By Doug Barry
Coni Lefferts has a good eye for what attracts buyers to a product. She cut her business teeth with a sales promotion agency for consumer product goods and noticed that poor packaging was pervasive, which had a negative effect on sales. It’s tough to sell the good stuff inside if the consumer is put off by what’s outside.
That insight, more than 20 years ago, led to the creation of Creative Packaging Solutions and to a reliance on China to manufacture what her creative team dreams up. Now amid a trade war and other conflicts between the United States and China, Lefferts needs a solution to keep the affordable packaging flowing.
Like a lot of other US businesspeople during the last couple of decades, Lefferts looked outside the United States for cheaper, or as she calls it “more cost effective,” materials for her customers. Her company acts as a broker and wholesaler. “We don’t directly manufacture.” The magic sauce is in the “systems,” she reflected. “We know what the packaging is made of, how it is manufactured, what it can be used for, whether it needs to be custom-made, and whether it will be attractive to the consumer.”
It took time to find the right factories. In the beginning she used Alibaba, the China-originated e-commerce platform. She was overwhelmed with the volume of available information. “Now, we have so many cooperative relationships, we don’t have to look anymore.”
A box of rocks?
Remembering the first import order, she said she sent payment and hoped for the best. “My first buy from China…I was a nervous wreck.” She recalls, losing sleep over whether the China manufacturer would deliver the goods. “I had heard of the nightmares—people opening cartons from China and finding sawdust or rocks or papers. My first order, there were no rocks. It was absolutely gorgeous packaging.” Relieved, she said, “My first import was beyond my expectations of quality, service, and price. I was sold.”
Like a kid in a candy shop, she soon found other factories capable of making what she needed from a wide range of specified materials, including metal, wood, fabric, plastic, or glass. “About everything you can imagine, from different parts of China. Plus, the pricing and lead times were good. We import from China in less time than the packaging could be made in the United States.” She was also pleased with the quality. “Chinese manufacturing plants are fastidious. Their engineering is top-notch.”
“Different areas of China had lockdowns and there was a rolling impact. As one province or city opened, another closed. When factories closed, we suffered delays."
Then came the Trump tariffs. Ostensibly, they were imposed to reduce the trade deficit with China and apply pressure to create a level playing field for American companies, including by opening more sectors, protecting intellectual property, and removing non-tariff barriers. “Everything changed after Trump starting using executive privilege to apply extra tariffs. We had to tell clients that costs were going up. First it was an additional 5 percent, then 10 percent, plus another increase, now it’s at 25 percent above the normal duty tariff of 6 percent.” She remembers how the clients were in disbelief. They replied with “Oh, the Chinese will pay the tariffs.” She had to tell them that the Chinese don’t pay the tariffs. The client pays the tariff. Instead, the Chinese will penalize US imports in retaliation. She said that the tariffs have contributed to inflation and if Congress has their way, tariffs will go even higher.
The executive order that applied the tariffs carved out tariff exclusions for some products, those that couldn’t easily or competitively be made in the United States. Lefferts hasn’t requested an exclusion, because her company has so many different products and tariff codes that come from different factories all over China. “I probably wouldn’t receive the exclusion anyway.”
Another blow came from COVID-19 and it hit hard. “Different areas of China had lockdowns and there was a rolling impact. As one province or city opened, another closed. When factories closed, we suffered delays. The shipping costs and port issues have become horrendous. Ships are held up waiting for clearance to dock and there are huge port delays after docking, with trucking issues.”
While things have improved a bit by late summer of 2022, she has heard, and very much hopes, that supply chains will return to normal by late 2023. “I don’t want to call this a new normal,” she sighed.
That may not be the only new normal to avoid. She said her company was going to import cotton packaging from China when the Uyghur forced labor problem arose. “The factory we wanted to contract with couldn’t meet the standards. We couldn’t be assured the cotton wasn’t sourced from Xinjiang and that forced labor wasn’t involved.” She said she couldn’t take the risk, so the production was changed to India. “You can’t imagine the headaches from that one order trying to use a factory in India. But it was better than importing from China and having the order seized when it arrived at the port.”
Although 2021 was a banner year, 2020 was a bad year, she said. “Volume was down a lot in 2020. Down 60 percent from 2019. We’re working to get back to the 2019 volume in 2022, and back to our planned, controlled growth.”
"China needs the United States, and the United States needs China. The relationship must be done in an equitable manner.”
Tariffs, COVID-19, and sanctions. Could anything else go wrong to scramble her forecasts? She’s watching the China factories to make sure they come back after the 2023 Chinese New Year shutdown.
Another unexpected challenge. People she knows and works with challenge her and have begun to question her on sourcing from China.
“Even in social gatherings, people who know you’re doing business with China roll their eyes. They don’t understand. Five years from now, they might change their minds about China. I can’t force them. What I do know and tell the doubters—Chinese people are good, hardworking people. Their factories are immaculate.”
In response to the eye rolls and the other challenges with sourcing from China, she is looking at alternative countries, including India and Mexico. The United States has a free trade agreement with Mexico, which would lower the tariffs to zero. “The efforts haven’t gone well. There is no help available to small businesses like mine to find alternatives. If I’m forced to abandon China, it will be bad for my company and it will have a domino effect on my customers and their customers—the consumers.”
The effect has kept rolling and could start multiplying if she stops manufacturing in China. Her company sells empty packaging containers to consumer product goods companies, which she is constantly trying to influence to export, including to China. For example, one brand bought bottles and caps made in China. They became so successful, they were acquired. Now the brand is being imported into China. The circle is complete, the packaging came from China, was filled, and is now going back with shampoo and body wash.
She hasn’t yet advocated with lawmakers. “I may be dragged into it unwillingly. If we all use our voices, we may have a greater impact. China needs the United States, and the United States needs China. The relationship must be done in an equitable manner.”