Twump and de gweat China hunt: Will Energizer’s pink bunny be caught in the cross-hairs?

A brief examination of recent trends in American trade policy through the lens of a domestic consumable battery manufacturer

In the world of corporate mascots, few are as emblematic as the furry pink rabbit wearing sunglasses and sandals and beating a marching band drum. While the Energizer Bunny may never tire, will Energizer Holdings’ (EH) prospects remain as resilient in the face of escalating rivalries between China and the USA

Energizer Holdings is one of the world’s largest manufacturers of household consumer batteries with revenues of $1.6Bn in 2016 and a market cap of $2.5Bn [1]. Energizer is headquartered in St. Louis, Missouri and operates six manufacturing facilities in the United States, two in China, and one each in Singapore and Indonesia respectively [2]. Facing declines in industry demand for consumer batteries and strong price competition from lower cost carbon-zinc no-name brand substitutes, Energizer has sought to differentiate itself with the “Energizer Ultimate Lithium®, the world’s longest-lasting AA and AAA battery” [3]. These lithium-ion batteries (LIB) command a 16% price premium over Energizer’s traditional alkaline based battery offering [4]. LIB anodes contain graphite and cathodes contain cobalt. The chemical properties of these materials directly contribute to the superior performance of LIBs and cannot be easily substituted.

Global cobalt and natural graphite mining is highly concentrated. The Democratic Republic of Congo (DRC) produces 50% of cobalt and China produces 65% percentage of natural graphite [5]. The linkage of LIB manufacture to the relative instability of the DRCs tumultuous political environment is no doubt a considerable source of risk to EH’s supply chain but beyond the scope of this analysis. China currently provides 34% percent [6] of all natural graphite imports into the U.S. and is therefore assumed to be the critical source of natural graphite for EH’s LIB manufacturing operations in the United States. Pursuant to the most recent United States International Trade Commission tariff schedule, graphite products may be imported tariff free from WTO member nations and is subject to a 40% tariff otherwise [7]. Predicting the likely impact of the Trump administration’s escalation of acerbic anti-Chinese rhetoric is therefore fundamental to EH appropriately understanding and mitigating its supply chain risks.

In 2001, after a period of protracted negotiations, China was admitted to the World Trade Organization (WTO) [8] Favorable reciprocal tariff schedules assured, Chinese exports to the U.S. began to rise rapidly. The country’s share of global US manufacturing imports doubled to 23.1% in 2011. The sharp increase in the import of Chinese manufactured goods has been estimated to have cost U.S. manufacturing half a million jobs in directly impacted industries, and a further 1.5 million jobs when considering upstream and aggregate demand effects [9]. Whether the savings gains from outsourcing companies have been sufficient to absorb this labour market shock remains an open topic of debate within the economics community. A strong argument can, however, be made that this adjustment has disproportionately benefitted the higher skilled portion of the workforce and disadvantaged the American manufacturing worker [10].
While the economists debate Keynesian multipliers and labour market elasticity, the American public has made up its mind. In a 2011 poll “61% of Americans said that China’s recent economic expansion had been bad for America.” [11] These political sentiments have translated directly into anti-China rhetoric from the administration. Peter Navarro, currently serving as the Assistant to the President, Director of Trade and Industrial Policy, and the Director of the White House National Trade Council produced the popular documentary “Death By China: How America Lost Its Manufacturing Base” and wrote the book titled “The Coming China Wars: Where They will be Fought, How They can be Won”. Robert Lighthizer, the US trade representative has long been a vocal critic of the WTO [12]. The argument of the Trump administration rests primary on the assertion that China has applied implicit subsidies to local manufacturers through the provision of subsidized capital, currency manipulation, and overly lax environmental standards.

Thus far, the US administration have acted on their rhetoric through pursuing unilateral investigations into specific instances of what it perceives as particularly egregious fair-trade violations. This will not come to include natural graphite given the lack of a domestic producer. The current strategy of the administration, therefore, poses limited risk to EH. The risk however, remains that the current strategy will escalate to a broader ‘trade war’ with accompanying across the board tariffs. EH has already established manufacturing facilities in China which should serve to sufficiently mitigate what small risk exists.

Given the raised prospects of targeted American protectionism of domestic manufacturing with respect to Chinese competition, and the continued headwinds in consumer batteries, should EH consider investing in local manufacturing of industrial grade lithium ion batteries?

Works Cited
[1] Deutsche Bank Markets Research, “Growing like Rabbits,” February 01, 2017.
[2] Energizer Holdings, 2016 Annual Report, p. 20
[3] Energizer Holdings, 2016 Annual Report, p. 5
[4] price comparison. 15 November 2017
[5] Elsa A. Olivetti, Gerbrand Ceder, Gabrielle G. Gaustad, Xinkai Fu, Lithium-Ion Battery Supply Chain Considerations: Analysis of Potential Bottlenecks in Critical Metals, In Joule, Volume 1, Issue 2, 2017, Pages 229-243, ISSN 2542-4351,, accessed November 2017
[6] U.S. Geological Survey, Mineral Commodity Summaries, January 2017
[7] Official Harmonized Tariff Schedule 2017, U.S International Trade Commission
[8] “All change,” The Economist, December 10, 2011,, accessed November 2017
[9] Acemoglu, Daron et al. “Import Competition and the Great US Employment Sag of the 2000s.” Journal of Labor Economics 34.S1 (2016): S141–S198
[11] “All change,” The Economist, December 10, 2011,, accessed November 2017
[12] Donnan, Shannon. “Trump trade tsar warns against China ‘market economy’ status,” The Financial Times, December 10, 2011,, accessed November 2017FT 5f


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7 thoughts on “Twump and de gweat China hunt: Will Energizer’s pink bunny be caught in the cross-hairs?

  1. Thanks for an interesting read! I want to expand on two important aspects along the theme of this article that the company should consider:
    1. EH’s long-term plan of operating in China could outweigh the risks pointed out. I would like to compare EH to Tesla. I admire Tesla not only for their vision, technology and resilience in the commercial Electric Vehicle (EV) market, but also its courage to be the first to seek opportunities to operate in China- that is not an assembly factory, but an actual complete start-to-finish company in Shanghai, China ( What usually comes to mind when discussing global trade with China concerns the cheap labor. In Tesla’s case, Musk is thinking long term: because China is the largest consumer of EV in the world. By setting up a company in China in its free-trade zone, Tesla enables itself to reach deep into the China market and avoid the tariffs that prevent Chinese buyers from purchasing. EH could have taken more risks and thought out of the box of a short-term benefit.
    2. However, EH China might not work though because it is in energy sector. All major energy business (from upstream to downstream) are strictly state owned in China. That means a foreign entity won’t have access to the cheap raw material just because it has a factory (shell) in China. Think about the Fuyao Glass case we talked about in class. Even if the Chinese company builds a factory in the US to take advantage of the (trending) cheap labor cost, the materials are still shipped directly from China! We need to keep in mind that a win-win global trade takes more than just the cost of manufacturing in the short term, the sentiments from the citizens/politicians from both countries, but also the deep root of the business model and the sector and geopolitical situation. China for example, is no longer in a position to take whatever capital from outside. It gets the power to say “No” (think failed attempts of Uber, Google, Amazon, and Facebook in China). Energy and Cyber security are among the top two industries that can’t sustain in China with just the foreign infusion of capital.

  2. Very interesting subject and great write up to read. I agree with Yin Gao’s comments above, and would also like to add that in my opinion, the move to protectionist policies cannot be sustainable in the long term (trade is inevitable), therefore I think EH should seek to maintain a long term focus in its businesses. However, the threats you articulate cannot be ignored, as they are real and significant threats to the business’ goals and objectives in both the short and long term. Therefore I recommend EH adopt a more holistic approach to its business model; which encompasses reaching out for dialogue and agreement with stakeholders on both sides of the Pacific, and also move to reduce its dependence on one market/geopolitical area by broadening its supply chain as much as possible and also negotiating for flexible supply arrangements. focused reassessment of EH’s strength’s, weaknesses, opportunities and threats is due because in this current environment only those businesses that are able to adapt quickly and with minimal disruption will thrive.

  3. Thank you Gladiator – I am entertained! To your point above, given there is currently no US based supplier of graphite, it seems unlikely that the administration would place a large domestic company at significant risk though a trade war with China. That being said, after doing some google searching, it looks like two US-based companies are exploring graphite projects in the United States – Alabama Graphite Corp. and Graphite One Resources ( If either of these companies were to successfully get off the ground, it could give the administration more comfort that US LIB manufacturers have the necessary supply available and that they may pursue fair trade investigations/tariffs on Chinese suppliers, and consumers may push for a US-based supply of graphite given the relatively high pollution levels of Chinese graphite mines. I do not have advanced knowledge of the cost breakdown per battery for Energizer, but if a marginal increase in graphite costs will drive a material decrease in Energizer’s margins, they should look to partner with these providers early to secure supply and manage costs going forward.

  4. While isolationism and investigations into cross-border trade may be a big threat for Energizer, I think these should just serve as a wake-up call for the much broader problems they face with globalization and technology advancement. Sourcing materials and labor from foreign countries are unlikely to be restricted by government since it is so vital to the U.S economy, but Energizer needs to understand how to face the same business risks regardless. As wages rise in foreign countries, and the countries with natural resources (graphite) want to use them domestically, how will Energizer’s margins remain? Ultimately they need to plan for these changes regardless of international trade policy, and likely invest more in delivering products that are not so dependent on limited natural resource supply and the availability of cheaper manufacturing labor.

  5. Interesting take! While I agree that strengthening it’s position in China is a necessary play for EH, and momentum for the graphite industry will further strengthen China’ hold on the material. Graphite has growing uses across the electronics industry (, and many bleeding edge technologies – carbon nanotubes, graphite based semiconductors – are dependent on the material. Given the proximity of electronics design and manufacturing to China’s material production base, expect graphite consumption to grow and become increasingly important to local industry and groundbreaking technologies. In response to this I would push EH to further expand operations in China, and diversify it’s customer base outside of the US.

  6. I agree with you that it is unlikely that EH will lose its graphite suppliers on account of protectionist policies because there are currently no domestic alternatives who can supply the same scale. Two thoughts on this:

    1. Would it be more advantageous for EH to integrate vertically and acquire one of the domestic graphic producers Matt (@mattasperheim) mentions? Surely, batteries are not the only consumer good that relies on graphite. If EH can produce graphite in-house, it may very well become a distributor of graphite itself to other companies. This change in business model would make EH also a B2B company. Is this an opportunity to grow?

    2. You have explored protectionism from the US perspective. What if the DRC and China were to implement protectionist policies? I believe EH’s supply chain would be complicated just the same. Given tensions with the US and China, it is possible that China may restrict or cap exports to the US on its own accord. This is also threat.

  7. Great read. I do think companies like EH should invest locally as the arbitrage opportunity of outsourcing such operations to China has been waning recently given higher labor costs in China, variable shipping costs, and more variability in trade policy. To address Joe’s comment on the labor front, I believe automation can help provide the push to move local. The benefit of automation is that at very low rates in the markets, companies can borrow cheap capital to fuel growth locally through capital versus labor. Automation can substitute away large labor expenses for cheaper capital depreciation and interest expense and can result in better yields. Moreover, it can result in lower defect rate upfront, as there wouldn’t be the same learning curve for low-skilled labor. Automation can provide a powerful antidote to the current outsourcing model.

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