Sign of the persistence of the congestion crisis in global shipping, there has been 69 container ships waiting to be unloaded outside the ports of Los Angeles and Long Beach on Tuesday afternoon, just short of the record of 73 ships set this weekend.
Global supply chain issues can frustrate consumers with empty shelves, but pose critical challenges for entrepreneurs trying to launch products and grow their businesses.
In an interview via Zoom, ‘Marketplace’ host Kai Ryssdal spoke with Lindsay McCormick, founder and CEO of a sustainable-minded personal care products company called Bite, about the impact of high freight and rising commodity costs on his company’s latest product launch.
Bite’s first product, a McCormick chewable toothpaste tablet invented in 2017, is made near the company’s Los Angeles headquarters, but a deodorant in Bite plastic-free packaging launched on Wednesday includes components made in China. The following is an edited transcript of McCormick’s conversation with Ryssdal.
Lindsay McCormick: So our deodorant is in an aluminum case [that] is made in china, and we also have 100% cardboard paper refill which is also made in china. … This is the first time we’ve worked with custom components, which meant, you know, steel dies had to be made at a manufacturer in China for these things to be made. the craziest times to do something like this.
Kai Ryssdal: I am on. So that’s about the size of a pack of cigarettes, right? It’s aluminum and shiny, and it’s written Bite on it. I don’t know if you are a Marketplace listener, but if you were listening the other day I told everyone that aluminum has peaked in 10 years.
Ryssdal: And there is the strong inspiration. So what does this do to your pricing power?
McCormick: You know, it’s been a challenge. We don’t pass a lot of our, you know, increased costs on to our customers. We expect many of these problems to be temporary. So things like our air freight – air freight is very expensive right now. We had a quote of $ 30,000 to send us our components, and typically it would be between $ 11,000 and $ 13,000. So that’s where it’s like, “Wow, we’ve got to get this.” It’s also, you know, it’s mid-September right now, we’re going on vacation [shipping season], so there are a lot of reasons why the prices are like this, and we’re just going to take the hit for a little while.
Ryssdal: OK, little time. So now let me introduce a guy by the name of Jay Powell into this conversation. He’s, of course, the chairman of the Federal Reserve, and he’s on your side, or maybe you’re on his side – I don’t know – that inflation is going to be a “little lapse of time.” You bet on a product launch, you bet on your pricing power. What if you were wrong?
McCormick: That’s a really good question, and it’s so out of our control, right? So the things we do to help absorb some of that is you know, yeah, we had to airlift the first shipment to go for launch, but we see the clear skies coming. After the holidays we can take our things on boats and ship them for an easier price that way.
Ryssdal: Fair enough. What about the other raw materials that go into this thing besides aluminum? Do you have any problems there?
McCormick: Yeah, so actually, we’ve found that our main ingredient – it’s basically like an oil, like a wax – and its price has tripled since we started this. And so luckily it had actually tripled and now it had only dropped to double the price. You know, at this point it looks like a deal. So for us, we have a very good relationship with our manufacturers and suppliers, so they help us bear some of the price on this, and I hope we will be long term partners.
Ryssdal: So you do, I mean, you bet for the long haul, don’t you?
McCormick: Yeah yeah. But you know, it’s not like we’re in a bad position, is it? We’re just not that good [of a] position it would have been if we hadn’t received $ 30,000 air freight invoices, right? But I think there’s a saying like, “Stormy seas make great sailors” or something? And so this is our rough sea and this is how we learn to sail.
Ryssdal: I imagine that somewhere deep in Bite, corporate secret files, you kind of have the next product launch plotted. Did this experience change you at all?
McCormick: I’ll definitely make sure we don’t launch again as the holidays approach. It’s a really intense thing, but it’s also, like, expecting the unexpected. We are a small team. We’ve been like every time we’ve had a pitch that we’re going to get a head start next time around, but the point is we have to play the best hand that’s dealt to us, and I think you know that if we get through this one, we can get through all the other launches that we have to come.