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    Wipro applying thought for FMCG?


    Wipro Consumer Care and Lighting (WCCLG), quietly founded by Wipro Group in 2003 with Rs 360 crore as start-up capital, is beginning to make noise – about its global and local acquisitions, marketing strategy, diversification and new product launches. Vishnu Rageev R unearths the other side of this IT major.

    Story begins
    Azim H Premji, chairman, CEO and MD of Wipro Group, believes in legendary Chinese leader Deng Xiaoping’s philosophy – “It doesn’t matter whether the cat is black or white, as long as it catches mice.” So, it doesn’t matter if you are in software or FMCG, as long as it makes money.

    Nearly a month after taking a major plunge into the global FMCG arena by acquiring Unza Holdings Ltd, a Singapore-based personal care products manufacturer, for $246 million (Rs 1,010.2 crore) in an all-cash deal, the Wipro chieftain is back in news for picking up 1.24 per cent stake in Marico Industries, one of the country’s top FMCG companies.

    When contacted, Marico’s spokesperson informed that Premji in his personal capacity has picked up the stake (75.72 lakh shares) in Marico. It is learnt that he picked up the stake during the first quarter of this financial year, though the news saw light only last week.

    “Earlier it was Unza Holdings; now it is a small stake in Marico. All these are clear indicators of Premji’s interest in FMCG retailing, which is booming and booming. The company is geared up for more acquisitions – both global and local – across various categories,” sources close to Wipro confirmed.

    Retail looms
    In November 2003, Wipro set up a wholly owned subsidiary called Wipro Consumer Care solely for manufacturing FMCG products in its Himachal Pradesh unit. The subsidiary started by manufacturing toilet soaps, focusing on its flagship brand Santoor.

    “Wipro Consumer Care and Lighting is the mother division of Wipro Ltd, with its roots going back to 1945, when Western India Vegetable Products was incorporated as a private limited company to manufacture edible oil,” said a company spokesperson.

    “Over the years, WCCLG crossed various milestones and metamorphosed from being a manufacturer of hydrogenated vegetable oils to a strong player in the FMCG space, with robust brands addressing consumer needs in various categories like personal wash, fabric wash, toiletries, personal grooming, baby care, cooking medium, domestic and industrial lighting, and energy drinks,” the spokesperson added.

    Currently, the company has brands across three separate retail divisions – Consumer Care, Lightings, and Furniture. Santoor (soap and talcum powder), Wipro Baby (soap and talcum powder), Milk & Roses (soap), Wipro Shikakai (soap), Glucovita D (energy drink), Chandrika (soap), and Safe Wash (detergent) are under Consumer Care; Wipro Smartlite (voltage-saving tubes), Vipro Bulbs and Tubes, and Wipro Domestic Accessories are offered under Lightings; and a variety of stylish office furniture are retailed under the Furniture division.

    The furniture business was initiated recently. It is learnt that while supplying custom-made lighting solutions for big corporate houses, the company found a latent demand for office furniture and moved into that space.

    Until August 2007
    From 2003 to 2007, acquisitions formed a defining strategy at Wipro. In a bid to expand its FMCG basket, Wipro acquired Chandrika Soaps for Rs 31 crore and Glucovita (glucose drink brand) for Rs 5 crore in 2003. It bought Chandrika Soaps from Bangalore-based SV Products and Glucovita from Hindustan Lever Limited (HLL). Last May, Wipro bought North West (electrical switches brand) from North West Switchgear Ltd for Rs 102.2 crore.

    After acquiring Chandrika and Glucovita, it is learnt that the company scouted to buy Mysore Sandal Soap — Karnataka Soaps & Detergents Limited’s (KSDL) flagship heritage soap brand – but it fell through.

    “ WCCLG has been buying brands selectively in the last three years or so – such as Chandrika, Glucovita and North West (electrical switches). The acquisition of Chandrika in December 2003 has heralded Wipro’s entry in the fast-growing natural products market,” states an industry watchdog.

    Latest on the line is the Marico stake (acquired by Premji, as mentioned earlier), culminating immediately after settling the Unza deal. Although the stake in Marico picked up from the secondary market is considered minuscule, it clearly indicates the growing interest of Wipro’s in the FMCG sector.

    Rumour had it three years back that Marico and Wipro were in a fierce battle for Chandrika. Industry watchdogs are surprised about Premji’s new move. They are keenly watching his next move. Could it be a majority stake next time in Marico? Only Premji would know.

    Unza deal
    Little did Wipro know that it would become the only Indian company to make the largest acquisition in the personal care segment, when it bought 100 per cent stake in Unza Holdings Ltd. In acquiring Unza, it is learnt that Wipro outbid large companies like Dabur, Emami, Godrej, Unilever, Colgate Palmolive and Sara Lee. Unza is Southeast Asia’s largest maker of personal care products and has a successful portfolio of deodorants and household care products. It has an employee base of about 4,000 in five manufacturing locations spread across four nations – Malaysia, Indonesia, Vietnam and China.

    So, what does the Unza deal bring to the table? In a nutshell, it means access to about 40 countries including Malaysia, Indonesia, Vietnam, Singapore, China, Hong Kong and Nigeria, and a portfolio of about 48 brands. The Singapore-headquartered company has personal care brands such as Enchanteur, Safi, Romano and Izzi, and detergent brands Vigor and Maxkleen. Wipro will now be a player to reckon with in the FMCG space in India as well as Southeast Asia. Last but not the least, in the FMCG push, it will also gain from Unza’s expertise in selling through big retail chains like Wal-Mart and Carrefour, and the model could be replicated in Indian retail.

    Nonetheless, analysts are sceptical about Wipro’s FMCG business, as it contributed just 5 per cent of Wipro’s turnover and 3 per cent of the group’s profits. The larger figures, however, tell a different story – in the last financial year, Wipro Consumer Care earned a 48 per cent RoCE, and had a net profit of Rs 100 crore with a 12 per cent margin. Also, it grew by over 38 per cent as compared to the FMCG industry growth of 10-12 per cent.

    Last year Unza’s revenues grew 14 per cent in US dollar terms – well ahead of market growth rates in the region. Unza posted revenue of Rs 683.3 crore for the year ended April 2007, while WCCL reported revenues to the tune of Rs 818 crore.

    Commenting on the transaction, Vineet Agrawal, president, WCCL, said, “This transaction will double our addressable market size in terms of GDP. Unza has an excellent product range and a large portfolio of strong brands catering to Asian consumers. They have been able to consistently grow faster than the market in the geographies they are present in. Unza also has a strong depth of managerial talent with experience across the region. We see a lot of similarities between the two entities, including customer centricity and empowerment.”

    Meanwhile, for Unza, Wipro will focus more on growing the business in the existing markets rather than bringing some of its brands into India or launch them in other countries.

    “This acquisition represents a truly unique opportunity for us to expand our presence in Southeast Asian markets and is a significant milestone for us. The combined entities will leverage regional best practices for driving growth and provide synergistic opportunities for better sourcing,” said Nagender Arya, general manager, New Business Development.

    The deal, which is expected to be completed soon, will make Wipro Consumer Care the third largest Indian FMCG company in terms of turnover with consolidated sales of Rs 1,500 crore ($375 million), pushing behind companies like Marico and Godrej, according to sources. The other major Indian companies are Nirma (Rs 2,500 crore) and Dabur Foods (Rs 1,700 crore).

    Applying strategies
    According to local media reports, Wipro is all set to buy a leading bottled water brand. Wipro officials declined to comment, but if it materialises, Wipro will be making another foray into a new business, which is most viable in a city like Bangalore.

    Santoor soap brand was considered to be the fastest growing in the market during the last three years. While it was strong in the southern markets and was the leader in Andhra Pradesh with a share of 26 per cent, it lagged in the North. Hence, Wipro had introduced a variant of Santoor, called Santoor White, to drive growth in the northern markets. Wipro Shikakai has a market share of 43 per cent on an all-India basis, out of which 36 per cent was accounted for by Maharashtra. It is also learnt that Wipro is exploring options to take Santoor to countries such as Vietnam and Nigeria. Recently, it extended Santoor’s portfolio with the launch of face wash and fairness cream.

    Best of all, explore the possibilities of hemp clothing, which is the real answer to the whole problem. But that, as they say, is another story.

    Recently, there was a big buzz in the industry that Wipro is seriously looking at other opportunities in the ‘wellness’ area, which includes launching nutraceuticals and digestives. From all accounts, Wipro is not going to be launching ‘me too’ products and is learnt to be exploring `non-existing’ markets with a `sizeable’ opportunity. Currently, it has a few honey variants along with Glucovita and Wipro Sunflower (vanaspati) under its food brand, Wipro Sanjeevani. Also, there were reports that Wipro is planning to enter the ayurvedic and naturals category, an area where HLL has positioned its Ayush brand.

    So, unlike its tagline (“Applying Thought”), Wipro has started reapplying thoughts to become the retail leader, it seems.