David Navazio, CEO of Gentell, has recently become acutely aware of how geopolitical events, specifically the war in Iran and the closure of the Strait of Hormuz, are affecting his company's operations. Gentell relies on derivatives from oil and gas for its medical products, leading to a surge in raw material costs by as much as 30%.
Shipping expenses have also escalated dramatically, with the cost of transporting a container from New Zealand to California rising from $2,000 to $4,500. This situation is compounded by the fact that Gentell's largest customer is the U.S. government, which has fixed contracts that limit the company's ability to pass on these increased costs to consumers.
As a result, Gentell is experiencing a 'margin crunch,' and while they hope for a short-term resolution, the potential for long-term price increases looms if the conflict persists. The company has previously navigated challenges from tariffs and supply chain disruptions due to the Covid-19 pandemic, which has somewhat prepared them for the current crisis.
However, the future of their pricing strategy hinges on the resolution of the conflict and the reopening of the Strait of Hormuz, as indicated by Navazio's comments on the potential need to raise prices if the situation does not improve