Foundation and growth help HCT in China
By Steve Toloken
Posted 16 March 2009 5:01 pm GMT
China is playing an increasingly large role in the plans of London-based cosmetics moulder HCT Packaging, with the company actively looking for local plastics firms to invest in after setting up its first injection moulding factory in China two years ago.
HCT, which supplies injection moulded cosmetic compacts, lipstick cases and other products, said it sees increasing business opportunities using Asia to supply the cosmetics industry, even as the global economy turns down.
“It is our business model to expand in Asia,” said Courtney Haley, managing director of HCT Asia, in a 12 March interview in her Hong Kong office. “We are expanding in Asia at a time when most companies are probably downsizing. We are hiring and we are continuing to invest.”
She said the company is looking closely at more joint ventures or other investments in local plastics firms. Two years ago, it set up a 50/50 joint venture injection moulding factory in Dongguan, Guangdong Province, with 650 employees and 50 injection presses – 25 Haitian machines and 25 from Lien Suo.
Haley said the company is actually seeing more business in the economic slowdown as its customers, the global cosmetic brand names, cut back on staff and give more design and product development work to suppliers like HCT.
“In times of recession, there are opportunities for us,” she said. “At a time when companies are downsizing, they are really looking to give projects to suppliers who can do everything for them.”
The family-owned company started in London 22 years ago as a design firm specializing in cosmetic packaging, with all of its manufacturing outsourced to Asia, and it remains very design-oriented, she said. It was started by Chris Thorpe and his wife Clare and today their sons, James and Tim, run day-to-day operations.
They say HCT was one of the first cosmetic supply chain companies to adopt an Asian outsourcing business model.
In recent years, however, Haley said the global cosmetic manufacturers wanted more direct control of factories in Asia. So the company in 2007 made the switch into direct manufacturing, setting up its joint venture in Dongguan.
“If you didn’t own a factory in China, you didn’t really start to fit into their [cosmetics manufacturers’] business model,” she said.
HCT still outsources much of its work but needs the JV, called HCT Kent Plastic Products, for projects it wants to patent or that are more difficult to design and engineer.
“We are continuing to invest in HCT Kent. We have not slowed down at all,” Haley said.
Products that HCT Kent manufactures generate about 15% of HCT Packaging’s sales. The company’s JV partner is a Taiwanese businessman named Kent Lee, whose wife is part of a family that owns Libo Cosmetics, a Taiwanese firm that also owns a cosmetics packaging moulding plant in Dongguan. Haley said Libo is a supplier to HCT but there is no other connection between them.
She said global sales for privately-held HCT are about $100m and are continuing to grow. The company has about 100 employees globally, not counting the employees in the Dongguan joint venture, Haley said.
The company also is looking for agents in South Korea, China, Japan and Australia.
Plastics are about 85% of the firm’s business, although Haley said HCT is also in the process of establishing a metals factory in South China, where it will use metal injection moulding machines.
She said the company’s 20-year background in plastics helped it develop products like a moulded metal compact case for Lancôme, because it applied knowledge from plastics to the metals side.
Haley said the company believes focusing on innovation and product development has helped it continue to grow.
One of its first projects in the 1980s was designing a compact case used by Estee Lauder’s MAC line, which has since become part of the line’s signature look, a rarity in a packaging world where designs are constantly refreshed, she said.
As well, HCT is working on new developments like “serious packaging,” which it calls package designs that can help improve the performance of a product, rather than simply look good.
The company spent more than a year developing a plastic container and brush for the Bare Escentuals cq brand so that it better holds loose skin powder and controls powder application. She said it sounds simple, but she said the design had not been done before, took over a year to develop, and competitors take apart the patented design to study how it works.
The company is also seeing interest among its customers for environmentally friendly materials. It recently developed a bamboo compact case for the Urban Decay cosmetic line, and the success of that in the marketplace has prompted others to follow with bamboo packaging, she said.
The company has looked at plant-based plastics as well, but has not found any that can meet long-term performance requirements, Haley said.
The manufacturing environment in South China is clearly difficult now, and HCT made the perhaps unusual choice of starting its operations just as China’s manufacturing economy started to encounter serious problems, in 2007.
But Haley said the closing of tens of thousands of factories in China have benefited HCT by eliminating competitors.
“What preceded the recession in China was the new labour law, and China cracking down on people who were forcing their labourers to work overtime and not paying them,” she said. “All of the sudden, overnight, you saw factories closing doors and leaving town. I’m happy because I pay my employees properly and I don’t force my employees to work overtime, and I pass all my social audits. I’m compliant and I expect my competitors to be compliant.”
While most of the company’s work to date in Asia has been for Western firms, she said the company is seeing more interest from local cosmetic brands in China, India, Korea and elsewhere in Asia.
Haley said global brands have tended to dominate the Asian cosmetics markets, but local companies are starting to spend more money to improve their packaging, contacting firms like HCT, and looking at strategies to attack in their home markets.
“I see a shift where the local brands are going to fight for it and really try to make a name for their brands and expand in Asia, and they’d be smart to do it,” Haley said