PERU - Instead of exporting the raw materials, we want to export more value-added products," Raul Rivera, marketing manager of Michell and Cia, an Arequipa, Peru-based maker of alpaca fibre, yarns and garments, told just-style.
Peru has more than 3.6 million alpacas, or 80% of the world's total.
There are resources to do this. Peru has more than 3.6 million alpacas, or 80% of the world's total, according to data from the country's ministry of agriculture. And while the fine, long wool of this shaggy animal has been traditionally exported, especially over the past two decades, more local manufacturers have been using it to make clothes.
At first, they sold knitted scarves and sweaters to tourists, but more recently they have been building off of this to expand into coats, dresses, jackets and vests to supply fashion labels in Europe, Japan and the US, including Max Mara, Kate Spade, Ulla Johnson, Mara Hoffman, Ragman and Peruvian Connection.
The latest push is to make collections to sell at their own shops in Peru and abroad, says Juan Pepper, Michell's commercial manager.
Indeed, Michell has more than 40 Sol Alpaca brand shops in Peru, plus another eight in Chile and two in Australia. This year, it launched a second label, Mallkini, with two shops in Cusco, a popular tourist destination in the Peruvian Andes. Another five stores are to be opened this year.
Michell's main competitor, Grupo Inca, sells clothes through its Kuna brand, while another manufacturer and retailer Anntarah is marketing its own and other Peru alpaca brands, such as Andina Outdoors, Ayni and Bonalla.
More brands are popping up with the same strategy of opening local retail chains to target tourism - spending by foreign tourists is on track to grow 8% a year between 2019 and 2022, according to the Central Reserve Bank of Peru - and then to go abroad, Rivera says. Several brands have opened points of sale in China and all of them are targeting the US, he adds.
The expansion push is boosting clothing exports, which accounted for nearly a quarter of the US $206m in total alpaca exports - fibres and yarns make up most of the rest - in 2018.
In 2018, alpaca clothing exports grew 16.1% to a record US $48m from US $42m in 2017, led by a 20.1% surge in sales to the US, which imported US $25m worth of products, or 52% of the total, the data show. The other big markets were Germany and Japan.
Igor Rojas, who runs PromPeru's clothing industry department, says he expects Peru's competitive advantages to drive further growth. "Few countries have a vertically integrated textile cluster" like Peru, he told just-style.
Indeed, Pepper says Australia exports mostly raw sheep wool, the same with South Africa and its goat mohair. "They haven't been able to develop what Peru has done with alpaca," he says.
A big challenge to extend the growth is to develop e-commerce strategies to meet the rising trend for shopping online, an effort that includes not just building websites but picking where best to warehouse products to supply Europe or the US, and how to meet an array of fashion trends.
"It is easier to ship yarns abroad than to manufacture a sweater for a particular country with a particular taste," Pepper explains.
Still, with manufacturers outfitted with the latest machinery in Peru, clothing exports are sure to grow based on the economics of the business, he says. "You get a better profit than by selling yarns."