Wipro: Strengthening Yardley

POWER MOVES

With the acquisition of the Asia, Asia-Pacific and North Africa businesses of Yardley from the UK-based Lornamead Group, Wipro Consumer Care and Lighting (WCCL), Wipro’s FMCG arm, is ready to fast-track its business which contributes around 8 per cent to the overall revenue. It forked out $45.5 million (around Rs 210 crore) for the assets, which is a little over twice their annual revenue.

WCCL’s first international acquisition — Singapore-based Unza — has helped the company strengthen its footprint in South-East Asia but its brands (Enchanteur, Romano and others) remain unfamiliar in India. Yardley, on the other hand, has a brand recall among Indian consumers. Talcum powder and deodorants have been Yardley’s traditional revenue drivers. “Yardley’s Lavender range is its signature and has been preserved well over a period of time,” says WCCL President Vineet Agrawal. Yardley products in fragrance, bath and skincare will soon get added to the Wipro portfolio in the country. Agrawal adds: “Yardley has a strong equity in India. It is dormant to an extent because of a weak distribution.”

So, Wipro has its task cut out — it needs to strengthen Yardley’s distribution network. India accounts for only 20 per cent of Yardley’s revenues. The plan is to increase its presence from 20,000 stores to over 50,000. “Yardley being the most premium range in our portfolio now, we would be looking at a network that is smaller than that of Santoor, our mass brand. We will use both Yardley’s existing network as also Wipro’s reach,” he says. It will ready its chain three to four months from December, when the deal is scheduled to close.

But a weak distribution won’t worry Wipro elsewhere. Seventy per cent of Yardley’s revenues (around Rs 70 crore) come from West Asia. This could help Wipro increase its revenue from the region, which will double from its present $15 million. “With two strong brands (Unza being the other) to talk about in this region, we will be able to negotiate and distribute better in modern trade channels,” says Agrawal. Unza’s strong presence in South-East Asian markets such as Indonesia, Vietnam, Malaysia and China (that returned around 40 per cent of WCCL’s Rs 2,083 crore revenue in 2008-09) will help fortify what are Yardley’s weaker markets.

Analysts observe that Yardley will work for Wipro if the former’s profit margins are preserved. While Yardley’s revenue growth rates hover between 20 and 25 per cent, Agrawal notes that its gross margins are good and won’t deter WCCL’s 13 per cent operating margin. Agrawal is confident that maintaining manufacturing efficiencies would safeguard margins. For now, Wipro will opt for a mix of outsourcing (which Yardley currently does) and manufacturing some products in-house.

With Yardley in its kitty, WCCL can now straddle different price points — another step closer to a complete portfolio. Wipro has been nifty in the other price point it is present in. Its mass soap brand, Santoor, has scaled up to the third position in value terms across India and number one in the southern markets.