Today, the firm’s business in APAC accounts for around 15% of its turnover. This is largely due to Toly’s performance in the Chinese market.
“As the second-largest market in the world, China is at the core of our Asia strategy and forms a big part of our global ambitions. Whilst the opportunity has been there ever since we stepped foot in China, it's really in the last five to seven years that we have seen the market transform,” said Samuel Xuereb, executive director of Toly.
Xuereb estimates that the skin care and make-up segments will grow at a compound rate of approximately 10% and 15% respectively over the next five years in China.
“Coupled with strong appetite for brands to invest in R&D, there is no question that China, in particular, has a bright future,” commented Xuereb.
Appetite for local cosmetics
One of the changes the company has observed in the market is the rising popularity of domestic cosmetic brands over western brands.
“Chinese brands today want to be different. They realise that imitating other brands or copying outright is no longer a sustainable strategy and consumers are looking for innovation and creativity both in formulation and packaging.”
Not only are the brands changing but consumer behaviours and preferences are evolving as well.
“Quality and innovation obviously comes at a premium, but the good news is that the modern Chinese consumer is willing and able to pay this premium,” said Xuereb.
The changing landscape of the Chinese beauty landscape has created new opportunities for Toly.
“Thirteen years ago we were considered ‘too expensive’ or 'too premium' for the market, today we are inundated with high-quality project briefs from Chinese brands. They are looking to us not simply for off the shelf stock packaging, but for a complete solution, leveraging Toly's capability across the NPD spectrum from brand conceptualisation all the way through to delivery of a finished product, including full service,” said Xuereb.
Speed is key
The key to remaining competitive in the Chinese market is the ability to react quickly to changes. Xuereb said the company’s biggest challenges were mostly because of successful product launches, which create an unpredictable surge of demand overnight.
“When that happens we need to react quickly to increase output. We have responded to this by building greater capacity upfront in terms of tooling as well as reserving a percentage of our manufacturing capacity for these sudden spikes in demand,” he said.
Another trend the company sees in the market is brands launching more promotions or iterations of existing products, which more often than not tend to require shorter production runs
“This necessitates not just quick development turnaround for a swift launch, but also quick manufacturing turnaround. We have developed a flexible automation system which allows us to do a product changeover in a couple of hours,” said Xuereb.
In order to capitalise on these opportunities in China, Xuereb said manufacturing in China remained a “priority” for the group.
“Our belief is that more and more customers will localise production closer to the point of sale, so with Chinese brands being a key part of our strategy, manufacturing in China actually increases in importance,” he said.
Currently, the group is also in the process of setting up a new sales office in Shanghai, which is schedule to open in in 2020.
“The next step after that will be to localise our marketing, design and innovation capabilities which are already very well established in Malta. We want Toly Shanghai to be the Group's crown jewel in Asia in terms of creativity. This will certainly set us apart,” said Xuereb.
As part of its strategy for Asia, the group will be exhibiting at Cosmoprof Asia this year. Previously the company has relied on off-site private exhibition for its key customers.
Xuereb said: “With our increased focus on Asia and the raft of new brands sprouting up in the region we recognise the importance of Cosmoprof Asia as a high quality source of prospective opportunities. We have a fantastic array of new innovations which we are really looking forward to launching exclusively at the exhibition in November.”