LEATHER IN LIFTOFF LAND By SUZANNE KAPNER March 5, 2007 -- Anyone who's suffered sticker shock while shopping for a new leather handbag recently, take note: pricey bags look set to get even more expensive. Demand for these bags - as well as other leather products such as shoes, jackets, upholstered furniture and car seats - has soared in recent years, far outstripping the supply of cattle and sheep. As a result, the price of raw hides has risen steadily, up 20 percent in the last year, according to Hidenet.com, an online market report. Many variables go into determining a product's price, such as labor, shipping and marketing costs. In the case of handbags, manufacturers have been using more exotic tanning techniques, such as washed leathers, and adding extra details such as metallic treatments or laminations to differentiate them in a crowded market. The strong euro has also played a role, helping to push up the price of imports. One of the bigger costs, by far, is that of raw materials such as leather hides. Calfskin, among the highest quality leather sought by handbag makers like Coach, tends to be in shorter supply than lesser grade skins. "A key reason behind rising handbag prices is the rising cost of raw materials such as leather," said Tim Schifter, the former owner of Le Sportsac, who along with Gwen Stefani, has launched a new accessories company, Schifter + Partners. Higher raw material costs won't affect all companies equally. Those likely to be hardest hit are smaller U.S. manufacturers. Coach, for instance, said it has offset most of the rise by shifting production to countries with lower labor costs. Shoes account for 55 percent of finished leather goods; autos and furniture make up 30 percent, and the smallest slice, 15 percent, comes from accessories and clothing, industry sources said. Unlike auto and furniture manufacturers, who have been squeezed by cheap Asian imports that have kept a lid on prices, shoe and accessory makers have found some wiggle room by upping the fashion quotient. Shoe prices, for instances, have risen by more than 10 percent since 2004, according to the NPD Group. Likewise, handbag makers said consumers are showing little resistance to price increases, as long as the merchandise contains additional embellishments like brass hardware. Several years ago, Coach's most expensive bag sold for $290. Today, the company counts 13 percent of its overall sales from bags priced at $400 and above. "It's our fastest-growing category," said Coach Chief Executive Lew Frankfort. Demand for leather has been on the rise for some time, accounting for a quarter of all upholstered furniture sold in the U.S., up from 7 percent two decades ago. The number of available hides depends on meat consumption, since cows and sheep are never slaughtered for their skins alone. Since a low point in 2003, the consumption of red meat has been on the rise, up about 5 percent to 51.5 million metric tons, according to the Foreign Agricultural Service. "People want to eat meat," said Don Ohsman, Hidenet's publisher, "but, even more, they want to buy leather."