Cosmetics maker’s rapid growth bucks trends in manufacturing

Dec 29, 2017
Oxygen Development, the cosmetics maker in Palm Springs, is expanding rapidly. Luis Urena, a compounder, scrapes, or “sweeps” liquid makeup foundation for uniformity from the sides of a mixer that can hold 500 kilos of product. (Melanie Bell / The Palm Beach Post)

Six years after opening a cosmetics factory here, makeup maker Oxygen Development has been busy bucking two big trends in manufacturing.

First is the reality that many American factories have gone dark as manufacturing moves overseas. Swimming against that tide, Oxygen Development runs three shifts a day, churning out lipstick, eyeliner, eyeshadow, foundation and other products for such cosmetics brands as L’Oréal and Estée Lauder.

Oxygen Development’s revenue has been growing fast and will approach $200 million for 2017, said Philippe Cohen, the 39-year-old head of the privately held company.

Second is the trend toward factory workers being replaced by robots. Oxygen Development employs more than 1,200 people, many of whom wear face masks and hairnets as they work on the production floor of the 220,000-square-foot facility at 1525 S. Congress Ave. in Palm Springs.

Parking is so scarce that the company bought three vacant lots just north of its factory. Workers who can’t find a space in the factory’s paved lot settle for a spot on the grass next door.

The parking crunch underscores a quirk of cosmetics factories: The work tends to be less routine and repetitive than in other industries, and therefore lends itself less to robots. Oxygen’s workers might put labels on one side of a package for 10,000 items, then switch to placing labels on the opposite side for the next 10,000 items.

“It’s hard to automate,” Cohen said.

Jeb Gleason-Allured, editor-in-chief of trade publication Global Cosmetic Industry, said products and consumer tastes change so rapidly in the makeup business that it still makes more sense to manufacture with humans rather than robots.

“People are still required in cosmetics manufacturing,” Gleason-Allured said. “The formats can change so radically. You have different bottles, so you have a different filling process. It’s still a very manpower-oriented process.”

With its cosmetics operation running at full capacity, Cohen is looking to expand. In December, the company announced the acquisition of Eyesome, a Korean maker of skin care products, for an undisclosed price.

The deal, financed by a loan from Fifth Third Bank, lets Oxygen jump on Americans’ newfound love of Korean cosmetics.

“The big rage is K-beauty,” Cohen said.

Cohen is keeping Eyesome’s main operation in Korea, but he’s also expanding in Palm Beach County. To house a new Korean skin-care operation, Oxygen Development leased 140,000 square feet of space at the Liberty Airport Center industrial park along Southern Boulevard.

Cohen expects to hire more than 200 workers at the new operation. And he says the investment in domestic manufacturing makes sense, especially when his factory is churning out skin creams that will be sold at U.S. locations of Sephora, Ulta and Target.

Shipping cosmetics from Korea requires weeks on a boat, but distributing from Palm Beach County cuts the ocean crossing out of the supply chain. That means the cosmetics brands that hire Oxygen Development to make their products don’t have their inventory sitting on a ship for a month.

“If they can get stuff faster, they’re willing to pay a little bit more,” Cohen said.

Meanwhile, China no longer is the dirt-cheap manufacturing hub it once was. While wages in the United States have been stagnant for decades, factory workers’ paychecks in China have been soaring — meaning China no longer is so compelling as a low-cost alternative to American workers.

“The competitive advantage they once had, it’s not there now,” Cohen said.

Oxygen Development doesn’t market the products it makes. Instead, it’s a contract manufacturer for household names.

In addition to factory and distribution workers, the company employs higher-paid chemists and engineers.

Oxygen Development’s growth marks a payoff for Palm Beach County, which lured the factory from Deerfield Beach in 2010 by arranging a low-interest $6 million loan through the U.S. Department of Housing and Urban Development.

When the county was recruiting the company in 2009, it expected Oxygen Development to employ 300 to 500 workers at an average annual salary of $34,500.

The company’s total number of employees has far surpassed that mark, although many of the jobs remain low-wage positions. The comparatively low paychecks mean Oxygen Development hasn’t qualified for county tax incentives.

Cohen expects his company to keep expanding, and industry watcher Gleason-Allured said consumers’ hefty budgets for makeup supports Oxygen Development’s ambitions.

“The sheer volume of consumers and how much they spend,” he said, “makes this market very attractive.”