Bain Capital's purchase of cosmetic packaging firm World Wide Packaging (WWP) comes at a time of fast growth in the industry as well as heightened environmental concerns over plastic pollution.
WWP, whose clients include Estee Lauder, L’Oreal and Dermalogica, said on Friday that it is particularly focusing on China, where demand for cosmetics is growing three times as fast as in the US.
One of the reasons private equity is a good fit for the firm is the difficulty of expanding in the highly regulated Chinese market and the complexities of cross-border deal-making.
WWP, which makes packaging from plastic mass-market containers to metal cases for lipstick, lip gloss, mascara, and eyeliner, made above $20 million of ebitda in 2017 and the Chinese company racked up an ebitda of about $15 million the same year, a person familiar with the transactions told FinanceAsia.
“With this deal, the combined entity will have a customer-facing function primarily in the US, and manufacturing, sales and marketing operations in China,” said Jonathan Zhu, a managing director at Boston-based Bain Capital.
Bain Capital has already invested in the beauty industry in Asia including in Korean brands Carver Korea and Huegel.
WWP is not alone in targeting the burgeoning China market. Australian rival Amcor bought Hebei Qite Packing for $28 million to help it expand in Northern China in November 2016. It also bought BPI China, the Chinese subsidiary of the UK-based British Polythene Industries, for £9.7 million ($14.10 million at the time), in 2016.
Established in 1980, WWP has offices on the east and west coasts of the United States. It already has a presence in Suzhou, China, which it opened in 2015.
Minneapolis-based private equity firm ShoreView Industries bought a majority stake in WWP in 2008.
The global tube packaging market is expected to reach $8.3 billion by 2023 at a compound annual growth rate of 5.79%, according to consultants Market Research Future. Booming e-commerce, increasing demand for small-sized packs as well as advances in manufacturing processes are driving growth.
Moreover, growth in oral and skin care and niche categories such as men's grooming and baby care are adding extra impetus, Market Research Future said. Innovation in designs and packaging, busy lifestyles, and a growing working population as well as convenience are driving the tube packaging market.
However, raw material costs and a global backlash against using environment-polluting plastic is likely to hinder growth, according to Market Research Future.
WWP’s design for a women's carrying case for condoms, marketed as a fashion accessory, won an award at the International Package Design Awards in 2006. It features a mirrored lid and a lower compartment, hidden beneath a false bottom, where condoms can be stored.
The firm has enjoyed more than four decades of uninterrupted growth, chief executive officer Barry Freda said in a statement.
The senior management team at WWP will remain in place, with Freda continuing to lead the firm.