Welspun Sees World of Opportunity
April 9, 2007-- Home Textiles Today,
Welspun is positioning to become the next major mill, along the way to dialing up as much as $1 billion in sales — quadrupling its volume — over the next three to four years.
It will do it, the Mumbai-based company says, through organic growth and outright acquisition of companies and brands, for which it is currently shopping. It will do it by being laser-focused on operating efficiencies, along with refining a sharp sense of the market segment — middle to upper end — it wishes to serve.
The company is already a retailer in India, where it operates 55 stores, with more planned. Welspun has even tested farming its own cotton, bringing its existing vertical integration another step backward, to the seed.
It would be an ambitious — and potentially dangerous — plan for any company in any industry, never mind in home textiles, where dozens of foreign and hybrid global firms share similarly grand aspirations to fill the void left by the all-but-collapsed U.S. mill system. Moreover, Welspun believes it can do it largely in an over-stored, over-assorted and over-supplied marketplace.
Welspun is encouraged by a strong financial track record, most recently posting a 115.4% gain in third-quarter profits to $3.6 million on sales of $57.9 million, soaring 61.2% over the same period a year earlier. As always, the challenge will be to find ways to sustain that kind of high-flying growth year over year.
But the Indian terry towel manufacturer — a mere 13 years old now — long ago penetrated some of the toughest U.S. retail shelves, and it has now matter-of-factly begun to expand its soft home lines. Welspun has clearly articulated its market position and based its product development around carefully defined stories, including the growing demand for everything eco-green. In the end, there will only be a handful of home textiles segments it chooses not to enter: windows and kitchen are not on the radar.
"We are trying to build up something similar to what Pillowtex, WestPoint or Springs once were in this part of the world — a one-stop shop for home textiles," offered Anurag Sharma, exports president for Welspun India, who is one of the chief architects of the plan. "So the next extension is in 2008 and we'll be ready with bath rugs. Then we will have towels, sheets, cotton blankets, decorative bedding and, now, rugs. This is the game plan."
It's doable, Sharma insisted. If the U.S. home textiles market he identified represents at least $20 billion, the worldwide market is approximately $40 billion, he suggested. There's no reason Welspun can't command a 2% to 2.5% share of that, he argued.
"I am looking at a $1 billion home textiles company by 2010 or 2011," he said. "This can be through a production based in India or through acquisition like we did in the U.K. with Christy. We are still looking for the right partners here in the USA. We've had some serious discussions but the numbers didn't work out."
The company is also on the hunt for brands. It holds the bath license for Nautica. And, while home textiles national branding has been largely challenged in recent years, Sharma said, "There are some good brands. Ralph Lauren is a good brand with a lot of potential."
He did not volunteer information on which brands or companies he has spoken with, but did confirm that the company is looking at the acquisition of a home textiles player in Europe.
"What we are looking for, really, is anyone who has some good brands who can take us to where we can differentiate from our competition," Sharma said. "And then, strong design and marketing capabilities. These are the three or four things we are looking for — apart from those [strong] numbers."
Of concern: too many competitors jumping in and the pressure on pricing that will add for "serious" players like Welspun. Additionally, with a U.S population growing slowly and retail return expectations continuing to increase, it will ultimately lead to the cannibalization of many stores' profits. Those are two core reasons the company is trying to distinguish itself by moving up to branded and value-added products.
"Of course, price pressures will always be there," Sharma acknowledged. "But we are a total vertical manufacturer right from cotton to end product, so we are entering all of the profit centers that normally the other wholesalers [can't realize]. We have the upper hand as far as costs are concerned."
Last February's market validated those directions, he claimed. "It validated that we are going in the right direction in coming up with performance products. The American consumer is getting more and more interested in knowing that things perform."
Sharma said that the company's relatively new sheet business is gaining traction with 75% of the capacity sold out, and about 80% of that coming to the United States.
"As we study the numbers, unless we expand and bring down our overhead, I don't think [the sheet business] will be as profitable as towels. So we are going to expand and double capacity. The capacity will go up to 10 to 11 million sets per annum from 8 million sets now."
Perhaps surprisingly, China hasn't posed much of a threat, Sharma said. Like the rest of the world, Indian companies spent years worrying about the looming threat to the world market when China joined the World Trade Organization and quotas were relaxed. But many Indian companies also feared that their opportunities in world markets would be trounced by the impact of China's entry.
The Indian companies have been more competitive than even they thought they could be, while China has wrestled with its own rapid growth and macroeconomic issues. That's why Welspun has not seen the need to joint venture with any Chinese companies.
Related Content By Author
Industry Related Content
Countdown to Heimtextil 2015 - Part 3