A ‘Real’ twist to health & wealth?
After food & personal care, Dabur is betting high on health & beauty

(column by Angshuman Paul)

The impending arrival of March spells anxiety for a number of business houses, for the corporate honchos are busy taking stock of their company’s financial performance over the past fiscal year. Come March 31 and on this date the destiny of a number of stakeholders is re-written. However prophets opine that a single year’s performance does not decide the fate of a corporation, but is just linked to the overall strategy of an organisation. Set a target for a year, achieve it and then start the next year with a fresh set of targets. That’s the mantra that the home-grown Dabur India has applied for its growth strategy. The past few years has seen the company exercising a constant surge in its profits. And FY07 was not an exceptional for the FMCG behemoth. The net profit of the company stood at Rs.2.52 billion as against Rs.1.89 billion for FY06, recording an incredible growth of 33%. Dabur India almost made it to the list of 100 Most Profitable Companies, registering a rank of 101 on the list. So what exactly attributed this growth and how was the year 2006-07 diferent as compared to other years? Sunil Duggal, CEO, Dabur India told B&E, “The fact that Dabur India grew faster than category growth rates in some key and highly competitive segments like oral care & hair care, particularly shampoos, drove growth in 2006-07.” Definitely Sunil Duggal’s strategic game plan is to aggressively expand and build a comprehensive product portfolio for Dabur in the FMCG sphere.

The New Age Dabur
The restructuring of the Dabur Group is truly unique, since the core business is now being run by non-family professionals; while the Burmans have given up executive positions in the core company to take charge of the new growth businesses. While talking about such a strategic management restructuring, V. C. Burman, Chairman, Dabur India told B&E, “It was in response to the changing dynamics of business... the family has a trusteeship role to follow, both for perpetuating the family business and in preserving & growing the business.” Amit Burman, who has taken charge of Dabur Foods told B&E, “New, high growth businesses require entrepreneurial zeal and are better suited to members of the family.”

The restructuring exercise did wonders for Dabur as they ventured into new areas through acquisitions and went on a massive expansion spree. States Duggal, “Inorganic or acquisition is a key strategy for growth at Dabur India. The growth can come both from the domestic as well as international markets. But one must look at strategic fit of the target in order to add value to the company.” For instance, Dabur’s acquisition of Balsara (a homegrown herbal company) for Rs.1.43 billion in January 2005 fitted very well with Dabur’s core competency of herbal flank. Rajan Varma, CFO, Dabur India told B&E, “Balsara on a standalone basis contributed 19% of total turnover (of last year).” And in FY06 Balsara’s home products recorded revenues of Rs.1,685 million, a growth of 42% over last year.

The period 2002-06 is heralded to be the most crucial for Dabur. At a time when the FMCG sector as a whole was experiencing sluggish growth and FICCI’s FMCG survey claiming that in FY06, the sector will grow at a miniscule 2%. The survey also pointed out that only segments that will stand out are food & personal care. Realising the potential of the two segments, the FMCG players in the country started to strengthen their portfolio with these two cash cows. Dabur was not an exceptional too! So on March 29, 2006, Dabur unveiled its Vision 2010, wherein by 2010 the main focus areas will be expansion, acquisition and a product portfolio comprising of food & personal care products.

The Final Scorecard
Once Dabur drove headlong into the two high potential segments of food and personal care, the company immediately catapulted to the top league, competeing with the likes of HLL, P&G and ITC. Dabur unleashed oodles of personal care products under its flagship brand Vatika and backed up with massive marketing activities, enabled Vatika hair care registered a growth of 31%, as against the category growth of 12.3% (according to AC Nielsen). While speaking to B&E about the performance of this lucrative personal care segment, Duggal said, “Dabur brands were the fastest growing in the toothpaste category with volume growth of 29% as compared to category growth of just 12%. Key drivers of growth in this category were Babool, which grew by 49%, and Dabur Red Toothpaste, which recorded growth of 16%. And we will continue to build these growth drivers aggressively and capture the opportunities as the market evolves and changes.”

'Real’ from the stable of Dabur, has 57% share of the food segment market (as per CMIE) and this year too Dabur strengthened this golden goose through product innovation & massive retail presence. Adds Amit Burman, “We are growing faster than Tropicana as we havevariety in juice to cater to a larger segment of society.” But that was not all, Dabur Foods Ltd., a 100% subsidiary of Dabur India, also targeted institutional buyers to enhance their presence. Sanjay Sharma, GM, Sales & Marketing, Dabur Foods told B&E, “This year, we dealt with 3,500 such food services accounts and we covered 80% of the 5-star hotels with our supply of juices. We also segmented the food business into two main verticals – food as FMCG & food as retailing.” A brilliant strategy, as the institutional segment is contributing 25% of total sales and generating business worth Rs.400 million and also giving stiff competition to players like HLL, ITC & Nestle. Little wonder that among all the businesses, Dabur’s presence in food recorded the highest growth of 29% in revenue.

Dabur’s Destiny
“Dabur India has recognised a clear need gap that exists in health & beauty (H&B) retail space in India, thereby enabling the company to have an early mover advantage in the market. We feel there is a growing need for quality service and store environment in the health & beauty retail market in India today and no major player has entered this space so far. We believe there is a lot of value creation possibility in this venture,” Duggal shares his business plan to B&E for FY08. The company has already lined up investment to the tune of Rs.1.40 billion in H&B segment and will have a pan India presence by 2010. It targets to earn revenue of Rs.17 billion in 2012 through 350 stores. But with Fortis HealthWorld (a H&B retail venture of Ranbaxy Group), investing a whopping Rs.8 billion to open 1,000 stores by 2011, the company think tank might have to go back to the drawing boards to chalk out new strategies. Even on the M&A front, Dabur is eyeing organisations in Middle East, Africa & India. Adds Duggal, “Various proposals are under consideration and the company has the right balance sheet to fund a large acquisition at short notice. We have also got our shareholders’ approval for raising $200 million to fund acquisitions.” And come March 2008, the big honchos of Dabur India, sitting in the posh green colour building of Dabur in Sahibabad, will look back and rejoice at the year passed by and then don their thinking caps to strategise for the next year. And with the promise of future growth, Dabur might just be looking at its best shot at going global and in the bargain secure a place for itself in the B&E list of 100 Most Profitable Companies.

(End of Angshuman Paul column)