Bain Capital dodges trade war impact as it remodels China cosmetics packaging venture with eye on US$34 billion market
- The private investment firm now uses its World Wide Packaging cosmetic packaging plant in Suzhou to mainly supply Chinese companies or multinationals that make products in the mainland for domestic consumers
On a sunny afternoon in August, hundreds of workers were busy operating the production lines at a factory in Suzhou, a manufacturing base in the eastern Chinese province of Jiangsu.
The cosmetics packaging business is a unit of New Jersey-based World Wide Packaging, both acquired and merged by Bain Capital Private Equity in early 2018. It now supplies integrated solutions – from design to packaging components such as plastic tubes – to some of the biggest beauty brands like Estee Lauder, L’Oreal and Shiseido for the local market.
The buzz at the Suzhou factory shows how businesses are adapting to the impact of the US-China trade war as margins erode. Last June, the US more than doubled the tariffs on US$200 billion worth of Chinese exports to 25 per cent, including cosmetics and skincare products.
“We have been turning the plant into one that mainly supplies to Chinese companies or multinational companies that make products in China for Chinese consumers,” said Jonathan Zhu Jia, a managing director in Hong Kong at Bain Capital. Many global cosmetic brands are made in China, for the Chinese consumers, he added.
The move has enabled WWP to retain a foothold in a US$34 billion beauty market onshore. Retail sales of skincare goods amounted to 212 billion yuan (US$30.3 billion) in 2018, according to Euromonitor, while make-up products were worth 42.8 billion yuan. They grew by 13.2 per cent and 24.3 per cent, respectively.
While China is the second largest market for cosmetic goods after the US, the mainland market is growing at three times faster than in America, according to Bain Capital, which oversees more than US$105 billion of alternative investment assets.