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April 06, 2009 02:00 AM

HCT Packaging looks for partners in China

Steve Toloken
Assistant Managing Editor
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    China is playing a larger role in the plans of London-based cosmetics molder HCT Packaging, as HCT seeks local plastics firms to invest in after setting up its first injection molding plant in China two years ago.

    HCT, which supplies injection molded cosmetic compacts, lipstick cases and other products, said it sees increasing business opportunities in 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, HCT Asia's managing director, in a March 12 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.”

    HCT is looking closely at more joint ventures or other investments in Chinese plastics firms, she said. Two years ago, the firm set up a 50-50 joint venture injection molding factory in Dongguan, with 650 employees and 50 presses — 25 machines from Ningbo Haitian Plastic Machinery Group and 25 from Taiwan Union Plastic Machinery Co. Ltd.

    Haley said the company actually is seeing more business in the economic slowdown as its customers — the manufacturers of 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. At a time when companies are downsizing, they are really looking to give projects to suppliers who can do everything for them,” Haley said.

    Chris Thorpe and his wife, Clare, launched HCT in London 22 years ago as a design firm specializing in cosmetic packaging, with all manufacturing outsourced to Asia, Haley said. Today the Thorpes' sons, James and Tim, run day-to-day operations. The firm remains very design-oriented, she added.

    HCT claims to be one of the first cosmetic supply-chain companies to adopt an Asian outsourcing business model. In recent years, however, Haley said global cosmetic makers wanted more direct control of factories in Asia. So in 2007, HCT 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 [cosmetics makers'] business model,” she said.

    HCT still outsources much of its work but also needs the joint venture — HCT Kent Plastic Products Ltd. — for products it wants to patent or 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 manufactured at Kent generate about 15 percent of HCT Packaging's sales. The company's joint venture partner is a Taiwanese businessman named Kent Lee, whose wife is part of a family that owns Libo Cosmetics Co. Ltd. Libo, in Taiwan, also owns a cosmetics packaging molding plant in Dongguan, and is also an HCT supplier, according to Haley.

    She said global sales for privately held HCT are about US$100 million and continue to grow. The company employs about 100 globally, not including those in the Dongguan venture. The company also is looking for sales agents in South Korea, China, Japan and Australia.

    Plastics account for about 85 percent of HCT's business, although Haley said the firm currently is establishing a metals factory in South China, where it will use metal injection molding machines.

    She said the company's 20-year background in plastics also helped it develop metal products like a molded metal compact case for Lancôme. Innovation and product development have helped HCT continue to grow, she said. One of its first projects, in the 1980s, was designing a compact case used in Estée Lauder's MAC line, which has since become part of MAC's signature look, a rarity in a packaging world where designs are constantly refreshed, she said.

    Also, HCT is working on new developments like “serious packaging,” which it calls package designs that not only look good but can help improve a product's performance. The company spent more than a year developing a plastic container and brush for the Bare Escentuals-brand face powder so that it holds loose powder better and controls application. Although it sounds simple, the design had not been done before and took more than a year to develop, Haley said, and competitors deconstruct the patented design to study how it works.

    HCT also is seeing interest among customers for environmentally friendly materials. It recently developed a bamboo compact case for the Urban Decay brand 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.

    HCT chose to begin 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 Chinese factories has benefited HCT by eliminating competitors.

    “What preceded the recession in China was the new labor law, and China cracking down on people who were forcing their laborers 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 firm's work in Asia, to date, has been for Western firms, she said HCT is seeing more interest from local cosmetic brands in China, India, Korea and elsewhere in Asia. Global brands have tended to dominate the Asian cosmetics markets, but local firms are starting to spend more money to improve their packaging, contacting firms like HCT, and looking at strategies to attack home markets, she said.

    “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,” Haley said, “and they'd be smart to do it.”

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