In times of COVID-19, US-based packaging companies come out the winners

Over the last three months, COVID-19 has gone from a mysterious infection located in the remote city of Wuhan to the global threat spreading like wildfire and causing international panic, the likes of which we have never seen.

Northern Italy has quarantined 60 million people, German Chancellor, Angela Merkel, stressed that 70% of the country’s population could be infected, the U.S. has declared a state of emergency and the Prime Minister of the UK, Boris Johnson, announced: “many more families are going to lose their loved ones before their time.” Indeed, this virus has drastically changed our way of life as the number of cases creeps towards 200,000.

While the virus itself has a fatality rate of 3.4%, which is exponentially lower than most headline-making outbreaks, its ability to spread rapidly has instilled fear across the board and wreaked havoc on global supply chains as the shadow of a major economic collapse looms upon us.

Factories in China are operating far below capacity, if at all, with most manufacturers having closed their operations. According to a Harvard Business School Professor Sunil Kumar recently described the “nightmare Chinese manufacturers are facing today,” explaining that between workers having significant difficulties making it to their factories due to the draconian travel restrictions and the risk of spreading the virus in such close quarters, managers are not willing to keep their factories going. 

But this virus is not only devastating to the Chinese economy. Production and delivery of products have been affected in all parts of the world, a stark reminder of the reliance we all have on China’s output. From a backlog of lobsters stuck along the western Australian coast to a New Jersey boutique struggling to fill its wedding dress orders, all industries in all corners are feeling the strain.

However, like all economic shake-ups, there is a small percentage of industries that take the slack for the massive decline, turning a challenging situation into a profit. Specific industries always flourish in difficult times- wars have their war babies (uniform manufacturers and weapon industries), recessions have their robust offspring (discount retailers and SIN industries), and this coronavirus is no different, giving particular industries a noticeable boost.

In this case, the biggest ‘winners’ to come out of the coronavirus epidemic is glove and mask manufacturers. Analysts have reported seeing the rubber glove stock bouncing off and one mask company which typically produces around 170 million masks a year, reported orders for one week of over a staggering half a billion.

But another, less obvious industry which has turned out a profit since the epidemic began is USA-based packaging manufacturers.

All products, whether manufactured in China or not, require high-quality packaging for their distribution. From the food and beverage industry, your everyday household items, to chemicals used in labs and hospitals, each object requires specific packaging that enables safe containment and delivery. The packaging is arguably the most widely used product, yet most manufacturing companies of this vital commodity are located in cost-effective places like China and South Korea.

While the demand for packaging worldwide has not slowed down, Chinese production is at a standstill, forcing U.S. companies to bring their packaging sourcing back to the United States. This has given the handful of local packaging manufacturers a time to shine.

Jack Grover, who owns a flexible packaging company Grove Bags was open about the positive growth his business has seen over the last few months stating, “Our organization has been fortunate in the way that all our packaging is produced in the United States, so we have actually seen an influx in our flexible packaging business from companies that were previously outsourcing their bags.”

In fact, business is so good for domestic packaging companies in the United States, that many of these businesses are struggling to keep up with the surging demands in their industry.

Grover continued to explain his current situation claiming, “Our operation is up to running 3 shifts a day, 7 days a week and we are still, unfortunately, having to turn work away because we are over capacity on our packaging side of the business, which is certainly due to the coronavirus.”

Another company that has upped its game to satisfy ever-increasing demands is FlexAttack. A business owned by family-man Ty Bonnar. This International and domestic bulk liquid transport and storage company has always been proud of its product that is one hundred percent the U.S. made. In the past, FlexAttack provided services to customers, including Fortune 500 companies, small startups, the United States Government, and Militaries around the world.

Although they have maintained a stable customer base due to their high-quality products, they have often lost customers to cheaper, Chinese-manufactured bulk packaging companies. Over the past few months, the tables have turned for the U.S. based companies who do their manufacturing locally, and Flexattack’s sales have increased significantly.

Considering the overwhelming demand, every single domestic packaging manufacturer should be greatly profiting during this time. It is a golden parachute for these businesses and the kind of opportunity that is unlikely to come again.

The pioneer of the movement to start manufacturing locally is a company called Environmental Packaging Technologies (EPT), a flexible packaging company that decided to keep all stages of product development in the U.S. when they were established. Founded in Texas in 2007 by Tatiana Golovina, a Russian-born entrepreneur, she stayed committed to keeping production in-house despite many questioning this decision and had years of industry success.

But where is EPT now, and why aren’t they the biggest winners of the packaging boom?

Although they were the forerunners of the U.S. based industry, EPT missed out on their chance to shine due to years of mismanagement and lost legal battles of the founder and president, Tatiana Golovina.

Golovina has been faced with multiple lawsuits over time. Investors, collaborators, and patent experts have been in court with her for years, over breach of patent rights, breach of contract, patent infringement, and fraud. Golovina was eventually found guilty of fraud and fiduciary duties after spending more time in the courtroom than closing business deals.

EPT then found itself delisted from SEC list due to concerns over manipulative trading activities and a lack of transparency. Throughout these turbulent years, Golovina’s focus and energy shifted from moving her company forward to winning her legal battles, a move that substantially weakened the company over time.

After attempting to contact EPT regarding their status and profitability during this boom, we found their website removed and no contact information available. It seems the company is barely operating during what could be their most valuable time.

The overall success of local bulk manufacturers, presented by these packaging companies, might restore the focus on national manufacturing and decrease the dependency on China. While stocks crash and the global economy takes a hit, companies like Flexattack and Groove Bags have more business than they know how to handle and are bringing more customers to the U.S.

Though this will gel well with Trump’s “Make America Great Again” ideology, it is easier said than done. Considering China’s extraordinary economic surge over the past 40 years, its race to becoming the world’s second-biggest economy, and its annualized growth of 7%, the coronavirus may end up being but a hiccup in China’s rise.

However, at the moment It is clear that those companies that have shifted their manufacturing out of China are some of the biggest winners to come out of these challenging times. U.S. bulk packaging companies who have maintained their reputations and kept production close to home are now benefitting from the kind of growth that will carry them through for years.

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