4 GLOBAL TRADE JUNE-JULY 2016 CONTENTS 64 ON THE COVER It s interesting that in places such as China, they absolutely prefer the U.S. certification of green over the Chinese one. It s more of a selling point there. You have Chinese customers who have to wear masks just to go outside because the pollution levels are so horrible and they want to be able to at least control the quality of their environment in their home. They see that the United States EPA has said this is the greenest product in its class and they say, We ll take that. - Kelly Vlahakis-Hanks, president and CEO, Earth Friendly Products FEATURES 68 2nd Annual SITE SELECTION PLANNING GUIDE, PT. 2 State-by-state guide to the best of America s economic development. 13 THOUGHT LEADERS Who have changed the logistics landscape for the better. 32 38 AMERICA S LEADING 3PLS FOR TECHNOLOGY 22 third-party logistics providers with best-inclass software to streamline your supply chain. COVER IMAGE BY JOHN GILHOOLEY
ALL IN THE FAMILY Kelly Vlahakis-Hanks is the second-generation owner of Earth Friendly Products, having taken up the roles of president and CEO in 2014 following her father s passing. 64 JUNE-JULY 2016 PHOTOS: JOHN GILHOOLEY
CLEANING UP INTERNATIONALLY HOW EARTH FRIENDLY PRODUCTS IS MAKING THE WORLD GREENER ONE EXPORT MARKET AT A TIME BY STEVE LOWERY reece was really instructive for us, says Kelly Vlahakis- Hanks, president and CEO of Earth Friendly Products, regarding a rare exporting misstep. In other countries, we have a lot of intelligence on the ground going in, but in Greece, frankly, I think we felt overly confident based on our own history and experience. Back in 2013, Vlahakis-Hanks had added the Mediterranean nation to its growing list of export markets for the company s ECOS brand of natural and biodegradable household cleaning products, though she and her management team quickly realized something wasn t right. Sales were weak and showed no sign of improving. But this shouldn t be happening after all, Greece was home. Van Vlahakis, a Greek immigrant/ entrepreneur and Kelly s father, founded the company on a less-thanshoestring budget in 1967. He spent parts of his first years in America living in homeless shelters a company origin story so amazing it was turned into a movie, A Green Story, which was released in 2012 (Vlahakis-Hanks was played by Shannon Elizabeth). Born in Crete in 1935, Vlahakis Sr. emigrated to the U.S. in 1953 when just 18 years old, having endured a horrific childhood in Nazi-occupied territory. His father died in a concentration camp. After settling in Chicago, he supported himself with odd jobs at bars and restaurants while attending Roosevelt University, where he earned a degree in chemistry in 1958 and put it to work in the cleaning products industry. But his first jobs exposed him to harsh chemicals; he suffered from severe headaches and noticed his colleagues were prone to rashes and other irritations. It made him think about what was being put in American homes at a most personal level. So he decided to search for a way to produce an effective and affordable cleaner that posed no dangers, and recalled that his mother would regularly employ such natural ingredients as olive oil and vinegar. He began experimenting and eventually produced his first green products, way before that term was in any kind of use. Returning to Greece decades later to export these great cleaning products Vlahakis had created was a victory of sorts a measure of the incredible strides he had made since leaving the country with $22 in his pocket. Beyond the undeniable emotion of the event there was a comfort level of knowledge and familiarity with a new market that really wasn t new; as Vlahakis-Hanks put it: We knew Greece. Except, maybe they didn t. Sales were flat. What Earth Friendly quickly learned was that the anemic launch had to do with their products labeling. Going into Greece, Vlahakis-Hanks knew that the great majority of Greeks spoke English and she was assured by people in the country that this fact meant their products could simply use the existing English labels. For a company with a history of needing to squeeze value out of every dollar, not having to print separate labels for the Greek market represented a significant cost savings. After her due diligence, however, Vlahakis-Hanks found that while people may speak a particular language, they were much more likely to buy a product whose ingredients were labeled in the native language they could read and understand comfortably and confidently. I think people assume that English is the international language and therefore will be accepted, she says, but people want their native tongue especially when reading through the ingredients which are very important to them. They want to be able to clearly and easily understand the product that they re buying for their family. Once we found out that the labels were the problem, we immediately translated them to Greek and sales immediately took off. We re now the number one green brand in the Greek marketplace. But there was a bigger lesson, Vlahakis-Hanks reflects. We quickly realized you need someone on the ground wherever you are so that you re really tied in to what s going on there. That s quite a footprint: ECOS products are sold in 62 countries throughout North America, Europe, Asia, the Middle East and Africa, with some 350 employees worldwide. In building this global presence, Kelly admits there was a time when Earth Friendly would enter into relationships with distributors met at trade shows, based almost solely on the customer s JUNE-JULY 2016 65
TRADE WAR OF WORDS A rare misstep in Earth Friendly s export program happened when the company assumed it could ship its cleaning products to Greece without translating the labels. desire to sell the brand. The process to partner with Earth Friendly is now much more involved. Vetting potential partners is a must, she cautions, but if you want to make the right partnership, you have to take a lot of steps beyond that. Take what we did in China, she says. We engaged a firm called Artia Strategies; they really spent a lot of time on the ground in China and developed a wonderful strategy for us there. When there were candidates, my husband Eric went over there and headed up the effort for a few months. He met with distributors, several times in some cases, and then after he had done all the groundwork, when it was down to the final three, I went over myself and met with them. Then we invited all three to come back here and meet with us here. So you can see, it s not a quick and easy process, but it s really well worth it. Competing in the rapidly growing green market, the company has quadrupled sales over the past seven years and continues to grow. Exports make up about 15 percent of total sales, a number Mike Palmatier, Earth Friendly s chief strategy and financial officer, figures to keep growing. We would like to see that expand by double-digits going forward, he says. Something like 16 to 17 percent. To facilitate the growth, Vlahakis- Hanks just opened Earth Friendly s new headquarters in Cypress, California a 125,000-square-foot facility which increased manufacturing space by 30 percent from its previous operations in nearby Garden Grove. There are four other manufacturing sites in the U.S. and an international sales office in Athens, Greece and the company is planning for additional brick and mortar expansion outside the country. This includes a manufacturing plant in Europe and a sales office to handle its rapidly growing popularity in Asia, helped significantly by a partnership with Disney in China which figures to become even more profitable when Disneyland Shanghai opens. The company s international success may surprise some when considering the stringent regulations they must adhere to in the U.S. and the varying, market-to-market criteria for what qualifies as a green brand. But the fact is Van Vlahakis set up some stringent standards of his own when starting his company all those years ago; he decreed that any new product would have to pass the threefold test of being effective, safe for both people and the Earth, and affordable. (Earth Friendly products regularly sell for the same or less than similar ones made by the likes of Clorox Co. and Procter & Gamble.) Vlahakis-Hanks, who took over the business in 2014 after her father s passing, says that Earth Friendly has always believed all three goals can be accomplished without suffering as a business. She s quick to point out that raising her minimum wage to $17 on Earth Day two years ago did not raise the price of any her products a single cent though it did reduce employee turnover and subsequent training costs. A Washington state facility opened in 2010 has had zero voluntary turnover. You can do the right thing for the environment, you can do the right thing for your people and you can do 66 JUNE-JULY 2016
the right thing for your business, she says. I think it s really changing the conversation, because I don t think those things are mutually exclusive. When we make decisions they have a great return on investment, they are a terrific return for the business. Unlike a lot of companies, Earth Friendly doesn t have a national purchasing program, though Vlahakis- Hanks does employ a national purchasing director based in California who oversees things, preferring to procure bottles, boxes and available ingredients as close as possible to the manufacturing plants where they are needed. She points out that sourcing materials from providers close to one of Earth Friendly s five manufacturing sites helps her bottom line by keeping trucking costs low because instead of bringing trucks from across the country, I m bringing trucks from across the street. That s not always possible when it comes to more exotic things like coconut oil, but anything I can get locally, I do, she says. It helps my bottom line, taking our shipping costs down. Sometimes I joke that my suppliers are so local I could get their deliveries using a forklift. The company also chose manufacturing sites as close as possible to ports that could serve its biggest customers. Its California facility primarily serves China; Washington handles other parts of Asia including Korea; and the company s western Canada and Chicago plants handle Canada s midwest. Canada is Earth Friendly s largest export market, followed by the United Kingdom, which is serviced by the company s New Jersey facility. All of our international customers pay for their own freight and handle all freight logistics either from our dock or from a U.S. port, Palmatier says. Most orders are shipped EXW [Ex Works] from the Earth Friendly Products shipping dock. We are either shipping or processing pickups on a weekly basis. Shipping EXW meaning the seller agrees to make the shipment ready for pick up at its own facility turns out to be a wonderful deal for the seller, of course, at least in regards to cost. The customer/buyer/distributor assumes all responsibility for the cost and risk of moving the product. But given the importance of quality control in the green industry, getting the right distributors has become of the utmost importance to the brand. Also of great importance for the green customers who buy products specifically for the ingredients is, of course, what s inside that product so it s not surprising that Earth Friendly s Greek misadventure wasn t the first time it has had to work through labeling issues. For instance, when dealing with the European Union and South Korea, Earth Friendly was initially told it would have to not only list all of its ingredients, which it had always done, but the exact percentage of each in every one of its products. Now, you can imagine the last thing I want to do is give my exact percentage, Kelly says. I d basically be giving over my information to anyone who wanted to copy my formula. So we negotiated hard with them. We said that we would put in ranges of percentages, we got some push back from them but eventually we were able to negotiate an agreement. Palmatier says labels are so key to Earth Friendly s business that it works with certified translation services to do the initial translation of labels. Once they are in the final stage of review for printing, we send the label to an attorney in that country to ensure we are meeting the local guidelines before we give them the green light to go to print. And then there is the fact that the term green is open to a lot of interpretation. What is green in one country doesn t qualify in another. Earth Friendly employs a dedicated team to keep up with what is required in each country. Helping in this endeavor is that the U.S. Environmental Protection Agency has some of the most stringent regulations and definitions when it comes to green products. While some may think this would prove a hindrance, Vlahakis-Hanks says the EPA s stamp of approval has proved a positive boon in many markets. It s interesting that in places such as China, they absolutely prefer the U.S. certification of green over the Chinese one, she says. It s more of a selling point there. You have Chinese customers who have to wear masks just to go outside because the pollution levels are so horrible and they want to be able to at least control the quality of their environment in their home. They see that the EPA the United States EPA has said this is the greenest product in its class and they say, We ll take that. And it s not just in China. Like so many American manufacturers, Vlahakis-Hanks has found that Made or Certified in the USA carries with it all sorts of sales benefits, so much so that it wasn t long ago that a distributor in Turkey asked if each Earth Friendly label could include the American flag. I was like, Really? she recalls. But when I thought about it, I wasn t surprised. It s so interesting that people really do trust that the U.S. has these wonderful regulations and rules in place so that they can trust the product. In terms of marketing our products, it s been a tremendous addition to our campaigns in a lot of places. And the list of those places figures to be growing in the near future. Vlahakis- Hanks says Brazil appears to be a very promising market to enter, and while the company already has a presence in both Japan and Australia, it would like to expand significantly in each. We really are looking to a lot of emerging markets, doing our groundwork on each as well as expanding our presence in places where we re already selling, she says. We think that we ve been a green leader from the beginning, from the time my dad started the company, and we think we can really build on that. We see ourselves as having a much larger footprint in the future. JUNE-JULY 2016 67