When small becomes big

Sheela Foam, the mattress market leader, is expanding its portfolio and reach

Sheela Foam Chairman and Managing Director Rahul Gautam, 65, an IIT-Kanpur engineer who completed his masters in the US, has been quietly giving shape to Sheela Foam for close to five decades.

Sheela Foam is the maker and marketer of Sleepwell mattresses. Organised players account for nearly 65 per cent of the market, and Sleepwell is the leader with a market share of around 23 per cent.

The company, which went public in November 2016 — it was the first to do so after demonetisation, with a Rs 5 billion share sale — did not start out as a maker of mattresses. Founded in 1971 by Gautam and his mother Sheela, a four-time Member of Parliament and currently emeritus chairperson, Sheela Foam was a supplier of polyurethane foam (PUF), the raw material that goes into the making of modern mattresses.

There are other applications of PUF too, such as in helmets, footwear, garments, industrial filters, electronic packaging and power generators. This business contributes some 20 per cent of the company’s annual turnover (Rs 17.50 billion in 2016-17), which will increase to 25 per cent in the next few years as the company pushes this segment aggressively.

Gautam says that the company will close 2017-18 with revenues of Rs 20 billion, a point endorsed by analysts tracking the company. Its three-year compounded annual growth rate has been 11.2 per cent.

The core mattress and home-comfort products vertical of Sheela Foam makes up 50 per cent of the business now, and is expected to touch 65 per cent in the next few years. Industrial products, where the company supplies foam to industrial manufacturers, currently accounts for 30 per cent, and this will correspondingly shrink to 10 per cent, Gautam says.

“The first two decades saw us largely take baby steps as makers of PUF. But the big break for us really came in the 1990s, when the economy opened up and consumers were looking at mattresses beyond coir, cotton or latex foam,” says Gautam. “We launched our Sleepwell brand in 1994 and there has been no looking back since.” 

The company has 11 manufacturing plants in India, five in Australia and one in New Zealand. It has also expanded its range to cover the full spectrum of home furnishings from pillows to cushions, recliners and sofa-cum-beds, besides mattresses. It recently launched newer mattress brands such as Cerafoam and Starlight (at lower price points) to widen its brand portfolio. Sleepwell is available at Rs 6,000-7,000 a unit.

Gautam is open to acquisitions of regional brands as he looks to fill gaps in his portfolio. “Almost 70 per cent of the Rs 100-billion mattress market is unorganised and if the shift from unorganised to organised has to happen, then players such as us will have to work harder,” he says. “For us the strategy would be to expand distribution and make ourselves available to more people at different price points. The idea would be to target consumers across the price pyramid.” 

The push in part is led by Gautam’s desire to see Sheela Foam touchRs 50 billion in turnover in the next five years. The time is apt for this big leap, he says, given that the goods and services tax (GST) introduced in July 2017 as well as the rationalisation of tax rates in November (from 28 per cent to 18 per cent) has helped in creating a level playing field. “Unorganised players will find it increasingly difficult to operate in a post-GST market,” he says. “So, organised players such as us have an advantage here to capitalise on this potential for good and affordable mattresses.”                                   

The company has 110 distributors and 6,000 dealers across the country. Half of the dealer network currently operates exclusively with Sheela Foam, Gautam says, and in the next five years the company hopes to see the other half also work exclusively with it.