Canadian Cosmetic Cluster Update 05/2020

Canada has been in lockdown for over a month. There have been many changes in the lives of every Canadian individual. We at the Canadian Cosmetic Cluster spent the past month talking to various companies from manufacturing plants to packaging companies and beauty salons. The media often paints a picture that is different from reality. It is much easier for bigger companies like L'oreal to turn around and adapt to situations like COVID-19. Smaller companies are not able to turn around as quickly and produce new products. It is a very difficult situation for many companies across all aspects of the supply chain. Here are important findings that we found like to address. 

1. The Collapse of Supply Chain - Packaging and raw materials are in shortage around the world. Some bigger companies are stockpiling and enabling it impossible for smaller companies to get access to stock. The waitlists are months long. This is impacting many smaller contract manufacturers.

Example #1: A Canadian contract manufacturing company in Toronto with the capacity to make 5 tonnes of liquid product and bottle filling per day. They have been unable to source bottles and caps. They can not take new clients because the pricing for raw material and packaging is changing daily. They can not have the same level of staff to work in factories. 

2. End of Small-Sized Cosmetic Companies - Companies have no funds to make products, source packaging, or materials. I predict start-ups will only succeed for essential items, technology, or complete innovation that can aid essential services. Many individuals have to have a more practical approach to cosmetic products. Many individuals are no longer working and do not have the money to spend on makeup or expensive skincare. There is a big problem with salons they are going to be having a difficult time. This biggest problem isn't the virus it is the effects of social distancing. 

Example # 1: A Salon in Toronto employs 18 individuals. This salon makes roughly $1 000 000 a year in profit before expenses. It will have to decrease its staff to have under new social distancing requirements. It is projected to make no more than a maximum of $600,000 a year under new regulations. It will be bankrupt by the end of 2021. The government is giving $40,000 in aid, $30,000 has to be returned within the year. 

Also, new companies have little opportunity to showcase their products to potential buyers as companies are consumed with COVID-19 tasks and preparations. 

3. Distrust in Organization and Government

The programs that were created to support small businesses are very slow. Fast track programs take up to 3-4 weeks to get approval. Many individuals have lost faith in government or large organizations. All expedited orders are not followed through all the way. There is a lack of organization - it just doesn't exist at all. 

Solutions?

The Canadian Cluster has been doing its best to provide connections for packaging, raw materials, and any inquiries within 24 hours. It has been difficult to see companies struggling. The importance of a strong supply chain is more important than ever and to make strong relations with other countries and to support each other. This is difficult. There is a growing hatred for international companies and international businesses. They blame globalization for the virus. Canada has become fractured. The Canadian Cluster is committed to support the supply chain and provide support to companies who need it. The has been in communication with a few company owners and we plan to lobby the government for more efficient systems of support. 

Let us hope that life will resume somewhat to normal standards shortly and we can continue to grow our industry with innovation and international collaboration.