By Jessica DiNapoli
NEW YORK (Reuters) -U.S. sunscreen-maker Edgewell Personal Care (NYSE:EPC) 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 (NYSE:WMT) and Target (NYSE:TGT). Rival sunscreens include Kenvue (NYSE:KVUE)’s 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.