Year: 2020

By: Chris Reese

As I stated in October the road ahead for consumer fireworks is a bumpy one with many potential potholes. The consumer fireworks industry has always been a unique challenge and the recent port closures in China were unexpected leaving many wholesalers and retailers without product for the New Year season.

Fortunately the New Year season is only a fraction of the demand the industry sees for the 4^th of July. In the Northern states most consumers do not celebrate with fireworks since the climate is so cold. However, depending on the weather, parts of the Southwest and most of Southeast retailers usually see up to 60% of their 4^th of July revenue. While the New Year season is not as big as the 4^th of July it’s still very important for many retailers.

For those that do celebrate the New Year with fireworks, certain products may be difficult to find and once again due to the shortages prices are increasing as the supply dwindles. Recently many wholesalers increased their prices on their remaining inventory 5 to 15%. At first this may not seem like much to the average consumer but this is the 3^rd price increase this year and retailers simply cannot afford to absorb the added cost.

Why did Chinese ports close?

In short the ports are building new facilities for testing hazardous materials. As a result, hundreds of containers that were destined to various wholesalers and retailers for the NY season are loaded and waiting to be shipped. However, with the projected closure to last for several months products won’t make it in time for the NY season. Usually this wouldn’t be a significant blow, but due to record sales this past 4^th, suppliers are extremely low and many are saving what they have left for their own retail operations.

To make matters worse, the longer the ports are closed the greater impact this could have on supply for the 4^th next season. Any further delay would simply be catastrophic for the industry. Fortunately we don’t expect that at this time.

Some good news:

As of this week, the Beihai port opened back up allowing some firework containers to ship out. Unfortunately the port/local government has decided to add another $5,000 on to the already high freight cost due to what the Chinese government calls a “peak season” charge. With most wholesalers usually shipping 20+ containers this is an exorbitant cost retailers and wholesalers are not willing to pay so very little product is expected to land in the US for the remainder of this year.

What products are in short supply?

As always availability will vary considerably from retailer to retailer and region to region. However in general listed below are the top 10 products that will likely be hard to find this New Year season.

Bamboo Sparklers – bamboo sparklers are generally safer and in higher demand then the wire version. Most wholesalers have been sold out since the 4^th.

Bottle Rockets – most retailers will have the generics on hand but the premium versions will be almost impossible to find.

Saturn Missiles – we expect the 300 shot versions will be especially difficult to find.

Small 200 gram aerials – items like garden in the spring, blue stars with reports, various happy’s, color pearls, magician, 100 shot magical barrage are retail staples that you may not see on the shelf this NY season.

Large diameter racks (NOABS) – Often referred to as nine on a board these titans give off the biggest display possible in consumer fireworks.     

Rockets – While most retailers will have some rockets expect selection to be small.  

Novelties – Items like adult snaps, tanks, and more popular smaller items will be in short supply.

Large effect roman candles – these are nowhere to be found period. Thankfully generic roman candles should be easy to find.

Artillery shells – especially the high powered 60 gram canister shells. Many wholesalers are sold out!

Assortments – without a doubt this will be the most difficult item to find on the shelf this year. If you’re the typical consumer that doesn’t know much about fireworks so you usually grab an assortment shop early this NY! If your retailer is sold out just ask a knowledgeable sales rep to put a package together for you that meets your budget.

So if you plan to exit 2020 by setting off a few fireworks shop before New Year’s Eve for the best selection or your plans for NY might just turn out to be a dud!

October 23, 2020
By Chris Reese

Every year the consumer fireworks market is under substantial peril. In 2019 the market was bracing for its greatest threat ever. Two of the largest consumer fireworks retailers teamed up to change the industry forever. Like a thief in the night, secret negotiations were made with the consumer protection safety commission to remove all metals in aerial fireworks. In short, removing all metals would render all consumer aerial fireworks useless and the industry would have been reduced to safe and sane fireworks like fountains and sparklers. While this may seem counterintuitive to the average consumer, the retailer giants had everything to gain and nothing to lose. Their goal, under the guise of safety, was to create an extremely profitable monopoly of the industry. With the supply chain agreements in place with Walmart locations all over the country it was a slam dunk. Thankfully at the stroke of midnight the National Fireworks Association was made aware of this hostile takeover plot and in late 2019 the industry was saved allowing it to survive another day.

In conjunction with the industry turmoil, in 2019 fireworks were also facing a 25% tariff due to the hostile trade relations with China. Fortunately, just in time for the importing season the 25% tariff was lifted and once again the industry could take a brief sigh of relief.

Fast forward to 2020 and the fireworks industry once again faces tremendous obstacles that will likely force significant changes for the foreseeable future. In 2020 the fireworks industry not only survived Covid but thrived! While this may be cause for celebration, 2021 does not look so rosy for the consumer’s wallet. The combination of factory shutdowns due to Covid 19, tragic factory accidents in China, and decimated inventory across the industry, has caused a perfect storm of a major supply chain log jam that simply cannot meet the US and European demand. To add insult to injury the Chinese government continues to force permanent closures of fireworks factories. It is no secret the Chinese government would prefer to abolish the fireworks industry altogether.

Over the last five years consumer fireworks have increased in cost on average about 5-10% year over year. However, this potentially may pale in comparison to what we see starting in 2021. The primary reasons for the price increase in the past include continued increase in demand, raw materials, labor, and shipping. There is no evidence that these price increases within the supply chain will abate anytime soon. To make matters worse the Chinese government is about to enforce a new regulation that will further increase the cost of consumer fireworks and will likely forever change their performance.

In 2021, all fireworks with tubes greater than 1.2 inches in diameter will need to be caged for shipping. In conjunction with the supply chain issues mentioned above, this will likely start to further escalate prices for years to come.

So why is the Chinese government requiring cages and how will this increase the retail prices of consumer fireworks? To be direct the US market does not quite understand the reasoning behind the Chinese government’s position on this new regulation. The Chinese government claims that the cages will provide an extra layer of safety during fireworks transportation. However, without going into a long lengthy explanation as to why this position is false, the cages will do nothing but add cost to the products affected and waste to US landfills.

At this point most Chinese factories expect an increase of about $12 to the case price of the items that will require a cage which is $3 per item for a 4/1 packed case. While that does not seem like much, as it moves along the supply chain the cost will exponentially increase. For example, let us say that firework X, packed 4/1, has a current FOB case price of $68 and the tube size is greater than 1.2 inches requiring it to be caged. This will increase the FOB price to $80 or by 17%. Keep in mind the cage will also increase the size (or cubes) of the case taking up more space on the shipping container and increasing the shipping cost. Once the case lands in the US the distributor may remove the cage or may leave the cage for the retailer to remove. Either way the cost will once again increase either through added shipping weight and extra labor for the retailer to remove the cages or extra cost for the distributor to remove and dispose of the cages. So, let us add another $1 per case to account for this added cost. This brings the landed distributor cost to $81 or an increase of 19%. Unfortunately, the cost increase will not end at this point.  The distributor must add their margin to the total landed cost. As you will see their margin will only exacerbate the case price of product “X”.

Original landed cost without the cage with shipping: $68 FOB + 30% shipping cost = $88.40

Landed cost with the cage including shipping: $80 FOB + 31% shipping ($24.80) + $1 cage removal = $105.80

Now let us add in the distributor’s margin for sale to retailers throughout the US:

Without cage distributor/wholesale price: $103.43

                                VS.

With cage distributor/wholesale price: $123.79

What was an initial $12 price increase has now roughly grown to $20. However, we still need to calculate the estimated retail price to get a better understanding of how this will impact the consumer.

To do this we need to add the average shipping cost and margin for the retailer:

Current retail price per item (non-caged): $68.52 (non-caged, shipping cost and average industry margin)

                                 VS.

Projected retail price per item (with cage): $82.01

What was initially just a $3 increase per item has now inflated to $13.50 per item or a whopping $54 per case! Most consumers will by more than just one item which means China’s new regulations will hit their wallet hard in 2021.  Also, keep in mind this is just using industry averages. Some areas will see an even higher increase for their market. Finally, what is even more concerning is that we do not know how shipping and raw material cost inflation will increase this price even further nor do we know how increase in demand will raise product cost.

There is no doubt the price increase forecasted for 2021 will be much more substantial then we have seen in the past and it most likely will not go unnoticed by the consumer. Unfortunately, this will not be the last threat to the industry as there are more perilous times ahead and baring another last minute miracle some fireworks are literally about to explode.