Due to inflation and rising costs, Karen Danudjaja, chief executive officer and co-founder of Blume, which makes wellness drink supplements, says her company has had to absorb some higher costs – as have some of her suppliers – and she’s working on backup plans to manage any future changes.SUPPLIED
Inflation rates, tariffs and increasingly cash-strapped consumers have made recent months a particularly tough time to be an entrepreneur.
Katerina Juskey, co-founder of LOHN, a Canadian business selling candles and home fragrances, says her company has made “dramatic changes” to its business to reduce operating expenses due to rising costs.
“In March of 2024, we were manufacturing and shipping in-house from a 2,000 square foot warehouse in Mississauga. We had two staff members doing production, one doing shipping, and then we had marketing and social media help,” she says.
Today, the LOHN co-founders are running their business very differently. They’ve let go of most of their staff, moved out of their warehouse, and they now outsource manufacturing and shipping.
“We had no choice because of the changing landscape. It has really cleaned up our profit and loss statement because we don’t have that overhead anymore, and we can focus more on marketing and sales.”
While Canada’s inflation rate is now below the Bank of Canada’s 2 per cent target, it soared during the pandemic to as high as 8 per cent – the highest level in decades. That’s meant rising costs for a range of ingredients or products businesses use. Add rising tariffs for imported goods – particularly from the U.S., and businesses across the country have had to face new challenges.
For Mariane Oliveira, chocolate artisan and founder of Mary’s Brigadeiro, based in Toronto, inflation has sparked a similar need for innovation. After huge, worldwide increases in the cost of her business’s most used material, chocolate, Ms. Oliveira switched to local suppliers.
“It’s normal to have some price increases each year in January and in August, but before January of this year I was paying $150 for 10 kilograms of chocolate,” she explains. “Right now, we’re paying $232 for the exact same product.”
The increase caused Ms. Oliviera to begin working with bean-to-bar chocolate makers in Toronto, which she says had always been a dream. The process behind this chocolate making method is meticulous, and therefore expensive. Still, Mary’s Brigadeiro made the switch.
“Now, with the raise in [general chocolate] prices, it’s pretty much the same price to work with them.”
For Karen Danudjaja, chief executive officer and co-founder of Blume, finding new suppliers while maintaining the integrity of the ingredients in her company’s wellness drink supplements isn’t a simple task.
“It may look on paper like one mango is similar to the next,” she says, in reference to an ingredient in one of the company’s offerings. “But depending on the supplier, they could have different flavour profiles, acidity, origins, certifications – so finding backup suppliers is a pretty long process for us.”
Ms. Danudjaja says many of her suppliers are keen to find ways to continue to work together. Although Blume has had to absorb some extra costs, Ms. Danudjaja says some of her suppliers have done the same. Her big priority now is crafting a set of comprehensive strategies to future-proof the business in an unpredictable landscape.
“So much of the work right now is about waiting, optimizing, and putting backup plans in place without turning the key just yet, because we just can’t know where things will land,” she says.
“One thing we’re doing is holding less inventory, when typically we’d hold more so we can seize on opportunities that can come up. We also discontinued lower performing [products] and just focus on higher performing ones. The goal is to reduce risk and make sure there’s cash available to us.”
All three entrepreneurs notice their customers are adopting similarly protective strategies when it comes to their own finances.
“We’ve noticed over the last three years there’s been a decline in buyers placing orders on the spot,” says Ms. Juskey, who frequents B2B (business-to-business) trade shows in New York City to sell to wholesalers. “They’re more conservative with their spending and are taking their time.”
LOHN dropped its minimum purchase amount to $350 from $500 to keep inventory flowing.
For Ms. Oliviera’s direct-to-consumer business, the key to catering to a recession-wary customer is to increase the number of small-batch offerings for sale.
“In the past someone might have been able to spend $80 on a custom-made chocolate Easter egg, and now they want to continue that tradition at a lower price. As an entrepreneur, we need to adapt, so we created different lines with the same quality of products but with smaller chocolate boxes at a fraction of the price.”
Blume uses surveys to track why people cancel their subscriptions. Respondents are recently listing tariffs as a reason for leaving.
“Consumers are prioritizing their dollars,” Ms. Danudjaja says. Though in some instances this has been to Blum’s benefit.
“We saw a big lift from customers wanting to support Canadian owned and operated businesses recently. There’s two competing dynamics at play there. The big question is about how long [local] Canadian support will last, or whether it will eventually be trumped by economic pressure.”
From a funding perspective, the new era of increased economic pressure is already here.
“The most important thing to investors right now is making sure the business is not just spending money to grow, but to be profitable,” says Ms. Juresky, whose operation is currently independent.
“We’re doing fine, but it feels like we’re constantly adapting,” says Ms. Juresky. Both her and her business partner have become new mothers amid the roller-coaster ride of changing so many facets of LOHN’s operations.
“Everyone is making fast decisions. If something isn’t working, we make sure we cut it immediately.”