When Godrej relaunched its flagship soap brand, Cinthol, in March2008, with a Hrithik Roshan commercial, the Bollywood star said inan interview that the ad film was bigger than Dhoom 2 there was, hesaid, more action in the ad than in the film. Well, it could nothave been less. India's Rs 6,750-crore toilet soap market, growingat 10 per cent per annum in value terms, is full of suspense andaction. Last year, ITC unnerved the entrenched players with itsFiama Di Wills, Vivel Di Wills and Superia range of personal careproducts; and, Wipro's Santoor dislodged Godrej No.1 to take thirdplace, in value terms, with a 7.6 per cent share of the market.
It would have raised few hackles if Wipro's advance had stoppedthere. But it is moving ever closer to #2 Godrej Consumer Products(GCPL) in overall market share in toilet soaps as well. At 9.2 percent, the Mumbai-based Godrej is less than a percentage point aheadof Wipro's share of 8.3 per cent.
Powered by Santoor
Santoor, which accounts for 40 per cent of Wipro Consmer Care & Lighting (WCCL's) revenues, is clearly leading the charge. Thedivision has grown at 25 per cent-plus for the last nine quartersand 27.7 per cent last year, far in excess of the industry averageof 13-16 per cent. Its Indian business alone has reported acompounded annual growth rate (CAGR) of 30 per cent over the lastfour years.
If UNZA, one of South East Asia's leading personal carecompanies, which Wipro acquired in August 2007 for Rs 1,010 crore,is included, then the fourth quarter numbers look even moreformidable: revenues of Rs 1,521 crore and PBIT of Rs 190 crore forthe year ended March 31, 2008. The UNZA acqusition has put us intoa new league altogether we have grown from being a Rs 1,000-crorebusiness to a Rs 2,000-crore business, says Vineet Agrawal,President, WCCL.Not surprisingly, Agrawal and his team are weavingall their strategies around Santoor. We are looking at ways toincrease the equity of Santoor beyond soaps and into the broaderpersonal care space. We will soon introduce more Santoor products, says Anil Chugh, Senior Vice President, WCCL. On the anvil are araft of skincare products under Santoor umbrella like Santoorhandwash, Santoor talcum powder and Santoor face wash.
The UNZA advantage
Then, it has already launched premium UNZA products likeperfumes, body mist sprays, hand and body lotions and deo roll-onsunder the Enchanteur brand in Ahmedabad, Bangalore, Kolkata, Delhiand Mumbai. We plan to launch other UNZA products at the premiumend of the market in due course, says Chugh.
These products already command huge market shares in Malaysia,Vietnam, Indonesia, Singapore and some countries in West Asia. UNZAgives WCCL a readymade basket of personal care products that arealready popular in several countries. Then, their presence acrossthe mid to premium segment will allow WCCL to expand rapidly withinIndia, says Ashok Jainani, Head (Research), Khandwala Securities, aMumbaibased broking firm.
The growth conundrum
A glance at The Nielsen Company data reveals the market fortoilet soaps was flat last year at 548,000 tonnes, but still grew9.6 per cent in value terms, owing to better realisations. But inputcosts have risen faster. Vegetable oil prices have risen 45 percent over the last year, and total costs have gone up 25 per cent ifall inputs are considered, but we have raised the price of Santoorby 14 per cent only, says Agrawal.
Despite this, WCCL has been able to protect its operating marginat 12-13 per cent. We could do it because our Six Sigma qualityprogrammes have improved efficiency and also because we have beenable to control our overheads. Then, we are investing in brands toensure that our top line grows faster than the industry, saysAgrawal. But storm clouds are gathering on the horizon. Consumerconfidence in India is dipping, and the latest Nielsen GlobalConsumer Confidence Index reveals that 42 per cent of respondentsfeel that a recession may be around the corner.Wipro admits thatthis could impact its plans. Any slowdown in economic growth ratesor saturation of urban demand coupled with a volatile monsoon couldhamper our ability to grow and maintain profitability, its annualreport for 2007-08 says.
What Wipro gains from UNZAUNZA operates with 48 brands, in 15different categories in 36 countries. Wipro can have ready access tothem.Wipro now can address larger consumer base; If China is takenout, then the GDP of rest of the countries where UNZA operatesbecomes equal to India's GDP.UNZA has experience in managing moderntrade (organised retail) in advanced countries. This will help Wiproto strengthen its relationship with fast growing modern trade inIndia. With combined Wipro-UNZA revenues, Wipro figures among top 10FMCG companies in India and among top three Indian FMCG companies.
Wipro products
Santoor toilet soaps, talcs, face wash and fairness cream, WiproBaby Soft, Wipro Shikakai, Chandrika, Wipro Safewash, WiproSanjeevani, Wipro Honey, Glucovita etc.
UNZA products in India
Enchanteur and Romano shower foam, hair care, body care and malefragrances
Says Jainani of Khandwala Securities: None of the soapmanufacturers will do very well in the coming year, particularly inview of ITC's aggressive foray into this market at various pricepoints. ITC's financial muscle will make it difficult for thesmaller players to grow. This makes us believe that it will be toughfor Wipro to make Santoor the #2 brand.
Then, Indian consumers are also very price-sensitive. The Indianskincare market holds great promise for personal care players. Butthe key to long-term success will be product and packaginginnovation, the ability to keep costs down, a well-oileddistribution channel and the ability to cater to the needs ofIndia's discerning consumers, says N.V. Sivakumar, ExecutiveDirector & Leader, Retail & Consumer Industry, at consultancymajor PricewaterhouseCoopers.
Market leader Hindustan Unilever (HUL) is growing the market byreaching out to customers not touched by the establisheddistribution system. We reach over 100 million rural consumersthrough Project Shakti and by 2010, we expect to reach over 600million of them. This will give us enormous competitive advantageand growth potential, says an HUL spokesperson. WCCL is equallyconfident. Our distribution reach has gone up, especially in ruralareas, and we are reaching more than 1.4 million outlets.Then, ouradvertising is creating a menting our distribution reach, saysAgrawal. Independent studies suggest that the Indian skincare marketis worth over Rs 4,000 crore and is growing at over 15-20 per centannually. It is estimated that the market will be worth Rs 5,880-6,720 crore by 2011. Sivakumar notes that India's per capitaconsumption of cosmetics and toiletries, at Rs 27.20 per annum, islower than those of most other countries in the Asia Pacific region.
Cool lighting
A leading player in commercial and industrial lighting, Wipro'slighting division was set up in 1992. It claims to be thesecondlargest player, next only to Philips, in segments such ascommercial lighting. A leading player in institutional lighting inspecified segments like software, pharma and retail, the divisionalso serves retail consumers and offers lighting solutions acrossvarious application areas. The division says it offers lightingsolutions for people and not buildings, and prides itself on its brightness management solutions .
Lighting was a technical issue earlier, rather than one whichaffected people. We changed that, says Rajesh Kochhar, ChiefExecutive, Wipro Lighting. The division turned aggressive ininnovation and marketing seven years ago and is upbeat about thegreen movement in lighting, which it successfully spearheaded inIndia. Out of 19 certified green buildings in India, the lighting in13 is done by Wipro. In a market that is estimated to be growing at22-25 per cent, the lighting division reported growth of 36 per centlast year, and accounted for 18 per cent of the Consumer Caresegment's revenue last year.
The division functions out of Pune, and has 18 offices all overIndia.
Products: Softlite; Fusion; Ideos; Solariz; Platina; Platinum;Crescent; Float; Rumbuzz; Solsoft etc.
KPMG India's Manager (Strategic and Commercial IntelligenceTransaction) C. Ravishankar adds: A walk down the aisles of asupermarket in South East Asia will reveal a host of productcategories that have barely penetrated the Indian market. Those areexactly the sub-segments that ITC has targeted. I agree it is aformidable player and has a good distribution network. But so far,it has not really impacted us too much. I'm confident that we willprotect our market share and continue to grow, says Agrawal.
A quiver full of arrowsHis confidence stems partially from theperformance of two other divisions WCCL's commercial & institutional lighting division and its three-year-old modularfurniture business that have been growing at a fast clip. The Wiproteam often markets the offerings from these two divisions as part ofa package deal. Office lighting and furniture complement each otherand are critical for ambience creation, says Parag Kulkarni, VicePresident, Furniture Business, WCCL, adding: Wipro's decentralisedpresence and wide network of third-party furniture manufacturers cutlead time for delivery, and has given us a leg-up over thecompetition.
Last year, revenues from the furniture and lighting businessesgrew 40 per cent and 36 per cent, respectively. We do lighting forpeople, not for buildings, and we're setting standards in lightingwith major innovations, says Rajesh Kochhar, Chief Executive, WiproLighting. The team is particularly proud that two of every threecertified green buildings in India use Wipro lighting solutions.
Overall, WCCL has hit a sweet spot in personal care, in lightingand in the furniture business. The synergies between Wipro andUNZA, and between its lighting and furniture divisions, are hugefactors in favour of WCCL. We feel that if WCCL is de-merged fromits parent entity, it will unlock massive value, says Jainani.
That's a suggestion Wipro Chairman Azim Premji cannot brush asidewithout deep consideration.
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