Sunscreen-maker Edgewell looks to lock in Chinese chemicals supply ahead of Trump tariff hikes (updated)

Edgewell Personal Care

08/11/2024 02:15

(Adds details on contracts in paragraph 1 and COO comment in
paragraphs 8-10)

        * 
      Maker of Banana Boat, Hawaiian Tropic has a 'China
dependency'
for sunscreen chemicals
    

        * 
      Edgewell also plans to cut costs if tariffs increase 
    

        * 
      Contracts would limit impact of tariffs for two to three
years
    

  
    By Jessica DiNapoli
       NEW YORK, Nov 7 (Reuters) - U.S. sunscreen-maker
Edgewell Personal Care  EPC.N  will look to reach new two- to
three-year contracts for Chinese chemicals to help control costs
as the company anticipates tariff hikes when President-elect
Donald Trump takes office.
Connecticut-based Edgewell, along with its competitors, has a
"China dependency" on the chemicals for its sunscreens because
there is no steady, alternate supply, Chief Operating Officer
Dan Sullivan told Reuters on Thursday.  
    Procurement teams regularly look to reach contracts locking
in raw material prices, and those agreements would seek to limit
Edgewell's cost increases if Trump imposes higher tariffs on the
chemicals and other goods from China as he promised during the
election campaign.
    The company's sunscreen brands include Banana Boat and
Hawaiian Tropic, sold at retailers like Walmart  WMT.N  and
Target  TGT.N . Rival sunscreens include Kenvue's  KVUE.N 
Neutrogena.
Trump has pledged to put a 60% tariff on goods from China,
resurrecting policies from his last term. There is already a 25%
tariff on the chemicals for sunscreen, Sullivan said without
specifying the chemicals. 
If a tariff is "going to go from 25% to 60%, that’s meaningful,"
he said. Given the absence of alternative sources for the
chemicals, "this is not like buying pulp or aluminum; this is a
highly engineered chemical," Sullivan said.
    The situation requires Edgewell "to be super creative and
thoughtful" about securing supply and its teams are "working on
it," he said. 
     When the U.S. imposes tariffs, U.S. businesses directly pay
the taxes to the U.S. government on their purchases from abroad,
according to the Tax Foundation. The costs of the levies can be
passed onto consumers and contribute to inflation.
  
     Asked whether new tariffs might prompt Edgewell to raise
sunscreen prices, the COO said it was too early to say. To
offset prior tariffs, Edgewell increased its sunscreen prices
for two summer seasons by a percentage in the mid-single digits,
Sullivan said. 
  
     "You have to be thoughtful around the state of the consumer
and the caution we see right now with the consumer," he said.
  
     U.S. consumers have pulled back on spending due to steep
inflation in recent years. An 8-ounce bottle of Banana Boat SPF
50 sunscreen on Walmart.com costs $8.97.
  
    The consumer-products maker also cut costs in the face of
earlier tariffs, a strategy Sullivan said it would lean on again
if Trump's new tariffs come to pass. 
  
     The pace of price increases for sunscreen chemicals from
suppliers has slowed, and Edgewell expects low-single digit
rises in costs, excluding the impact of tariffs, down from
around 30% during the COVID-19 pandemic, he said. 
  
In Trump's first presidency, Edgewell received an exemption from
tariffs on steel used in its razor blades, Reuters reported at
the time.

(Reporting by Jessica DiNapoli in New York; Editing by
Marguerita Choy and Cynthia Osterman)
((mailto:Jessica.DiNapoli@thomsonreuters.com; 845-591-4428;
Reuters Messaging: Twitter: @jessicadinapoli))