In a bid to tide over the ongoing consumption slowdown, Dabur India is stepping up its investments to expand its direct rural distribution network and is launching lower-priced packs of its key brands. Talking about inorganic growth strategy, the company’s CEO Mohit Malhotra told BusinessLine that Dabur is open to acquisitions at the right valuation. Excerpts:

What is your take on the rural consumption slowdown? What are your growth expectations?

While we hope the festive season and the ‘near normal’ monsoon should lead to a better second half as compared to the first half of this fiscal, I feel this slowdown in consumption will be relatively medium term and will not disappear in another couple of quarters.

We are targeting a mid-to-high single digit growth in FY20. Nearly 45 per cent of our business comes from rural India. So we are focussing on strengthening our rural footprint by establishing a direct distribution network in 60,000-65,000 villages, that contribute to about 50 per cent of the FMCG industry’s sales, over the next two years.

We have stepped up investments and expanded our direct rural distribution footprint to 48,000 villages from 44,000 villages in the April-June 2019 quarter alone.

We are focussing on creating a portfolio that will ride on this infrastructure. So we are launching Low Unit Price packs (LUPs) of ₹5, ₹10, ₹20 and ₹40, to make our power brands more accessible to rural consumers.

The direct distribution footprint increases the breadth of our portfolio significantly.

What are your plans for inorganic growth?

We are scouting for an acquisition target either in India or in other South-East Asian markets such as Bangladesh, Sri Lanka or Myanmar. It should be strategically aligned to our core portfolio in the natural, herbal and Ayurveda space at the right valuations.

What does your innovation pipeline look like? Will you enter new categories?

We are focussing on growing our power brands (Dabur Amla, Dabur Red, Real, Dabur Chyawanprash, Dabur Honey, Pudin Hara, Lal Tail and Honitus) by putting significantly higher investments behind them to drive growth in the medium term.

In line with our premiumisation strategy, we will look at offering our power brands in modern formats, especially targeted at e-commerce and modern retail stores.

For instance — Our cough syrup brand, Honitus, can be moved from the medicine chest to the kitchen cabinet, in the form of a tea bag for everyday consumption. Rather than looking at new categories, our focus will be on having a play in category adjacencies.

There are expectations from the FMCG industry on plastic waste management. What are your plans ?

We are ahead of the curve in plastic waste management and have embarked on a path to become a plastic-waste free company by 2020-21, with a target to effectively collect and recycle all the plastic waste that we generate. This is a structured programme and nearly ₹8-10 crore of our profits will be invested in this initiative. This is in addition to our CSR commitments as a company.

The company said that despite the slowdown, rural demand remains ahead of urban demand. What’s your strategy for driving growth in urban regions?

General trade is under immense pressure due to various factors including the liquidity crunch due to the NBFC crisis. We are also seeing downtrading in semi-urban regions.

Urban India has become disaggregated, due to the emergence of e-commerce and modern retail channels. We are adopting different strategies for different channels. For the e-commerce channel, we are crafting specific SKUs and doing exclusive bundled offers.

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