Getting to the U.S. is now simpler for Care Bears.

• In 2021, the Care Bears manufactured in China faced a complex supply chain to the U.S.
• Plush toys now have an easier path to American marketplaces and distribution points.
• More Americans are spending on experiences rather than goods.

The factory floor in China, where the Care Bear's journey begins, is back to normal along the global supply chain.

Anward Shen, the owner of An'Best Toys in China, stated that the cost of producing Care Bears for U.S. retailer Basic Fun! has returned to its pre-pandemic level. His factory in Ankang produces a million Care Bears every month.

The global supply chain disruptions in 2021 led to a 25% increase in the cost of producing Care Bears, resulting in tighter inventory availability for some time.

Jay Foreman, CEO of Basic Fun!, stated that compared to October 2021, the current situation is like night and day. He explained that everything in the supply chain was out of balance and every step was disrupted.

While it is easier to obtain Care Bears for American consumers at lower prices, there are new challenges in the system due to differing economic conditions in the U.S. and China.

Beijing is facing deflation and slower growth, unlike the U.S. where policymakers address inflation in a strong economy.

The slowdown has caused material prices to decrease. High unemployment in the country has allowed manufacturers to control rising wages for workers. Additionally, with global demand declining, factories are competing for U.S. orders by offering lower prices.

Shen stated that the move benefits customers and enables him to retain their business. "We passed on nearly all of the cost savings to U.S. buyers and their customers," he said. "They want the cheaper price. We need the orders."

Beijing's decision to lift restrictive Covid controls at the end of 2022 has eased travel across the country. Shipping containers are plentiful at the Chinese ports. Shen stated that his American buyers are still working through old inventories, freeing up freight space.

Overseas buyers purchased excessively, believing the market was recovering post-pandemic, but are now reducing their stockpiles.

In 2021, Care Bears were delayed for up to two months, increasing expenses. Currently, they are being shipped out promptly, but deflation is affecting the export industry.

Funshine Bear

At 10 a.m. on a Wednesday, beyond the Port of Los Angeles, two ships are carrying fuel and another is transporting automobiles. Large ships loaded with cargo from Asia have already entered the port and are being processed by dockworkers.

What a difference two years makes.

In 2021, during the supply chain chaos, CNBC traced the journey of a Care Bear from a factory in China to a store in New York. There were 65 container ships anchored off the ports of L.A. and Long Beach. Gene Seroka, the L.A. port's executive director, stated that some vessels without reservations were waiting outside the port for weeks.

Containers remained on the docks for 11 to 13 days after an appointment was unloaded, and the cost of a traditional shipping container increased to approximately $20,000.

Many Christmas items did not arrive in time.

Ships are sailing directly into port this year, according to Seroka. Unloaded cargo is now being placed onto trucks or trains within three days, which is back to pre-pandemic turnaround times. Additionally, shipping container costs have decreased by 90%, bringing them back to "normal" pricing.

But not everything is back to normal.

According to Seroka, half of the truck gates at the port remain unused daily, indicating available capacity.

This year, global trade has decreased by 5%, as stated by the United Nations. Numerous U.S. retailers purchased excess inventory ahead of time, resulting in overstocking in many instances, due to the softening of consumer demand.

Seroka stated that the lack of activity at his port was due to several factors, including the supply chain backlog of 2021, which drove some business away from the West Coast. Additionally, the dockworkers' union contract expired, and negotiations took a long time to resolve.

The Panama Canal, which underwent an expansion that ended in 2016, became a focus for shippers looking to redirect cargo traffic. As a result, east coast ports saw a rise in cargo handling, while west coast ports experienced a decline. According to Seroka, the ports of Los Angeles and Long Beach went from handling at least 40% of all containers to 33%.

Seroka stated that history has demonstrated that when cargo departs from Southern California ports, some of it remains in other port locations. Currently, he is traveling across the country in an attempt to regain lost business. He acknowledged that the process has been challenging.

The Panama Canal is experiencing a drought, which has caused water levels to decrease and made it difficult for some ships to pass through. According to FreightWaves, 22% fewer ships transited the canal in November compared to October. The Panama Canal Authority predicts that 2023 could be the second driest year on record.

The Port of Los Angeles and Port of Long Beach experienced a 19% and 24% increase in total standard container numbers, respectively, in November compared to the previous year, while New York and New Jersey saw a 6% decline.

The cost of shipping to Southern California has decreased, making it more affordable for retailers and Care Bears, as long as consumers continue to purchase.

Grumpy Bear

The cost of transporting a Care Bear from the port to a warehouse and retailer has decreased. Due to the pandemic, consumers have shifted their spending from goods to experiences, resulting in fewer items being transported via trucks and trains.

In October, the American Trucking Associations reported that contracted freight volumes decreased by 6% year-over-year, while spot volumes dropped nearly 40%. This decline in volume affects trucking companies' profits, as they are paid based on the amount of cargo they transport. With lower volume comes higher competition for each load, resulting in a decline in trucking companies' revenue per mile.

A surge in supply and a decrease in demand have resulted in a freight recession.

According to Bob Costello, chief economist at American Trucking Associations, the trucking industry has been in a recession for a year due to an excess of trucks and a shortage of freight. He stated that this situation is not favorable.

Despite wage growth outpacing other industries, cost pressures remain high for trucking companies, leading some, like Yellow, into bankruptcy.

According to Costello, the pain in the industry isn't over yet, as "a considerable number of individuals" are likely to depart from it in the upcoming year.

The market has shifted from favoring freight to favoring shippers, mainly manufacturers and retailers, due in part to supply chain normalization.

The global freight recession is expected to persist in 2024, with low order expectations for the first half of the year, which may negatively impact the trucking industry.

Christmas Wishes Bear

The Care Bear's journey is now quicker and less expensive than it was two years ago, but it's up to the retailer to decide whether to pass on these savings to the consumer.

In the supply chain, the Care Bears' final destinations before being settled with their new owners are either on store shelves or in distribution centers.

The CEO of Basic Fun!, Foreman, stated that the cost of labor is currently higher than it was in October 2021, when CNBC first reported on the Care Bear's journey and expenses. However, there is less pressure on manufacturing and transportation costs, which is helping to balance things out.

The Care Bear journey from the manufacturing facility in China to U.S. retail stores in October 2021 took more than two months. Now, Foreman reports that it's back to normal, taking between 32 and 35 days.

In the fall of 2021, nearly a quarter of the total cost of the Care Bear was attributed to transportation. Currently, it stands at 5%.

Retailers were faced with the decision of whether to pass on the transportation surcharge added to their invoices by Basic Fun! two years ago, which aimed to cover additional costs in the supply chain.

The 14-inch Care Bear is currently being sold by most retailers for approximately $15, which is a decrease from $17 to $20 in 2021, according to CNBC research. Foreman explains that this price drop is due to a variety of factors, including lower supply chain costs, deflation, seasonal discounting, and consumer demand for more affordable toys.

The decline in Care Bear prices is greater than the overall toy price decline.

This year, the average spend of our customers on toys has decreased from $36 to $21.95, leading to more, but smaller, less expensive toys under the Christmas tree. Foreman suggests that there are many deals on toys available this year.

Now, the challenge is to attract consumers to the market despite a normalized supply chain, as stated by Foreman.

Eunice Yoon reported from Ankang, China; Jane Wells reported from San Pedro, California; Pippa Stevens reported from Burlington, New Jersey; and Courtney Reagan reported from East Rutherford, New Jersey.