The Power of I 2014

A blooming business

Ramesh Flowers has moved to the top of the home fragrance supply chain with a bouquet of offerings

The contrast couldn’t have been starker. In the middle of several steel structures, transmission towers and smoke billowing out of factories in Thoothukudi’s (formerly Tuticorin) SIPCOT industrial area, walking into the grey and blue headquarters of Ramesh Flowers is like entering a garden in full bloom. Heady scents of lavender, vanilla, roses and cinnamon awaken your senses. It is like someone held out a heavenly bouquet of flowers to you amidst the heat, dust and grime. The visual is even more stunning when you walk into their showroom, where you can find colourful floral bouquets and arrangements, wreaths, potpourri bags in bright and exotic hues of orange, red, blues, green, burgundy, fuchsia, shimmering gold and silver, and ornamental sea shells across the entire room. It is hard to imagine that such a transformation is possible from something as nondescript as dried flowers and leaves, things we consider waste. But 61-year-old Mahendra Raj Singhwi of Ramesh Flowers was not only able to envision the transformation but also put in place a business that has built a name for itself in the international markets. 

For Singhwi, Thoothukudi was the change he needed back in 1977, when he was 24 years old. After a series of setbacks in his electrical motors, automotive parts and printing businesses, Singhwi came to Thoothukudi to source some ornamental seashells for his brother’s dried flower business in Calcutta (as it was then known). On the several bus rides he took across South India, it was clear that this part of the country had a bounty to offer when it came to botanicals — dried flowers, leaves and palm products, among others. And for someone who was familiar with the dried flower business, it was too good an opportunity to miss. 

“Not only was the quality of the products better, there was also less competition when it came to sourcing raw materials from the forest,” says Singhwi, chairman, Ramesh Flowers. “The dry weather in Thoothukudi and better quality of labour made it an ideal place for me to start the business.” In Calcutta, the four months of monsoon used to wreak havoc on botanicals. It would often be impossible to dry the flowers or leaves in the humid weather there, leaving most of them to rot.

So he decided to start his own company from Thoothukudi in 1982, and named it Ramesh Flowers after his brother’s friend — a lazy choice, he admits now. In the early days, the company used to supply dried flowers and leaves as raw material to Steingasser in Germany. “I was operating out of my home with five or six workers, doing the packing myself and a single notebook for all my transactions.” Initially, the company used to ship dried shola, pine cones, lotus stems and coco cups in bamboo baskets. Three years into the business, Singhwi decided to offer value addition and came up with better packaging, bleaching and colouring the products in order to differentiate Ramesh Flowers from bulk exporters. 

In 1987, during a visit to the US and the UK, Singhwi discovered potpourri and instantly knew it was the next step in the business. “It was an untouched market since no one from India was exporting and we could effectively use the raw materials that we couldn’t export,” he says. According to him, only Thailand was exporting back then, with the rest being manufactured by companies in the US and the UK. Since costs were rising in the US and the UK, Singhwi managed to clinch his first order to supply bulk potpourri, convincing some hesitant first-time importers later that year. 

In 1989, a French couple who had heard about Ramesh Flowers met Singhwi and his wife, requesting them to do dried flower arrangements for their company, Vermont, which was a leading design firm in France at that time. Singhwi’s wife, Manju, who joined the business a few years after their marriage in 1985, took over the bouquet business. She went to Paris for a couple of months to learn how to make the bouquets and wreaths. “I came back and trained a bunch of girls in how to put them together,” says Manju, director of manufacturing at Ramesh Flowers, who was an English teacher before she joined her husband’s business. 

For the next two years, the French company sent its team to train the workforce at Ramesh Flowers in this new craft. But the French firm didn’t survive for too long. It shut shop after three years as it expanded aggressively and could not sustain the operations. However, Ramesh Flowers continued to make bouquets for customers in the US and Europe. 

Ramesh Flowers sources its botanical raw materials from across the country, except western India, where it has not developed a network. Its suppliers collect agro and forest waste and minor forest produce down the entire Eastern coastline, from West Bengal to Tamil Nadu, as well as Madhya Pradesh, Uttar Pradesh and Himachal Pradesh. The company ensures that there is no ecological damage or destruction of trees while sourcing raw material. While availability is never an issue, initially, at least, there was much curiosity on why dried flowers, leaves and seeds were being collected. “We were viewed with some suspicion as no one could understand just what one could do with dried leaves, fruits and seeds. Some even thought we were exporting drugs hidden under those things,” remarks Singhwi.

Today, Ramesh Flowers has a 40% market share of India’s combined dried flower exports of around ₹300 crore. The company currently exports 2,000 TEUs of dried flowers every year. TEUs (twenty foot equivalent units) are 20-foot metal containers used to transport cargo in ships, trains and trucks. 

Always on the lookout for ways to take his business ahead, Singhwi early on recognised the potential of home fragrances. Accordingly, he started offering scented potpourri and fragrance oils in 1995, followed by fragrance sachets and pillows from 2002-2003 and diffuser and gift sets in 2006. Candles were the latest addition to the company’s portfolio nearly two years ago. It makes immense sense when you look at the market opportunity. Candles make up nearly two-thirds of the global $7 billion (₹30,000 crore) home fragrances market in the US alone. Total exports from India are to the tune of ₹350 crore.

Today, Ramesh Flowers ships 30-40 TEUs of candles each year and has one unit dedicated solely to the manufacture of candles and incense sticks. Singhwi believes that the candles business, which contributes 10% to overall revenues, has the potential to become the highest revenue contributor in the next couple of years. “The business can be scaled easily since the processes are more standardised and the turnaround time is considerably shorter,” he says. While he was deliberating on the entry into candles over the past four or five years, the final push came from the customers. Currently, the company supplies to retailers such as Big Lots stores and Wilkinson in the US and the UK and is looking to increase its capacity before it takes its latest offering to its larger and marquee clients.

There are several on the company’s list, starting with its largest customer Ikea, the Swedish furniture major, contributing 26% to its overall revenues. “Ikea approached us about 13 years ago and has been a client since then,” says Singhwi, who is proud of the fact that he has never had to spend heavy on marketing money to rope in international clients. Apart from Ikea, the company also counts leading retailers across the US and the UK, such as Walmart, Kohl’s, Asda and Michaels, as its top clients.  

Mutual Admiration

Some of these have been mutually beneficial partnerships, where both sides having gained from each other. Take the case of Ikea. “We have learnt a lot from Ikea about standard international practices, water conservation, lower chemical usage and improving efficiency of workers,” says Singhwi. The firm even switched its diesel boilers to steam boilers fuelled by wood fire, ensuring no carbon discharge and thus gaining carbon credits. Ikea, on its part, is all praise for its vendor. “New product development and execution has been Ramesh Flowers’ strength and has given them a clear edge over competitors,” says Lokendra Sharma, who has been a part of the buying team at Ikea India and has worked with Ramesh Flowers on product development for a couple of years now.

Being an environment-friendly company, Ikea has laid down some stringent terms on inputs it uses, from chemicals that are used not only in the fragrances but also in the ink used to print the label and the glue used in the packaging. Not only Ikea, most buyers lay down stringent conditions on areas such as where the fragrances and raw materials should be sourced from (there is emphasis on sustainable sources), the font size on their labels and the quality of packaging.

Ramesh Flowers and its clients work closely on the designs and choice of colours for the season, based on what’s hot in the fashion industry. Customers now demand that the company also work on how the display should look in their stores. “They want more bang for their buck now and it is good in a way since it weeds out weaker players who are unable to maintain international standards,” says Singhwi. According to him, there is a high level of transparency in their costing as well. “We share our costing with customers and put our mark-up on that. Our customers know exactly how much money we make.” On a combined level, Ramesh Flowers makes a net margin of about 7-8% on a turnover of ₹130 crore (FY13). Revenue for the company has more than doubled from ₹60 crore in 2007, which marked its 25th year in business. 

Unlike most export industries where the Chinese threat is imminent, in the dried flowers business, no such thing exists. “Our processes are complex and require a fair bit of experience and manual labour. This doesn’t lend itself to mass production and hence you will not find many Chinese companies competing in this space,” says Manju.  

Rocky road?

But predicting demand is definitely a challenge, and growth in the business is not always linear since tastes, colours and fragrances change according to the season and trends. “Since the product is not a necessity, you can never predict demand very accurately. You have to keep coming up with new and interesting products to get the customer’s attention,” says Russell Mohta, managing director, Siboflor Natural Decorations, which is Ikea’s other vendor for dried flowers in India. Also based in Thoothukudi, the firm brought out its Dutch partner, Hogewoning, over seven years ago and currently has a turnover of around ₹20 crore. The good thing about the industry, according to Mohta, is that there are no large investments in machinery and making production changes according to the season’s trends is easier.

With the rupee on a downward spiral over the past year, Ramesh Flowers has little to worry on the currency front. While its 20% imports act as a natural hedge against any appreciation, the company goes in for a forward cover for half of its export revenues, leaving the balance unhedged. It imports most of its packaging requirements from China, since most of the packaging quality in India doesn’t make the cut for its international clients and, more importantly, freight costs are so high in the country that it becomes cheaper to import from China rather than sourcing it from North India. 

Shortage of labour is a big problem to contend with for Ramesh Flowers, with 2,000 people employed across its five manufacturing units. “Thanks to MGNREGA, people are unwilling to come and work here. The government should not give out free money. It takes away people’s incentive to work. Instead the government should tie their payments to productivity,” says Singhwi. To tackle this issue, the company has mechanised some processes, bringing down its headcount from 3,000 employees in early 2000 to 1,500 now in the floral business and 500 employees in the candle business. Power supply, however, remains an issue and increases the overall input costs for the company.

Despite these challenges, Ramesh Flowers definitely seems to be in a good spot, with demand outstripping its ability to meet it. The company is also looking to establish its own online presence, where it can retail its products. In the early 2000s, the company opened its own retail outlet called Sixth Sense in Chennai and while it has not scaled the number of retail outlets, it plans to use the brand to develop its online presence and set up small display counters in large-format stores. It is already supplying to some of the leading domestic retailers such as Home Store and Fabindia, and Good Earth is likely to enter the fold soon.

Over the next five years, the firm has set a ₹400 crore target, including ₹120 crore each from the candle and floral businesses. Though it faces competition from firms such as Primacy, Sibaflor Natural Decorations, Fauna International and Singhvi International, its economies of scale put it at a distinct advantage. For the man who says he can convert any waste — agro, plastic or iron — into something beautiful, Ramesh Flowers’ success was something he never imagined. “Success came to me when I let go of all my dreams to become big in business and came to Thoothukudi to start afresh. I realised that if you try too hard for something, it doesn’t happen. So I started Ramesh Flowers with an open mind and no major ambitions and have not looked back since.”