Companies

Dabur India to focus on bolstering production capacity, cost savings measures

Meenakshi Verma Ambwani New Delhi | Updated on May 13, 2021

Sees tailwind for healthcare portfolio

Dabur India closed the challenging FY20-21 with double digit revenue growth and gained market share in key categories. The company has announced plans to invest ₹550 crore in the next 4-5 years to ramp up existing production capacities as well as to set up a greenfield facility in Madhya Pradesh. As the country battles the second wave of pandemic, Dabur India CEO Mohit Malhotra told BusinessLine that innovation will continue to be the centrepiece of the company’s strategy with a sharper focus on power brands and cost saving measures to mitigate impact of inflationary trends. Edited excerpts:

What has been the impact of the second wave with lockdown-like restrictions imposed in many States?

We were seeing strong recovery trends till the second wave took everyone by surprise. So what we are seeing, in terms of categories right now, is that the healthcare portfolio is seeing a tailwind since the second half of April, whether it’s Chywanprash, honey, Ayurvedic division, OTC portfolio, health juices and health drops. All these products are doing well.

In terms of channels, e-commerce again is doing exceedingly well. Last year e-commerce’s share to the total turnover was 5-6 per cent and in April, we saw this contribution going up to about 7 per cent. Categories such as healthcare, oral care and shampoos are all doing very well on e-commerce. Modern trade and self-service grocery stores are seeing some impact where there are lockdowns and where outlets are operating for limited number of hours. Wholesale mandis at this point in time are working and are able to supply but because people are getting impacted our frequency of servicing wholesale has gone down a little bit and less people are frequenting the wholesale markets.

With the spread of the pandemic to rural regions, are there concerns about rural growth which has been extremely strong in the past fiscal?

As it is a dynamic situation one can’t talk with conviction on how rural India growth will pan out. Hopefully, spread of Covid in rural gets controlled then rural growth will bounce back on the back of government stimulus. We are hopeful that government will announce stimulus for rural because last year the economy revived on the back of the stimulus. Also, a good monsoon has been forecast. So, I think rural should trend up. At the moment, we are not seeing any sort of pressures at the sub-stockists level except in Maharashtra.

Are there concerns about urban recovery and discretionary-spend led categories?

I don’t think the impact is going to be as severe as it was last year. Last year, the impact was very severe because there was a country-wide lockdown. This time even with lockdown-like restrictions in various States, the overall economy is still open and supply chains are working. So that said, there could be a little bit of impact on discretionary portfolio for one or two months. We are seeing some moderation in Covid situation and if the moderation continues to be the way it is then I think even the discretionary portfolio will continue to do well. In the March quarter, we saw a complete revival of a discretionary portfolio especially in the home and personal care segment. The first 15 days of April was also very good and the second half also has not been bad as there is growth though on a lower base.

Has the Covid-led restrictions had any impact on production capacities?

There has not been any impact on manufacturing as of now and all our factories are running full steam.

What kind of inflationary pressures are you seeing due to hike in prices of commodities?

There is an unprecedented commodity inflation of about 5-6 per cent that we’ve seen in the last quarter of the last fiscal. The agri-commodity basket alone has seen huge inflation driven by prices of edible oils, herbs, spices and honey among others. To mitigate this impact, we’ve done some calibrated price increase of around 3 per cent. But that’s not good enough to offset the impact and so we will be taking a second round of a calibrated price increase. We expect inflation pressures to be prevalent in the first two quarters of this fiscal year. But in the second half, we expect the prices to soften a little bit. As price increases will not be enough to mitigate this inflation impact, we have also embarked on a cost optimisation project across the company’s value chain called Project Sammaridhi. Last year, we ended up saving around ₹50 crore through this initiative and this year we want to save another ₹100 crore to help in mitigating this inflation impact.

Will you continue to pursue an aggressive new product launch strategy this year?

Innovation will continue to be the centrepiece of our strategy going forward especially in healthcare segment. New products contributed about 5 per cent to the total sales in the last fiscal and we would want to continue to keep it in that range in the current fiscal year. We are sharply focused on our power brands and have been entering white space and adjacencies around these power brands.

In healthcare segment, for instance, this year we are looking to launch Chywanprash in new formats and expand our single herb range and consolidate our health juice portfolio. Couple of new launches are also planned in personal care and skin care segments and we are looking to take brand Hommade beyond pickles and chutneys.

Published on May 13, 2021

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