Corporate File

How Dabur is upping its ayurvedic game

Meenakshi Verma Ambwani | Updated on May 23, 2021

Thinking ahead: Mohit Malhotra

Recipe for success: Dabur also plans to invest ₹550 crore to ramp up its existing manufacturing capacity

Booster shot: Dabur Chyawanprash is one of the company’s ₹1,000 crore power brands

The 137-year-old company is capitalising on its herbal heritage and banking on nine power brands to grow during the pandemic

The ongoing Covid-19 pandemic has ushered in change. If it brought some business to a standstill, it also led to the grand transformation of several FMCG behemoths — from slow process-oriented elephants into nimble panthers. Especially remarkable is the case of Dabur India. The 137-year-old company demonstrated a feline-like speed and ferocity in pouncing on new opportunities, overhauling its go-to-market strategy and capitalising on its ayurvedic lineage.

Despite a washed-out Q1 due to the national lockdown, the home-grown FMCG major registered a 10 per cent growth over the past fiscal in consolidated revenues in FY 21 at ₹9562 crore, with gross sales crossing the ₹10,000-crore mark for the first time. The India FMCG business of the company grew by about 15 per cent for the fiscal year.

As Indian consumers turned to immunity-boosting remedies such as Dabur’s Chywanprash and Honey to cope with the once-in-a-century health crisis, the company added a cool ₹500 crore to just its annual health supplements business. Combined with its Ayurvedic OTC and Ethicals business (which comprises products like Rheumatil spray relief ), Dabur’s overall healthcare piece grew by about 32 per cent. Beyond healthcare too, the company gained market share across key categories including oral care, personal care and packaged juices and nectars, even as it decided to ramp up its food offerings with the Hommade brand.

Time Turner

Founded in 1884 in Bengal by Dr SK Burman to produce and dispense Ayurvedic medicines for diseases such as malaria, the company has come full circle. In the pandemic year of 2020-21, Dabur fired on all cylinders to launch more than 50 new products to meet needs created by Covid-19, drastically shrinking launch process timelines across categories. The products ranged from immunity boosting tea to new offerings in the hygiene space.

For observers, Dabur’s agility and growth was significant given that only a few years ago it was weathering a huge challenge from Patanjali and in 2016-17 had seen a market share erosion in Chywanprash as the Baba Ramdev promoted price warrior stormed the market. It took a few quarters before Dabur could counter Patanjali’s price strategy with marketing innovations and recoup.

What helped Dabur during the pandemic was that its CEO Mohit Malhotra, who had taken charge just a year before in April 2019, had set in motion a change process to introduce agility. A Dabur lifer, Malhotra, had joined the company as a management trainee in 1994 to rise up the ranks, showing entrepreneurial zeal in his last assignment as head of Dabur International, based in Dubai. Company insiders point to the way he catapulted Vatika into a ₹1,000 crore brand, with a bulk of its sales coming from overseas, by expanding the product’s appeal beyond diaspora.

Malhotra brought that same zeal to India when he took charge. In an investor call he talked about how a key challenge for him was to make the elephant dance. He points how the risk-taking appetite was accelerated during the pandemic.

“We focused on bringing about a cultural transformation, becoming a much more agile, nimble-footed, innovation-centric and technology-centric company during this crisis,” Malhotra tells BusinessLine.

The Power of Nine

The company’s strategy hinges on its nine power brands that contribute over 70 per cent to its total sales. The power brands are Dabur Chyawanprash, Dabur Honey, Dabur Honitus, Dabur PudinHara, Dabur Lal Tail, Dabur Amla, Dabur Red Paste, Real and Vatika. Of these Amla, Vatika, Real and Dabur Red Paste are ₹1,000 crore brands.

The strategy is to do aggressive media spends on these nine brands, and launch product extensions. For instance from sugar free Chywanprash to Dabur Red pulling oil to single ingredient based toothpaste with clove, neem and basil, it extended the proposition of its products. In personal care it launched a new flanking brand Dabur Badaam Amla Hair Oil.

Malhotra says the company would invest in power brands to improve their visibility, enhance distribution and drive innovation through new products, variants and format launches, while growing their salience with millennials and Gen-Z.

Even as the focus is on growing the power brands, Dabur also launched new offerings wherever it spotted an opportunity. So last year it pushed out products like Giloy health juices, Tulsi health drops, a range of immunity-boosting churanas, kadhas and teas in the healthcare space. It also ramped up oral care with the launch of Dabur Dant Rakshak Ayurvedic toothpaste targeted at the Hindi heartland. It got into the fast-flying space of hygiene products with sanitisers, floor cleaners and disinfectants.

Dabur also got its digital act together, launching a dozen new e-commerce-first products such as the babycare range, 100 per cent cow ghee, Organic Apple Cider Vinegar and a premium shampoo range under Vatika Select.

Explaining the new product development strategy, Malhotra says the focus is to extend the power brands to white spaces and adjacencies wherever these brands have the right to win, and do not have a risk of dilution. He believes the company has just about scratched the surface in categories such as home-care and foods.

New products contributed about 5 per cent to the total sales in the last fiscal and Malhotra said with innovation becoming an integral part of the company’s DNA, it hopes to continue to keep it in that range in the current year.

A report by Edelweiss Securities noted that the company has strong presence in less penetrated but high growth categories and its broad product portfolio provides a good play on Indian Consumer Goods backed by its Ayurvedic, natural and herbal antecedents.

Plating up more

A crucial step this year will be to scale up the food and beverage business, leveraging on the rising in-home consumption opportunity. The company has separated its foods business into foods and beverages to reflect this focus. Malhotra believes Hommade has the potential to become a power brand. After extending the brand to chutneys and pickles, Dabur is next taking it into spices, sauces and condiments segments. “This year, we are committed to making Hommade a ₹100-crore brand. In next four years, we want to make it a ₹500 crore-brand,” says Malhotra, adding that the tailwind in the ready-to-cook and ready-to-eat categories support this strategy.

In beverages, Dabur was broadly playing in the ₹100-110 price points in the juices and nectars segment but now is making a bigger play by venturing into juice drinks segment at lower price points, starting at ₹10 in PET bottles and is set to compete against the likes of Frooti and Maaza. It is also venturing into carbonated fruit-based beverage segment.

Dabur also plans to invest ₹550 crore to ramp up its existing manufacturing capacity and set up a greenfield facility in Madhya Pradesh to augment production capacities for healthcare, personal care and beverages.

But fast- paced diversification has its own sets of challenges. Malhotra agrees that it raises the investment conundrum. “We need to ensure that investments are carefully deployed,” he says.

Significantly, Dabur has a war chest of ₹5,200 crore in its balance sheet and Malhotra says it is constantly evaluating acquisition opportunities though nothing is on the table now.

Adding so many more products also adds to operational challenges, he admits. “It creates complexity in terms of the number of SKUs and so we need to be quick to remove the SKUs that are not doing well,” he says. But with analytics and digitisation, he says, Dabur is enabling its sales force to improve its efficiency.

He said the company would continue to invest behind power brands to improve.

Pandemic learnings

“The learnings gained from the first wave of the pandemic will last for a lifetime. In the first wave the supply chain disruptions were more challenging and was the trigger for change in the way we operate our business,” explains Malhotra.

For instance, Dabur implemented a Continuous Replenishment System (CRS) to manage its inventories better and reduce time. As a result, in this second wave, Malhotra says the company is well prepared.

The FMCG major has also overhauled its go-to-market strategy which includes digital footprinting of all outlets helping it to visualise urban and rural coverage to identify gaps. Its “Ghar Ghar Ayurveda” retail initiative focuses on adding more stores to its network and expanding the assortment of Dabur products at existing partner outlets. It also piloted a “Dabur Yoddha” programme in select states roping in local sales representatives in villages to grow penetration in hinterlands.

Malhotra said that the company has now grown its direct rural reach to about 60,000 villages. The aim is to ramp it up to over 76,000 villages by the end of this fiscal. In urban markets, the company has been focusing on ramping up chemist outlet coverage, modern trade coverage as well as e-commerce channels. “At an overall level, we reach 1.4 million outlets directly, and plan to reach over 1.5 million outlets directly by next year,” he added.

Last year, the company also embarked on a cost savings initiative called Project Samarridhi across the value chain shaving off around ₹50 crore. This year it aims to save ₹100 crore through this initiative.

For Malhotra, who took up gardening as a hobby during the pandemic, and talks about how green his home has become, it must be satisfying to see the seeds of his endeavours blossom both on the business and personal fronts. But he has to stay vigilant as literally every other FMCG player, from Marico to HUL, is now playing the Ayurveda card.

Published on May 23, 2021

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