By -
Feb 12, 2013
Wipro Ltd., the Indian software-to-
soaps company controlled by billionaire Azim Premji, says
Chinese demand for cosmetics containing bird’s nest extracts
will help its consumer unit counter slowing growth at home.
Wipro’s acquisition of Singapore-based L.D. Waxson Group will aid the company to tap demand for luxury skincare products among China’s growing middle class, said Vineet Agrawal, president of the Bangalore-based company’s consumer unit. L.D. Waxson’s Bio-essence range includes creams that contain bird’s nest, used in traditional Chinese medicine for its anti-ageing and tissue repair properties, according to Agrawal.
The $144 million purchase, announced in December, offers Wipro access to the premium skincare market in China, which Euromonitor International estimates will grow to 38.2 billion yuan ($6.1 billion) in 2016 from 22.1 billion yuan last year and is dominated by Procter & Gamble Co. and Mary Kay Inc. The deal also helps the unit tap skincare demand in Southeast Asian markets with sizable ethnic Chinese populations, Agrawal said.
“Bio-essence is a skincare brand focused on products with Chinese ingredients,” Agrawal said in a telephone interview yesterday. “Wherever the Chinese ethnic population is there, we think we can expand - like in Vietnam and Indonesia.”
The nest of a few species of swiftlets is also the key ingredient in bird’s nest soup, a Chinese delicacy, the Food & Agriculture Organization says on its website. Malaysia is the major producer and exporter of the nests, according to the FAO.
“These products have an advantage in markets where there’s an awareness, like in eastern Asia,” said Shushmul Maheshwari, chief executive officer at RNCOS E-Services Pvt., a market research company based in New Delhi. “In India, herbal products are always perceived as safe.”
The shortage of bird’s nests in China isn’t hurting Wipro’s supplies of the commodity, Agrawal said. “We do long-term purchases for everything,” he said. “As of now, we don’t have any problems ensuring supply.”
Revenue growth at Wipro’s consumer care and lighting business slowed to 18 percent in the 12 months ended March 31, 2012, from a 26 percent pace a year earlier. Hindustan Unilever Ltd., the Indian unit of the world’s second-biggest consumer- goods company, last month reported third-quarter profit and sales that missed analysts’ estimates.
Godrej Consumer Products Ltd., controlled by billionaire Adi Godrej, has acquired at least five companies in the last three years, including Indonesian insecticide maker PT Megasari Makmur and Argentinian hair-color maker Argencos SA.
Indian consumer companies’ strategy of acquiring assets in other emerging markets will help future growth and is an “optimal use of cash,” said Nitin Mathur, a Mumbai-based research analyst at Espirito Santo Investment Bank.
Marico Ltd. got almost a fourth of its annual revenue from its international business, which includes Bangladesh, Vietnam and South Africa, and 43 percent of Godrej’s overseas sales last quarter came from Indonesia.
“Indian consumer companies have a strong presence in Asian developing markets because the sales environment there is very similar to India,” said Sachin Bobade, an analyst at Brics Securities Ltd. “There is a lot of growth potential in these markets.”
In November, Wipro’s board agreed to set apart its consumer, infrastructure engineering and medical diagnostics businesses into a separate, closely held company, according to an exchange filing. Wipro will focus exclusively on information technology and software services and the new company, named Wipro Enterprises, will be an unlisted entity.
Premji, with a net worth of $16.4 billion and ranked 46th on the Bloomberg Billionaire’s Index, and his family control about 78 percent of Wipro.
Shares of Wipro rose 0.5 percent to 414.05 rupees as of 9:56 a.m. in Mumbai trading, extending its gains this year to 5 percent. The benchmark BSE India Sensitive Index has advanced 1.3 percent in the period.
In 2009, Wipro acquired rights to the Yardley of London brand of beauty products in Asia, Middle East and parts of Africa from the U.K.’s Lornamead Group for about $45.5 million. The acquisition gave Wipro an entry into the more profitable business of selling premium cosmetics. In July, the unit acquired the rights to the brand for the U.K. and most of Europe, it said in a statement.
Wipro, which posted third-quarter revenue growth of 32 percent at its consumer business in China, 26 percent in Indonesia and 24 percent in Vietnam, expects the L.D. Waxson acquisition to help maintain its growth momentum in Southeast Asia, Chairman Premji said on a conference call last month.
L.D. Waxson “is a good strategic fit,” Premji said. “The transaction helps us to consolidate our successful facial skincare business in Malaysia to a dominant leadership position and moves us to market leadership in Singapore as well.”
To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net
To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net
Wipro’s acquisition of Singapore-based L.D. Waxson Group will aid the company to tap demand for luxury skincare products among China’s growing middle class, said Vineet Agrawal, president of the Bangalore-based company’s consumer unit. L.D. Waxson’s Bio-essence range includes creams that contain bird’s nest, used in traditional Chinese medicine for its anti-ageing and tissue repair properties, according to Agrawal.
The $144 million purchase, announced in December, offers Wipro access to the premium skincare market in China, which Euromonitor International estimates will grow to 38.2 billion yuan ($6.1 billion) in 2016 from 22.1 billion yuan last year and is dominated by Procter & Gamble Co. and Mary Kay Inc. The deal also helps the unit tap skincare demand in Southeast Asian markets with sizable ethnic Chinese populations, Agrawal said.
“Bio-essence is a skincare brand focused on products with Chinese ingredients,” Agrawal said in a telephone interview yesterday. “Wherever the Chinese ethnic population is there, we think we can expand - like in Vietnam and Indonesia.”
Chinese Delicacy
Almost 60 percent of Bio-essence products contain ingredients derived from bird’s nest, according to Agrawal. The nests, made mostly of the swiftlet’s saliva, are found in the mountains around Southeast Asia including in Vietnam, Thailand, Indonesia and Malaysia, according to L.D. Waxson’s website.The nest of a few species of swiftlets is also the key ingredient in bird’s nest soup, a Chinese delicacy, the Food & Agriculture Organization says on its website. Malaysia is the major producer and exporter of the nests, according to the FAO.
“These products have an advantage in markets where there’s an awareness, like in eastern Asia,” said Shushmul Maheshwari, chief executive officer at RNCOS E-Services Pvt., a market research company based in New Delhi. “In India, herbal products are always perceived as safe.”
The shortage of bird’s nests in China isn’t hurting Wipro’s supplies of the commodity, Agrawal said. “We do long-term purchases for everything,” he said. “As of now, we don’t have any problems ensuring supply.”
‘Optimal Use’
Wipro is among Indian firms acquiring companies overseas to boost sales as growth slows in India, where the government estimates the $1.8 trillion economy is set to expand 5 percent in the year ending March 31, the least in a decade.Revenue growth at Wipro’s consumer care and lighting business slowed to 18 percent in the 12 months ended March 31, 2012, from a 26 percent pace a year earlier. Hindustan Unilever Ltd., the Indian unit of the world’s second-biggest consumer- goods company, last month reported third-quarter profit and sales that missed analysts’ estimates.
Godrej Consumer Products Ltd., controlled by billionaire Adi Godrej, has acquired at least five companies in the last three years, including Indonesian insecticide maker PT Megasari Makmur and Argentinian hair-color maker Argencos SA.
Indian consumer companies’ strategy of acquiring assets in other emerging markets will help future growth and is an “optimal use of cash,” said Nitin Mathur, a Mumbai-based research analyst at Espirito Santo Investment Bank.
Second Best
Godrej’s share of overseas sales increased to 43 percent in the year ended March from 23 percent two years earlier, according to data compiled by Bloomberg. The company’s 12-month total return, which includes share price gains and dividend payout, is the second-highest among the 10 companies on the BSE India Fast Moving Consumer Goods Index, and trails only India’s biggest distiller, United Spirits Ltd.Marico Ltd. got almost a fourth of its annual revenue from its international business, which includes Bangladesh, Vietnam and South Africa, and 43 percent of Godrej’s overseas sales last quarter came from Indonesia.
“Indian consumer companies have a strong presence in Asian developing markets because the sales environment there is very similar to India,” said Sachin Bobade, an analyst at Brics Securities Ltd. “There is a lot of growth potential in these markets.”
In November, Wipro’s board agreed to set apart its consumer, infrastructure engineering and medical diagnostics businesses into a separate, closely held company, according to an exchange filing. Wipro will focus exclusively on information technology and software services and the new company, named Wipro Enterprises, will be an unlisted entity.
Yardley Brand
The consumer unit, which includes lighting products, had sales of 10.3 billion rupees ($191 million), or 9.3 percent of Wipro’s net revenue from operations, in the three months ended Dec. 31, compared with 8.79 billion rupees a year earlier. The bulk of the unit’s revenue comes from sales of the Santoor bath soap and Yardley range of soaps and deodorants, Agrawal said.Premji, with a net worth of $16.4 billion and ranked 46th on the Bloomberg Billionaire’s Index, and his family control about 78 percent of Wipro.
Shares of Wipro rose 0.5 percent to 414.05 rupees as of 9:56 a.m. in Mumbai trading, extending its gains this year to 5 percent. The benchmark BSE India Sensitive Index has advanced 1.3 percent in the period.
In 2009, Wipro acquired rights to the Yardley of London brand of beauty products in Asia, Middle East and parts of Africa from the U.K.’s Lornamead Group for about $45.5 million. The acquisition gave Wipro an entry into the more profitable business of selling premium cosmetics. In July, the unit acquired the rights to the brand for the U.K. and most of Europe, it said in a statement.
Good Fit
Wipro’s Chinese consumer business currently contributes about $40 million in sales, or 5 percent of the unit’s total revenue, Agrawal said. The company sells shampoos, soaps and moisturizing creams under its Unza brand, and its sales are mostly concentrated in Guangdong, Hainan and Guangxi provinces in southern China. Wipro bought Singapore’s Unza Holdings Ltd. in July 2007 for 10.1 billion rupees to add customers and factories in Malaysia, Vietnam, China and Indonesia.Wipro, which posted third-quarter revenue growth of 32 percent at its consumer business in China, 26 percent in Indonesia and 24 percent in Vietnam, expects the L.D. Waxson acquisition to help maintain its growth momentum in Southeast Asia, Chairman Premji said on a conference call last month.
L.D. Waxson “is a good strategic fit,” Premji said. “The transaction helps us to consolidate our successful facial skincare business in Malaysia to a dominant leadership position and moves us to market leadership in Singapore as well.”
To contact the reporter on this story: Adi Narayan in Mumbai at anarayan8@bloomberg.net
To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net
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