With huge scope for growth, China at centre of Wipro Consumer's global map

Rapid localisation and speedy launches have helped WCCL scale up in a keenly contested market

Wipro Consumer Care & Lighting (WCCL), the Bengaluru-headquartered consumer care major, has been present in global markets for over 12 years, but it is only now that the company is setting up a manufacturing plant in China, its second largest market globally after Malaysia. The fact that this would be WCCL’s first greenfield plant outside India signals the importance the firm ascribes to China, where it has established a strong foothold through a series of acquisitions.

WCCL, part of Wipro’s unlisted entity Wipro Enterprises, has already acquired land for the proposed plant in China's southern Guangdong province; it will entail an investment of around Rs 1.5 billion and would be operational in 2020.

In FY18, WCCL crossed revenues of $1 billion (Rs 66.35 billion), almost half of which came from the international markets. Malaysia continues to be its largest market with a revenue contribution of $145 million, followed by China ($120 million) and Vietnam (around $45 million).

In China, the Azim Premji-owned company operates two plants — one that came along with the acquisition of Singapore-headquartered FMCG company Unza in July 2007, and the other through the acquisition of LD Waxson in 2013. WCCL also leverages the manufacturing plants of Zhongshan Ma Er Daily Products for third-party manufacturing. “In terms of capacity and investment, this will be our biggest plant outside of India and will cater to all personal care segments — such as shampoo, shower gel, skin care products, roll-ons and the liquid detergent segment — in which we are present,” says Vineet Agrawal, chief executive officer, WCCL.

The other three countries where WCCL has manufacturing facilities are Malaysia (three plants) and one each in Indonesia and Vietnam.

While China is the second largest global market for WCCL currently, the scope for growth in the country is immense, says Agrawal. The company is predominantly present in two provinces including Guangdong and Hainan in South China while it is expanding into neighbouring provinces including Guangxi, Fujian and Sichuan. In Guangdong itself, which has a gross domestic product (GDP) of over $1 trillion, WCCL is number three in most of the categories it operates in, including shower gels, soaps, liquid detergents and roll-ons. Interestingly, its major competition in the province is not from local Chinese companies but from global majors including Proctor & Gamble, the American consumer goods giant which holds the number one position in the market, followed by British-Dutch consumer goods company Unilever.

Despite stiff competition in the region, Agrawal says, the company will rapidly expand its manufacturing base, and through its wholly-owned local subsidiary, enrich its product basket. The new categories where it sees a big opportunity are lotions and liquid grooming products. What has helped WCCL in scaling up in China is its unwavering focus on localisation. It has 3,000 employees in China, which accounts for roughly 30 per cent of the company’s 10,000-odd global workforce. Interestingly, the company has only one Indian executive in the region. “Having a strong local footprint gives us the ability to understand the consumer and their requirements much better,” says Agrawal. Understanding the nuances of a local language (Mandarin in this case) is key to prising open a market, he says. “While most of our senior executives in the country are well-versed in the language, we also conduct English classes for our junior employees.”

Wipro’s tryst with the global market for its consumer care portfolio started way back in 2006 when the company was growing at 28 per cent plus year over year. “When we looked at our annual strategy plan then, we realised that there were many companies that were eyeing global markets for rapid growth. We started by exporting to West Asia where a big chunk of the Indian diaspora resides,” says Agrawal.

The company soon realised that this route was going to be a long haul given the size and scale of the company at that time as compared to players such as Marico, Godrej and Dabur that had forayed into international markets such as Bangladesh and West Asia at least 10-15 years before it did. That’s when WCCL decided to take the inorganic route to catch up fast. “By then, we had done three acquisitions in India and our confidence level was high because of the success of these acquisitions. While we wanted to start with a small acquisition abroad, we ended up buying Unza which happened to be in multiple countries with multiple brands and was present in categories we didn’t understand. So it was a leap of faith for us,” Agarwal adds.

In 2006, WCCL’s revenue was a little over than Rs 6 billion as compared to Godrej Consumer Care’s revenue of about Rs 9.5 billion, Dabur’s Rs 20 billion and Marico’s Rs 11.5 billion. The acquisition of Unza for Rs 10 billion ($246 million) in 2007 gave the company a solid presence in quite a few markets including China, Vietnam, Malaysia, Singapore, Indonesia, West Asia and Hong Kong. Since then, the company has gone on to acquire global brands such as Yardley (2009), Yardley UK (2012), L D Waxsons (2012) and Zhongshan Ma Er Daily Products (2016).

WCCL’s revenues of Rs 66.35 billion in FY18 is already ahead of Marico (revenue of Rs  63.3 billion), while it is fast closing the gap with rivals Godrej (Rs 98.6 billion) and Dabur (Rs 80.5 billion). The company’s products are now available across 40 countries while it has direct presence in 15 countries, including Malaysia, Indonesia, Vietnam, China, some countries in West Asia, and pockets of Africa and Bangladesh.

With international revenues accounting for almost half its overall revenues, does the company expect it to grow bigger than the domestic market? Agrawal says while both the domestic and the international businesses are doing well, local policies, geopolitical situations impact that growth. For example, in FY18, the domestic market grew faster for WCCL — at 18 per cent, as compared to international at 11 per cent. A year before, domestic growth was slower, impacted as it were by demonetisation and the implementation of the Goods and Services Tax.