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Yonwoo riding Asian 'cosmetics wave'

NCHEON, SOUTH KOREA - South Korean cosmetics packaging maker Yonwoo Co. Ltd. has grown from $20 million in sales in 2002 to $150 million last year, and the company gives a lot of credit to one key strategy - a financial commitment to innovation in the often-fickle cosmetics industry.

The Incheon-based injection molding company maintains a staff of 30 industrial designers and mold and packaging engineers, which it said is unusual for a company of its size, and spends at least 8 percent of its turnover each year on research and development.

"It's a big number for us," said Daniel Cha, export sales manager. "This is one of the key factors that brings us success - we're never scared to open the wallet. We are really a tech¬nology- and innovation-orient¬ed company."

The company claims to be the first in South Korea to develop cosmetic lotion pumps and airless cosmetic containers, and its design team is responsible for producing 30 new product ideas a month and then weeding out the best for its catalogues.

Beyond the focus on R&D, Yonwoo has seen its business significantly internationalize since 2008, to the point that it's now looking seriously at setting up its first production outside Korea.

It has close partnerships in product development and marketing, with separate companies in the U.S. and Europe: Beverly Hills, Calif.-based PKG Group, made up of managers of the former Los Angeles-based Seda Specialty Packaging Corp.; and Barcelona, Spain-based Quadpack Group.

Plastics News recently sat down with Yonwoo and PKG executives to discuss the firm's rapid growth, its global plans and how it sees South Korea as one of the top spots in the world for developing skin-care products, and consequently, the packaging that goes with it.

International expansion

In the last five years, the company has gone from being focused on Korea and specialty global cosmetics manufacturers, to being more global and dealing increasingly with the world's biggest cosmetics makers.

Exports are 55-60 percent of sales now, up from 40 percent in 2007, when the company was less than half its current size. Yonwoo said it sells its packaging directly to the 12 largest cosmetics manufacturers worldwide.

It has a sizable plastics focus - 3,500 active injection molds, 65 of its own injection molding machines and another 240 or so molding machines at South Korean subcontractors that are 100 percent devoted to Yonwoo business, including some in subfactories inside Yonwoo's campus in Incheon. The company, with about 1,100 employees, is also in the midst of adding new capacity in Incheon.

But manufacturing in South Korea will no longer be enough for the company.

"There is big and serious pressure from our customers, global customers to have a second operation close to their location," Cha said.

Operations in China and Brazil are under discussion, although it looks like Brazil would be the first, said Curt Altmann, vice president of global development for Yonwoo International and PKG Group, and a 30-year veteran in packaging design in the cosmetics industry, including working for global brands.

"It goes from sales distribution to assembly to molding to decorating," he said. "Everything is on the table."

The company has an ambitious goal of $800 million in annual sales by 2021, Altmann said.

Yonwoo believes being in South Korea gives it a competitive advantage in the cosmetics industry.

Cha and Altmann said South Korean pop culture has been a widespread hit in Asia and increasingly elsewhere - a phenomenon known as the "Korean wave" - has the spin-off effect of making Korean cosmetics products more popular worldwide.

Skin-care forefront

Korea has become one of the globe's centers for developing cosmetics, they said.

"We are very lucky in that Korea is at absolutely the forefront of skin-care product development in the world right now," Altmann said. "It is the most sophisticated market from a product standpoint and usually it's invented here and then goes to the world."

"The classic example is 'BB cream' [blemish balm] - the BB cream phenomenon worldwide started right here," Altmann said. "I can't think of a single culture that pays as much attention to skin care as Korea."

Yonwoo is also in a sense riding South Korea's economic growth.

The country went from being one of the poorest in the world in the 1950s to last year having a per capita income of $32,400, just a fraction less than the European Union's $34,500, higher than Spain and Italy, and more than three times that of China.

The country is home to global automakers like Hyundai and electronics giants like Samsung, all with global supply chains and vying for customers worldwide, so South Korea's manufacturers have to rely on something besides being low-cost to survive and thrive.

For Yonwoo, that means constantly focusing on making its manufacturing operations nimble - it designs its own version of plug-and-play manufacturing modules for its factories  -  and on innovation.

Cha said Yonwoo founder and CEO James Joong Hyun Ki has considered packaging innovation essential since the company began in 1983.

"We want to be a global packaging company and we want to be recognized as a solution provider, an innovation-oriented company," Cha said.

As an example, Yonwoo's design team in March commercialized a line of cosmetic containers made entirely of polyolefins, in response to customers' desire for more recyclable packaging, Altmann said.

The product currently is not being used by any cosmetics maker, but Yonwoo has built one of its standard four-cavity tools to be ready.

"We wanted a package where the consumer could just take and blue-bin the whole thing," Altmann said, adding that the challenge was making a pump system that was strong enough using only polyolefin materials, without other resins that might contaminate recycling streams.

"What we finally nailed with this system was being able to come up with a system where the check valves, the housing, everything is either polypropylene or polyethylene," he said.

"There are a lot of people now that are very interested in this," he added.

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