“Today, we manufacture foam at five locations across India,” he said. “Along with those, we have six plants that convert it into end products such as sheets, rolls and mattresses.”
Sheela sells mattresses in India under the Sleepwell brand, a fully integrated division.
Selling mattresses across India requires a very efficient distribution network for the mattresses, Gautam explained. “We have about 110 distributors and, below them, about 5,000 retailers,” he said.
The company uses a range of channels to reach the market. “About 2,500 outlets are exclusive dealers and the rest are multi-brand outlets,” he explained. “They range in size from being very small to very big.” This diversity means that Sheela operates through franchises, as he believes the amount of work needed to manage that much real estate would be too great for a company of Sheela’s size.
Outside of India, Sheela is known for its 2005 acquisition of Joyce Foam. This followed a number of conversations between Joyce and Sheela, and ultimately came about after the Australian Competition and Consumer Commission prevented Pacific Brands from acquiring Joyce. The Australasian division of Sheela has its headquarters in Sydney, with units in all five of Australia’s big cities, and a further outpost in New Zealand.
“Joyce makes foam and supplies it to mattress and furniture makers,” Gautam said. “Frank Van Gough is the ceo in Australia. We learn a lot from each other, as the markets are completely different.”
He added that, for example, Sheela’s IT works extremely well in Australia, while some of the bedding developments pioneered in Australia are starting to make their way into the Indian market. “We have had the experience of managing something which is really another culture at a distance,” Gautam said.
After 45 years as a private, family owned company, Sheela Foam floated on the Bombay stock market in 2016.
The flotation was not simply to raise money, he explained. Rather, it was designed to help it develop the tools it needed, and broaden the scope of experience at senior levels while separating the company’s ownership, business direction and management functions at the firm.
“Currently, 14% of Sheela is floated, and 86% is still owned by the family,” Gautam explains. But, he added, under Indian law this must rise to 25% of the firm within three years.
The flotation will also give Sheela the ability to move more quickly if a suitable acquisition target were to present itself.
Gautam shares many family companies’ dislike of debt financing. “We have been very debt averse as a company, because without debt you’re more in control of your destiny,” he said.
It would be a mistake to think that producing foam alone is what interests Sheela, however. “That’s not priority one,” Gautam said. “I think the business in Australia works very well. It gives us the flavour of a western market, a developed market but do we need more of it? Probably not.
“We are in the foam business and also in the mattress business. India is very diverse, but we understand it better than ever before. There’s opportunity here.”
Sheela Foam specialises in selling mattresses produced with unfilled flexible polyurethane foam, placing it in the upper end of the market, a place it has held since the outset. Could that change? “There is no doubt that there is a large bottom-of-the-pyramid that exists. We have some thoughts on how to address the market without compromising the brand,” Gautam explained.
But there are complications. Distribution channels at the bottom of the mattress market in India are rather different to Sheela’s route to market through Sleepwell. There is also the risk to its reputation, and the firm is keen to retain the brand equity already built up by the established business
For now, it is clear that Sheela is putting a real focus on quality. This comes through when discussing the recent purchase of a vertical vacuum foaming machine from Opus of the UK.
“All of our machines are top-of-the-line,” Gautam said. “And the plant next door in Delhi is probably top-of-the-order. It makes both ester and ether foam.
“We have known about vacuum foaming for a long time, but we never had any capacity until patents started expiring. Then we were the first company in Australia to put a variable pressure foam machine in.” This was a horizontally configured vacuum foaming machine, he said.
The new plant uses a vertical foam machine in a variable pressure chamber.
“We call it a VertiVac, a vertical machine with a vacuum,” Gautam said. “I believe it is the first designed to be used commercially anywhere.”
It is in production without methylene chloride or blowing agents, and foam with a density of 11kg/m³ can be produced. “This is extremely soft and can be used to replace polyester fibre in mattresses quilting,” Gautam said. “Our in-house consumption of polyester wadding for this application is large and this will supply all the firm’s needs in the future.”