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Cosmetics molder HCP expands in China, eyes doubling size from TPG investment

By: Steve Toloken

November 29, 2013

Chinese cosmetics packaging molder HCP Holdings Inc. is planning a sizable expansion of its facility in Suzhou, China, part of a series of investments the company is making after its purchase last year by American private equity firm TPG Capital LP.

Shanghai-based HCP plans to add 50 injection molding machines and 10 metallization and painting lines in Suzhou, during an upgrade that will also let it expand lean manufacturing programs there, according to HCP President and CEO Eddy Wu.

HCP is one of the world's larger plastic packaging companies focused on the cosmetics market, and also has molding and packaging factories in the United States and Mexico. Globally, it employs more than 4,000 people and has more than 300 injection and blow molding machines.

"The new expansion not only give us additional space to expand our capacity but also, maybe more importantly, provides more flexibility for HCP to implement various lean manufacturing production which tends to be more difficult to realize in a traditional [packaging] factory," Wu said, in an email to Plastics News.

HCP has made other investments since San Francisco-based TPG bought the company for an undisclosed sum in mid-2012. It has added capacity for PET bottle injection blow molding in Shanghai, with at least 17 machines there, for customers including Procter & Gamble and Shu Uemura International.

It also expanded mold making this year, giving it the capability to make more than 300 molds annually, and has added a joint venture for aluminum packaging in its factory in Huian, Jiangsu province, he said.

Wu said the company, which had more than US $200 million in sales in 2012, wants to double the size of the business in five years. HCP has grown from $160 million in sales in 2010.

When TPG acquired the company last year from the Chen family, which started the business in Taiwan in 1960, one reason given was to expand HCP's global platform. In 2011, company executives told Plastics News they had been looking at acquisitions or investments in Europe.

Wu said Europe remains an area of interest "given the fact that this is the only region with business significance that we don't have a factory."

"Adding European manufacturing would certainly help HCP's competitiveness," he said. "However, this is not the only option. We also look at potentially going into other product categories while we are looking… into other geography. At this point, we have many options and we are looking at all of them."

HCP continues "actively looking for global platform expansion options," he said.

Wu came to the company with a background in plastics, previously serving as president and CEO of Momentive Performance Materials Asia Pacific and general manager of the GE Plastics Noryl business in Asia and president and CEO of GE Toshiba Silicones.

He said the company has added substantially to its management stable since the TPG purchase, beefing up global expertise in supply chain, information technology, human resources and business development, while adding to its executive team in North America.

HCP said it's responding to rapidly rising labor costs in China by working to make its factories there more efficient and upgrade to handle more premium packaging.

The changing cost picture in China does make its U.S. and Mexican factories more competitive, Wu said.

"Thus we are happy that we have facilities in [those] two countries as well," he said. "But at the same time, we also need to work on productivities in our China factories to maintain competitiveness. We also are working to improve our manufacturing capability in China so that we can focus more on higher value-added product which tends to justify better a premium price."

The company is also working on improving manufacturing in North America, as it finds that China's rising costs and customers' desire for manufacturing closer to end markets can be an opportunity for its North American factories, said Damien Dossin, who joined the company as president of HCP America in March.

"The labor rate is not much higher in Mexico than it is in China," said Dossin, in an interview at the CosmoProf Asia trade show in Hong Kong in mid-November. "Customers are more pragmatic about the total cost of ownership."

Still, he said the company was adding about 120,000 square feet of manufacturing space in Suzhou partly because it has "such a brain trust" in that area.

TPG has made other sizable investments in plastics, including in 2011 buying Ashland Distribution, now Nexeo, one of North America's largest resin distributors, and owning Hilex Poly Co. LLC, the largest maker of plastic bags in North America, until divesting it last year.

TPG has more than $50 billion in assets under management, with offices in several Chinese cities. It has invested in some notable Chinese companies, including sports apparel maker Li Ning and computer manufacturer Lenovo.