Deal focus: Carlyle backs Tokiwa’s global beauty push

At its heart, the global cosmetics industry hasn’t changed in thousands of years. Advances in science and technology can create new product categories and improve safety for end users, but the fundamental goal of crafting a product that will appeal to consumers’ sense of beauty remains the same.

But meeting this basic need has never been simple: not only do individuals’ tastes vary based on their location, economic status, culture, and other factors, but they are also constantly in flux. Cosmetics players must feed the market with new and innovative products, and time their releases to hit just the right point in the cycle.

Finding the right manufacturing partner is a vital step in this process, and Japan’s Tokiwa aims to be one of the best. Over the past 70 years, the company has served the world’s top global brands in its home market, helping them tweak their product lines for the Japanese consumer, manufacture the cosmetics and their packaging, and bring them to store shelves as quickly as possible.

"All these top brands spend lots of marketing dollars to launch products at a certain time, and if you can't deliver on time it's a big loss for them,” says Yusuke Watanabe, a director on The Carlyle Group’s Japan buyout team. “Tokiwa is well positioned both technologically and with the supply chain capabilities to deliver innovative products much faster than its competitors."

Carlyle has placed its confidence in Tokiwa with a funding round of undisclosed size through its third Japan buyout fund. The firm plans to help Tokiwa leverage its industry alliances to grow beyond the Japanese market and achieve global scale.

This process had already started before the investment, with Tokiwa’s partners – which include some of the world’s leading premium cosmetics brands – beginning to order products for export in addition to serving the Japan market. The company believes it can accelerate its expansion with the help of a partner like Carlyle.

"The products are still made in Japan, but the point of sale is all over the world, and increasingly in the Western hemisphere,” says Watanabe. “So the company's reached a turning point of becoming global, and we believe that over the next two or three years, if we handle things well, Tokiwa can grow much bigger."

As Tokiwa pushes into new markets – the company is planning to launch its first US manufacturing plant this year – Carlyle will provide both financial support and expertise gained through its previous cosmetics investments in Western markets. The aim is to put the company on even footing with its biggest rivals.

"A lot of their competitors are family owned, not just in Japan but also in the US and Europe. But some are listed – or becoming bigger with the help of private equity firms – and we think there'll be a lot of consolidation in the next five to 10 years. It's a very interesting time for Tokiwa," Watanabe says.

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• Topics
• North Asia
• Consumer
• Expansion
• Japan
• The Carlyle Group
• Growth capital