P&G Says 17,600 Products Could Be Affected By Coronavirus In China, Highlighting Supply Chain Risk

Consumer goods giant P&G, joining a chorus of companies including Apple, Adidas and Starbucks, warned Thursday that its sales and profit in China, its second-largest market, would be hurt by the coronavirus outbreak there. But the risk goes beyond that.

“We access 387 suppliers in China that ship to us globally more than 9,000 different materials, impacting approximately 17,600 different finished product items,” Jon Moeller, Procter & Gamble’s chief operating officer and chief financial officer, said Thursday at a conference in New York. “Each of these suppliers faces their own challenges in resuming operations.”

With the U.S. depending heavily on China—“the world’s factory”—for imported categories from shoes to mobile phones, retailers and brands are on their toes, waiting to see how the outbreak could end up affecting what consumers see on U.S. store shelves.

Apple this week warned that the worldwide iPhone supply would be “temporarily constrained,” with its factories in China “ramping up more slowly” than it had expected. Amazon, for its part, has emailed brands about supplies for its summer-extravaganza Prime Day, the New York Times reported, adding that Amazon is ordering more often and placing bigger orders of Chinese-made products that had already been shipped to the U.S.

Walmart said this week that it doesn’t yet see any “sourcing impact” but cautioned that the situation is too “fluid” to make any specific forecast. 

Cole Haan, in its recent IPO filing, warned that the outbreak might hurt its sourcing and manufacturing operations. While less than 15% of its shoes and handbags are made in China, Cole Haan said its manufacturers in other countries source materials from there. 

China represented one-fifth of overall U.S. imports in 2018, according to the U.S. Trade Representative’s Office. Furniture, toys, sports equipment and plastics rank among the top imported categories, according to the USTR.

The fashion industry is also watching the situation closely. According to the Footwear Distributors and Retailers of America, 99% of all shoes sold in the U.S. are imported, and 70% of those imports come from China. 

About two-thirds of global shoe exports and more than a third of clothing come from China, the world’s largest exporter of shoes and apparel, according to a Coresight Research report. The report also found that the country supplies about a quarter of the world’s smartphone shipments. 

“If factories can’t attain full capacity by mid-April, we expect the ripple effect will lead to supply chain breakdowns around the world,” the report says. “We expect brand owners and retailers to accelerate supply chain diversification (to other countries) in the coming two to three years.”

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