Dabur India on Wednesday said its board has approved an investment of ₹135 crore for setting up a manufacturing facility in South India. This marks the FMCG major’s first investment in South India. The company said the greenfield factory will manufacture a range of products including Dabur Honey, Red Paste and Odonil air fresheners.

The FMCG major posted a consolidated net profit of ₹514.2 crore for the third quarter ended December 31, 2023, up 8 per cent from ₹475.9 crore, a year ago. Revenue from operations was up 7 per cent at ₹3,255 crore in Q3 led by home and personal care, and food & beverage businesses. The company said its India business recorded a volume growth of 6 per cent.

On the greenfield facility in South India, Mohit Malhotra, CEO, Dabur India, said, “Our business has scaled up in South India and today accounts for around 18-20 per cent of Dabur’s domestic business. With South India’s contribution increasing, we have decided to establish a new manufacturing facility there to cater to the local demand better.” The company has an existing network of 13 domestic manufacturing locations.

According to him, moderating inflation, positive consumer sentiment and the company’s focus on rural distribution footprint expansion helped demand from the hinterland bounce back for the company in the third quarter.

Rural demand

Responding to a query on rural demand on the investor call, Malhotra said rural markets reported a growth of 6-6.5 per cent in the December quarter, while urban markets grew 3.8 per cent year on year. “We have given very contrarian results (compared to peers in terms of rural demand) because of our focus on village expansion, rural outlet expansion, and curation of a rural portfolio.That’s why we could beat what the market is saying,” he said.

The company said it has expanded its rural footprint to 1.17 lakh villages from 1 lakh villages and expects to end this fiscal with rural coverage of 1.2 lakh villages.

“Rural demand has got impacted and my hypothesis is this is because food inflation has started once again or has not abated. So, if you see fruits, vegetables, spices, cereal etc, we have seen inflation pick up in the range of around double-digit now. And in rural, where per capita incomes are lower, their incomes are skewed towards consumption of essentials, and therefore, discretionary gets impacted,” Malhotra said.

“That said, elections are approaching and I think there will be a lot of government investments which will happen on infrastructure, which will help rural and also some dole-outs will be given by the government in rural which will only increase their disposable income. One very positive sign is that the gap between urban and rural (growth) is reducing over the past three quarters. So as the gap narrows between urban and rural, I think, rural recovery for the industry is imminent,” he added.