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% 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 organizations. Analysts expect revenue to have reached $91.4 million for the year ending June 30, a 35% rise in two years. Net profit is seen totaling $18.1 million, a 69% jump since fiscal 2014. That performance puts it on our annual Best Under A Billion list for the first time.
Karex recently bought U.K. condom-maker Pasante, which supplies the National Health Service, Tesco and Costco; U.S. condom brand ONE, known for its hip, arty packaging and young customer profile; and a U.K. 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% 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-flavored, 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 labor-intensive, and Malaysia’s labor 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% decrease in foreign workforce and had to hire short-term contract workers at an increased cost.
Goh Miah Kiat’s great-grandfather was part of a wave of Chinese migrants who sailed to Southeast Asia in the late 1800s and early 1900s in search of better economic prospects. He opened a small sundry shop on a rubber estate in Muar, Johor. Some customers brought in rubber sheets to barter for rice, sugar and other daily necessities.
Goh’s grandfather, Goh Huang Chiat, expanded that side business into a rubber-processing factory. Malaysia is one of the biggest producers of natural rubber in the world, and in its heyday the business included a trading office and a factory in Singapore. Goh Huang Chiat became wealthy enough to send five of his seven children to university–in the U.K., Australia, New Zealand and Malaysia. Then came the mid-1980s global commodities crash. Prices plunged overnight. “It rubbed us out of business,” says Goh Miah Kiat. “Grandfather went bankrupt.”
Malaysian rubber producers–looking for a new lease on life–turned to making rubber gloves or condoms. The Goh family sold its homes, pooled the money and plowed it into a new condom factory. The HIV/AIDS crisis was spreading, and public health organizations were promoting condoms. Goh’s two U.K.-educated uncles, Goh Siang and Goh Leng Kian, had studied chemical engineering and mechanical engineering, respectively; the pair designed and built the condom machines from scratch .
The family slept on mattresses in a room above the factory. Once, when cousins from Hong Kong visited, instead of balloons, they blew up some condoms to lend a festive air.
After a rocky few years the company that would become Karex began to prosper. Goh left Malaysia to study economics and management at the University of Sydney. While he was there, his father, Goh Phon, died unexpectedly, and the extended family took over financing his studies. When they requested that he return immediately after graduating in 1999, he could hardly say no. At the time Karex had 60 employees and annual revenue was $1.9 million.
Goh took over sales and marketing. He signed up new, high-volume customers, including organizations such as the U.N. and the World Health Organization, which were leading the global fight against HIV/AIDS. These large contracts allowed Karex to expand rapidly. By the time the company was listed in 2013, it was the world’s biggest condom-maker and Goh was chief executive. Today the Goh family retains a 56% stake in the business.
The company also makes catheters, but these are only 4% of sales, as well as ultrasound probe covers and lubricating jelly, which make up 3%. Condoms, at 93% of Karex’s revenue, remain the star.
In the last 25 years, says Goh, 38, the public perception of condoms has evolved. At first condoms were primarily a contraceptive. Then they were protection against diseases. What’s next? “Pleasure,” says Goh. If that sounds like a tall order, Goh is in fine company. The Bill & Melinda Gates Foundation has called for the development of a “next-generation condom that significantly preserves or enhances pleasure, in order to improve uptake and regular use.” After all, condom design has changed little in the last 50 years; the sector is ripe for new ideas.
Karex’s recent acquisition of TheyFit is part of that thinking. Built on the premise that condom sizes should be as varied as bra sizes, TheyFit offers customers a downloadable, printable measuring tool–for both length and width, from which guys can figure out which of the 95 sizes fits them best. A better fit means more pleasure. This fall TheyFit will be rebranded as myONE Perfect Fit condoms, marrying the marketing of ONE with the snugness of TheyFit.
“People want to use condoms today,” says Goh, “but they also want to feel it’s not there.”
HITTING ITS MARK
A second condom-maker also makes the BUB list this year, India’s Cupid, based in Nashik in the western state of Maharashtra. As with Karex, it supplies condoms to governments and nonprofits for AIDS prevention and family-planning programs. But it’s also one of the few global suppliers of female condoms, which are ten times more expensive than male condoms.
Cupid’s top market is Africa, where there’s a shortage of 445 million condoms a year. Africa has one of the lowest global condom usage rates, at 4%, compared with 7.4% for the Asia-Pacific region and 18.4% for developed markets. Global condom sales are projected to hit 38.2 billion units by 2019–notching a five-year compounded growth rate of 9%.–Anuradha Raghunathan