At a cosmetics plant in Suzhou, a manufacturing hub on the eastern side of a Chinese province in Jiangsu, hundreds of employees are busy working on the production floor on a clear August noon.
The cosmetics packaging company is a division of World Wide Packaging located in New Jersey, which purchased and combined at the end of 2018 by Bain Capital Private Equity.
It now sells customized products to some of the top beauty brands including Estee Lauder, L'Oreal and Shiseido for the local market - from development to product materials like plastic tubes.
The chatter at the Suzhou plant demonstrates that businesses react when profits erode to the effects of the trade war between the US and China.
Last June, the US more than tripled to 25 percent the taxes on Chinese imports worth US$200 billion, including cosmetics and skincare products.
According to Jonathan Zhu Jia, managing director at Bain Capital in Hong Kong, they have "converted the plant into one that primarily supplies to Chinese companies and multinationals in China."
For the Chinese consumers, he said, most multinational cosmetic brands are made in China. The move made it possible for World Wide Packaging to maintain a presence in an onshore beauty industry worth US$34 billion.
Based on a Euromonitor report, last year, retail sales of skincare products amounted to 212 billion yuan (US$30.4 billion), while make-up items were valued at 42.8 billion yuan. WWP has grown around 13.3 percent and 24.4 percent, respectively.
Bain Capital, which controls more than US$105 billion in alternative investment capital, has disclosed that while China is the second-largest market for cosmetic products next to the US, the mainland market is rising three times faster compared to that in America.
"We saw the local market, industry, and customers here when we conducted feasibility studies," said WWP chief executive Barry Freda. "We find Chinese demand for cosmetics, and therefore packaging strategies, were really at the forefront to boom."
In China, according to figures from the National Medical Products Administration, 4,933 firms are eligible to manufacture cosmetics at the end of June 2019.
In the mid to low-end markets, home-grown brands are dominant, while the high-end market is dominated by joint ventures and foreign-owned companies.
Zhu said the packaging enterprise also collaborated as a distributor with a producer located in Taiwan. Manufacturing plants in mainland China had a cost advantage of 20 percent over the manufacturer in Taiwan before the trade tariffs. Even, he said, it's hard to beat the solid network and strong domestic supply chain.
