Alligator hides for the world: when you learn about the complex processes the alligator skins go through before they are ready to be made into expensive handbags, fashion wear, shoes, briefcases, and watchstraps, you will appreciate their beauty and value. Heng Long International is a homegrown company that has managed to become one of the top five international tanneries.

[ILLUSTRATION OMITTED]

THE next time you see a well-dressed woman carrying a Prada, Stefano Ricci, or Testoni handbag, there is 20 per cent chance that the crocodile leather is from Heng Long International Ltd. It is one of the largest independent tanneries of crocodilian leather in the world.

The company is primarily engaged in the sourcing, tanning, and processing of a wide range of raw crocodilian skins into crusts and premium finished crocodilian leather and supplying them to the global luxury and high fashion industry. The Singapore tannery sells its products to fashion products manufacturers in over 20 countries in Europe, north America, Asia, and Africa.

The origins of Heng Long's business began in the early 1950s by the father of the non-executive chairman, a Chinese emigrant fisherman from Muar, Johor, who hit on the idea of tanning animal skins after he met some sailors with monitor lizard skins for sale. He tanned these skins and sold them to shops selling watchstraps and belts to the British colonial forces in Singapore. By the late 1970s, in response to generational change, non-executive chairman, Koh Long Cheok, and managing director, Koh Chon Tong (CT Koh) gave a new lease of life to the old family tannery business with the establishment of Heng Long Leather Co as a partnership in 1977. It was converted into HLL as a private limited company in 1979.

From 1979 till 1992, the firm's activities consisted of a mix of sourcing and trading in crocodilian and other exotic skins to other tanneries and traders, and value-added activities such as dyeing and finishing crocodilian skins for the Asian market. During this period, the tanning process was carried out in a workshop located along Upper Serangoon Road.

In 1992, Heng Long began to focus on value-added tanning activities in view of the increasing competition and declining profit margins in the trading of exotic skins. It moved to a new tannery at Defu Lane, with a production area of approximately 2,867 sq m and equipped with modern tanning machinery.

With better capacity, the firm diversified its customer base from Asia and entered the European market, where the luxury and high fashion houses are based and offered premium prices for high-end crocodilian leather. It also diversified the end usage of the leather by expanding the number and type of our products such as watchstraps, shoes and garments.

Since 1995, Heng Long has been supplying its products through exclusive and non-exclusive agents to luxury fashion houses and high-end watchstrap makers. The luxury fashion houses include Prada, Hermes, Testoni, Stefano Ricci, Broni, and Zagliani in Europe. It also supplies skins to Kwanpen, a Singapore fashion house.

[ILLUSTRATION OMITTED]

Executive director Koh Choon Heong (CH Koh) says: "The high end tanning industry in the world is dominated by five tanneries. Three are in France of which two are owned by Hermes, one in Italy is owned by Gucci, and we are the fifth." Although Hermes has its own tanneries, they still buy from Heng Long because they can't get certain skins which Heng Long gets from its exclusive sources. Other fashion houses will not want to buy from Hermes' tanneries as they treat the fashion house as a direct competitor.

He explains that there are high entry barriers to the top-tier crocodilian skin tanning industry. Heng Long has developed strong relationships with customers, supply sources, and key producers. It requires substantial working capital to operate tanneries. The firm's strength lies in its long operating history and technical capabilities.

He adds: "Crocodilian leather is unlike car upholstery. Once makers like your leather they won't change to another supplier. Tanning is 90 per cent science and 10 per cent art. The art portion is like a secret recipe that is hard to imitate."

The demand for crocodilian products has been growing over the years; this has led to a scarcity of supply. CH Koh says: "The watch industry has increased its demand for quality watchstraps. There is extensive use of crocodilian leather for handbags by luxury fashion houses. However, the supply growth is slow. In the United States, alligator skins come mostly from Louisiana. In the 1970s, alligators were hunted till they were close to extinction. Today, the US Fish and Wildlife Service do aerial surveys of wild alligators. It gives permits to landowners to collect the alligator eggs from the wild. Alligator farmers organise the collection and pay the owners about US$20 per egg.

"When the animals are about 1.3 metres, the farmers must return 12 per cent of their alligators back to the wild. In the wild, only 5 per cent will survive if they are left to hatch from the eggs."

As the wild population of alligators increase, each year in September, the animals have to be culled. All trading of alligator leather have to be conducted under the auspices of the Convention of International Trade in Endangered Species, Cites.

As an entrepreneur CH Koh believes in taking calculated risks: "We believe in the fundamentals of our business. In 1992, we invested in a new tannery and new equipment. We took the right strategy to diversify our customer base to Europe and later to north America. We knew they need our quality skins. We maintain good relations with the farmers who are our suppliers. In a recession, we continue to support them."

The company believes in fairness when working with business partners. It tries to look after their interest on a long-term basis. It will not squeeze them to gain greater profits. It shares market knowledge with them. For example, the quality of the leather in this industry is crucial. CH Koh says: "We give farmers feedback on what the fashion houses want. Knowledge is important to the farmers. Sometimes we have to advance them money to keep them going. We encourage them to produce the species that customers want. We meet both parties very often. The designers and buyers from fashion houses will come to our tannery about four times a year to select the crusts that suit them."

[ILLUSTRATION OMITTED]

The raw skins are sourced from the United States, south America, Africa, and Asia.

Management Philosophy

CT Koh says: "We have gone through three generations as a family-owned company. As studies on family-owned businesses say, there is a need to change at the third generation. We did a public listing in 2008 to make the changes. We like family members to come in and continue the business. They have to be capable and willing to work. If family members are not capable, we won't push them to the top. We are not afraid to bring in professionals from outside the family."

CT Koh says that the firm has good workers who have followed them from 1970 till the present. They value their staff. The firm has a staff strength of 140 workers. He insists that family members have to start their career in the firm like any other worker. For example, his son is working as a production coordinator.

[ILLUSTRATION OMITTED]

On being a public-listed company, CH Koh says: "The good part is that there is transparency in the running of the business. Actions are scrutinised by the board. The company can be a leader by taking a long-term perspective in production. The drawbacks are concerns with drops in the share price. If a strategy takes three to five years to show results we have to explain this as shareholders like you to grow profits faster.

Production

Fashion houses and end-product manufacturers have to respond within a matter of months to fashion trends which may require from tanneries increased numbers of a certain size and species of crocodilian leather with the latest colours and finishes according to the prevailing fashion trends.

However, the rearing of crocodiles and producing of raw crocodilian skins by farmers and producers is a slow process requiring between one to five years.

Upon receipt of the wet salted crocodilian skins from overseas, they are individually inspected and graded. The crocodilian skins are washed and soaked in water for several days depending on their physical condition in preparation for the tanning process.

As part of the liming process, the skins are then tumbled in a computer-operated drum with alkaline chemicals for up to five days. During the liming process, the scales of the skins are removed.

The skins are then treated with acidic chemicals in drums overnight to remove the calcium deposits to produce a softer, more penetrable skin for tanning.

The skins are then processed with chrome chemicals. This process enables the skins to absorb other tanning chemicals to be applied in the subsequent re-tanning stage. At the end of this process, the skins are termed as "wet blue" in the tanning industry.

After chroming, the skins are shaved by workers using shaving machines to level the skins to the thickness specified by the customers. The shaved wet-blue skins are then bleached to remove the natural pigmentations. Finally, the skins are treated with re-tanning chemicals to complete their conversion into unfinished leather called crusts.

Dyeing and Finishing

The crusts are selected according to customers' requirements with reference to size, species, and grade.

The crusts are soaked in water in the "wetback" process to re-hydrate them in preparation for dyeing. The crusts are then dyed with chemical dyestuff in computer-operated drums to achieve the colour specified by the customer. During the seasoning process, finishing chemicals are applied to the surface of the leather to prepare it for polishing. The skins are then dried and polished using glazing or felt polishing machines to achieve different levels of shine according to the customer's specifications.

Future Plans

On plans for the future, CT Koh says: "We'll continue the good relationships with our suppliers. Presently, we're waiting for the economy to recover. Our warehouse and production are in two locations, we hope to build a new tannery so that we can work under one roof."

CH Koh adds: "In the short term, we'll focus on maintaining market share and profitability. We'll manage cash flow prudently. We want to be ready when the upturn comes. The demand for skins will continue to grow. Good candidates for joint venture and acquisition can be considered.

"In an industry that is constrained by limited supply, it is of utmost importance to ensure a constant supply of good quality skins in the long term. Having gone through several economic peaks and troughs ourselves, we acknowledge that strategic inventory planning is vital as it can potentially be a powerful tool to influence the supply chain. We believe that our sourcing capabilities will place us in an even stronger position when the economy recovers."

In the latest results for financial year 2008, Heng Long International showed an increase in revenue to S$68.2 million with net profit of S$11.4 million despite the global economic downturn.

CT Koh says: "Increasingly over the years, Europe has become our strongest market as we focus on segments that command higher margins. Overall, we are pleased with our performance in FY2008. As with most companies, we could be facing a challenging year ahead. However, we are still confident of maintaining our market share in the top-tier crocodilian tanning industry.

"Going forward, while the first quarter of FY2009 is not expected to be profitable, we are cautiously optimistic that FY2009 will remain profitable."

As a parting shot, we use the words of Robert Guidry's song to interpret that alligator leather goods can be a statement of "style": "See you later alligator, after 'while crocodile Can't you see you're in my way now, Don't you know you cramp my style".

[ILLUSTRATION OMITTED]

Making a Fashion Statement with Alligator Leather

LADIES like to look elegant when they are wearing expensive goods made from crocodilian leather. Ch Koh says: "The branded handbag is a reflection of the status of the person. In the classic category, ladies keep the handbags for generations and believe that the value will go up. Many ladies buy crocodilian products such as briefcases, belts, or shoes for their husbands as well."

In the classic category, the first handbag is always black, later they will want to own coloured crocodilian bags. Black is not the best leather as they are dyed in dark colours if the initial dyeing is not of the required standard. In the luxury category, the goods do not change much over time. Ch Koh has this definition of luxury goods by a friend: "Luxury items are like a glass of water in the desert-everyone wants to have it but not all can have it."

CT Koh remembers seeing a handbag at the Hermes factory in France that came with diamonds on the flaps. It retailed for 130,000 Euros. his advice to women is to decide what you want to use for casual or formal occasions. Expensive handbags are useful for day functions while for formal cocktails, you may want to carry a small pouch.

Many fashion houses recommend colours to suit the four seasons. For example, the Gucci bag changes its design according to the season. the colour in vogue now is gray and blue.--TCT