Think of one thing you do more frequently now than ever before amid the COVID-19 pandemic outbreak. Hopefully, washing your hands and cooking at home come to mind.
Bangkok-based firm Equator Pure Nature, which specializes in all-natural household cleaning products derived from a pineapple fermentation process rather than petrochemicals, understands this shift in behavior and is preparing to reach a fivefold increase in its sales in China in 2020.
The company sells its eco-friendly products, including liquid hand soap and dish-washing liquids, in 15 Asian markets under the brand Pipper Standard. By February 2020, in the Chinese market alone, Pipper Standard already generated about 75% of all of its 2019 sales, said the company’s founder and CEO Peter Wainman.
KrASIA recently spoke with Wainman about his company and its business expansion plans in China. The US-born entrepreneur has also recently been named “expat entrepreneur of the year for corporate social responsibility” by the British Chamber of Commerce in Thailand for the company’s products, which represents an alternative to traditional chemical cleaning products, and for its focus on social and environmental responsibilities.
Small, but multinational and ambitious
Equator Pure Nature’s products have a wide international presence, backed by 70 investors coming from different countries around the world, such as Nigeria-rooted Kayode Akinola as an individual investor (former partner of investment firm KKR), and Texas-based Wildcat Capital Management, which manages capital for the founding partner of TPG Capital, David Bonderman.
Despite having no previous experience in the consumer products sector, having earned his masters and bachelor’s degrees, both in electrical engineering, from the Massachusetts Institute of Technology and the University of California, Wainman came up with the idea of developing entirely natural cleaning products in 2010, following an allergic reaction he suffered to chemicals in a fabric softener.
It took four years for Wainman, who moved to Thailand in 2006, and Equator’s founding members, including a chemist and a microbiologist, to find the right fruit and fermenting technologies to initiate production.
Equator Pure Nature finally launched its products in Thailand in 2015, and the company’s business at home has already turned profitable, Wainman said, explaining that it started to start exporting its products to international markets around 2016. Now Pipper Standard products are available in countries including Indonesia, Singapore, Japan, South Korea, India, and China.
The firm has filed for patents to protect its pineapple fermentation technologies in the United States, Europe, China, and other Asian markets as early as 2014, said Wainman, while the firm’s brand name has also been registered or is pending registration in 60 countries.
“We are the only natural cleaning commercial brand in the world with a globally patented pineapple fermentation technology,” Wainman said, adding that his company’s products “clean as well or better than chemical-based products.”
He explained that although the company’s yearly revenue is currently less than USD 5 million, he estimates to hit between USD 50 million and USD 100 million annually. He added that the company’s sales now grow at about 70% annually, and to meet future targets the firm will need to continue with a growth rate of between 58% and 82%.
China harbors unique challenges
While an international expansion in 15 markets may sound beautiful for entrepreneurs, the reality check can be harsh. For example, China, the world’s largest consumer market, harbors unique challenges, Wainman ensured.
While today businesses in China recognize e-commerce as the foremost crucial sales channel for consumer goods vendors, it took the Thai company two years to understand this defining characteristic of the modern Chinese economy.
Equator’s business in China was first launched in Taiwan, where the firm started gaining about 85% of sales from brick-and-mortar retail stores and only a small proportion from e-commerce channels. The company then leveraged its Taiwan distributors, which also had partners in the Chinese mainland, to start offering its products in the mainland.
Equator first set up its headquarters in Xiamen, a coastal city in Fujian province near to Taiwan. The firm initially promoted its products mainly to maternity centers, offering care-taking services to moms and their newborn babies.
However, fully focused on these brick-and-mortar channels, the company’s brand, Pipper Standard, did not immediately succeed in the Chinese market. In 2018, Equator relocated its China headquarters from Xiamen to Shanghai, while its distributor hired a new team of people to boost sales and tap e-commerce platforms.
As e-commerce sales began picking up and surpassing brick-and-mortar sales, the company fully transitioned its China’s strategy to e-commerce in 2019. Wainman explained that his firm targets mothers with young kids, health-conscious individuals, high-end sports fans, and people who suffer from allergies as their main consumers.
Equator launched a flagship store on Alibaba’s B2C platform Tmall in May 2019, while Pipper Standard products are also now available on JD.com, and Suning.com. Since the second half of last year, the company has also been leveraging on key online opinion leaders on social e-commerce site Xiao Hong Shu (Little Red Book) and China’s largest short-video app Douyin to boost its brand profile.
While the firm finally found its right growth strategy in the Chinese mainland market, the COVID-19 outbreak, which started in January in Wuhan, represented both a challenge and an opportunity, Wainman said. He explained that while the company’s logistics were paralyzed in late January and early February, sales also spiked, as residents started to wash more frequently their hands and clothes, and cleaning more carefully their houses. However, from the gradual resumption of logistics services after the Chinese Spring Festival and 14-day self-quarantine required by some large cities, its business has kept growing in China.
Fundraising still vital for the future
Wainman says that his decision to enter 15 markets was partly motivated by his personal ambition to see as many people as possible to use natural products. A personal dream of expansion into so many countries has its costs, especially because most of these markets, with the exception of Thailand, are still in the investment stage.
He said his company has started a USD 5 million Series E financing round, although due to the ongoing global health crisis, investors worldwide are tightening their purse.
Former investment banker Wainman, who started his career at Donaldson, Lufkin & Jenrette Securities, admitted that it might be difficult for Equator Pure Nature to secure new investors, as they might be only able to raise funds from their current shareholder base, something which is quite different from previous rounds.
However, Wainman said he is “absolutely confident” that the company will receive additional investment from some of its 70 current shareholders, such as Thailand steel tycoon Khun Sawasdi Horrungruang, since they understand and trust Equator’s strategy.
“Good companies can still raise money; it’s just under different terms.”
He explained that before the pandemic, companies might be able to raise at USD 10 dollars a share but now the price might be USD 5 dollars a share. If the new funds do not materialize as expected, Wainman, who holds the majority of the voting power along with his wife, said he will have to cut spending, which will affect sales but could be necessary.
However, he believes that although the current investment landscape has changed, more and more investors are looking beyond just profits and shifting to “triple bottom line investing”, also known as either Environmental, Social, and Governance (ESG) investing.
“As a clean-tech company, Equator Pure Nature and our brand Pipper Standard fits this space perfectly. We have a globally patented technology with products derived from pineapple that are certified to biodegrade which makes us very environment-friendly, and we run our company similar to larger multinational organizations,” Wainman said.