From Martha Stewart's American Made event to
Entrepreneur magazine's recent spread on the theme, the obsession with the Made in America label has reached a fever pitch. But what do you do when your product idea can't be made in the U.S.?
That's the question Simon Ford and Malte Barnekow found themselves
pondering in 2009, when they were canvassing different locales to house
their spirits brand, The 86 Company. "We actually looked to distillers
and suppliers in several countries to partner with on making an old
school Carta Blanca rum, like the ones that came from Cuba during
Prohibition, There were distillers that make excellent rum and were
willing to work with us, but didn't have the knowledge and capabilities
for the style we wanted to create."
And while the two New York City-based founders considered
facilities in the U.S., which accounts for most of the company's sales,
they noted a lack of manufacturing capabilities as a core reason why
America was out. "Local manufacturing in the U.S. is simply not
competitive," says Barnekow. "In my experience, it's twice the price for
half the quality, across the board."
In recent years, the U.S. has certainly seen a resurgence in manufacturing, with companies like
American Giant and
Black & Denim
making a commitment to produce products stateside. And various
marketplaces and services such as Etsy and Maker's Row have sprouted to
support them
Still, some startup founders, who would normally choose to set up shop
or source ingredients in the U.S., are either finding the process
prohibitively expensive or impossible due to a lack of resources.
Runa is a Brooklyn-based beverage company (with a nonprofit branch)
that makes tea and an energy drinks. Yet the main ingredient for the
company's tea is called guayusa, a leaf from trees that grow in the
Amazon. To harvest the leaf, which required making connections with
farmers in Ecuador, was a challenge in itself. "We had to figure out if
and how [Ecuadorian] communities wanted to work with us, and we had to
get a product regulated and accepted in the U.S. that hadn’t been sold
there before," says Dan MacCombie, Runa's co-founder.
MacCombie and Runa co-founder Tyler Gage spent the first six months
of the company's life traveling around South America, scouting out
places to source their guayusa. The trek also required "convincing
people we were legit, had good intentions and we weren’t a bunch of
North Americans coming to screw them out of their money and their land,
which unfortunately, is something they’ve experienced in the past," adds
MacCombie.
Despite its benefits, having a global operation, comes with many headaches. Just ask Jamal Motlagh of Acustom, a New York-based custom clothing company that uses digital technologies to create bespoke menswear.
"Legal issues such as tariffs and import duties have been problematic,"
says Motlagh, whose company uses fabric sourced everywhere from North
Carolina to Turkey but operates mainly out of a factory in China.
"Import has been the biggest issue into China. The problem there is that
you need a ground logistics team that you can trust. Fabric production
and supply is still an old-school game. There aren’t good websites or
ways to get a hold of them or their offices globally."
The 86 Company's
Barnekow adds that working with distillers from around the world comes
with its own set of challenges. "Our caps are from England, our bottles
from China, our liquids from Canada, England, Mexico and Panama," he
says. "So, yes, we deal with the tedium of time differences, currency
fluctuations, regulation, complex tax constructs and a shipping industry
that has very little time for small entrepreneurs like ourselves. It
makes for a very nice story from a marketing and product perspective,
but it does make our day-today lives extremely difficult."
To minimize this difficulty here are three tips that have helped these founders make their international operations work:
Right size your expectations.
"In my experience, a general rule is work with suppliers that are the
same size as you," says Barnekow. "Large suppliers are designed to serve
large customers. If you are a small company, look for small suppliers.
You will speak the same language and have an understanding for each
other’s incentives."
Focus on the positive.
"The moment where we think everything would be easier [if we were based]
in the U.S. happens every day, but it wouldn’t make me want to run this
company," says MacCombie from Runa. "We connect the farmers to the land
to the supply chain to the market… I know people starting tea companies
now -- good people, more power to them -- but I don’t feel that’s what I
want to contribute to the world. The complexity of working with
farmers, supporting ecosystems -- that’s what keeps it interesting. I
spend more of my time selling tea, but it’s always in the back of my
head that I’m doing something that really aligns directly with what I
believe in."
Make the most of your situation.Working directly with the people in the factories as well as the
sourcing companies has been very interesting, and I use the time
difference to my advantage," says Jamal from Acustom. "I send questions
during my work day and later in the night, I’ll get an answer back… So
when I wake up, they’ve had a full day to work on whatever the question
or problem was."
