COSMOFACTORY

Deanna: [00:00:00] This episode is about solving for supply chain disruption. It's about sourcing cosmetic packaging, about how both brands and suppliers are rethinking partnerships, locations, and business tactics. It is also about using adversity as an opportunity to identify and implement strategic shifts. For today's episode of the Cosmo Factory Podcast, I am speaking with Brandon Frank, CEO of Pacific Packaging components.
Brandon, [00:01:00] welcome to Cosmo Factory.
Brandon: Thank you. It's great to be here.
Deanna: Yeah, you're welcome. I'm, I'm happy to be speaking with you today. Now you have what I would describe as a very practical view, thanks to over 15 years of experience that you have in the beauty packaging, distribution business, and your view of how the packaging supply chain is evolving on a day-to-day basis as our industry adjusts to new tariff policies and, and trade developments, um, I think will be quite.
Informative, Help us, if you will, just get some perspective on the scope and severity of disruption that you are seeing along the packaging supply chain.
Brandon: So I think the biggest area of concern. Is the tariffs that have been levying it directly with China. So that's packaging that is manufactured in China and then imported into the us. US businesses are bearing the brunt of those costs. Uh, tariffs are attacks on businesses here in the us so all of those goods that have been coming over have. Seen [00:02:00] significant price increases that were unexpected by both the packaging companies that we're bringing them in and or the brands that are using those packaging items. And so what we're seeing is just a lot of uncertainty, a lot of chaos, a lot of concern about what the future will hold, and, um, a real lack of kind of the ability to plan effectively on what the future's gonna hold.
Deanna: No, that makes sense. Uncertainty is, is not a friend of business for sure. Um, can you say how this disruption may be impacting different materials, plastic, glass, metal, paperboard, anything else? Like are there remarkable differences? Um, from what we have typically sourced from China as an industry or.
Brandon: No, there isn't. And that's one of that, that's been one of the things that has been, uh, just incredibly unique, um, in, in this tariff situation is it's not by sector or material. It's just a blanket tariff across the board for nearly all goods that are coming in. [00:03:00] Um, and so one, it makes it simple to know. What the tariffs are gonna be for each one. Um, although I would recommend that everyone research the codes that are being used, the importing and checking those, there's lots of really good tools online for that. Um, but yeah, it's, it's, it's really just been across the board and, um, it's not just China, obviously there's, there's tariffs being levied against every other, you know, also every other country in the world, uh, for packaging items.
And so it's kind of been this moving target of, okay, well let's go source packaging in another part of the world. And then the tariff goes up. Over there, and then maybe it goes down in China. Uh, just as of the recording today, it's, it's, uh, August 12th today. Uh uh, but just a 90 day extension was just kind of announced today on the, on the tariffs from China, which we're gonna go back up to the levels of a hundred forty five, a hundred fifty 5%, um, which was just incredibly high for, uh, every single beauty brand that was bringing packaging in.
Deanna: Yeah, so we know that beauty makers are [00:04:00] now working with suppliers in new locations, and that suppliers are opening facilities or making acquisitions, uh, even, you know, new partnerships in new locations too. Just as an example, the California based company, Alder Packaging, recently announced a new partnership with Cemex.
Uh, CEX has facilities in Columbia. Where they manufacture things like mascara, wands, lip gloss tubes, fragrance caps, nail polish bottles, a range of packaging for our industry. Um, and in her remarks to the press, Sarah Haffey the COO of Alder Packaging called attention to the advantages of having regional suppliers in what she calls today's complex sourcing environment.
And she also pointed out, um, what she's seeing from clients. In that they're really proactively working to build, and I'm quoting again from her build flexible supply chains with a mix of South American, US, Chinese, and EU manufacturing options. Close quote there. Um, and, but I know that's just one anecdote and this is, you know, a, a remarkably large and complex industry.
Can you say more about what's happening [00:05:00] geographically? Where are the moves happening in terms of places, regions, countries? What do you see?
Brandon: Yeah. Well I think, you know, in the very beginning, I think the push was to encourage us manufacturing, right? That that was kind of the, one of the. The main reasons why the tariffs were put in place in the first place. And the challenge with that is, one, we don't know if the tariffs are gonna stay long term.
So investment in US manufacturing is risky at best. I think, uh, because obviously if the tariffs go away next year. Then all of the investment that was. Uh, so that being said, there is still significant investment in new manufacturing facilities in the us. Um, a lot of those are either funded by Chinese companies coming in and creating, uh, either warehouses or full on, um, you know, plastic production.
You know, facilities. And so there is, there is that happening? So it's kind of a, um, a cautious investment kind of [00:06:00] vehicle, um, I think in US manufacturing. But that transition is gonna take a long time. It's not gonna happen overnight. So in the short term, I would say in the next five years, uh, the kind of emphasis has been on looking in other parts of the world.
So Southeast Asia was kind of the easiest switch going from China, uh, to Southeast Asia. Um, I'd, I'd also add Taiwan and South Korea's other kind of hotspots for beauty packaging in, in Asia. India has come on the scene as a really low price leader for a number of different packaging formats and types, including glass and dispensers. Uh, we have phenomenal. Uh, partnerships in that part of the world. Um, and then I think the other area, and we've had a lot of success in Columbia as well, uh, and I think just strategically where it's located, the amount of investment, the infrastructure there, in terms of South America, it, it is probably best positioned to take advantage of kind of the disruption that's happening. But overall we've seen is that wherever those kind of, whatever the type of packaging, you have to start with the [00:07:00] type of packaging first. And then what are the. Manufacturers around the world that can achieve kind of all of the needs that the brand, um, uh, has at that time, and the specs for the packaging. So that qualification process needs to happen. And then from there, the brands, I think, you know, kind of select which ones are gonna be the right fit for them. And we're, we're intimately involved in that, in that process as well.
Deanna: Yeah, and I'm not sure if this is the same question, um, or if, or if there is something different happening here. Um, you know, you mentioned companies, you know, from China as an example, investing in facilities in the United States or warehousing even. I'm wondering about sort of. Parts of the manufacturing process, right.
Are you seeing companies relocate their technology in terms of, you know, shipping equipment or tooling and molds, you know, to a new location? I don't, I don't know how that's really different from opening a full facility, but I feel like there's a nuance here.
Brandon: [00:08:00] yes, uh, there's. Full investments happening to where the, all the manufacturing facilities are being opened. And then there are kind of these, um, other avenues that companies can kind of pursue that aren't as risky. So that would mean moving machinery, moving molds, uh, so that if things change quickly, then they're much more agile to be able to move back or move somewhere else to where the tariffs could be maybe significantly lower.
Deanna: Mm-hmm. Okay. Okay. And so here we are. I'm wondering now, does every brand need to reconfigure their packaging supply chain, or, uh, maybe the, the question to answer is, how would a brand know that that's the choice they need to make right now?
Brandon: What we're spending a lot of time doing is. Anytime a brand is making and shipping packaging from China, then it's worthy of kind of looking at what other options are out there, especially for hero SKUs. SKUs where brands really rely on, uh, the movement of those items maybe. Maybe significant contractual agreements [00:09:00] with retailers cannot be disrupted. Those situations, I would say, are probably the highest priority, but even if you don't kind of check all those boxes, it's still worth a look of, can I get this someplace else in the world? Uh uh, how much is it? What are the minimum order quantities? Uh, what are the lead times? Um. I think all of those things can be kind of worked on while the primary source continues to happen. But here's, here's the reality. China has a 2030 year headstart in packaging, engineering, supply chain, uh, in, in terms of running lower order quantities and highly customized items. Very few places on the planet can compete with China,
even at tariffs that are close to that thirty, fifty, a hundred forty 5%. Uh, just because the engineering, the technology, the, the, uh, the knowledge and the expertise just doesn't really exist in other parts of the world like it does
Deanna: I often hear that that packaging from China is remarkably accurate and it's just [00:10:00] their turnaround time is second to none, is just anecdotally. I hear these comments all the time.
Brandon: Yeah. And it, and it, it, it makes moving some items away from China. Impossible right now. Um, but there's still a significant amount of packaging formats that that could come from other parts of the world.
Deanna: Yeah. So once a brand has decided or recognized they, they want to make this change, what are some of the steps involved? You, you mentioned maybe a couple there, but tell us, tell us the steps involved and, and I guess it might be helpful too, to highlight ones that people might be inclined to leave out. Oh here as we're, uh, making changes a little more quickly than we might otherwise.
Brandon: Yeah, so I, I mean, I, I think, I think the first step is for brands to realize that this is kind of the new normal, you know, things are, things are not going to all the, you know, become harmonious again, uh, tomorrow. So things are gonna stay chaotic. So I think the first question is evaluating your current packaging and saying, okay, do we stay with this complex?
Packaging design [00:11:00] that I can only get in China, or that makes it really difficult to move to other parts of the world, or is now a really good time to look at a packaging rebrand, or we can simplify the packaging that will make it easier to source in other parts of the world. So that's more of an internal kind of conversation, right? Once I think that question is figured out, then I think going externally to a packaging company like Pacific Packaging, uh, or. To the current supply chain that you have within your, within your brand network, and just try to take the current specs that you're kinda looking for and then just start asking those questions of, you know, I. Can this be made somewhere else? What are the minimum order quantities? What are the price breaks for these tiers based on the brand's? Um, kind of annual expected quantities, um, the decoration capabilities, uh, lead times, um, if custom molds need to be built, like what's gonna be the process for that? Um. Then in terms of packaging format, so I'd say, you know, probably the easiest to [00:12:00] move in other parts of the world or anything in the secondary
tertiary category. So paperboard, corrugate boxes, uh, uh, ambassador kits, you know, things like that. Uh, very easy to move to other parts of the world, including here in the us. Uh, the next simplest would be pa uh, plastic bottles, uh, PET, polyethylene, polypropylene, uh, bottles and jars. There. There's kind of a ready supply of manufacturing op options there. Glass, uh, is a little bit more difficult. Um, but there's still really good options that are kind of, uh, that are there. Um, outside of Asia, that's where it gets a little bit tricky. There's a couple in Central and South America, but their minimum order quantities are closer to 50,000 rather than five or 10. Uh, and then India does have some really good glass manufacturing as well, but again, the minimum order quantities are gonna be. Pretty high, uh, color cosmetics are still really tough.
China's gotta a kind of lock on that area. Uh, there is some good options in Taiwan and kind of outside of mainland China, but it, almost [00:13:00] all of it is, is in Asia. Once we come out of Asia and Europe and other parts, the cost just becomes kind of cost prohibitive to making those switches, at least based on our network. And then dispensers, I would say that dispensing is quickly moving. Away from China. There are really good options in India. I just did a post on LinkedIn about this, um, and India's really wanted to compete for this business right now. Um, and then I think US capabilities for these kind of items are also increasing as well. But here in the US because of the tariffs, demand has went up. So the lead times are, uh, astronomical, right? Compared to, uh, uh, other, other factories around the world.
Deanna: I, I, I certainly don't follow packaging as carefully as you do, but I have noticed at trade shows that I've been going to Indian suppliers showing caps, closers, display. Answers, it's much more prominent, um, than it, than it has been in the past. So that's interesting to, uh, to hear you sort of validate that observation.
How long [00:14:00] does it take reasonably for a brand to transition their supply chain and, and what, what happens in the between, in the interim?
Brandon: Yeah, so definitely start working in parallel. Um, so I think that takes a little bit of the stress off, right? Uh, because you can continue to order your packaging from your primary supplier as you work on that secondary option. Uh, but it also depends. So for simple, um, kind of standard secondary packaging is really easily, 'cause you already have all the things, uh, in terms of guidelines and, and spec sheets and, and all that. Uh, so, so generally the rule of thumb is, is, is, is the higher degree of customization that's happening with that packaging, the more time it's gonna take to be able to move it over. So if we start from most complex custom mold. Obviously a new mold is gonna have to be built, tested, confirmed. All of that includes drawings, 3D models, then the decoration piece, so making sure that the decoration is gonna be correct on that, on that item, going through that testing process, creating a [00:15:00] range board, light to dark, making sure that those things are really dialed in. Once that's confirmed, then you're really ready to go to production. And, um, usually with molds you start with a, like a, a single unit cavity. Production mold or not, not a production mold, but kind of a, a sample mold to be able to get the form correct. So there's all these like steps and each one of those steps are, can be hung up with issues or changes or uh, uh, you know, all sorts of kind of delays.
And that's where. Companies like ours can really help kind of take that timeline and shrink it down because we can consolidate it, make it much more efficient, improve the communication between all the different members of that packaging value chain that are need to get to be involved from the designers, to the fillers, to everyone else. Um, but it, so generally I would. Say that if it's complex and molds, I would give yourself at least six months to make that transition. Uh, six to 12 months. 12 months, you're giving yourself plenty of time. No one's gonna lose any, [00:16:00] uh, uh, any, any hair or, uh, or, or go gray. But anything less than six months would be pretty tough for anything complex. Um, but again, a few weeks in secondary packaging, you can usually figure out another option.
Deanna: Yeah. You know, hearing you talk about this makes me think a little bit about, um, folks who source natural ingredients from, um, maybe an agricultural setting or even a wild harvesting setting. It's, it's very common for brands like this or even manufacturers who use that. Particular type of ingredients to have multiple sources and often in multiple regions, um, you know, if it needs to be equatorial, but some other equatorial region or something.
I, I, I guess just to clarify, it's not common for folks to have multiple packaging suppliers historically. Is that what I'm hearing you say?
Brandon: Yeah, historically it's been, it's been relatively singular, uh,
that you kind of design packaging with, with one place and you move forward with it.
Um. But yeah, this, this, this kind of, again, this [00:17:00] uncertain environment has caused everyone to kind of take a look at things like, okay, well how else can we, how else can we figure this out?
Deanna: Yeah. So are there, are there then hidden advantages is, you mentioned the, the word agility earlier is, is beauty packaging becoming more agile or are there some other ways that this is shifting our supply chain?
Brandon: Yeah, I mean it's,
uh,
I.
don't, I don't think I, I still think it's a little too early to tell like what the long-term implications of the, of the packaging kind of supply chain are gonna look like if us. Kind of manufacturing is gonna continue to become more robust and we're gonna continue to buy more things here. Is Mexico gonna become an industry leader in this part of the world is Columbia? You know, I think there's a lot of questions on, on, on where it's gonna happen there. And then what role will China play? Um, you know, uh, I think there. And they've told me in my, in my talk to the factories, like they've realized that US is no longer a reliable trading partner.
And so they're looking in other parts of the world to be able to supply packaging, uh, to them, [00:18:00] which I think is just happening at a faster rate. So I think there's, there's so many different dynamics here from so many different views. And I'm in a really unique place 'cause I talk a lot with the brands and come up with strategies for them on how to solve these problems. But I'm also very, very close with the, you know. 300 or so suppliers in our packaging network in terms of what are they doing, what are the strategies? And every day I'm on WeChat throughout the night with different Chinese factories of what's gonna happen. Like, and so we're all trying to figure this out and that's how I like to kind of look at it, is like, okay, here's kind of the problem.
Let's pull alongside each other and look at this problem and come up with strategies. To be able to bring the most value to our clients, which are the brands, uh, while also honoring the partnerships of our manufacturing partners,
uh, to keep, to keep their machines running.
Deanna: sure. And before this disruption, um, I would say that the beauty packaging industry as a whole was very much. Focused on solving challenges [00:19:00] around environmental sustainability. I'm wondering if, if progress here has stalled. I know we can't really separate this moment in beauty packaging history from what's happening because of the tariffs that have been imposed, but are you seeing progress in the sustainable beauty packaging space?
Brandon: Yeah, there is. There is progress, but just like we saw in COVID, anytime there's kind of a big disruption or costs or lead times or just the practicalities of the business today become difficult, sustainability takes a backseat. And I, I think we're seeing something similar in that regard. Um, there are some kind of, uh. Highlights or good things that are coming out of this. Um, for example, I mentioned Columbia earlier, uh, but they're largely powered by hydroelectric. Uh, it's really Heal Hill and Bogota especially. And so a lot of the, the electricity for these factories are very clean. Also, their domestic supply of recycled content is some of the best in the world [00:20:00] 'cause they have government subsidies and incentives to use plastic recycled content from, from.
From the country. So, so in this kind of exploration of other parts of the world, there's kind of these other pieces while we look for sustainable packaging materials that we didn't really fully utilize before too. So what I would e encourage all of us to do is as we're going through this kind of chaotic searching for new vendors or suppliers or secondary or whatever, that we just keep it a part of the discussion.
'cause we might be surprised in what we find.
Deanna: Yeah. Yeah. Well, Brandon, I really appreciate your candid perspective on all of this, and for all the information you've shared. Thank you for being a guest on the Cosmo Factory Podcast.
Brandon: Uh, it's my pleasure. Thank you.
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