, and the subsequent changes and
adjustments made in light of said research27
Peruvian Alpaca Value Chain
The alpaca value chain of Peru is a complex one, involving a myriad of different
actors all with substantial influence in the production and distribution of alpaca
garments
The following key stakeholders have been identified as crucial within the value
chain:
• Alpaqueros (Local Alpaca Farmers) responsible for production, shearing,
pasture rotation, health treatment, etc.
• Alcanzadores and Rescatistas (traders / buyers) acting as brokers, travel to
production areas and buy fibre lots from producers, fibre is then redistributed to
business agents who in turn sell to processing units
• Processing Units – internationally-operating firms (Michell, Prosur and Grupo
Inca) responsible for carding, combing, spinning, dyeing and finishing
• Craftsmen mostly women, organised into local associations, responsible for
the likes of knitting and weaving
• Governmental Bodies responsible for promotion, coordination and technical
assistance to key industry players
• NGOs offering of technical assistance to producers, as well as research and
development of producer organisation as to drive commercialisation
Source: Swiss Federal Institute of Technology28
Alpaca Fibre Output
Currently, it is understood that the identified major processing units are currently
accounting for 95% of total alpaca fibre output – with 90% of which being geared
towards export – leaving little room for value add within the local Peruvian context
What’s more, is that the majority of what is being exported is being done so as
fibre, as opposed to finished garments, as illustrated below:
Grade of Manufacture Percentage Share of Export
Washed Raw Fibre (Without carding,
0.07%
filling or combing)
Semi-Processed Fibre (Mainly tops) 81.57%
Yarns 17.35%
Garments 1%
Source: Swiss Federal Institute of Technology29
Alpaca Fibre Output
Ultimately, garment production, the aspect of the value chain where the greatest
and most consistent yields may be earned, is being left within foreign markets
What little value-add that is being seen within the local context (which is
understood as seeing less than 10% of total output) is being manufactured by local
craftsmen – belonging to disorganised local associations – the majority of whom
simply knit for local markets, or sell their products in the streets of tourist-
frequented cities
It is understood that the processed alpaca tops are sourced through the
international buyers of the identified markets, whereby the tops are subsequently
manufactured and completed as garments
Manufacturing is completed by foreign independent entities, or by the
manufacturing houses vertically-integrated into the value chains of major global
high-end brands
Source: Swiss Federal Institute of TechnologyPeruvian Alpaca Production Chain 30 Source: Swiss Federal Institute of Technology
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Peruvian Alpaca Production Chain
Processed alpaca products geared towards export from Peru are met with a
number of regulatory barriers
Escalated tariff structures in developed countries such as the United States, see
heightened duties for fully-processed goods, the barrier of which keeps Peruvian
alpaca garments and products from being exported to the likes of the US for mass
market
Ultimately, this sees that the majority of exports are comprised of processed and
semi-processed alpaca tops, which is then further processed as a finished product
within the export location and consequently distributed
Given that the local industry is built upon a mercantilist structure, this is a
substantial barrier to the development of the industry
This paired with the fact that the local market is limited, seeing little organised
support or marketing other than a few dominating players, ensures that rural /
small farmers are unable to grow whilst the hegemony of the likes of Michell is
safeguarded
Source: Swiss Federal Institute of Technology32
Social and Economic Roles of Alpaca Farming in Peru
GDP
EMPLOYMENT SUSTAINABILITY
CONTRIBUTION
The alpaca industry of Textile manufacturing Alpaca farming is
Peru is key to currently comprises a known to see a far
providing a livelihood total of 23 percent smaller ecological
to more than (48.62 billion USD) of footprint that other
150 000 Peruvian the country’s GDP – livestock – requiring
families (contributing with alpaca being a little food and
60 percent of textile dominant contributor inhabiting high
manufacturing altitude areas using
employment in Peru) little water33 THANK YOU
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