Moving out of China: How to Move Your Beauty Production from China to the US
Many things have changed in the past 2.5 years, but without a doubt the biggest change of all has been the swift change in manufacturing capacity of China. It’s been a while since you’ve heard from me, directly, as the founder of Genie Supply, but today we’re going to address the biggest elephant(s) in the room:
Is China going to make a comeback in manufacturing?
Knowing the answer, what can I do to best protect my brand?
How can I move away from doing business with China?
What considerations are there in making this move?
Like any good break-up, this will take a lot of planning. Stock-outs are a brands worst enemy, as they dry up life source #1: cash flow. But don’t worry, we’ll get into costs, planning and timing so that you can make a clean break.
First, a little background:
The Brief History of Our Experience with / Relationships in China for Beauty Manufacturing:
Many of you probably already know my story of graduating from college, moving to China alone, and navigating the world of beauty packaging, consulting, QC and ~ factory life ~ on the Chinese side for my own brand, Amalie Beauty.
Consulting (as a side-gig) for US brands in China was difficult given all of the cultural differences and quality/consistency (or rather lack or quality, inconsistencies) that I experienced, so it was relatively difficult to be a great consultant. I rarely made money, as I scrambled to cover my factories’ faults, and much sweat, many tears and a little blood was shed in the process.
In late 2017, I left China and moved back to the US, with the explicit intention to open my own lab, and do things right. Hence, Genie Supply was born.
Prior to COVID, you could get anything manufactured in China relatively quickly, and relatively cheaply. I wrote about COVID-19 before most of the globe even began taking it seriously, back on February 3rd, 2020 (no, seriously). I had just returned from China, going on a trip there for the Chinese New Year, then unfortunately, turning back around just 48 hours later and heading home, once the city of Wuhan was locked down.
It’s funny looking back at that blog now.. 4-6 weeks? Hehe. I really thought that COVID was going to be like SARS in 2002-2003, where China alone would bear the pain and suck it up in order to spare lives. Unfortunately for all of us, 2002 and 2020 were worlds apart in terms of the difference in daily global travel. Only serious business travelers were going to China in 2002.
I found myself hopping on a plane to China anytime the flight price looked reasonable enough in 2020. The damage was already done by the time I wrote that blog in February, meaning COVID had spread to the entire world in the 3-4 months prior, unbeknownst to. us.
Manufacturing in China had already become increasingly expensive and difficult with the government mandated shutdown of almost 1/3 of China’s factories due to Xi Jin Ping’s 2020 environmental initiative (HA - they achieved it one way, if not the other).
This is something I wrote about in depth at the end of 2017 / beginning of 2018, as we were just preparing to open our lab doors. I had said many times how difficult working with China on a long-term basis was (source) but, I was shouting from the rooftops: China is getting expensive to work with!
Everything leading up to today signaled inflation, consolidation, and slight difficulties that could be easily surmounted with enough elbow grease, communication, contracts, QC checks, or by reducing margins on beauty’s notoriously high-margin products just every so slightly.
However, I fully believe that what we’re viewing now - in 2022 - is the start of a post-China manufacturing world.
Yeah, I said it. We need to start thinking about the world of manufacturing without China.
The future of beauty manufacturing is not in China.
But, I manufacture primarily in China. What Now?
I have really bad news for you - It’s going to get worse (again, I know) before it gets better.
Now is the time for you to begin diversifying your supply chain. I know, I know. The US hasn’t done this in SEVERAL decades and is completely dependent on China for its entire supply chain - even if many parts of the chain have now been outsourced to cheaper neighbors like Vietnam, Laos, Bangladesh. It doesn’t matter. They’re still run by China.
We have to reduce our dependence on China, now.
So look at each component of your product, including:
Intellectual Property:
Formulation IP
Testing IP
Manufacturing:
Packaging
Batching
Testing
Filling / Assembly
Where are those pieces performed now? How much do you know about each of these pieces?
Let’s start from the top.
At the end of this, we’ll show the total cost and timeline for each step, so that you can start to save money for the move, and plan to have enough inventory to avoid stock outs in the meantime.
Step 1: Extricating Your Formulation Intellectual Property (IP) From China
This will be your first step, and we caution you to approach it gingerly. If you’re manufacturing with a Chinese lab/factory, you probably are using one of their private label formulations. Even if they made it specifically for you, or customized it specifically for you, they have you by the tail.
Unless you have a contract that explicitly mentions that you own the formulation IP, you are going to have to find a way to get it from them.
You can do this nicely, by asking first.
Then, you can always offer money for it.
At the end of the day, if your lab is unwilling to give the formulation to you, the first consideration should be, “Do I need to reverse engineer this somewhere else?” We have an entire blog on the topic and the legal implications of reverse engineering a formulation that you do not own (read here), but at the end of the day whether you reverse formulate or re-formulate, steps will need to be taken to secure your IP.
At the end of the day, if your lab is unwilling to give the formulation to you, the first consideration should be, “Do I need to reverse engineer this somewhere else?”
We’re more than happy to give you a quote for such a service, and we will weigh any legal liabilities throughout the quoting process and keep you informed 100% of the way. Here’s where you can take next steps to request that quote.
The total cost of this step depends on whether you get the formula for free or work out a deal to get it comp’d with a new manufacturing (or your existing) with a number of units purchased, or if you have to get it reformulated altogether, but the expected cost for securing your formulation IP is $0 - $5000 per formula.
Even after you’ve paid, it could still take months of back and forth to get your formulation just right with a new lab, so don’t expect this to happen overnight. The average time for reverse formulating is 1.5 - 3 months, but it could take up to 6 months in total, especially if your formulation contains lots of ingredients that have many variants, which need not be specified at a high level on the INCI list (e.g. polyisobutene could be anything from a thin liquid to a SUPER viscous jelly. Both will be “polyisobutene” on the ingredient listing. Doh!)
the expected cost for securing your formulation IP is $0 - $5000 per formula.
Total for Step 1: $0 - $5000
Timeline for Step 1: 0 - 6 months
Step 2: Extricating Your Testing Intellectual Property (IP) From China
Now you have the formula. Great. What’s next?
You may think you’re ready to make the product, but the formulation alone is not enough. In the US, (this is not a law, just a measure of confidence interpreting the FDA’s guidelines) a formulation needs AT LEAST stability testing to prove shelf life and PET testing to prove that the formulation will not get contaminated during its normal use.
(You can learn more about testing here). Add onto that RIPT if you’re in Canada or the EU, and ocular testing for anything going near the eyes , like eyeshadow or mascara.
If you don’t have those 2 testing results - PET and stability - for your formula, they will have to be performed again.
Just like the formulation IP, always ask your lab first. If they have the results and provide them, you’re good to go for contract manufacturing elsewhere. If not, you’ll need to perform the testings on your new formulation.
You can work with the same lab that reverse formulated your product, or you can hire a lab like ours for testing (prices listed here). Pricing is generally a la carte (per test / per time).
If your product fails any of the tests in any way, you’ll have to reformulate slightly.($) then re-run the tests again. So don’t run them until a chemist who knows what they’re doing has given them a good look-over.
Stability testing takes 3 months, while PET takes 6-8. Run them concurrently if ya spicy to save time, or stack them to be conservative, starting with the one you think will be most risky with your formula.
Total for Step 2: $0 - $1250+
Timeline for Step 2: 0 - 3 months
Step 3: Extricating Your Packaging From China
This is a tough one. Getting packaging somewhere that’s NOT China is really tough right now. But the quality of packaging coming from China is nothing to sneeze at either. So what do we do?!
For now, we recommend keeping in mind that the ecosystem of packaging in China is not stable and not forever. Check out other vendors and ask where they source from. 90% will say China, but some glass and plastic packaging is made in the US (very limited) while glass bottles can often come from Italy as well. Expect prices to be 2-4x.
Total for Step 3: TBD
Timeline for Step 3: TBD - It’s going to be a journey, while we wait for the organic ecosystem to re-populate.
Step 4: Extricating Your Manufacturing From China
Again, it’s going to be tough, and initial costs are high.
On the bright side, when it comes to price hikes, everyone’s doing it ~
Inflation is extremely high right now, and consumers expect prices to rise. If you’re going to do it, you might as well do it once, and give a damn good reason, like: Moving manufacturing state-side! People can definitely get behind that.
Inflation is extremely high right now, and consumers expect prices to rise. If you’re going to do it, you might as well do it once, and give a damn good reason, like: Moving manufacturing state-side! People can definitely get behind that.
We love a good USA moment.
As for finding a manufacturer, it will be tough. MOQs and MODs range all across the board in the US, unlike China. We have a few blogs on the topic, and an entire page on contract manufacturing here.
Our general MOQ is low for the industry - 2500 pcs - but we drop it 60% lower if you do a partial tech transfer (Step 1, Step 2 or both from above) with us. So we could be a great option for low MOQ contract manufacturing your color or skincare product.
In the end, you will need to find a lab that you get along with at a core level - that is, one that you have similar values to. So ask yourself, what’s most important to you: ethics, price, MOQ, diversity, transparency, communication - what is it?
In the end, you will need to find a lab that you get along with at a core level - that is, one that you have similar values to. So ask yourself, what’s most important to you: ethics, price, MOQ, diversity, transparency, communication - what is it?
Whatever your 2-3 core values are, find them, and then use that to guide your search.
Total for Step 4: 2 - 5x higher MOQs (potentially)
Timeline for Step 4: 3-4 months for manufacturing
Conclusion: Moving out of China
If we tally it all up, this is what we get:
Total Cost: $0 - $6500 + 2-5x higher MOQs
Total Timeline: 3 - 12 months
The breakup with China is going to be messy for the entire world.
If we would’ve listened to Wu Tang Clan Financial and diversified our assets, we wouldn’t be in this situation right now, but hey - none of us were running the world when these decisions were being made in the 50s, 60s, 70s, 80s and even 90s.
Today’s consumers are more eco-conscious and ethical than ever before. It’s time for all of us to put our money where are mouths are and plan the move out of China.
If you want to discuss your exit, please contact us or schedule a consultation today.
