Growing up above his family’s condom factory in Malaysia, Goh Miah Kiat had a stock answer if anyone asked what it did. “I just said we make rubber products,” he says, “and hoped people didn’t ask more.” Of course, there was an upside. In school, “Obviously, I was the cool boy… my friends all wanted to know about condoms.”
These days there’s no more hiding. The Goh family business, Karex, is now the world’s biggest condom-maker. Last year, its four factories in Malaysia and Thailand churned out 5 billion condoms—roughly 15 percent of the world market, mostly for export to more than 120 countries. Karex expects to raise production to 6 billion condoms this year and to a rate of 7 billion by the end of 2017.
Karex grew rapidly over almost three decades as a contract manufacturer for the world’s best-known brands, such as Durex, and by supplying bulk orders to global public health organisations. Analysts expect revenue to have reached $91.4 million for the year ended June 30, a 35 percent rise in two years. Net profit is seen totalling $18.1 million, a 69 percent jump since fiscal 2014. That performance puts it on our annual Best Under A Billion (BUB) list for the first time.
It’s a high-volume, low-price business. Karex generally makes just 3 cents each on condoms that end up retailing for as much as $1. Its goal is to acquire and build its own stable of brands. Its brands now make up just 7 percent of sales; Karex hopes to pump that up to 20 percent in three to five years.
Karex recently bought UK condom-maker Pasante, which supplies the National Health Service, Tesco and Costco; US condom brand ONE, known for its hip, arty packaging and young customer profile; and a UK bespoke condom-maker called TheyFit. Its own Carex brand is already a leading mass-market condom brand in the Middle East. “This strategic shift allows the company to capture more of the industry’s value chain,” says Kenneth Yap, who manages the KAF Asia Equities Fund. The fund holds Karex shares. “If they can sell more condoms at 30 cents rather than 3 cents, their already outstanding net profit margins of 20 percent can be improved further.”
To do that, Karex plans to tap ONE’s branding savvy. The Boston-based brand with the distinctive tubular packaging debuted last year in Malaysia and will soon be on store shelves in Singapore. Recently, just in time for durian season, ONE introduced a durian-flavoured, studded condom.
On a recent morning the smell of ammonia wafts from Karex’s factory in Port Klang, a 45-minute drive southwest of Kuala Lumpur. The ammonia is used to stop liquid latex from coagulating. This is Karex’s headquarters and one of its four facilities. The other factories are in Pontian and Senai, in southern Malaysia, and Hat Yai, Thailand.
Inside, a conveyer belt dips a long row of cylindrical glass rods in a smooth wave—like a line of can-can dancers—into and out of a trough of liquid latex before moving the white-coated rods through a hot oven to dry. After a second dipping—the “double-dipping” method that’s become standard in condom-making—and another spin through an oven, jets of water separate the rubbers from the rods; they are washed and spun in big washing machines, then tumble-dried.
Next door, workers in hairnets, gloves and surgical masks stretch every condom on a mandrel running an electrical current to check for pinholes. If a button lights up, it means there’s a hole and the piece is discarded. Each rolled condom is then manually placed on a conveyer belt for packaging and given a squirt of lubricant.
The work is labour-intensive, and Malaysia’s labour shortage means most of the workers at this plant are from Nepal, Myanmar or Cambodia. After the Malaysian government recently froze the intake of new foreign workers, Karex had a 20 percent decrease in foreign workforce and had to hire short-term contract workers at an increased cost.
(This story appears in the 16 September, 2016 issue of Forbes India. To visit our Archives, click here.)