Dabur pulled the Balsara business back into the black within six months of acquiring it. The acquisition has helped Dabur gain share in categories such as oral care and home care.
"The integration of Balsara with the company has resulted in better economies of scale and enhanced distribution. We have been able to better our efficiencies in various areas as it gives us better bargaining power." _ P. D. Narang
Dabur India can well be cock-a-hoop now over its acquisition of the Balsara home products brands last year. Having achieved some degree of success in putting some zing back in them, Dabur is now increasing its thrust on growth through more acquisitions. Even though questions were raised about the viability of buying a loss-making business at the time of acquisition early last year, the financials of the brands for the previous fiscal have proved otherwise.
Not only did the company bring back the Balsara business to black within six months of acquiring it, the acquisition has also helped boost Dabur's financial performance, especially in categories such as oral care, where it was earlier present through only Dabur Dant Manjan and Dabur Red toothpaste.
According to P. D. Narang, Group Director, Dabur India, the Balsara business had a topline of Rs 189 crore in the previous fiscal, a growth of 35 per cent. Further, Balsara clocked a net profit of around Rs 14.8 crore in the year while its oral care business (comprising Meswak, Promise and Babool) grew by a sizeable 43 per cent.
"The integration of Balsara with the company has been completed and has resulted in better economies of scale, enhanced distribution and penetration. Further, we have been able to better our efficiencies in various areas, including raw material sourcing, as it gives us better bargaining power," says Narang.
The enhanced bargaining power can be seen in all spheres including advertising where the company has been able to negotiate better rates with media-buying houses for Balsara's advertising.
The company has earmarked roughly 20 per cent of the Balsara topline for marketing spends. Narang says that Dabur would spend nearly Rs 36 crore - Rs 40 crore on above- and below-the-line marketing schemes on Balsara brands.
Apart from adding a complementary brand portfolio and bringing about economies of scale, the takeover also gave Dabur access to Balsara's manufacturing units at Kanpur, Silvassa and Baddi. Further, on the distribution front, market analysts point out that it gives the company greater geographical spread as the bulk of Balsara's revenue comes from the West and South of the country, while Dabur's strength lies in servicing the Northern and Eastern markets.
Narang adds that the integration of Balsara with the company after the acquisition was also carried out seamlessly. Dabur had mandated Accenture to list out the problems at Balsara beforehand and so was able to tackle these aspects.
On the human resources front, Narang says the company has added 200 people to its workforce post acquisition and has retained Balsara's marketing, sales and manufacturing teams.
Dabur is now working on implementing a new marketing strategy for the Balsara range. This includes introducing new packaging as well as bringing the Balsara products, which are more herbal-oriented, under the Dabur tree.
For instance, the packaging of Babool and Meswak has already changed to reflect the new ownership. The pricing too has been altered for certain products. Meswak toothpaste's price has been reduced by Rs 10 to Rs 50 for the 200 gm pack.
Overall, Dabur's oral care business recorded a growth of 6 per cent led by the toothpastes portfolio which grew by 31.9 per cent. While Babool registered a growth of 70 per cent backed by changes in product, packaging and a new ad campaign featuring Vivek Oberoi, Meswak posted strong growth of 72 per cent on the back of renewed marketing focus.
On the other hand, Dabur Red toothpowder declined 10 per cent during the year while Dabur Red toothpaste posted a strong growth of 18.7 per cent, increasing its market share from 2 per cent in 2004-05 to 2.8 per cent the last fiscal.
Analysts point out that the growth in Dabur's oral care business excluding Balsara would have been flat.
The company is working on a re-launch of Promise. "Research is on for a new product formulation and we are looking for a pan-India launch soon," says Narang, adding that the brand is doing extremely well in select international markets such as Russia.
Dabur is unlikely to bring in the Balsara home care products under its brand umbrella as they do not go with Dabur's brand identity of products with herbal/natural . Balsara's brands in the homecare category include Odomos, Odopic, Odonil and Sanifresh.
"We are very bullish about the home care category as we feel it has tremendous growth potential. We are looking to expand our home care portfolio to include more products and variants. For instance, we recently entered the air fresheners category," says Narang.
Balsara's home care portfolio recorded an impressive growth of 63 per cent in the last fiscal with all brands posting strong growths. While Odonil grew by 80 per cent, Odomos registered a robust 70 per cent growth driven by favourable product refurbishing and Odopic posted a growth of 15 per cent. The company said that growth in the future would be driven by newer product formats. The company's new Odomos range would be launched by around July and new initiatives in Sanifresh and Odopic would be rolled out in the fourth quarter of this year.
Analysts, however, point out that despite the turnaround in performance last year, Dabur should be cautious as Balsara is its first major acquisition and marks its first departure from the herbal platform. It thereby remains to be seen how efficiently Dabur will integrate the non-herbal brands into its product portfolio. Further, the company will have to invest substantially to expand the brand equity of the new additions. Dabur is also looking for newer business models and is extremely bullish on private labelling and contract manufacturing for entities in Europe and the US to further its growth.
"We would be stepping up the contract manufacturing business where Balsara had a strong hold. Our focus would be to further the business by supplying to Government institutions and supermarkets," observes Narang. Dabur is emphasising R&D for launching customised products to address this growing area. So much so that the company is hoping to grow its vendor business from the current Rs 12 crore to Rs 60 crore in the next four years. Dabur now contract-manufactures primarily oral care products such as mouthwash and toothpaste.
The company is planning to invest substantially in its Balsara factory in Silvassa next year and convert it into an EOU both for contract manufacturing as well as for branded products which it doesn't make in the overseas factories. Market watchers point out that the company will be abIe to meet the needs of the export market much more efficiently from this factory rather than from its current units which are configured towards domestic requirements.
Meanwhile, Dabur's acquisition trail does not seem to end with Balsara. With that takeover paying rich dividends, Dabur is learnt to have begun discussions to acquire a domestic FMCG player operating in the herbal space.
With a war chest of over Rs 100 crore ready, and which can be increased to Rs 1,000 crore if required, Dabur is all set to create more ripples in the FMCG space.