David Chung Transcript
Clint Betts
David, thank you so much for coming on the show. It means a lot to have you on here. Tell us about yourself, your company, and what iLabs does.
David Chung
Well, basically iLabs is a contract manufacturing company that really focuses on research and development and bring innovations to beauty industry, mainly like skin care, hair care, body care, fragrance and so on. We focus mainly on OTC products such as sunscreens and acne; that area is a big chunk of our business, bringing innovation to the market. Basically, we are based in Mahwah, New Jersey, here, and this is what we have done for the last, I guess, five years.
Clint Betts
OTC is over-the-counter, I'm assuming? Okay.
David Chung
Right. Exactly. Yeah. Sunscreens and acne areas are controlled by FDA, so we call that OTC areas.
Clint Betts
Okay, that makes sense. What were you doing prior to this, and what made you get into the beauty industry?
David Chung
Oh wow. Clint, I've been self-employed I guess forever, since I got out the college, I guess since 23 years old. I'm pretty old now, but I've been doing this for a long time and been in the beauty industry quite a bit. Before iLabs, I also had another contract manufacturing company, very similar called Englewood Lab, set in Englewood, New Jersey. I built that company from blank sheet of paper and took the company IPO in Korea and exited back in 2018.
Clint Betts
That is incredible. Well done. Congratulations on that. That's very cool. Tell me about supply chain issues. Obviously, we're talking on a day I don't know when this will air, but we're talking on a day when the President of the United States, Donald Trump, has imposed tariffs on Mexico and Canada. We're actually talking an hour after Mexico. He gave Mexico a thirty-day leave on that, and they're going to try to work out some sort of deal. The Canada one is still happening. How are you thinking about tariffs? How are you preparing for that? I'm sure that's a big part of your business, this whole supply chain thing, right?
David Chung
Yes. In our beauty industry, I don't know the exact percentage, but I would say, I don't know, maybe 70 to 90% of our packaging materials like the bottles, the jars, the caps come from China. A big chunk in our industry, whether it's your luxury skincare brand, doesn't really matter; a lot comes from China. When Trump first round, he increased his duty to 20 25%. Now it just got announced, I guess last week, he's going to increase another 10%. Now, China will not be competitive anymore even though they have low wages; now, at 35, 40% of duty coming into the country for this packaging material is going to be really a big deal, especially for manufacturers in China. It's going to hurt a lot. For us, our cost of growth is going to go up dramatically as well unless we move to another country.
Clint Betts
How do you feel about it? Do you think it's good or bad? It sounds like you think it's bad.
David Chung
Well, I think there's always a silver lining in this. For the consumer, obviously, the price will go up; it'll be increased now in inflation, but now the business people need to figure out how to go about finding other ways of getting these products, the packaging materials that are outside of China. For iLabs, for me personally, it's a good thing that I also have an exactly identical manufacturing facility in South Korea where we are able to produce. The opportunity for my client to be able to move those stuff to our manufacturing in Korea and produce there where they have pretty much very small duties coming into the country as a finished good, but overall, it's going to be not good news for the average consumers obviously.
Clint Betts
Yeah, it'll be super interesting to see how it plays out. It seems like the Mexico ones are already being worked out and it might not even happen. We'll see what happens as this thing goes. Really interesting times and fascinating time to be running a business like yours. What does a typical day look like for you?
David Chung
Well, it's a typical day for me; I'm one of those people who is a morning person. I get up very early. I usually start my workout exercise around 6:00 A.M. or so and then do a little bit of meditation in the morning to just get me the start. From 8:00 A.M. on, I'm just back to back until late at night. I also have a company in South Korea, where, due to the time zone, I'm working at night, which is morning there. Usually, I end the date at 8:00 or 9:00 P.M.
Clint Betts
Wow. What keeps you motivated? Why do you keep going? I mean, you've had a lot of success. What keeps you motivated and driven to keep working that hard?
David Chung
Clint, I always ask myself that question every day, and oh my God, I don't know. Especially when I exited my last company, which I had very good success, a brand called Farmacy Beauty, which I sold to Procter & Gamble, P&G. I guess I could kind of retire at that point, but I think for me it's not about the money, Clint, I think it's more about the excitement of building something. Every time I build a company, I guess you could compare it to when somebody hikes the top of the mountain, that feeling of achievement, I guess, sort of. I think that is really my main reason; it keeps me hungry all the time. It's crazy.
Clint Betts
What have you learned about leadership as a CEO and as a CEO of all these various companies? What works, what doesn't, and what are some good traits for leaders, particularly for those who are listening now?
David Chung
Looking back, sometimes people ask me, "Hey David, what made you where you are today?" I usually, looking back, say, Clint, it's not complicated. I think it's about building a reputation for yourself and your business style, such as underpromises and over-delivery to your customers, as well as people around you. If you keep doing that, then everything just comes naturally. Things just come together, and people give you a business. That's been my, I guess, my philosophy of business.
Clint Betts
Yeah. What about building a culture inside your team? How have you worked on that? How do you think about hiring, and, in particular, how have you dealt with this whole work-from-home versus everybody-in-office versus a hybrid model that we've all gone through post-COVID?
David Chung
Well, we do have some people working remote, but because iLabs is a rich R&D and manufacturing facilities, majority of our employees hard to work from home because you have to be there to do lab work as well as production. I would say the majority of our employees are not remote; they're usually in the office. The world has changed because of the remote and how to keep the talent to be in your company because if another company say you could work from remote every day, then you lose a great talent. I think the only way to really keep your talent and people that I always feel is because I believe in people and everything. You become successful because of the people and you need to treat those talent people, which is hard to come by as we know, and make sure that you are engaged and really listen to them in a lot of ways.
Clint Betts
How are you thinking about AI and are you using artificial intelligence inside of your company? How does it affect a consumer product company like yours?
David Chung
Yeah, a lot of people are talking about AI these days. It's very big topic, and I'm always fascinated by what is happening today and I am living in this generation. AI will affect many different industries, but for my industry as a manufacturing of a beauty industry, I think two things it's happening. One is at the production section where today, let's say, one line, you have 20 people to produce anti-aging cream as it comes out of the assembly line. I think that's going to be dramatically changed to maybe two people from the 20 people now using AI robotic system. All this technology has been dramatically improving as we speak in the next few years.
The other interesting area that's happening is our research and development in the lab. Today, we formulate creams and lotions, whether it's anti-aging or whatever the product is. Our scientists and chemists who formulate the products are the ones who create the recipe for this product. I think in the future, AI will take that over, and you'll only have more technical lab persons rather than high-level formulators anymore because they're collecting the data of, let's say you want to create an eye cream, what raw materials, ingredients needed at what stage to have the best outcome for your wrinkles or whatever it is. I think this coming is not there yet, but I just see it's just matter of time that will minimize our chemists and scientists at the high level position wise dramatically.
Clint Betts
How long does R&D take? Just to follow up and continue on your thoughts here, tell me about R&D and D and the whole of that because you're regulated right by the United States government and any other government that you sell into.
David Chung
Yeah, so basically, R&D is you start with a client who comes to you and says, interest in, "I want to create an incredible," I'm just going to make up, "a sunscreen that's SPF50, but I want to feel really nice. Also, I want to have other benefits other than protecting the sun." Then, they give us what we call briefs. Then we take that and start using different ingredients to come up to satisfy the brand, the customer, and make sure that everything they're looking for is in there. That could be 20 ingredients or 40 ingredients in the formula and going back and forth. That's typical until the customer finally approves the formula, and then we go to the next step to get the pricing and everything that's needed. Initially, it's to satisfy the customer of what they're looking for. I think this is going to be the case, and eventually, AI will be able to figure that out. It's very similar to creating spaghetti or something. What do you need to make the best taste? Yeah.
Clint Betts
Yeah. That's super interesting. I wonder how regulations change, and when a regulation changes or when something comes out, how does that affect your company? What do you do in order to respond to, "Hey, you need to tweak this," or, "You need to tweak that?" I mean, does that happen that often?
David Chung
Well, it does. I mean, it's almost like the brand's taste where they feel, "Oh, I don't like the smell. Can you make this type smell," or, "Viscosity is too low, can you make it a little bit higher?" These things happen all the time, and this is more about what customers taste, and we try to satisfy them to their knees. At that point, we're not really typically related to FDA guidelines. When we do, FDA guidelines are what we are claiming; when we start claiming things, we are going to protect you to some SPF50 numbers. That's whether we get involved with government regulations. Until that happens, it's between iLabs scientists and customers.
Clint Betts
What do you think about the economic outlook for 2025? How are you thinking about that? Are you feeling good about where we're going right now? I mean, and obviously, tariffs are this really interesting and intense curveball, but overall, compared to 2024, how are you feeling about it going into 2025?
David Chung
Well, Clint, to be honest, I'm a little worried that there's a lot of uncertainty in our industry. When you have uncertainty, it's just very difficult to predict because what is the side effect is going to happen to this tariffs or any other new rules coming out in the future. You could have a great business, and next thing you know, "Oh my God, now this business is a disaster." We do export products to Canada a lot, and if Canada decides to increase the duty to what the Trump administration is placing, then if they say, "Oh, we are going to charge 30% duty coming into Canada from made in the USA," then the business is done. It's difficult. All these side effects that could happen are unpredictable; to be honest, what could come out of that?
Clint Betts
Yeah, that is fascinating. Yeah, that's an interesting thing that you have to deal with here. This really does affect anyone who's doing exporting or importing at the level that you're doing and having to sell into other countries. Man, that's fascinating. It's a really interesting time, and we'll see how it shakes out.
David Chung
Yeah. I think these things we really need to strategize very, very carefully because the side effect could cause a lot of damage, whether it's United States or any other country, I'm not sure.
Clint Betts
Do you read? Give us some reading recommendations.
David Chung
These days I don't have much time to read it, I've been working so much lately. There's one book that I read over and over again: How to Win Friends and Influence People by Dale Carnegie. I like that book a lot and learn a lot from it. Every time I read, I always learn, and I just picked up another book recently, it's called Influencer: The New Science of Leading Change. I haven't studied it yet, but I'm reading it because the way we market things is changing so fast through the influence world.
Clint Betts
Finally, we end every interview with the same question, and that is at CEO.com, we believe the chances one gives is just as important as the chances one takes. When you hear that, who gave you a chance to get you to where you are today?
David Chung
Well, I think there are many, many people in my journey to where I am today has been really contributing to my success, to be honest. I did study with my mother when she came to the United States. She immigrated to the United States and brought me into this country at age 12. She gave me an opportunity to be an entrepreneur here in the United States, work hard, and be educated to become successful. I started with my mother. Along the way, as I'm running different companies, it's pretty much many people that really give me the opportunity to work with them or introduce other people that later on became my success. It is many, many people, and I have always appreciated it. I'm only a small portion of my success; the rest is the people around me, and it starts with my mother, who gave me an opportunity to be in this beautiful country where I could do anything I want to do. It's a country of opportunity. I'm always appreciative, and hopefully, I'll do the same thing to other younger generation who wants to be successful as long as they have their hungry mind and wants to become successful.
Clint Betts
David, thank you so much for coming on the show. Really congratulations on everything you've built. Congratulations on your success. I hope you slow down at some point so that you can bask in your accomplishments and everything that you've done, but it's incredible what you're doing and keep going.
David Chung
All right. Thank you for inviting me here and appreciate the opportunity to talk to you, Clint. Thank you.
Edited for readability.