The employees at Lush Fresh Handmade Cosmetics believe in the delicious-smelling, plant-derived products that they sell. In fact, CEO and Vancouver native Mark Wolverton says, “it’s almost like a cult.”
Since 1996, Lush’s North American arm has been manufacturing and selling preservative-free, cruelty-free bath and body products across Canada and the United States. After spotting a Lush store in London and realizing it would play well back home, Wolverton convinced the company’s British-based founders, Mark and Mo Constantine, to let him open a store in Vancouver.
“We struck a kind of partnership deal where they have a vested interest in the market through some ownership,” Wolverton says. “They provided us with the know-how to manufacture the products and we put in the money and sweat equity to build the marketplace here in Canada.”
The all-natural bath bombs and soaps made from fresh fruits, nuts, herbs and veggies hit big with the city’s clientele, and a second store soon followed. Now, Lush North America has just opened its 200th store, with 155 in the United States and 45 in Canada. (In total, Lush has close to 900 stores globally in 50 countries.) Wolverton says they are adding about 20 new North American stores every year, as well as branching out into Lush spas.
With corporate headquarters located in Vancouver and manufacturing bases in Vancouver and Toronto, Wolverton spoke with Global Connections about using Canada as a home base, maintaining strong employee culture and competing with the big guys.
With so many stores in the United States, why have you decided to maintain corporate and manufacturing bases in Canada?
It’s an organic thing. I’m born and raised in Vancouver, and in our manufacturing business, we have a lot of dedicated, career-oriented staff. Over the years, we have built a very strong team, and it’s difficult to relocate Canadians to the United States because you’re taking jobs away from Americans. Also, Canadians are generally a lot more rooted than U.S. people are, and the labour force here is fantastic. The people are dedicated, they have a great work ethic.
It sounds like culture is very important to your company.
Customers these days are so smart in terms of what’s in the ingredients, what they put on their skin, where it comes from, how it’s impacting the environment, whether it’s giving back to communities, and our staff is really the same way. They choose our business because it’s a lifestyle and it’s something they can believe in, rather than just a job.
How do you go about supplying all 200 U.S. stores from your Toronto and Vancouver manufacturing bases?
Our business is a bakery-style business, built around fresh, handmade products. So the ideal situation is the store orders it today, we make it tomorrow, it gets shipped [by truck] to the store the next day and the customer buys it the day after. Logistically, it’s easy to go over the border with NAFTA. There’s very limited, if any, duty impact on anything. Shipping lanes are fantastic up and down the coast. For California, we can have it to a store within less than 48 hours, and you can deliver almost next day or the day after into New York and those markets.
I suppose as [the company] grows, and you get more density in the lower U.S. states, opening up some manufacturing where the product can be fresher might be in the cards. But you’re dealing with labour pool, cross-border work issues and visas, and we’re very, very connected to our staff.
But getting product to your stores in such a short time frame must be challenging.
We are almost a fully vertical business. We make our own products, we source our own ingredients globally, sometimes we grow our own raw materials, we run and manage our own stores, we build the furniture, in-house IT, PR, recruiting, we run our website, our call centre. There are very few pieces of the business we don’t have control over, and I think that makes a big difference. When you’re relying on suppliers and you can’t control border and timing issues, that can have a big impact on your business. But when you’re cradle-to-grave in terms of the supply chain and delivery to customers, you can really keep an eye on making sure that everybody is supported through the process and you can maintain the highest quality possible.
Are there any tax or regulatory issues that affect your ability to transport your goods to the United States?
When it comes to crossing the border, we’re in a pretty advanced country so the FDA (Food and Drug Administration) and Health Canada have some pretty similar guidelines. We have spot checks by the FDA to look at products and you have to have your proper registrations done. But really, NAFTA and building a relationship with border security allows you to have a trust relationship so that your products flow fairly easily without much difficulty.
We import some stuff from the U.K., fragrance components and other raw materials, and you do have the ability to do duty drawbacks on any amount that you manufacture and ship into the United States. Taxwise for us, the Canadian marketplace has always been pretty favourable from a corporate perspective, because corporate taxes are less than they are in the United States. So having manufacturing and corporate profits in the Canadian marketplace at this stage is more favourable than in the United States, though obviously that can change.
If an international or Canadian business wanted to be based in Canada and ship to the United States, what should they consider?
Location. A lot of people will choose a location for price and not for accessibility and the environment of their staff and so they end up with high turnover and the staff can’t commute to their space. Then, when they ramp up for seasonal sales, they can’t choose the right staff to make sure the business is successful. So, location and staff environment is hugely important. And accessibility to a labour pool where you have the ability to build your team is important.
The cosmetics industry is said to be cutthroat, with huge multinationals controlling so much of the market. How do you compete?
Those other businesses do huge runs for efficiencies and cost, products they might put in warehouses for five years. They load it with preservatives, they put all their money into packaging and it’s all spent on advertising. We don’t advertise; the product speaks for itself. When a customer buys our product, they’re entrusting us to spend the money ethically, so that means non-animal-tested ingredients, it means the product and ingredients are the best quality possible, while benefiting communities and farmers’ groups, and that they can feel good about where the money is going. I don’t think those big companies even fit into that space.