Thursday 19 September 2019

'We are a small Irish firm changing the rules of the game': How WaterWipes went head to head with the baby care Goliaths - and won

 

Cleaning up: Xavier Renaux has overseen the rapid growth of WaterWipes. Photo: Brian Connolly
Cleaning up: Xavier Renaux has overseen the rapid growth of WaterWipes. Photo: Brian Connolly
John Mulligan

John Mulligan

There is a map on the wall near Xavier Renaux's office that is cluttered with pins stuck in each country where WaterWipes are sold. Mexico is among the new additions and South Africa is likely to soon join an expanding global presence. Within the space of a decade, it has seen the product zoom from a standing start to more than €50m in annual revenue. The figure has doubled since 2016.

"I always say, managing a business that is growing at 30pc or 35pc a year is complex," concedes the effervescent Renaux, a 50-year-old Belgian who took the plunge two years ago by jumping ship from Danone to join the Irish firm he had never previously heard of. "It's nice, it's good fun," adds the chief commercial officer of WaterWipes.

A packet of Waterwipes
A packet of Waterwipes

The product is part of the Drogheda -based Irish Breeze business that is owned and headed by Edward McCloskey, and which he founded in 1993.

The Co Louth businessman has recounted about how when his daughter was born more than 10 years ago, she suffered from severe nappy rash.

Checking the ingredients on the wipes being used on her, he wondered if there was an opportunity to manufacture a water-based wipe with no chemicals.

He was told it could not be done, but he persevered and WaterWipes is the end result: a product containing just water and a drop of fruit extract.

"Edward worked for six years with a pool of scientists, biologists and dermatologists, including a professor at Trinity College," says Renaux, who is living in a Drogheda hotel during the week and flying home to Belgium at weekends, where his family is still based. "When he started with the idea, everybody told him it could not be done."

Now, the Drogheda factory manufactures millions of packets of wipes every week. The Irish Breeze products - hand lotions, soaps and the like - now generate only about 5pc of the overall annual revenue at the group, and their manufacturing is outsourced.

WaterWipes have muscled their way into a global market where branded products had been dominated by multinational Goliaths such as Procter & Gamble's Pampers, and Kimberly-Clark's Huggies.

Now the abandoned Irish Breeze premises sit across the road from the current, modern factory - a reminder of how just one product helped to transform a relatively sleepy company into a world player.

"Going fast, yes, it's great, but you have to do it right," says Renaux, who was head-hunted in 2016 to join the firm.

"Because of the uniqueness of our technology, we have a different challenge than other products," he explains. "Doing what we do, using so few ingredients - it's a challenge."

"We are still a kind of startup," he adds in his thick Belgian accent. "Compared to all those big multinationals, we have a very tiny business.

"But I think we have agility. If something is close to the heart of Ed [McCloskey], we can move extremely fast. One of our values is to be brave. We are able to accept some risk - probably more than big companies that might go through a big validation process that can take years. So there are big advantages to being small."

When Renaux landed at the company, he helped position it to cope with the pace of growth it was experiencing, and to achieve its potential.

"We were really an export business," he says of the company when he joined. At that stage, WaterWipes had a decent presence in Ireland, the UK, Australia, New Zealand and the US.

"Basically, we were selling containers of WaterWipes to someone who was doing something with our product, and with a very low level of control," he explains of its sales at the time in many continental European markets, and places such as the Middle East.

"We had some contact with distributors, but they were buying our product and that was it. That is not how you build a strong brand," says Renaux, who just prior to joining the company was the global commercial development director for Danone's early life nutrition unit.

Renaux delved into his network, hiring key staff who had experience of building brands in multiple geographies and doing it very quickly. He says the WaterWipes back story was "very appealing" for many recruits.

"In some countries, we changed distributors, and stopped selling to some that really weren't the right partners," he recalls. "We have started to put much stronger plans in place, in terms of how we want to communicate the brand in those markets.

"Consumers have to be able to understand the product proposition, and the values of the brand."

The effort has paid off. Since he joined, revenue within Europe and the Middle East has risen 18-fold.

Three years ago, the company employed 25 people. The headcount is now 250 and it wants to hire another 30 people by the end of the year.

"A few years ago, we were producing a few hundred thousand packets of wipes a week," says the Belgian. "We're now producing a few million."

He will not say precisely how many millions of packets, just that it is in single-digit millions. "We are becoming a significant player in a number of countries," he adds.

But with the blistering pace of growth has come the need to manage it and plan for the future.

"Our level of profitability allows us to make the investments that need to be done to accelerate the growth," says Renaux.

Irish Breeze has been unlimited since 2017, meaning it no longer has to file publicly available accounts. But in 2016, it made a €5.4m pre-tax profit, up from €4.3m the previous year. It generated €3.5m of net cash from its operating activities in 2016. In 2009 - before WaterWipes had gained any traction - Irish Breeze made a more than €400,000 loss, and a near €110,000 loss in 2008.

Renaux says a significant percentage of turnover is being invested in marketing and hiring staff.

"And we are investing heavily in our production capacity," he adds. "We know that this company has a blue ocean opportunity in front of us. Maybe we are able to produce a few million more packs a week by the end of the year. We will need much more in the next three to five years.

"We can still expand the facility and capacity here, and we are working on that, but, of course, we are investigating other options."

Making a decision about whether to build a manufacturing facility outside Ireland will depend on whether the company can replicate its clean-room manufacturing process elsewhere, and also, of course, if it makes financial sense.

"The US is one of the things that is on the list, but it's not only the US," he says.

"We could manage our future demand from this facility, probably until 2021," explains Renaux. "After that, we have to make a choice: is it expanding and making a big investment here, or opening somewhere else? And that is a decision we are currently working on."

On the face of it, Asia would seem like another likely candidate for a production facility, but Renaux is not so sure that China, for instance, would fit the bill. In September, the company will officially open a regional sales office in Singapore, with a staff of seven.

"Asia is probably the next continent that we need to develop," says Renaux. "We are still at the very early stage in Asia. There is big potential. But the markets in Asia are complex."

WaterWipes are sold over online platforms in China, for instance, but it is still a relatively small presence for the business.

"But we should be in a position to sign a contract, a distribution contract, with a local distributor in China in the next two weeks," according to Renaux. That will give it a presence in online markets that specifically target domestic customers.

"Later, probably not in 2019 but maybe at the end of 2020, we will start to work on physical distribution [in China]. We'll be focusing on mums and baby stores first. In terms of the choice of where we're going to open a [manufacturing] facility, first we need to deliver the product quality," Renaux points out. "Our technology requires a very high level of water quality, we have a clean-room environment here, and high standards of hygiene. I'm not sure that we could do that in China."

"Because of our technology process, it's crucial to be in a place that can deliver all those expectations," he says. "We will look first to see if we can expand here. Here, we know exactly what we have; the process is complex, and it's not easy to replicate somewhere else."

By next spring, he says management will need to have made a decision on those expansion plans if the company is to meet future demand.

And its growth surely hasn't gone unnoticed. The Irish upstart remains a minnow among sharks.

You would think it would make it easy prey for much bigger rivals with deeper pockets.

"We want to disrupt the status quo," says Renaux. "I think we have a company that is doing that. For consumers, we're offering a choice that wasn't there before.

"We are proud also to see that all those big multinationals are looking at us very seriously. They are trying to copy us.

"So far, nobody has succeeded in bringing the same quality product with so few ingredients.

"I believe it's because we have strong technology and expertise that is not easy to gain in the short term.

"So, you have all these big companies that are looking at a small Irish firm that is changing the rules of the game. That's quite nice."

"Of course, it's put pressure on us. It's also forced us not to be complacent with what we do. We can still do better," stresses Renaux. "It forces us to ask, how can we stay ahead of them?"

Staying ahead of them has so far seen the launch of facial wipes for adults launched this year, using the same, basic ingredients as the baby wipes.

But Renaux says there is more to come. "We are really on a journey to bring the company to the next level," the Belgian adds. "I think there is an opportunity for the brand to be stretched outside wipes. There are still multiple opportunities within the wipes category that we should consider. But we don't want to be just a baby care company. We are much more than that."

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