Demonetisation has had an impact on FMCG business with primary sales declining significantly, said Sunil Duggal, CEO, Dabur India. “We have been very proactive in not exposing ourselves to any credit risk and defaults from the trade partners who may become financially stressed. One will have to give some credit extensions no doubt but it is being done in a calibrated manner to credit-worthy partners,” Duggal said.
In an interview with BusinessLine, Duggal shared the company’s strategy to lessen impact of demonetisation and also future growth prospects with particular focus on science-based Ayurvedic products and acquisitions.Excerpts:
There has been a supply chain dislocation and destocking and obviously primary sales have been significantly impacted. Destocking impacts the primary deliveries, but the secondary deliveries continue. The momentum, in terms of secondary sales and actual consumer offtake, has slowed down but it is not as dramatic as the loss of sale due to primary billing numbers.
We have been protecting ourselves from any credit risk and defaults from the trade partners who may become financially stressed. We are giving credit extensions in a calibrated manner.
How is this impacting ad spends and consumer promotions?
In terms of cutting ad-spends, we felt it was prudent to take whatever we could off-air in November. But, the intent is to put it back on-air as soon as possible.
Before resuming extensive media campaigns, we will analyse the consumer sentiment. We expect some clarity in next few days. However, we are extending consumer promotions by another month. So any direct benefits to consumers in terms of discounts and promotions continue in December.
Some analysts are saying it will take six months for complete normalcy to resume. What’s your view?
Once the liquidity in terms of hard cash availability comes back, which I believe it will in the next 2-3 months, we will start seeing normalcy returning. We are already seeing signs of liquidity improving in the Southern region compared to North and the East region. I do expect our business to revive quiet sharply. But, the question is can we get back to a normal growth rate in the fourth quarter? That is what we are trying to do. We are trying to slowly revive the curve. The process of normalcy will be slow but it will be visible and we hope to accelerate it so that we can have full normalcy by the end of fourth quarter.
Dabur is increasingly focusing on science-based Ayurveda. How do you plan to leverage this positioning?
We are putting all our ayurvedic products on the platform of science- based ayurveda. We seek to differentiate ourselves from many of our competitors which operate more on the faith platform. There are many consumers who would want validation before they buy a product. So we will seek to recruit these consumers for our products, who will be swayed by rational arguments of product efficacy, manufacturing quality and validation process. It’s important for us to take the leadership in the science-based Ayurveda platform. I don’t think any other company has that capability in terms of R & D facilities, testing protocols, product validation processes. We are looking at healthcare space in a much larger context. This will be substantially driven through our herbal, natural and ayurvedic products.
What are the new product launches that are on the cards?We have pushed back new product launches and will not be launching new products in this quarter because of demonetisation. We will launch them in the fourth quarter or the first quarter of next fiscal year once the situation is normal. These will conform to the science-based Ayurveda philosophy. Some of these launches will be in the OTC, health supplements and personal care space.
The company has said that it is open for acquisitions. What segments will you look at for inorganic opportunities?
We will look at all the segments that we are present in for acquisitions, especially in the healthcare and personal care space. We also believe that due to the current economic conditions many of the smaller companies that are very-cash dependent might face issues in terms of their viability. So, we will be refocusing on the M& A space because perhaps the best deals are done in stressed economic conditions. We have the cash and there may be assets available now at comparatively knocked-down valuations compared to two months ago.