A tale of the tubes.

By now, we're accustomed to seeing manufacturing get shipped overseas, much of it to China. And we're used to watching as business processes and technology functions are moved to India.

But here's a strange new twist. An Indian company called Essel Propack has just opened a $25 million plant in Danville, Va., to manufacture toothpaste tubes for Procter & Gamble.

Why is P&G outsourcing the making of Crest tubes to an Indian company? And why can that company make those tubes on American soil cheaper and better than anyone else?

The story began in India when P&G tapped the Bombay company to start making tubes for markets in that part of the world. Essel, as the company then was known, expanded to Egypt, China and Germany, supplying P&G in those markets, too. Then it acquired a Swiss company, Propack, and kept expanding.

Today, its share of the global toothpaste tube market stands at 30 percent, up from 8 percent in 1995. Its only two global competitors are a unit of Pechiney of France and a British company called Betts.

It turns out that the Indian company is vertically integrated in the processes needed to transform plastic resins into tubes. Thanks to its technology, Essel Propack is able to compete in the United States--and let P&G concentrate on products and branding. "It's wiser for toothpaste producers to look at us as suppliers than to make the tubes themselves," CEO Cyrus Bagwadia says.

His $120 million company is betting big on U.S. growth. "This is just the beginning," Bagwadia says. "The idea is to expand into other segments," such as cosmetics.

Bagwadia notes that Essel Propack is not competing on the basis of lower offshore labor costs. His new plant employs 95 Americans and just two Indian nationals as managers.

Is this just a fluke, or are more Indian manufacturers on the way? Bagwadia says pharmaceutical makers, such as Ranbaxy, also are pouring in and other companies are likely to follow. How the wheels of the global economy do turn!