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Posted August 12, 2021

 

Amid all the bluster about competitive conflict with China and noise about reshuffling global supply chains, one Atlanta consumer products company is doubling down on the country, both as a market and a sourcing hub for its worldwide expansion.

Kids2, a nearly 50-year-old maker of toys and children’s products based in Atlanta, last year opened a new 75,000-square-foot factory and four-story office building in the city of Jiujiang employing more than 1,000 people. This March, it unveiled a swanky new design center and office in Shanghai, complementing offices in Hong Kong and a few other locations.

The Buckhead company has been sourcing from China since the early 1990s, when CEO Ryan Gunnigle started traveling there to forge sourcing partnerships for the company, which he eventually acquired from his parents. China quickly became the central hub in a network of distribution centers the company gradually opened in new markets as it grew.

Now, Kids II products like Baby Einstein educational gear, Bright Starts toys, walkers and activity centers, and Ingenuity swings and high chairs are made in China but sent to logistics hubs in Europe, Japan and the United States to start their sales journeys into the 90 countries where Kids2 products are sold.

That distribution model remained largely untested until the China-U.S. trade war began in 2017, when a tit-for-tat tariff spat gave many the impression that the winds had permanently shifted in the bilateral relationship. Even those that weren’t planning to leave China began looking at a “China plus one” strategy to diversify their risk portfolio. The pandemic’s emergence in China in 2020 added fuel to the fire, and many companies began fleeing to places like India or Vietnam.

Mr. Gunnigle faced those same pressures at the height of the uncertainty in February 2020, when Chinese New Year was interrupted by a strange new virus.

“We certainly paused and have a few conversations, and I have flashbacks from my board going, ‘What are we doing?’” Mr. Gunnigle told Global Atlanta, but over three decades he had learned to ride out political crises and look intently at fundamentals. “It was our belief that there are not a lot of other infrastructures in other countries to be able to do what we do.”

Those that chased the trends into other markets? Some ended up chastened by inflated asset prices and ended up returning to China, especially in the garment business, Mr. Gunnigle said.

Another factor in the decision was that, in Kids2’s view, China was not only the best manufacturing location, but also a growing market, a fact that reduced the risk of investing there. While its products may face a higher tax coming into the U.S., having a Chinese factory would mean tariff-free access to the domestic Chinese market.

“When you really step back and think about it from a 30,000-foot level, there was really not a lot of benefit right now to moving,” Mr. Gunnigle said in an interview. “We have fantastic employees there. We’ve got a wonderful global team, and manufacturing and selling into that market is a big part of our strategy, so from that standpoint, the factory was not a risk.”


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