Wipro Consumer Care and Lighting is building its own direct-to-consumer play but has ruled out the acquisition of any startups in the D2C ecosystem to drive growth. The company has adopted this strategy, said CEO Vineet Agrawal, as it believes that these companies are run very differently from regular businesses.
“We don’t see the need to acquire startups in this space. We have made seven investments in startups but don't have any plans to acquire them over time,” said the CEO.
“Also, from the (startup) founders’ perspective, most of them would like to run the company their way and look at us more as a financial investor. However, they come to us as they can learn a lot more from us than from a regular investor given our experience in the segment,” he added.
FMCG companies in acquisition mode
Of late, several fast-moving consumer goods (FMCG) companies have acquired D2C startups. Marico has acquired male grooming player Beardo, beauty brand JustHerbs and breakfast and snacks maker True Elements, while Tata Consumer Products has taken over Soulfull.
Wipro Consumer Care and Lighting invests in startups through its venture fund arm Wipro Consumer Care–Ventures and has acquired minority stakes in seven companies in India so far—Soulflower, OneLife Nutraceuticals, LetsShave, MyGlamm, PowerGummies, T.A.C –The Ayurveda Co and Happily Unmarried.
According to Agrawal, the company has invested about Rs 100 crore through its venture fund arm and is now eying Southeast Asia for further investments in startups. “We have a team in countries like Indonesia and Vietnam that can help us evaluate startups,” he said.
Even as Wipro Consumer Care rules out acquiring startups, the company is building its D2C play and has launched brands such as Vitress and Bioessence, TheBetterBath.in. The company had launched skincare brand Bioessence in Malaysia and Singapore and recently introduced it in India as well.
The company plans to continue building its D2C portfolio.
Yearly performance
Wipro Consumer Care and Lighting reported a 2.7 jump in net revenue for the year FY22 to Rs 8,634 crore as compared to Rs 8,400 crore reported in the year-ago period. About 48 percent of the turnover was contributed by India, while the rest was from its international markets. Apart from India, the company has a presence in 19 countries, spread across Asia, Africa and West Asia.
“In Malaysia, our largest market, we clocked about $150 million in FY22. China revenue stood at $100 million, Vietnam was about $90 million and the Philippines about $70 million,” said the CEO.
The company's flagship soap brand Santoor crossed Rs 2,300 crore in turnover during the year, while Yardley, said Agrawal, grew 30 percent. Santoor is now the top soap brand in Andhra Pradesh, Telangana, Karnataka, Maharashtra and Gujarat.
The operating environment, however, remained challenging and the company’s margin, which stood at 12.7 percent in FY21, dropped to 11 percent in FY22.
“There has been a clear 2-3 percent drop in operating margins due to the cost increase on account of inflation and supply-chain challenges during the year,” said Agrawal.
“The cost of palm oil from September 2021 to the May 2022 period jumped by as much as 50 percent, and hence we were compelled to raise the product’s price by 19 percent,” he added.
Rural distress
Wipro Consumer Care has also witnessed a dip in demand in the last few quarters, which has impacted its sales volumes, especially in rural areas, which contribute about 55 percent of its sales.
Agrawal indicated that with a fall in edible oil prices in June, the situation has improved a bit.
“If you look at the last 15 days, palm oil prices have cooled down by about 20 percent. They are still higher than what they were in September 2021 but things have improved,” he said.
“From a demand perspective, too, May-June is better than March-April,” he added.
The company expects its India consumer business to grow between 16-18 percent in the quarters ahead as demand revives with the monsoon and the operating environment improves.
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