Tariffs, offshoring and reshoring

By: Peter W. Washington :: February 24, 2019

This is Part 2 of a 3 part series on the advent of Manufacturing 5.0 focusing on Tariffs, Off Shoring, and Reshoring. The interview is with David Hawkins, CFO of El Dorado Packaging, and Peter Washington, Director, CapX Partners.

PW. Like many manufacturers, you’ve experienced disruptions due to the recent tariff escalations. How are you managing these challenges?

DH. We package products for use primarily in the food and agriculture industries, which are two of the industries affected by the higher tariffs. We import some paper from Europe, but fortunately, that has not been impacted by tariffs. Our customers have been impacted more with the reduction in export of agricultural products to China. So, we have experienced some impact in sales volume to those customers.

On the positive side, one of our customers imports certain packaging products manufactured in Asia that are being hit by higher import tariffs, which has raised their imported costs significantly. We shut down a related product line two years ago, because we couldn’t compete with the Asian manufacturers on price. With the higher costs from Asia due to tariffs and the long lead times from Asia, this customer approached us to consider becoming a domestic supplier for these products. So there may be some benefit to domestic suppliers from these changes.

PW. As an equipment finance company, we certainly look at assessing risk and opportunities. How has El Dorado Packaging been able to assess the feasibility of restarting a product line or going after new markets?

DH. What we’re finding is that we need to think not only about possibly bringing a product line back but also how to adapt our products to a fast-changing market place. Our customers that are selling commodity-related products are looking for improvements in packaging to differentiate themselves. Packaging that supported a national brand across the country, may now be split between private labels that are more localized. Market growth for certain types of food products, such as sugar and wheat flour, is being affected by alternatives that create competing emerging markets. For us, this results in smaller production runs, more setups and greater diversity in SKU’s. The equipment we installed with the support of our CapX partnership will keep us competitive in this more diverse marketplace.  

El Dorado Packaging is a leader in multiwall and consumer bag packaging products and services. We create customized packaging solutions for seed, food, animal health products, bulk packaging and more. The company provides extensive design, manufacturing and printing expertise from our three locations in Arkansas, Minnesota and Nebraska.

Click here to read Part 3 of this series.

Peter W. Washington, Director

Peter joined CapX Partners in June 2009 and is responsible for managing transaction underwriting and portfolio management. Prior to CapX, he served in the commercial lending and institutional sales divisions at the Northern Trust Company. Before working at Northern Trust, Peter served as a High Grade/High Yield analyst for Banc of America Securities in New York, NY. Peter graduated magna cum laude from Florida A...