Bay Cosmetics Establishes Stable Supply System for Cosmetic Materials Amid Deepening Procurement Difficulties Due to Escalating Middle East Tensions

### ◼️ Summary of this Article The entire industry is facing severe procurement difficulties, and we are receiving inquiries such as "we don't know when materials will arrive." Our company has established a global supply system since its inception, and even under these circumstances, we are able to deliver within "3 months" from order placement as our standard response.

### ■ Background: Escalation of Middle East Tensions and Impact on Cosmetic Container Supply Chain Since late February 2026, the worsening situation in the Middle East, centered around Iran, has led to a drastic reduction in shipping traffic through the Strait of Hormuz, decreasing by over 90% from 120 vessels per day to approximately 5 vessels.

This impact has severely hit the cosmetic industry's supply chain.

- Supply delays and shortages of droppers, pumps, containers, etc., from Japanese and Korean container manufacturers due to naphtha shortages. - Soaring raw material costs for plastic packaging materials, including PET resin, due to a surge in crude oil prices (Dubai crude temporarily hit $166/barrel). - Significant increase in transportation costs due to several-fold rises in ocean freight and war risk insurance premiums. - Prolongation of procurement lead times: It has become standard for major materials like bottles and pumps to require over 6 months for procurement. - Obstacles to business plans: Increased risk of stockouts for existing products due to material shortages, and postponement or review of new product launches.

Droppers, in particular, are affected in both glass tubes and rubber components. Domestic manufacturers are increasingly reporting that they "don't know when they will arrive."

### ■ Bay Cosmetics' Response: Stable Supply through a Global Procurement Network Since its establishment, our company has built a procurement network for cosmetic containers and packaging materials centered in Guangzhou and Shaoxing, China. In addition, we have forged broad cooperative relationships with raw material companies in Japan and various countries worldwide. Through this multi-layered global procurement system, we maintain a stable supply even under the current Middle East situation.

【Key Containers and Packaging Materials Available for Supply】

| Category | Example Items | |---|---| | Bottles | PET bottles, airless bottles | | Pumps | Dispenser pumps, mist sprays | | Droppers | Glass droppers, plastic droppers | | Sachets | Aluminum sachets, film sachets | | Others | Jar containers, tubes, caps |

【Three Factors Enabling Stable Supply】

1. Construction of a Strategic Supply Network in Preparation for Geopolitical Risks Our company has recognized geopolitical risks as a medium-to-long-term management challenge even before the destabilization of the Middle East situation and the emergence of maritime transport risks. Based on this, we have made strategic investments in building our unique supply chain. Specifically, in the industrial cluster of Guangzhou, where over 3,300 cosmetic-related manufacturing companies are concentrated, we have actively promoted relationship building with key local factories from an early stage. We have secured a direct transaction network with manufacturing bases that have crude oil procurement routes via land pipelines.

2. 【Overseas Defense Network】Acquisition of "Exclusive Supply Rights" to Occupy up to 25% in Emergencies Our company continuously secures approximately 5% of the manufacturing capacity at key factories in Guangzhou and Shaoxing during normal times. Furthermore, we have recently concluded a special agreement that will be activated in the event of force majeure, such as natural disasters or raw material supply disruptions. This allows us to preferentially allocate up to 25% of the production lines of these factories, which have an annual production capacity of several hundred million units, for the Japanese market.

3. 【Domestic Defense Network】Expansion of a Robust Domestic Manufacturing Base through a Wholly-Owned Subsidiary In addition to our overseas procurement capabilities, our domestic manufacturing system, established through the complete acquisition of "sanpack Inc." in September 2025, functions as a second line of defense. With this dual supply system of overseas procurement and domestic manufacturing, we are fully prepared to address our customers' supply chain risks.

### ■ Anticipated Future Situations and Bay Cosmetics' Responsiveness As procurement difficulties deepen across the industry and uncertainty grows regarding "when materials will arrive," Bay Cosmetics Co., Ltd. is committed to delivering within "3 months" from order placement as its standard response.

This speed and certainty are supported by the aforementioned "exclusive supply agreement" with key Guangzhou factories, which ensures advance securing of materials in anticipation of emergencies, and a rapid response system based on our domestic manufacturing infrastructure. It is this robust "dual-structure" supply chain that allows us to promise maximum delivery times under any market conditions.

Bay Cosmetics leverages this procurement speed and stable supply capability as its greatest strength, preventing customers' opportunity losses due to material shortages and strongly defending business continuity and growth.

### ■ Future Outlook Our company will continue to closely monitor trends in the Middle East situation and fluctuations in raw material prices, striving to provide prompt and transparent information to our business partners.

Even in an uncertain business environment, we are fully committed to the sustainable growth of our partners' brands, acting as a partner that accompanies them through all stages of their business, from planning and development to sales growth.

### ■ To Manufacturers Facing Container Procurement Difficulties We are accepting consultations from manufacturers facing the following challenges:

- Unable to get delivery dates from existing container suppliers - Urgently need to secure alternative suppliers for Korean or Japanese containers - Production lines are on the verge of stopping due to shortages of specific parts like droppers and pumps - Looking to diversify procurement sources in anticipation of prolonged Middle East tensions - Want to request one-stop support from formulation design to containers

We can provide comprehensive support from container procurement consultation to formulation design, manufacturing, and sales promotion. Please feel free to contact us.

### ■ About Bay Cosmetics Co., Ltd. Our company is a cosmetic OEM/ODM manufacturer. We have established a system to accompany brand businesses through all phases, from product planning and development to manufacturing, sales channel development, sales growth, and international expansion.

Our initiatives in each phase:

| | | |---|---| | **Initial Consultation** | We propose optimal categories and product strategies based on market data, after confirming not only specifications but also business goals, budget, and target audience. | | **Planning & Development** | We design products that integrate market trends and sales strategies. Our cosmetic AI generates formulation proposals in as little as approximately 5 minutes. | | **Manufacturing Process** | We offer flexible schedule adjustments tailored to sales promotion plans. We provide integrated proposals for fixtures, containers, cosmetic boxes, and designs, reducing adjustment man-hours for our clients. | | **Delivery Speed** | We achieve **high-speed delivery in approximately 3 months**. As we own our factories, we can provide speedy and flexible responses (e.g., assembly). | | **Sales Promotion** | We provide ongoing sales support even after delivery. We propose next steps, including unique sales menus like Qoo10, support for securing retail shelf space, and sales promotion know-how from our parent company. | | **International Expansion** | We provide comprehensive support, not limited to documentation, but also including selection of expansion destinations and local deployment methods. |

Our System:

- Track record of operating our own brands: Our group operates cosmetic brands distributed in over 10,000 EC and offline stores, accumulating practical sales know-how. - Dedicated marketing team: