Ghosh, Forbes India
26 June 2015
Wipro enjoys instant recognition as an information technology
behemoth, but hidden behind the namean acronym for Western
India Vegetable Products Limitedand the companys sunflower
logo are traces of its humble origins as a manufacturer of edible
Founded in 1945 by MH Hasham Premji, father of current promoter-chairman
Azim Premji, Wipro began as a fledgling business riding the wave
of an imminent Indian Independence. The company grew quietly from
strength to strength, single-minded in its consumer care focus
as a vanaspati manufacturer. Later, it would diversify into toilet
soaps and toiletries.
In 1981, Wipro shifted gears and rode the IT boom that would
create fortunes for many. It pioneered the marketing of indigenously
made personal computers in the mid-80s, which was a money
spinner for the company.
Today, at $7.5 billion, the IT business is the younger yet bigger
sibling. However, despite living in its shadow, the consumer care
entity is no minnow either. Wipro Consumer Care & Lighting
(WCCL), though yet to cross a billion dollars in business, grows
alongside, a silent behemoth in the making.
Over the past 30 years, the Azim Premji-led, and now privately-held
WCCL has been building a business that is estimated to be close
to a billion dollars in revenue for FY15. It is now present in
over 40 countries and is the first homegrown consumer care products
firm to report 53 percent of its revenue from overseas markets
in FY14. For the same period, Godrej Consumer Products garnered
47 percent of its revenue from its international business followed
by Dabur at 32.4 percent, while Marico International contributed
about 25 percent to Maricos overall turnover.
WCCL, as a separate entity, germinated from Wipros decision
to segregate the IT business in December 2012. The move was aimed
at creating better shareholder value for its software services
enterprise. The hive-off created a separate unlisted entity (Wipro
Enterprises Limited) which included two main businesses: WCCLto
cater to consumer care, lighting and office furnitureand
Wipro Infrastructure Engineering that manufactures hydraulic cylinders
and other high-precision components for the aerospace and defence
sectors. Around the same time, the company also severed its links
with its origins when it sold its oldest brand, Sunflower Vanaspati,
to US-based food processing company Cargill Inc for an undisclosed
Wipros decision to diversify its consumer care portfolio
(from vegetable oil to toilet soaps and toiletries) can be traced
to the early 80s. In the 1980s, the Indian economy
was still under licence raj. Growth could have come through acquisitions
or extensions to a new line of business. To expand capacity in
the vanaspati unit, we made acquisitions in Gujarat and Karnataka.
And this was when we moved into our current product portfoliotoilet
soaps and toiletries, says Suresh Senapaty, former CFO,
Wipro Ltd, who joined the company in 1980. During his over-three-decade
stint with the company, Senapaty also served as CFO of Wipro Consumer
Care in 1982, when it was the biggest business for the group.
The metamorphosis into a manufacturer of toiletries was a logical
step given the background in edible oils. Wipro invested in its
own manufacturing capabilities, which was uncommon for companies
in the sector at the time. But the transition had its own share
of initial missteps.
When Wipro first launched its toilet soap brand Santoor in the
home market of Bengaluru in 1985, it sank without a trace. Weak
distribution and a sluggish marketing strategy were the chief
culprits. This, however, didnt deter the fledgling Rs 95
crore-Wipro consumer care business from doing the seemingly foolhardy.
The brand was re-launched a year later, nationally this time,
and without a single change to the product.
Failure was simply not an option. At the time, all toilet
soap brands were manufactured by third parties. The barrier to
exit the business was low for most, given the low investments,
but not for us. We had invested in our own manufacturing capabilities,
given our background in edible oils. We went ahead despite the
naysayers, confident in the product and ourselves. This, I think,
was the start of our transformation, says Vineet Agrawal,
chief executive officer, WCCL.
In 1980, about 90 percent of the consumer divisions revenue
came from Sunflower Vanaspati, largely from Maharashtra and Madhya
Pradesh. Today, WCCLs Santoor brand contributes over 30
percent of its overall business. It is the third-largest brand
in the toilet soap category in India, with a market share of 9.5
percent, behind Hindustan Unilevers Lifebuoy and Lux.
According to market intelligence firm Euromonitor International,
the Indian beauty and personal care market was estimated to be
around Rs 65,000 crore in 2014 and is expected to cross Rs 1,20,000
crore by 2019. Santoor is a significant player in this market,
leading the toilet soaps category in key states such as Andhra
Pradesh (the biggest market for Santoor in India where it enjoys
a 41.2 percent market share), Karnataka, Maharashtra and Gujarat.
However, brand experts feel that despite a varied mix of products
in its portfolio, most of WCCLs brands are strong only in
the southern and western pockets of the country and are yet to
establish their dominance in the northern and eastern markets.
At the same time, Santoor is the third largest toilet soap
brand in the country despite the fact that its presence is largely
regional. Wipro needs to push ahead in its under-penetrated markets,
says Harish Bijoor, brand strategy specialist and CEO, Harish
Bijoor Consults Inc, a Bengaluru-based brand consulting firm.
A Mahendran, chairman and managing director of Global Consumer
Products Private Limited, points out that for WCCL, the jewel
in the basket is Santoor. But, unfortunately, the
soap brand is localised and strong only in certain markets. The
brand is yet to penetrate deeply across the country. But, I think,
now Vineets plan is to take Santoor across all states,
adds Mahendran, who is also the former managing director of Godrej
Consumer Products Limited (GCPL). The challenge for WCCL will
be its ability to put together a power portfolio of offerings
in different consumer care segments. It is not enough to
have one killer offering in the form of Santoor. It needs other
big beach-head brands with distinct identities of their own to
offset the dependence on Santoor and its numerous brand extensions,
Even as the industry weighs in on the future of the business,
in the last four years (2010-2014), WCCL has grown at a compound
annual growth rate (CAGR) of 21 percent clocking a revenue of
Rs 5,025 crore (about $837 million) for the fiscal year ended
March 2014; EBIT during the period stood at Rs 575 crore. The
company has to record a revenue of around Rs 6,300 crore for FY
2014-15 to cross the billion-dollar threshold, which will be a
26 percent growth over the previous year. CEO Agrawal, however,
shies away from disclosing how far the company is from this milestone
as well as the financials for the recently concluded fiscal. WCCL
is expected to announce its FY15 earnings during its board meeting
scheduled to be held in the early part of June.
The top management at WCCL says there has been no significant
change in functioning post the 2013 demerger of the IT business.
Everyone runs independently, whether it is the infrastructure
and engineering division, us or IT services. So when we split,
there was no pain. The ability to take risk increases with being
unlisted, says Agrawal. Agrees Mahendran: WCCL, as
an independent, unlisted company, should become more aggressive.
And in the next three to five years, it should perform well under
Vineets leadership as it does not have the constraints of
being part of a listed company anymore.
WCCLs healthy balance sheet and a strong annual cash flow
has ensured a buffer from currency volatility and allowed the
company freedom of operation. The organisation generates a cash
flow of close to Rs 400-500 crore a year. At the time of the demerger,
the WCCL business had around Rs 1,700 crore in cash reserves.
Its always easier for an unlisted company to undertake
acquisitions, as no investor buy-in is required. However, as an
organisation, the board keeps checks and balances in place. We
have not acquired any company since the demerger, which I think
highlights the risk approach we take to growth, says Agrawal,
who is also executive director at Wipro Enterprises Ltd. Thus
far, WCCL has made eight acquisitions across the personal care
and lighting space in India and in overseas markets. The Singapore-based
Unza Holdings buyout in 2007 for $246 million in the personal
care category has been its largest deal till date.
It wasnt all smooth sailing. We had to work very
hard to build our credibility as a brand in international markets.
In some countries, being taken over by an Indian company is looked
down upon. They would rather be acquired by a European or US company,
At a time when brand India wasnt fully appreciated,
Wipro had to work doubly hard to prove itself as a leader with
world-class products and a vision in the consumer care space.
To seal its foreign acquisitions, WCCL had to demonstrate its
long-term intent, that it was not a mere fly-by-night
operator. During its Unza takeover, the management flew down the
top 100 employees of the Singapore-based company for a five-day
induction programme to Bengaluru. On the agenda was one thingIndia.
The delegation was immersed into all things Indianculture,
heritage and traditions. Trips were made to showcase the wealth
of Indian history, including the Taj Mahal in Agra and the Amba
Vilas Palace in Mysore, the seat of the Wodeyar kings. For people
who had never seen India, this initiative was an eye-opener and,
also, helped cement Wipros equity as a global leader.
Experts point out that for WCCL, all its buyouts worked out well
and fulfilled its objective of a strong overseas foothold, even
with large deals such as Unza and Singapore-based FMCG company
LD Waxson Group, which was acquired for $144 million in 2012.
The firm has managed to cement its presence in emerging markets
such as Malaysia, China, Indonesia, Vietnam and Singapore with
its string of acquisitions.
For WCCL, India constitutes about 47 percent of its total sales
and Malaysia is close to 25 percent, making it the second-largest
market for the firm in terms of overall sales.
It has also expanded its base in mature markets by acquiring
Yardleys UK and Europe business (excluding Germany and Austria)
and the UK-based heritage personal care brand Woods of Windsor.
It also grew its Indian portfolio by acquiring brands like Glucovita,
Chandrika, Aramusk and North-West Switches.
Acquisitions, more than exports, have driven the business
outside India for WCCL. In recent years, it has moved to buying
significantly larger-sized businesses (like Unza and LD Waxson)
that already have a wide international footprint, giving further
momentum to the growing share of overseas markets in the companys
overall sales, says Devangshu Dutta, chief executive, Third
Eyesight, a New Delhi-based retail and consumer products consultancy
The overseas acquisitions are of those businesses that
have an emphasis on emerging rather than mature markets. Many
of these emerging markets are under-penetrated and have possibly
helped Wipro to buffer any potential growth slowdown over the
last 2-3 years in the highly competitive domestic market,
Wipro became the second-largest personal care company in Malaysia
two years ago, ahead of global giant Procter & Gamble (P&G).
At present, Unilever leads the market in Malaysia. In Vietnam,
Wipro is the third-largest player just behind Unilever and P&G,
while in Singapore, it is the second-biggest player in facial
skincare with a 14 percent market share and leads the facial cleansers
category with 15 percent.
If we have to grow faster, we have to set a target higher
than the industry growth rate. The India and Saarc market has
grown from Rs 270 crore in FY04 to Rs 1,565 crore in FY14, a 19-20
percent CAGR over the ten-year period. During the same period,
the FMCG industry in India, has grown in the range of 10-12 percent,
says Anil Chugh, chief executive, (consumer care business), WCCL.
Chugh, who heads the consumer care and Yardley business for India,
Bangladesh, Nepal and Sri Lanka, says the growth has been both
organic and inorganic across markets.
When we acquired the energy drink brand Glucovita in 2003,
it was an approximately Rs 4-4.5-crore brand in terms of revenue;
today it clocks over Rs 40 crore. We acquired such under-utilised
brands and have grown them significantly, he says.
While Santoor is the current cash cow for the business, WCCL
also operates other fast-growing categories. Its lighting and
furniture businesses garnered revenues of around Rs 703 crore
in FY14, which is 14 percent of the companys overall revenues.
The company first ventured into the commercial lighting space
in 1992. The institutional lighting division began three years
Liberalisation helped us grow the lighting business. The
software industry was booming, large office spaces were opened
and the demand for lighting skyrocketed. We focussed on the offices
rather than outdoor lighting, says Agrawal. In the last
three years, Wipros consumer lighting business has grown
at a CAGR of 20 percent.
In 2004, WCCL branched out into the office furniture space. It
started the business initially by manufacturing furniture for
its in-house companies for a year to understand category nuances.
We focus only on the institutional furniture business,
says Parag Kulkarni, senior vice president and business head,
commercial lighting, WCCL. In lighting, about 45 percent
is institutional, the rest is domestic. Currently, the growth
in the institutional business is fairly strong and this looks
set to continue.
Even as the business keeps its eye on the ball, WCCL has invested
strongly in areas critical for success: People, processes, and
its sales and distribution muscle.
WCCL has, as its core team members, people who have been part
of Wipro for many yearsa rare feat. Agrawal himself joined
Wipro as a newbie campus recruit after his MBA from Jamnalal Bajaj
Institute of Management, Mumbai, in 1985 and has stayed on, moving
to lead WCCL in 2002. Chugh has spent 25 years with the business,
while Kulkarni has completed two decades with the organisation.
Wipro Enterprises Ltd is led by non-executive chairman Azim Premji,
while its board includes Suresh Senapaty, Vineet Agrawal, Pratik
Kumar, CEO of Wipro Infrastructure Engineering, and Rishad Premji,
elder son of Azim Premji and chief strategy officer, who was recently
appointed to the board of Wipro Ltd.
Azim Premji, the 69-year-old billionaire promoter of Wipro Ltd,
keeps a day dedicated every quarter for WCCL. He plays an active
role in all major decisions of the company such as strategy and
operational planning, capital expenditure and acquisitions. His
involvement in the business also extends to interactions with
some major clients and WCCLs employees. WCCL has a total
staff strength of 8,300 people, of which about 5,600 are stationed
Research and development (R&D) is another key ingredient
for fuelling the companys growth. As Wipro plans to scale
its consumer care business globally, innovation will play a vital
We launched Glucovita Bolts, a first time product with
Glucose which can be taken on the go (without water). We struggled
with the formulation and packaging because it was the first time
that such a product was conceived and made. However, it was worth
it as it has been a success. Safi Shayla shampoo in Malaysia is
a specially formulated shampoo for hijab-clad women. In the first
year itself, it has garnered a seven percent share in Malaysia.
Without innovation, one will never become a leader, says
While the company doesnt disclose its R&D budgets,
it operates R&D centres in India, Malaysia, Vietnam, Indonesia
and China. It also has centres of excellence in India and Malaysia.
Debashish Mukherjee, partner, co-head, consumer and retail industries,
India and Southeast Asia, AT Kearney, feels the marketing and
distribution minds of some of the multinationals have earned them
a very high market share. A strong distribution channel
and building brand awareness through a huge advertising budget
makes the difference for any brand. Thats where most of
the international players score over local peers. Theres
not much differentiation in product quality or pricing,
WCCL, to that end, is bolstering its distribution to compete
on a national level. It has 30 sales offices spread across state
capitals in the country along with a network of branch offices.
The company claims to have 4,000 distributors across the country,
reaching over 7.5-8 lakh outlets directly and with an indirect
reach of 18-20 lakh outlets.
Senapaty, director on the board of Wipro Enterprises, also points
to a push towards a stronger online presence. It is important
to not just be present, but there must also be a strategy for
emerging sales channels such as ecommerce. With higher mobile
phone penetration and newer experimental models of delivery, FMCG
companies must have an active online sales strategy. He
says that WCCL is also looking to capitalise on under-penetrated
categories like bath and shower products, deodorants and bodycare.
While per capita consumption in these segments is far lower
in India than in other emerging markets, they are growing rapidly
and this growth is what the company will capitalise on,
This growth should be one to watch out for because WCCL must
show the same foresight and clarity of thought it has done so
far to create another Santoor and expand into other markets.
Otherwise, and this is a cautionary note, the dream of the next
billion is likely to remain just that for the older Wipro sibling.
(Published in Forbes