'Teh tarik' condom maker talks business strategy

• The digital marketing edge – more revenue opportunity and marketing time
• Although the largest, Karex earns US$100 million a year while Durex earns US$4.5 billion

KAREX Bhd (Karex), a Malaysian family business turned largest condom manufacturer in the world, is known for its unique condoms – which include durian, ‘nasi lemak’ and its latest ‘teh tarik’ condoms.

Daring to push the envelope and never one to shy away from innovation, Karex has forged a pathway of growth and success for itself. At Digital News Asia’s What’s Next 2018 conference on Aug 30, the managing director of Karex, Goh Miah Kiat (pic)  talked about the company’s beginnings and its digital journey.

When his family’s rubber trading business was hit by crisis in the late 80s, Goh’s grandfather had to find a way to make it work. “All my grandfather, father and uncles knew were rubber and at the time, it was also the height of HIV.”

While many in the rubber industry were rushing into glove production, Goh’s grandfather had the foresight to do something different – condoms. “We lost everything in the crisis. So the condom factory was set up in the house I grew up in,” Goh shares, reminiscing about how his secondary school friends were always keen to visit.

Growing the business

From helping around in the factory as a teenager, Goh is now the managing director of Karex and has grown the company to the size it is today. “Back in 2000, we were earning RM7 million in revenue and in 18 years we’re grown that to RM400 million.”

As far as his strategy goes, Goh says, “Innovation is always the key in any business. In condoms, the anatomy doesn’t change but the way it is made has sort of changed.”

He credits the ‘crazy people’ he works with for the innovation of the company’s products. “We created a colour changing condom that changes from pink to purple when it gets hot and we also had to think of how to colour condoms with fluorescent colours for our glow-in-the-dark range.”

Another important aspect in scaling the business upward was the development of the manufacturing machines to manage the cost of production. In terms of earning revenue, Goh says, “the retail business only makes up 50% of the condom market. Governments essentially buy the remainder 50%.”

He explains that the government’s purchase of condoms has contributed largely to Karex’s growth. “No matter what business you run, your business model has to be right. We’ve got the right model. We know we have to be cheap, low cost and we must innovate.”

However, Goh also attributes Karex’s success to timing. “Condoms are medical devices and the regulations behind it are just crazy. Condoms are really made a lot safer today compared to 30 years back.”

The benefit in going digital

One particular opportunity Goh has spotted is in companies peddling one-size-fit-all condoms. Goh puts forth, “How many of you guys actually think one size fits all? The condoms in the market today are claimed to fit a watermelon, but how does the watermelon feel inside the condom?”

Sharing statistics to make his point, Goh says that only 12% of men feel comfortable in it. “This is a huge opportunity for us. So we bought over TheyFit (since renamed to MyONE) which produces condoms in 66 sizes.”

The challenge they faced was bringing all 66 sizes to the limited shelf space in retail shops. “But there is a demand for it and the digital space has opened up a new opportunity for us,” Goh explains, talking about the brand’s online shop.

To purchase, customers need to self-measure and purchase online. “It’s amazing because, believe it or not, a lot of men today still feel embarrassed buying condoms at a physical shop.”

Going digital is also a strategic decision to grow the company’s revenue. “The average price of a condom is US$1 in USA but Karex sells at 3 cents apiece. So to make that extra 97 cents, launching a brand and going digital is a huge opportunity.”

Additionally, Karex also benefits from increased online engagement by going digital. In brick and mortar, Goh says, “The average man only spends five to 12 seconds buying a condom, which only gives us that much time to present our products to customers. But going online gives us more marketing time.”

Although Karex is already 2.5 times larger than its closest competitor, it still has lots of ground to cover revenue-wise. “We earn about US$100 million a year while Durex and Trojan are at US$4.5 billion and US$1 billion respectively – so it was really no question for us but to move into the branded space.”

Related stories:

Week in Review: World Bank zooms in on Malaysia’s Digital Economy & What’s Next welcomes Condom King

Week in Review: Have government efforts lifted Malaysia’s innovation levels?

What’s Next returns for 4th edition as digital disruption heats up

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