Although the name may not ring a bell with consumers, BASF is a Global 500 company and world’s leading chemical producer. The company is also a major provider of cosmetic care materials. In 2017, Fortune ranked BASF at #126 among its Global 500 companies in terms of operating income. Chemical producing peers, Dow Chemical and China National Chemical Corp ranked #196 and #211 respectively.
Since it entered China in 1885, BASF has grown its Greater China business to Euros 5.9 billion in annual revenue. It operates advanced production facilities in Shanghai, Nanjing, and Chongqing and is China’s largest foreign-invested chemical business. BASF products span vitamin, sports footwear, pesticide, automotive components, beauty, and personal care sectors. In the beauty and personal care industry, BASF counts brands like L’Oreal, Estee Lauder, Cotti, Shiseido, P&G, Unilever, and Shanghai Jahwa among its clients in China.
Rigorous Implementation of Global Standards
BASF China’s commitment to rigorous enforcement of global standards is even reflected in access requirement for its facilities. Executives and visitors of all levels are required to receive safety training before entering.
(From left to right: Hua Zhuoqin, Vice President of BASF Care Chemicals Asian-Pacific; Mao Jianwen, Vice President of BASF Care Chemicals Asian-Pacific; Sang Ying, the Secretary-general of China Beauty Expo)
Although in many industries, Chinese-based plants may lag behind their EU or US counterparts, “however, it is not an excuse for lowering the bar. For national standards or for BASF’s own standards, BASF always implements the strictest standards no matter where it is, said Dr. Mao Jianwen, Global Vice President of BASF.
Dr. Mao complimented China’s industry associations on their effort to improve industry standards. “We are delighted to see that China Cleaning Industry Association (CCIA), and China Association of Fragrance and Flavor, and Cosmetic Industries (CAFFCI) and other organizations are striving to plan and coordinate overall industry development. They not only improve industry standards, but also promote positive energy, educate consumers, and share industry development.”
Referring the CCIA example, he noted that CCIA has recently drafted the “13th Five Year Plan” for the cleaning product industry, created the “Description of Household Detergent Ingredients” in the safety system for household detergent ingredients, and listed nonylphenol polyoxyethylene ether authorized by the Ministry of Industry and Information Technology in the items prohibited for market access in the Yangtze River Economic Zone.
In the recent dioxane controversy, CAFFCI not only upheld industry standards but also actively communicated these to the public. It explained the facts, attempted to solve consumer problems, and supported compliant companies.
“Entering the market over 130 years ago, BASF has deep roots in China. It will, as always, cooperate with clients, industry associations, and the government to improve and promote creation and improvement of industry standards as it contributes to China’s chemical industry,” said Dr. Mao.
3rd Quarter 2017 BASF Sales and Earnings Show Strong Growth
Sales reach Euros 15.3 billion up 9%
Earnings before interest and taxes excluding special items reach Euros 1.8 billion up 16%
Earnings per share of Euros 1.45 up 49%. Adjusted earnings per share of Euros 1.40 up 27%
Cash from operating activities reached Euros 3.8 billion up 52% while free cash flow reached Euros 2.8 billion
“Hopefully, we’d like to be able to grow with the market. Rapid development in China not only drives demand, but also brings tremendous competition. China has moved into its ‘new normal’ phase of growth. We will adjust our own strategy to according to the market. We believe that competition will continue to evolve based on differentiation. We’ll focus on our technological advantages, industry trends, and customer demands to win in China.” Dr. Mao explained.
Using surfactants as an example, Mao said that the supply-demand ratio has risen to 2:1 across the China market. So, all players should think about adjusting their strategies, including BASF. Among the strategy shifts mentioned by Dr. Mao, sun screen agents stood out. BASF can supply the full range of sun screen agents in the market and also offers its own high-end sun screen agent. BASF supplies high-end sun screen agents to many leading brands. “BASF is one of the main domestic suppliers of sun screen agents,” according to Zhang Taijin, a member of Guangdong Cosmetics Standardization Technical Committee.
(Product testing by a BASF scientist)
Hua Zhuoqin, Vice President of BASF Asia-Pacific, also stressed that “a business cannot grow by only selling raw materials and products. That’s why we provide clients with solutions and customized services that leverage our global network, technological advantages, and range of products. China and India are both Asian countries, but the needs of their consumers are different. Even when they have the same needs, we still need to provide different customers with different solutions.”
Hua Zhuoqin has not only figured out a growth plan, but has also taken a Chinese approach to confidently achieve sustainable growth in China. “If BASF wants to expand, there will be adequate strength to support it.” He explained that BASF launched a lubricant and wax facility in Shanghai’s Jinshan District with an investment of RMB 150 million in June, 2017. These materials complement the wax ester, emulsifier, and main surfactants that are currently produced by BASF in Jinshan. This improves BASF’s overall production capacity and enables it to better serve the China and Asia-Pacific personal care market.
Global Innovation Comes to China
BASF is constantly striving to localize its operations. According to Dr. Mao, “The Chinese market is always a major battlefield for global companies. In the automotive market, for example, 28 million cars were sold in China last year, more than the total amount in the 2nd to 4th ranked markets. So, ‘winning in China’ is critical to BASF and other companies trying to crack the China market.”
At the same time, greater access to information and years of R&D have boosted the capabilities of local companies. The generally can couple this with rapid response time and cost advantages. “Facing these challenges, BASF must combine its global R&D capabilities with its local R&D efforts and market input to develop more customized solutions for Chinese and Asian consumers.” Dr. Mao added.