Dabur India Ltd

Fiscal 2010-11 witnessed the global economy largely shaking off the effects of theeconomic and financial crisis and starting on the road to recovery.

Nevertheless, economic growth in the industrialized nations was below average comparedwith the performance seen after previous economic slumps, with only Asia, particularlyIndia and China seeing above-average momentum. The year FY 2010-11 faced headwinds such asthe Euro-zone debt crisis, political upheaval in Middle East and the twin catastrophes ofearthquakes and tsunami striking Japan.

The Indian economy continues to be on a strong growth trajectory with CSO (CentralStatistics Office) estimating a growth of 8.6% in real GDP for the 2010-11 fiscal ascompared to a 8.0% growth for 2009-10 fiscal. The agriculture, forestry and fishing sectorwitnessed a surge in fiscal 2010-11, with CSO estimating growth of 5.4% as compared to0.4% for fiscal 2009-10. The manufacturing sector continued to post good growth with CSOestimates at 8.8% for both fiscal 2009-10 and 2010-11. The services sector was theoutperformer with CSO estimating growth at 9.6% for fiscal 2010-11 although this wasslightly less than 10.1% for fiscal 2009-10.

Per capita income in real terms (at 2004-05 prices) during fiscal 2010-11 witnessed anuptick, growing by 6.7% in fiscal 2010-11 as compared to 6.1% in fiscal 2009-10.

Indian economy is vitally linked with the monsoon because of its large agriculturalsector and huge requirement of water resources. A large part of the country gets more than75% of the annual rainfall during the four months, June to September (Monsoon season). Theproduction of food-grains has a high correlation with the amount and distribution ofmonsoon rainfall over the country. Further, the generation of hydro-electric power frommonsoon rain water is a clean energy source. The 2010-11 fiscal witnessed more than itsfair share of rainfall, which was at 102% of the long term average for the season ascompared to deficient monsoons last year. This augured well for foodgrains’production, which increased by 8.2% to 235.9 million tonnes in 2010-11 from 218.1 milliontonnes in 2009-10 (advance estimates by Ministry of Agriculture). This will enable therural economy to continue to grow well, apart from other factors which are contributing torural growth.

Although GDP growth remained strong, high levels of inflation throughout the yearplayed spoilsport, oscillating within a band of 11% to 8%. This led to several rounds ofinterest rate hikes by the RBI (Reserve Bank of India) to curb inflation and preventoverheating of the economy. In addition, inflation in food articles touched peak of 20-21%during the months of May-June 2010 and continued to remain in double digits throughout theyear.

All round high inflation in commodities and manufactured products led to significantincrease in input costs across the sectors. In addition, crude prices moved up, which alsohad an impact on transportation costs, hydro carbon linked inputs and packaging costs.Overall, FY 2010-11 was a very challenging year in terms of input cost inflation andmanaging material costs.

FMCG Sector in India Steady growth in the Indian economy is being driven by strongdomestic consumption, economic reforms, private entrepreneurship and global linkages.

Domestic consumption is on the rise due to increasing disposable incomes, growingemployment opportunities and favourable demographics, such as young population (median ageof 26 years), growing middle class and changes in consumption and life style. As per arecent study conducted by Booz & Company, FMCG sector is expected to grow in the rangeof 12% to 17% upto 2020 and would touch a market size between of Rs 4,000 to Rs 6,200billion i.e. US$ 90 billion to US$ 138 billion. Current market size is estimated at Rs1,463 billion i.e. US$33 billion (A C Nielsen report on FMCG industry, March 2011).

The billion plus Indian population, with 50% of population below 25 years and 65% below35 years of age, offers substantial opportunity going ahead. Robust economic growth wouldtranslate into higher per capita incomes, which are expected to increase by around 3 timesto $3,231 by 2020 from $1,017 in 2009. In addition, evolution in consumption patterns inrural India augur well for sustained growth in FMCG sector.

The following factors are driving consumption in both rural and urban markets:

• Upgradation of consumption from unorganized to organized and from unbranded tobranded products

• Increasing per capita consumption, which is relatively very low as compared tosome of the other emerging markets

• Improving penetration of consumer products, resulting in increased usage acrosspopulation strata

• Change in consumption habits with consumers moving up the ladder and demandingproducts suiting their needs and evolving lifestyle

The urban theme would be played by rising share of nuclear households, increasingproportion of women in working population, growing size of the Indian middle class andchanges in lifestyle and consumption patterns.

India’s growing middle class is another important factor driving economic growthand consumption. Indian middle class, which constituted 5% of total population in 2007, isexpected to grow to more than 40% of the population, increasing ten times from 50 millionto 583 million by 2025 (The ‘Bird of Gold’: the Rise of India’s ConsumerMarket by Mckinsey Global Institute).

In fact, the growth of the Indian middle class and economic growth are inter dependantas shown in this circle: rising incomes leading to higher consumption levels, which inturn drive robust economic growth, translating into more employment opportunities andsubsequently higher wages.

The modern trade channel is another factor contributing to growth of the FMCG industryas it is driving consumption by providing convenience, visibility, better shoppingexperience and variety. This is also an important channel for marketers to have directconsumer interaction and interface. Modern trade is growing at a fast clip and is expectedto increase its share of revenues as it expands.

On the rural side, there has been visible evolution in rural consumption patterns, withincreasing demand for quality and branded goods, though pricing and affordabilitycontinues to remain an important parameter. Increasing consumption is being witnessed incategories such as soaps, shampoos, oral care and laundry. Greater media penetration inrural areas is also acting as a key influencer on lifestyle and consumption patterns.

The very attractiveness of the Indian FMCG market is leading to aggressive competitionamong the key players. Fiscal 2010-11 saw a wave of disruptive competition happening in afew categories of the sector, with significant increase in advertising and promotionalspends and attempts to win over consumers by offering greater value for every rupee spent.

For the 2010-11 fiscal, Indian FMCG sector continued on a strong growth trajectory,with the Non-Food and OTC segment of the industry growing by 15% (AC Nielsen MAT Mar2011), driven by opening up of rural markets, increased income in rural areas, growingurbanization, along with evolving consumer lifestyles and buying behaviour.

An increasingly tougher input costs environment led to price increases acrosscategories by various FMCG players. Last year, a benign input cost environment hadresulted in expansion in gross margins, which in turn led to various players increasingtheir advertisement and promotional spends. During fiscal 2010-11, the input costsspiraled while the advertisement and promotional spends did not witness any significantdecline due to heightened competitive activity, and this put pressure on margins. AtDabur, we managed inflation in our commodity basket by effecting calibrated priceincreases, strategic stocking and prudent buying. On account of these, we managed toprotect our margins and reported strong growth of 21% in our operating profits.

Dabur Performance Overview

Dabur completed another year of strong growth, both in revenue and profits. Thehighlights of the Company’s performance in fiscal 2010-11 on a consolidated basisare:

• Consolidated Sales increased to 4,109.9 crores in fiscal 2010-11 from Rs 3,415.8crores in fiscal 2009-10 registering a growth of 20.3%

• Earnings before interest, taxes, depreciation and amortization (EBITDA)increased to Rs 819.8 crores in 2010-11, from Rs 677.3 crores in fiscal 2009-10,registering growth of 21.0%

• Consolidated profits after tax (PAT) went up to Rs 568.6 crores in fiscal2010-11 from Rs 501.3 crores, going up by 13.4% Earnings per share (EPS) went up to Rs3.25 in fiscal 2010-11 from Rs 2.89 in fiscal 2009-10

The Company has maintained a strong and consistent growth trajectory in consolidatedsales during the last 10 years, with growth accelerating in the last 5 years to CAGR of18.5% (See Chart below). The Company’s sales crossed the Rs 4,000 crore mark duringfiscal 2010-11.

Sales growth during 2010-11 continued to be significantly volume-driven, with volumesaccounting for more than three fourths of the total revenue growth. The challenging inputcost environment led to calibrated price increases across categories.

On the operational front, the Company managed to maintain EBITDA margins which werestable at 19.9% in 2010-11 as compared to 19.8% of sales in 2009-10. Aggressive marketinginitiatives led to gain in market share in categories like Chyawanprash, Glucose,Toothpastes and Toothpowders.

Overseas Acquisitions

The year 2010-11 was a landmark year for Dabur as the Company embarked upon its firstinorganic foray into international markets with two successive acquisitions.

HOBI KOZMETIK GROUP

Dabur’s first overseas acquisition - Hobi Kozmetik Group - is a leading personalcare products Company in Turkey, which markets a wide range of hair care, skin care andbody care products. The Company is a leader in the hair gel category with a 35% share andmarkets its products under the ‘Hobby’ and ‘New Era’ brands. Itsproducts are sold across 35 countries, including the Middle East and North Africa. TheCompany had sales of around $30 million and has been acquired for a total consideration of$69 million. The acquisition was completed in October 2010.

Under the transaction, Dabur has acquired 100% stake in three Hobi Group firms - HobiKozmetik, Zeki Plastik and Ra Pazarlama. The acquisition provides Dabur entry into thefast growing Turkey market, in addition to a complimentary product portfolio which can beleveraged across MENA and Africa through Dabur’s existing network. The acquisition isin line with Dabur’s strategy to aggressively expand its scale of operations andstrengthen its presence in the Middle East and North African region.

NAMAST LABORATORIES LLC

In January 2011, Dabur acquired Namast Laboratories LLC, a Company which markets aspecialized range of hair care products to people of African descent. The Company isheadquartered at Chicago, USA, and is a leading player in the ethnic hair care segment inUSA, besides enjoying good brand equity in African markets. The Company had revenue of$94.7 million in 2010 and has been acquired at a cost of $100 million. In addition to theacquisition cost of $100 million, there may be further milestone payments upto a maximumof $40 million to the shareholders, pursuant to an earn out agreement, linked toachievement of sales and profit targets over the next 4 years. The acquisition of NamastLaboratories provides Dabur access to a suite of products specifically suited to Africanpopulation, giving your Company more ammunition to expand its presence in Sub-SaharanAfrica.

Namast, was founded in 1996 to fulfill the needs of the health-conscious consumers ofAfrican descent, and offers a range of products developed with natural ingredients whichmakes it a good strategic fit with the Dabur’s portfolio. Namast markets itsproducts under the brand ‘Organic Root Stimulator’ and is one of the leadingmarketers of hair and beauty products for women of colour. The Company controls a 13%market share in the USA and enjoys significant market positions in many countries inAfrica, the Middle East, Europe and the Caribbean region of North America. It has a strongmulti-channel distribution platform across the USA in mass, retail, beauty stores andsalons.

Besides offering Dabur an entry into attractive new markets like Turkey and Sub-SaharanAfrica, these transactions add to your Company’s existing portfolio, a host ofpopular international brands that enjoy pole position in their respective categories. Theproducts from Hobi and Namast complement Dabur’s portfolio, offering us a strongplatform to enter newer product categories and markets. Both acquisitions also providemanagement continuity, with senior personnel in both companies continuing to stay withtheir respective companies. These two acquisitions, we believe, would take theInternational Business into an altogether different trajectory of growth and open up hugepotential opportunities for Dabur in the growth markets that it is targeting in theinternational arena.

The performance of the various Strategic Business Units (SBUs) of Dabur India Ltd.during the year under review is presented below.

Strategic Business Units

In a year that was marked by soaring inflation and disruptive competition in keycategories, a judicious mix of strategies such as calibrated price hikes, efficientbuying, prudent management of overheads and sustained consumer connect activities acrosskey markets helped Dabur move ahead on the growth track during 2010-11.

Consumer Care Division (CCD), the largest business unit within Dabur capturing its coreFMCG business, including foods, now accounts for 67.9% of the Company’s consolidatedrevenues. This division has reported a 15.4% growth in revenues during 2010-11 fiscal

International Business Division (IBD), the fastest growing and the second largest SBUfor Dabur, accounts for 21.7% of Dabur’s consolidated revenues. The division endedthe year with a revenue growth of 46.3%, including sales of Hobi and Namast for part ofthe year (consolidated from October 7, 2010 and January 1, 2011 respectively)

Consumer Health Division (CHD), which leverages Dabur’s core competence inAyurveda offering a range of Ayurveda-based Over-The-Counter (OTC) products, brandedethical and classical products, reported a growth of 13% and now accounts for 7.5% ofconsolidated sales

The division-wise contribution to Dabur’s consolidated sales for the 2010-11fiscal are shown in the chart above.

Consumer Care Division (CCD)

The 2010-11 fiscal began on a mixed note for the industry. Above average monsoonsacross large parts of the country boosted agricultural produce and sentiments in ruraleconomy. The government’s continued focus on Rural India with a plethora of schemeslike job guarantees and loan waivers further ensured higher non-agri income in thevillages and put more money in the pockets of consumers in the hinterland.

In addition, the great rural-urban divide is no longer as dramatic as it was a decadeago. With members of several rural households migrating to urban markets, the increasingprosperity of the urban markets has found its reflection on rural economy as well. Apartfrom increasing prosperity, media reaching deeper into rural markets has also impacted theconsumption patterns. As a result, Rural India is witnessing strong demand growth andincreasing consumption of FMCG products.

While these factors boosted overall positive sentiments, inflation spiraled to doubledigit levels and the deepening crises in West Asia pushed up oil prices, threatening todampen consumer demand and force consumers into tightening their purse-strings. Even inface of such tough external conditions, Dabur India Ltd. continued to roll out newproducts and variants in its core FMCG business, stepping into newer categories whileexpanding its reach in the hinterland to end the full year with strong volume-led doubledigit growth.

Robust IT-enabled tools were also put in place to minimize sales loss and improve salesforecasting, besides special consumer connect initiatives, focused media activities andnew product initiatives. This focus on the ever-changing consumer needs and aspirationshelped the division end 2010-11 with a growth of 15.4%.

Your Company also extended its direct engagement programmes with the rural consumerthrough non-traditional media like Haat activities, fairs and festivals like ‘KumbhMela’ etc., giving the rural consumers an opportunity to experience Dabur products.Rural India continues to be a big growth driver with demand from the hinterland continuingto outpace urban markets in some key categories. However, urban India also witnessed gooddemand and Dabur has rolled out new products during the year to successfully tap thissegment as well.

New product development continues to be a key focus area at Dabur, with your Companyintroducing a host of products and variants to keep up the excitement in the market. Someof the successful new launches during the year include fruit flavoured variants of theflagship health supplement brand Chyawanprash, a new range of health supplements under thebrand NUTRiGO, specially formulated cough & cold tablets under the brand Honitus, apremium skin repair product under Dabur Uveda, Gold Bleach under the Fem range,India’s first fruit fiber enriched juices called Real Activ Fiber+, Odomos mosquitorepellent in an oil format for the rural markets and electric air fresheners under theOdonil brand, to name a few. All of these new launches have been very well accepted in themarket and have gained share of both the market pie and the consumer mind space withinjust months of hitting the shelves.

Dabur’s CCD business is today divided into four key portfolios: Healthcare,Personal Care, Home Care and Foods. These cater to a number of consumer products segmentslike Hair Care, Oral Care, Health Supplements, Digestives, Skin & Body Care, Home Careand Foods. Adjacent chart gives the relative share of each category.

HEALTH CARE

Dabur’s Health Care vertical continued its strong run in the domestic market, ledby continued marketing activities and launch of new products and variants. The Health Carecategory - which has the maximum number of brands in Dabur’s Billion Rupee Brandportfolio - includes Health Supplements, Oral Care and Digestives, and ended the year withstrong double-digit growth in sales of 16 % and gained market share across every productcategory.

Health care has, in fact, been identified as an important growth engine for the future,and Dabur has lined up a host of new initiatives for the category, going ahead. The comingyear would see your Company enter a host of new emerging Healthcare categories withspecially formulated products to address the needs of the modern day consumer.Women’s health, gastroenteritis, heart health, cough & cold are among the newsegments identified for

Health Supplements

‘Health is Wealth’, goes the age-old saying. This adage holds true even moretoday and the growing health consciousness among Indians, coupled with the risingincidence of flu and viruses across the country, is pushing consumers to increase theirspends on Healthcare products, both as prevention as well as cure. Dabur - the mosttrusted brand in the Healthcare market in India - is well placed to ride this boom and hasrolled out a plethora of initiatives to tap this growing health consciousness amongIndians.

The first of the new Healthcare initiatives came in the form of two fruit-flavouredvariants of Dabur Chyawanprash - Orange and Mango. The new variants are packed with thesame 49 Ayurvedic ingredients like Amla, Ashwagandha and Guduchi which build immunity, andwill provide the same immunity and health benefits as Dabur Chyawanprash, albeit in atastier format.

Research suggested that a large number of youth, particularly kids, found the taste ofChyawanprash an entry barrier. This led to the introduction of these fruit flavoredvariants. People feel that products that are healthy can never be tasty. These newChyawanprash Orange and Mango variants are expected to bridge the health & tastedivide. The variants have met with a good response and your Company is confident that theywould go a long way in expanding the consumer base for this age-old health tonic.

Another major initiative in Chyawanprash was the signing of popular Bhojpuri cine starRavi Kishan purely for consumer-connect and brand building initiatives. Ravi Kishan hasbeen roped in to lead Dabur Chyawanprash’s effort in spreading awareness about theneed for immunity through its various on-ground mass activities, like consumer contactprogrammes, dealer meets etc, in Bihar and Uttar Pradesh.

The first of these activities was rolled out in the form of ‘Dabur ChyawanprashSwasthya Chetna Abhiyan’, a 45-day activity across 540 villages in rural UttarPradesh and Bihar that reached out to almost 20 lakh people. In the previous year, DaburChyawanprash had rolled out a mega immunity awareness drive in schools called ‘ImmuneIndia’, under which a sustained campaign was held to educate consumers about howbuilding immunity would help them protect themselves from the various flus and viruses.‘Swasthya Chetna Abhiyan’ was an extension of this school-contact programme torural areas.

The activity incorporated five elements: free health check-up, engagement activities,movie screenings, spot sales and a meet-and-greet opportunity with brand ambassador, RaviKishan. The idea was to educate people regarding the importance of building immunity andhow Dabur Chyawanprash can help in doing so.

At the end of the campaign, 30 citizens from the villages of Bihar and U.P. wereselected to form Dabur Chyawanprash’s Immunity Ambassadors to further spreadawareness about building stronger immunity to fight the rising incidence of flu, viralattacks, infections in their respective villages and districts.

The Immunity concept was further taken forward this year to cover changing climate andMonsoon. The brand took forward this message to build immunity to fight the vagaries ofchanging climate on mass media with advertorials, print campaigns and a PR exercise. Aspecial TVC was also released to further drive this message among consumers. Therebydriving relevance of DCP beyond winters.

Riding on these initiatives, Dabur Chyawanprash reported the best-ever growth in thepast decade and even ended the peak consumption season (winters) with a record 70% marketshare (volume share as per AC Nielsen for Oct-Nov 2010).

Dabur Honey, the largest branded honey in India, also continued to grow. The qualityand purity of Dabur Honey helped the Company meet the onslaught of heavy undercutting byprivate labels and competition in the market and emerge stronger. Besides, Dabur Honey wasmade available in a 20 gm pack priced at Rs 10, which has been hugely successful and hasadded new consumers to the brand. Our market intelligence revealed that consumers had adistinct need to use Honey for feeding it to children and for religious usages. This newSKU helped us address this need.

Dabur Glucose was another strong performer in the health supplements basket. DaburGlucose recorded a market share increase of 220 basis points (24.9% as compared to 22.7%previous year-volume share as per AC Nielsen for MAT March 2011 and 2010). The Companyintroduced a new campaign that revolved around the power packed in one glass of DaburGlucose. It also capitalized on the emerging trend for taste in health with its flavouredvariants.

The year also saw Dabur foray into the Vitamins, Minerals & Supplements categorywith the launch of Dabur NUTRiGO - Daily Health Supplement with offerings for Men andWomen. The launch of Dabur NUTRiGO is part of Dabur’s aggressive plan to augment itsleadership position in the Healthcare market in India, where the Company currentlyoperates with traditional Ayurvedic products like Dabur Chyawanprash.

The move into modern OTC healthcare with Dabur NUTRiGO comes as a logical next step foryour Company, given the evolving consumer and market. The new brand offers two distinctiveproducts -Dabur NUTRiGO Total (for Men) and Dabur NUTRiGO Woman. Dabur NUTRiGO Total comeswith the promise of not only providing day-to-day stamina and strength to men, but alsohelps protect their long-term health. It is packed with an optimal mix of Multi-Vitamins,Multi-Minerals and Special Natural Extracts like Lycopene and Ginseng. Dabur NUTRiGO Womanis a specially formulated health supplement that helps maintain beauty and vitality fortoday’s modern day women. It is specially formulated with an optimal mix ofMulti-Vitamins, Multi-Minerals and Special Natural Extracts like Evening Primrose Oil andGreen Tea. The Dabur NUTRiGO range is now also available online through a dedicated salesportal.

Oral Care

The year 2010-11 marked another year of strong growth for Dabur’s Oral Careportfolio, a business that comprises two key product categories - Toothpaste andToothpowder. While the toothpaste portfolio continued to outshine the industry, growing atnear double the industry average, the toothpowder segment too reported moderate growthduring the fiscal. The toothpaste portfolio of Dabur - yet again - was the fastest growingin the country, even in the face of stiff competition.

According to AC Nielsen Retail Audit (MAT Mar 2011), Dabur’s toothpaste brandsgrew by a cumulative 18.1% as against an industry average of 10.8% and even reported amarket share gain of 90 bps in one year. Dabur now enjoys market share of 14.1% of thetotal toothpaste category as per AC Nielsen Retail Audit (MAT Mar 2011).

Dabur Red Toothpaste delivered another good performance to end the year with a strongdouble-digit growth and emerged as an Ayurvedic alternative. Besides introducing two newSKUs of Dabur Red Toothpaste - an Rs 10 pack and a 300 gm value pack - aimed at differentconsumer class and markets, Dabur also rolled out a mega Oral Hygiene awareness programmefor children that reached out to about 21 lakh school kids across the country. Under thisprogramme, these kids were educated about the need for oral hygiene and how Red toothpasteoffers complete protection from all dental problems. Strong regional focus initiatives inSouth India, intensive media across India and other all-India ground-level activationshelped the brand grow well and gain market share. The brand ended the year with a 42 bpsgain in market share to end the year with 4.1% share of the pie (as per AC Nielsen RetailAudit MAT March 2011).

Backed by a strong value proposition to consumers and delivering on the key oral carebenefits through natural ingredients, brand Babool continued its strong growth momentumand ended the fiscal with a market share of 8.9%. The brand was introduced in a newpackaging propagating the benefits of its natural ingredients. Babool toothpaste containsextract of Babul plant. Babul bark contains natural Tannins at a level of 20-40% and is anexcellent astringent. It offers effective oral care protection, mainly to inflated gumsand helps to provide and maintain clean, strong and white teeth. Clinical studies clearlysubstantiate that the use of Babul for oral care makes the roots of the teeth strong fromwithin, mainly due to the presence of tannins in Babul extract.

Meswak, the third big pillar in Dabur’s toothpaste market strategy, was alsointroduced in a new packaging to build a closer association with the Dabur umbrella brand.Meswak, today the largest brand in the premium toothpaste market, is scientifically provento reduce tartar & plaque, fight germs & bacteria to keep gums healthy, preventtooth decay, eliminate bad breath and ensure strong teeth. In short, Meswak providescomplete Oral Care, which is core to fitness and well-being.

Dabur’s toothpowder brand Dabur Lal Dant Manjan reported a 2.1% growth after yearsof remaining stagnant. The demand recovery was a result of an extensive rural activationprogramme that sought to convert non-dentifrice users to toothpowder across Uttar Pradesh.

This initiative helped Dabur Lal Dant Manjan increase its consumer franchise at a timewhen growing affluence in rural India had resulted in an overall shift in consumerpreference from toothpowders to toothpastes.

This programme covered village schools, local Haats and Melas in these states. Theseinitiatives ensured that Dabur Lal Dant Manjan grew ahead of the category and gained 50bps in market share (AC Nielsen Volume Share for MAT March 2011).

Digestives & Baby Care

Dabur continued to dominate the digestive tablets space with its brand Hajmolaexpanding its reach and franchise to end the year with double digit growth. Introductionof new flavours and high-decibel activation programmes ensured that Hajmola continued tobe the most preferred digestive tablets for Indians with nearly 2.6 crore Hajmola tabletsbeing consumed daily across the country.

The entire Hajmola franchise, including tablets and candy, had undergone a majorpackaging revamp during the year, making this preferred digestive brand more modern,contemporary and in sync with the modern day consumer’s tastes and aspirations.

The year also saw Dabur expand the Hajmola franchise with the introduction of a newflavoured variant – Hajmola Kachha Aam. Variants, in fact, continued to be the keygrowth driver for the franchise, inducing trials and bringing newer consumers into thefold. A new campaign for Hajmola Kachha Aam was also aired in April-May this year, coupledwith an on-ground activation campaign reaching out to 17.5 lakh consumers. This campaignincluded tie-up with Dabbawalahs in Mumbai, tie-up with the fast food chain Nirula’sin Delhi and NCR, wherein 35 of its outlets served samples of Hajmola Kachha Aam toconsumers, and an arrangement with Indian Railways through which a free sampling exercisewas carried out across all Shatabdi trains originating from Delhi.

The other new flavour - Hajmola Pudina - that was introduced about two years back, alsoregistered handsome gains, led largely by a mega rural thrust with a special TVC beingaired on Doordarshan and helped Hajmola Pudina’s contribution to the overall valuesales of Hajmola tablets.

To increase thrust in rural markets, the Company had launched an Rs 20 SKU in 2009,which continues to be a key growth driver for Hajmola.

Dabur’s flagship baby care product Dabur Lal Tail ended the 2010-11 fiscal withgrowth in mid-teens. The product was re-launched this fiscal in an all-new packaging withits "2 times faster physical growth" claim being placed on the pack for thefirst time. A new TVC was also aired to drive home the message on faster physical growth.Sustained consumer education programmes across the hinterland and a focused communicationto propagate its benefits helped the brand expand its presence and scale.

The brand was supported by an effective on-ground programme involving Mobile HealthUnits, christened ‘Samajhdaar Ma, Swastha Bacha’, which helped establish thefunctional benefits and superiority of Dabur Lal Tail over ordinary oil. Dabur Lal Tailcampaign has been designed to educate the primary target group i.e. the mother about theclinically proven benefits of massaging with Dabur Lal Tail.

The communication focuses on informing the consumer that massaging with Dabur Lal Tailhelps in strengthening baby’s bones and muscles and is proven safe and effective forbetter overall physical growth of babies, and these benefits are also shared with theinfluencers such as rural medical practitioners/doctors who can take this message into thevillages and to the masses.

The response to this 60-day activity was highly encouraging. The programme covered morethan 150 villages, reaching out to over 60,000 mothers and more than 900 chemists. Freehealth check-ups were also offered to these villagers, and the campaign has adopted anintegrated design of addressing the issues of infant Healthcare like massaging, hygiene& immunization, in addition to educating the consumers about benefits of Dabur LalTail.

PERSONAL CARE

The year gone by has been tough for the personal care market with intense anddisruptive competitive activities by larger rivals and hardening raw material pricessqueezing margins. The shampoo business has been particularly impacted by increasedcompetitive intensity during the year.

Dabur’s Personal Care category, which accounts for 30% of CCD sales, todayincludes a range of herbal, ayurvedic and natural products for hair care and skin &body care.

Hair Care

Dabur’s Hair Care business comprises hair oils and shampoos, with hair oilsconstituting major part of the catgeory. Despite heavy discounting by rivals and growinginput cost pressures, Dabur’s flagship hair oil brand Dabur Amla Hair Oil ended theyear with strong double digit growth. Even though competition introduced mega price cutsand rolled out lower priced products aimed at the bottom end of the pyramid, Dabur tookcalibrated price hikes on some select SKUs of its hair oil brands to negate the input costpressures.

Dabur Amla continued to withstand competition and has truly established itself as thelargest and most preferred perfumed hair oil brand in the country with a consumer base ofover 35 million users.

As part of a strategy to attack the coconut oil stronghold in South India, Dabur hasintroduced focused marketing initiatives specifically targeted at the south Indiaconsumers. In southern markets, the product has been christened as Dabur Amla Nelli HairOil to help the consumers relate in a better way to the product and understand theingredient benefit story. The year also marked the achievement of another big milestonewith Dabur Amla Nelli Hair Oil entering the Limca Book of Records 2011 for organizing thelongest ever non-stop hair massage marathon in Chennai.

Dabur organized a series of seminars across key markets to educate consumers andparlour professionals regarding the benefits of Dabur Amla Hair Oil. At these seminars,Dabur also shared the results of an independent consumer research initiated to evaluatethe superiority of Dabur Amla Hair Oil in comparison to ordinary coconut hair oil. As perthis the consumer study in an expert discussion session titled "Discover The Mystiqueof Amla for Giving Women Rich, Black Hair", it was proven that Dabur Amla Hair Oilmakes hair visibly blacker v/s ordinary coconut hair oil.

Besides, its mega rural beauty pageant initiative continued for the fourth year inrunning, helping the brand convert a larger number of loose mustard oil users to DaburAmla Hair Oil. Your Company expanded this consumer initiative, christened Dabur Amla‘Banke Dikhao Rani’, which recognizes and rewards young girls for their beautyand talent. The contest was held across 52 districts in three states -Uttar Pradesh,Madhya Pradesh & Bihar -covering 2,000 villages.

Dabur’s Coconut Hair Oil brand Vatika Enriched Coconut Hair Oil also experiencedsharp spike in raw material prices. These cost pressures were negated by a judicious mixof intelligent buying and calibrated price hikes. Besides, the brand continued toestablish its superiority over plain coconut oil and performed well during the year.

The Vatika Enriched Almond Hair Oil brand too expanded its presence in the market andhas been performing well in key geographies like East and West India.

It was a tough year for the Vatika shampoo range as it faced pressure from both ends-on the one hand from entry of new players, increasing disruptive competitive intensity inthe form of price cuts and higher promotions by rivals and on the other hand from risinginput costs. Dabur was quick to respond to the increased competitive intensity andre-launched the brand during the second half of the year with a new proposition, besidesincreasing consumer promotions to offer the largest shampoo quantity in a sachet. Thishelped the brand gain ground towards the end of the year and win back volume market share.A new pricing strategy has now been put in place as the Company is offering an enhancedvalue proposition for Vatika shampoo bottles, besides increasing focus on rural marketswith a slew of consumer contact activities.

Skin & Body Care

The Skin Care category, a relatively new business for Dabur, was a star performer, withyour Company now emerging as the second largest Beauty Care company in India (according toImages Business Of Beauty April-May 2011 issue). All three key brands in this portfolio -Dabur Gulabari, Dabur Uveda and Fem - posted handsome gains.

The Gulabari franchise continued to improve its penetration, led by increased consumeractivations like college-level beauty contests, focused campaigns around festivals likeDurga Puja in East India and enhanced retail & trade visibility. Dabur Gulabari hasbeen hosting beauty contests in Uttar Pradesh, Hyderabad and North East, and theseinitiatives have helped build good equity for the brand.

The recently launched Ayurvedic Skin Care brand Dabur Uveda has been well accepted inthe market. After more than a year of its introduction, Dabur Uveda has carved a niche foritself in the Indian Skin Care market with its expertise in Ayurvedic Skin Care. DaburUveda Range of products is a unique combination of Ayurveda and science that offersproducts in a modern format for modern women.

The brand, which was hitherto available only in Delhi-NCR and key markets ofMaharashtra, expanded its network to Punjab, Bangalore and Hyderabad. With Uveda, Dabur isfocusing purely on cosmetic counters, which includes Modern Trade outlets, accessorystores and general trade cosmetic counters, and is being sold through a network of BeautyAdvisors. This concept has been very well accepted as the Beauty Advisors offer skin careadvice and products based on the individual’s skin type. Your Company already has anetwork of 250 Uveda Beauty Advisors across these markets and the

Company is now looking at rapidly extending the range, besides enhancing its retailcounter network.

The year also saw expansion of the Dabur Uveda range with the launch of Dabur UvedaComplete Repair Cream and a variety of Face Masks. As part of its effort to provideconsumers superior quality products with convenience of time and place, Dabur launched itsfirst-ever online shopping portal www.daburuveda.com. With this, Dabur has become thefirst Indian FMCG Company to launch a dedicated online shopping portal for its beautyproducts range. Brand Uveda has also become active in Facebook and Twitter and the onlinesales portal is integrated with these, providing consumers a complete digital experienceof knowing and buying Dabur Uveda range of products.

The third key pillar of Dabur’s Skin Care strategy, Fem registered robustdouble-digit growth during the year. The core products under the Fem personal careportfolio - bleaches & hair removing cream performed well, while liquid soaps remainedstagnant. Fem has been the pioneer in bleach category in India for more than two decadesnow and enjoys 49.3% share of the bleach market (AC Nielsen value share for MAT Mar 2011).

The entire Fem portfolio was re-launched during the year with a new logo and a completepackaging revamp, giving each bleach variant a role based on its special ingredients. Theefforts made by Dabur to revitalize the brands and its focused approach saw Fem’sbleach portfolio move ahead on the growth trajectory.

Dabur continued its focused media intervention, coupled with local consumer activationsin Delhi-NCR, Maharashtra, Punjab and Uttar Pradesh by way of beauty pageants, improvedretail presence and higher engagement with the beauty parlour community, which helped thecore business of bleaches and hair removing creams register strong growth during the year.

Both Fem and Oxybleach organized mega model hunts across the country, a move thathelped improve visibility for the brands. Fem launched ‘Get Famous in 15Minutes’, a nationwide contest that gave participants a chance to represent India inthe Elite Model Look 2010 contest to be held in Shanghai. Oxybleach, on the other hand,was associated with India’s International Face 2010 (IIF), a countrywide search fortwo winners who get a chance to walk the ramp at Milan and Paris Fashion Week.

Dabur has now extended the Fem portfolio with the launch of all-new Fem Gold CrmeBleach that comes with real gold in it to provide a golden glow for special occasions. Theproduct has a beautiful fragrance with special moisturizing ingredients which give asuperior bleaching experience.

The year also saw Dabur enter the Professional Facial market with the launch of OxyLifeProfessional Facial Kit. Packed with the unique OxySphere Technology developed in Germanythat helps to encapsulate pure oxygen in each product of kit and release on application,this kit has been created exclusively for professional use and works in a five-stepprocess face cleanser, face scrub, face cream, face gel and face pack to give a visiblyradiant look.

With OxyLife Professional Facial Kit, Dabur is tapping into professional space and theendeavor is to give superior result through a differentiated offering. This kit would besold directly to parlors and salons through Dabur’s large dedicated team forprofessional channel. This is the first professional product to be launched by Dabur andthe plan is to augment this offering with more such products dedicated for theprofessional channel.

In the Body Care market, Dabur relaunced the Fem hair removing cream in a new packagingwith a pH restoring lotion. The Fem liquid soap range was also re-launched during the yearwith an improved formulation to increase the germ-kill properties. The product now offers40% more protection against germs as compared to normal soaps. This benefit is nowdepicted on the pack too.

The beginning of the 2011-12 fiscal will also mark Dabur’s entry into the emergingHand Sanitizer market with the launch of Fem Safe Handz instant hand sanitizer. Fem SafeHandz is being launched in two variants - Lemon & Blossom. This is an emergingcategory which is expected to grow fast with increasing focus on health and hygiene.

HOME CARE

The smallest part of the CCD business, Dabur’s Home Care portfolio was theturnaround story of the year and ended the fiscal with a 33% surge in revenue, thanks tofocused and continued media activity, relevant new products and high-decibel on-groundpromotions and campaigns to develop this evolving yet under-penetrated category. Thecategory emerged from moderate growth to high growth due to these key initiatives.

A surge in mosquito menace and the rising incidence of mosquito-borne diseases-particularly the Dengue scare in North and West India - resulted in a surge in demand forDabur’s personal application mosquito repellent Odomos. The brand was aggressivelypromoted in the post-monsoon mosquito season with focus on efficacy and safety of theproduct, which has been certified by the Indian Medical Association (IMA).

Moving ahead on its commitment to fight deadly mosquito-borne diseases like Dengue andMalaria and make cheaper protection available to rural consumers, Dabur launched OdomosOil, a mosquito repellent for the masses. The launch of Odomos Oil is a move to providerural consumers safety from mosquito-borne diseases at an affordable price.

The new Odomos Oil is a clinically tested and proven product that offers users 100%protection from mosquitoes and helps in prevention of diseases such as Dengue, Malaria& Chikungunya. Odomos Oil gives users full-night protection and is the only mosquitorepellent oil that is completely safe to use on skin, unlike some of the cheap local oils.Odomos Oil has been competitively priced so that it becomes affordable for ruralconsumers, who are most affected by mosquito-borne diseases.

This summer, Dabur also rolled out an educational campaign called ‘Machhar MuktiAbhiyan’ in Uttar Pradesh, aimed at educating the rural population about the variousmosquito-borne diseases. The campaign sought to reach more than 1.2 lakh people in 232villages in two phases. The objective of this campaign was four-fold: first, to educatethe rural population about the various diseases transmitted by mosquitoes and theirprevention; secondly, to educate the audience about the danger caused by cheap productsavailable in the category, thirdly, to establish Odomos Oil as the most trusted brand forthe cause, and finally, to induce brand trial and purchase.

The Company also extended the range with the introduction of Odomos Rose, a newfragrant version of the popular mosquito repellant, in line with the consumer’s needfor skin care properties and better sensorials.

In the Air Care category, the Company provides a range of products under the Odonilbrand. The brand, which has been facing increased competition from other players andprivate labels, introduced several key innovations both in the product and in campaigns toend the fiscal with strong double digit growth. The new thematic communication that wasrolled out this year has been highly effective in creating relevance and drivingpenetration.

The air freshener range was expanded with the launch of Odonil electric air freshener(pluggy). Available in four natural fragrances - Exotic Rose, Fresh Lavender, MysticJasmine and Floral Fusion - Odonil Pluggy is aimed at meeting the changing lifestyle andconvenience needs of consumers. This new introduction from Odonil is meant for the livingspaces of the house, such as drawing & living room, and is extremely simple to use.This product has been very well accepted in the market. Many more such innovations are inthe pipeline.

SaniFresh, the toilet cleaner brand, continued its powerful performance and recordedstrong growth during the year. The focus on winning consumer value equation throughselective advertising, improved product and providing better value to the consumersboosted the brand’s sales. SaniFresh also rolled out a unique community serviceprogramme across Punjab titled "Seva at Gurdwara". Under this mega community andCSR initiative, volunteers offered free cleaning services to the Gurdwaras in 6 cities ofPunjab. During the period, the SaniFresh team cleaned up public toilets of 56 Gurdwaras.

FOODS

Dabur’s Foods Business, which now accounts for 15% of CCD sales, delivered astrong performance during the year, ending the year with a 28% jump driven by growingdemand for its range of packaged fruit juices and culinary pastes and purees.

Ral was revamped this year and introduced with a new logo and new pack design. Thelogo change has been introduced to make the brand more contemporary and to better denotethe freshness and fruit power of the products. A new communication campaign was alsorolled out to stress on the special 6-layer packaging for Ral that keeps nutritionintact even without any preservatives. Ral signed Sonali Bendre as the brand ambassador.Special occasion gift packs for Rakhi and Diwali festivals further added excitement aroundthe brand, helping Ral post industry-best growths and market share gains despite theentry of newer players.

Dabur is now preparing to launch a new Apricot variant of Ral this summer. Ral isalso joining hands with Disney for its hit movie franchise ‘Cars’ to reach outto kids with the 200 ml packs. Under this tie-up, specially designed 200 ml packs of Ralwill be introduced with Cars’ popular characters on the front of the pack. Excitinggift options and merchandise are also being created to build greater excitement for kidsand Ral, and the same would be launched parallel to the release of this new Hollywoodmovie.

DID YOU KNOW?

Dabur is the first Company in India to introduce fruit fiber-enriched beverages underthe Ral Activ brand Dabur’s range of 100% juices with no added sugar under theRal Activ brand also maintained the growth momentum during the fiscal, riding on thegrowing health consciousness among Indians. A new ‘Snack Healthy’ campaign waslaunched for the brand.

The 2010-11 fiscal also marked the launch of India’s first fiber-enriched fruitbeverage range - Ral Activ Fiber+. The new beverage range contains soluble dietary fiberthat helps manage weight, keeps digestive system healthy and maintains heart health. Madefrom 100% fruit juice with no added sugar and no preservatives, Ral Activ Fiber+ isavailable in two exciting tasty variants - Multi Fruit, which is a blend of exotic fruitslike Passion Fruit, Apricot, Guava, Orange & Apple; and Orange Citrus Punch, which isa blend of tropical citrus fruits like Orange, Mandarine, Tangarine, Pineapple &Lemon. One glass (200 ml) of Ral Activ Fiber+ is equivalent to fiber present in onewhole Apple or Orange. Ral has always been at the forefront of innovation, pioneeringthe concept of packaged fruit juices in India and was being the first to introduce 100%fruit juices and fruit-vegetable juices. The launch of Ral Activ Fiber+ marks a stepforward in this direction. This range was test marketed in Mumbai and Bangalore inDecember 2010 and will be rolled out nationally this summer.

The year gone by saw mega initiatives -from in-store sampling to higher 360visibility - being introduced for the culinary range of products under the Hommade brand,which helped this portfolio report impressive growth of more than 50%. A sustained mediacampaign coupled with the sharp surge in prices of raw garlic and ginger in the marketpushed demand for the Hommade culinary pastes range, which was relaunched last year in anall-new packaging.

Your Company will now be extending this portfolio with the launch of single-use Hommadesachets and Hommade pastes in glass bottles. Special TVCs are also being introduced topromote various products under the Hommade culinary range.

International Business Division (IBD)

Our International Business Division (including Hobi and Namaste acquisitions) recordedan impressive sales growth of 46.3% from Rs 610 crores in 2009-10 fiscal to Rs 892 croresin 2010-11 fiscal, contributing to 22% of consolidated sales. Excluding the acquisitions,the International Business Division recorded sales of Rs 717 crores in 2010-11, growing by17.6%. The operating margins of the business improved significantly during the first halfof the year, reflecting the strength of the brands. However, in the second half of theyear, the external conditions became challenging due to political turmoil and instabilityin key countries of Middle East and North Africa regio n, leading to demand contractioncoupled with inflationary pressures due to commodity cost inflation. In spite of that, thebusiness continued to grow and is expected to return to normalcy in the coming months.

In the international markets, your Company has built strong and robust brandarchitecture with brands like Dabur Amla and Vatika across geographies. As per NielsenRetail Audit in Saudi Arabia, Dabur Amla is the largest brand in the Hair Oil segmentthere. Dabur Amla franchise has been extended into Hair Creams and a number of variantshave been launched in Hair Oils and Hair Serums. Vatika has also maintained its growthtrajectory, with Vatika Hair Creams emerging as the biggest brand based on Nielsen RetailAudits in Saudi Arabia and Egypt. In fact, Vatika, with its offerings across hair creams,oils, conditioners and treatment products, has now emerged as Dabur’s largest brandin the overseas markets.

Vatika DermoViva - the new brand launched for the Personal Wash and Skin Care segmenthas grown in strong double digits in soaps category and has managed to create consumerequity in a category dominated by strong MNC players. Vatika DermoViva was extended intoHand Wash category during the year.

Dabur Herbal Toothpaste is Dabur’s key brand in the Nigerian market, where it hasbecome the no. 2 player in terms of market share based on Nielsen Retail Audit. The brandwas re-launched in MENA during the year to capture the herbal niche in this highlycompetitive but large category.

The key contributing markets to the International Business growth have been GCC, Egypt,Nigeria, Algeria, Morocco, Jordan, Syria and Kenya.

GCC, the largest region in the International Business Division and despite being amature market, has grown by 21% over last year, fuelled by innovations and new productlaunches in the Hair Care, Personal Wash and Oral Care segments.

Dabur Egypt Limited witnessed growth of 34% despite the slowdown during the fourthquarter on account of political instability. The plant in Egypt had to be shut down for acouple of weeks; however the operations returned to normalcy as soon as the politicalsituation improved.

African Consumer Care, Nigeria, has grown by 34%, aided by strong growth of DaburHerbal Toothpaste and Dabur Herbal Gel in the Oral Care category.

Asian Consumer Care, Pakistan, has grown by 17%, with Hajmola and Dabur Amla emergingas the two strong brands for the region.

Asian Consumer Care, Bangladesh, has performed well with a growth of 47% during thefiscal 2010-11. The growth has been led by focus on five key brands -Amla Hair Oil, VatikaHair Oil and Shampoos, Dabur Honey and Meswak. In addition, the Company’sdistribution network has been strengthened and media platforms were utilized extensivelyto promote the brands.

Dabur Nepal Pvt. Ltd., which manufactures fruit juices and also caters to localconsumer market in Nepal, recorded growth of 26% in sales. There was some temporarydisruption on account of local insurgency issues; however, our production and operationscontinued during most part of the year.

Overall, the International Business is on a strong growth trajectory. The business,which started as a small enterprise catering only to the Indian diaspora more than 15years ago, is now a multi location, multi category operation catering to people of diversebackgrounds and ethnicities, and having local supply chains in most of the countries inwhich it operates. The focus on customization of the product portfolio, while adhering tothe global Dabur brand architecture as enunciated by the adage "Think global, Actlocal", has enabled the business to grow exponentially.

After having grown to a size of Rs 717 crore through organic expansion, the businesshas now acquired Hobi and Namaste (please refer to section on Overseas Acquisitions).These acquisitions are expected to make a good strategic fit and prove to be highlysynergistic with the existing portfolio. Moreover, the companies provide good productcapability with in-house R&D and strong pipeline of new products which can beleveraged across our other markets.

Consumer Health Division (CHD)

The more traditional part of Dabur’s business, the Consumer Health Division (CHD),offers a range of Healthcare products based on the age-old principles of Ayurveda butoffered in modern, contemporary and ready-to-use formats. This division is core toDabur’s new strategy to drive growth from over-the-counter (OTC) Healthcare products.The CHD portfolio, comprising both OTC products and classical range, registered a growthof 13% during the fiscal, aided by the launch of new initiatives and sustained mediacampaigns.

Honitus was a key growth driver during the year, reporting strong growth with increasedmedia presence during the Monsoon season. Brand Honitus was extended this year to ColdCategory with the introduction of Honitus Day & Night tablets in the last quarter ofthe year. This is a specially formulated product, offering separate tablets for day andnight usage. The day tablet offers non-drowsy cold relief while the night tablet gives youa restful sleep. The product has received encouraging response in the market.

The Pudin Hara Franchise also registered strong double-digit growth with the launch ofPudin Hara Lemon Fizz variant. A new campaign for Pudin Hara, with the theme ‘JaanteHo Par Lete Kyo Nahin’, was also rolled out which boosted the brand’s earnings.The launch of the first-ever television commercial for the rejuvenator brand Shilajit Goldhelped the brand post handsome gains during the year.

In the OTC portfolio, Dabur had last year revamped the women’s health tonic brandDashmularishta. The new pack, with brand ambassador Juhi Chawla on the front label, gavethis age-old product a new, younger and more contemporary look. The Women’s HealthPortfolio - comprising Dashmularishta and Ashokarishta -performed well with thecontinuation of an educative campaign featuring Juhi Chawla.

With the relaunch of the Classicals portfolio in a new, contemporary avatar and focusedhealthcare promotion activities through Dabur Ayurvedic Centres, Health Camps and Vaid(Ayurvedic doctors) Meets, the division’s ethical business growth accelerated and thebusiness reported healthy double-digit growth. Going forward, fresh initiatives likeaggressive equity building activities and new product introduction in several high-growthOTC categories have been lined up.

Retail Business - New U

Dabur India Ltd. operates a chain of focused beauty retail outlets under the brand nameNew U. This business is operated under the wholly-owned subsidiary H&B Stores Ltd. bya team of retail experts who have experience in beauty/lifestyle retail and realtyintricacies.

This business, which underwent a strategy and format tweak in the previous fiscal, isnow being expanded in a calibrated manner with special focus on North India. The networktoday has 36 retail outlets and 15 more are in various stages of development and set to belaunched by the end of the second quarter of 2011-12 fiscal. While a bulk of these storesare centered in North India - covering Delhi-NCR, Punjab, Uttar Pradesh, Rajasthan andMadhya Pradesh -the business has also established seeding presence in South India withoutlets in Hyderabad and Bangalore.

The end of the 2010-11 fiscal saw Dabur take initial steps to venture into thefranchise route for New U stores, by issuing an advertisement in leading dailies seekingapplications. The first of the franchisee outlets - focussed on high-streets as againstcompany-owned outlets in malls - is expected to be operational by July 2011.

The year saw New U expand its private label business at the stores with theintroduction of New U branded cotton balls, nail enamels and nail enamel removers. Thisportfolio would be rapidly expanded with the launch of New U body showers, body lotions,lip balms and other personal care items in July this year. The formulations for all theNew U private label products have been developed by our experts at New U.

The profile of New U stores has undergone a revamp and the outlets are now positionedas a lifestyle beauty store, offering a one-stop solution for all beauty needs. Thisbeauty connect has been further strengthened by the presence of exclusive internationalbeauty brands - like QVS, Homar, Divo etc - at New U stores. The Company is planning tobuild a pool of 8-10 international brands exclusive to the New U cache. Today, the New Uprivate label brands and exclusive brands together account for about 12-15% of totalvolumes at New U and this is expected to grow going ahead with the expansion of the New Uprivate label portfolio.

New U has entered into shop-in-shop tie-ups with three big retailers across India tooperate and manage the beauty products portfolio at these mega stores. This tie-up alsomarked New U’s entry into the Pune market through the shop-in-shop route and yourCompany is confident that it will prove to be a well-established retail destination. TheCompany has also ventured into establishing Express Stores, which would be highly focusedtiny format stores that would stock only fast-selling items. The merchandise in these NewU Express Stores would be localized according to consumer preference in each location.

The New U stores offer consumers a host of promotions and activations, which haveemerged as a big consumer hook all through the year. New U has rolled out a host ofconsumer promotions and activations at its stores in association with vendors likeMaybelline, L’Oreal Paris and Dabur Uveda. Some of the highly successful brandactivations undertaken include ‘Makeover Marathons’, ‘Festival ofBeauty’ and the ‘Gals In The City’ campaign with Maybelline. New U also hasa consolidated annual promotions and marketing calendar targeted at seasonal promotions,theme-based campaigns and category growth drivers. Ongoing promotions like free gift forevery guest walking into the store has helped generate awareness and induce trials. Theconsumer loyalty programme - AdvantageU - has also been well accepted by consumers. TheCompany also revamped and relaunched its website - www.newu.in.

Sales & Distribution

Dabur has a highly developed Sales and Distribution network with a presence in even thesmallest of markets. Dabur’s distribution network covers over 2.8 million retailoutlets, with a high penetration in both urban and rural areas. The growth strategy ofDabur envisages a key role for technology in improving efficiencies of the Sales &Distribution network. During the year, significant investments were made in InformationTechnology solutions in various aspects of Sales & Distribution.

Dabur enhanced the footprint of its Stockist transaction software ‘Drishti’to cover almost 75% of business, gathering real-time market information. Real-time dashboards have been created in ‘Drishti console’, providing ‘quicksnapshots’ of all dimensions of operational efficiencies in Sales & Distribution.This has enabled all levels of the Sales organization to direct their actions in a highlyfocused manner, improving field efficiencies while reducing costs.

To ensure consistent product availability in the marketplace, it is important to have ahigh level of forecast accuracy for manufacturing and supply chain to respond adequately.The CCD sales system implemented a Sales forecasting system in the APO module of SAPduring the current year. The system evaluates historical sales trends, factors seasonalityand sales promotions to generate a statistical forecast for the month. The tool hassignificantly enhanced the forecast accuracy in CCD and forecast errors have been reducedby 60% from previous levels. This has resulted in improved stock availability across theyear and further improvement is expected in the coming days.

The sales IT project on Supply Chain optimization at Dabur has been nominated as one ofthe five winners for the ‘Diamond edge’ award by eminent jury of UBM &Information Week magazine. Close on the heels of this award Dabur bagged the Best runaward in Supply Chain from SAP for this initiative.

The CCD Sales system at Dabur has taken another big step towards strengtheningprocesses by improving efficiency of the ordering interface. This has been achieved byimplementing a comprehensive IT enabled order capture system made available to allStockists operating their transactions through ‘Drishti’. The system proactivelyalerts the Stockists on SKU’s likely to go below minimum threshold levels (basisaverage sales trends/factoring promotions etc.) and generates suggested orders at SKUlevel. The tool helps the Stockists manage their ordering process better, making the orderprocessing task at CFAs faster and improving responsiveness in customer service.

Comprehensive enhancements were effected during the year in making the Stockist claimsprocess more robust and efficient. To improve customer service for Stockists, the CCDSales system rolled out a web-based claims submission system ‘Nivesh’.‘Nivesh’ claims processing system provides complete clarity on marketactivities, specifies requirements on supporting documentation for claims submission andprovides real-time information on status and details of claims settlement.

MODERN RETAIL STRATEGY

The Modern Trade segment resurged in the 2010-11 fiscal, with key players reconfiguringtheir networks and scaling up operations. The Modern Trade landscape witnessed new formatsemerging as potential winners over the medium term. A comprehensive strategy was developedto accelerate growth for Dabur in this backdrop, focusing on share gains in emergingformats & key categories.

The strategy focused on creating a distinct identity for Dabur brands (core beingherbal expertise) that are relevant for shoppers. Building an effective servicing &activation system to service the requirements of Modern Trade are also a critical elementof the approach. This helped Dabur improve growth rates in Modern Trade channel during theyear & make significant market share gains across all key categories.

FEM PORTFOLIO

In order to leverage the Fem portfolio in beauty channels and have better focus, adedicated Fem Sales force has been retained in the larger markets, while integrating thebusiness with the larger CCD sales system in smaller towns to leverage scale. The Femdistribution network was fully integrated with the CCD across 700 towns & the ruralmarkets to leverage synergies. This has enabled the Fem range to be available acrosslarger number of Grocery stores, apart from the traditionally strong Cosmetics &Chemist channels. The Fem sales network was also fully integrated in Modern Trade channel.The strategy has helped Fem business grow in line with plans for the year.

The Beauty Parlour servicing network was extended to over 300 towns across the country.This network enables Dabur to demonstrate effectiveness and build franchise for the newrange of products like Fem Gold Bleach and ‘OxyLife Professional Facial kit’.

The ‘Uveda’ Beauty Advisor network, operated through the Fem sales system,was extended to 11 towns with over 300 counters. Significant investments were made intraining and development of these resources and enhancing the range of products. This hasresulted in sales output per Beauty Advisor moving up substantially during the year.

TRADITIONAL TRADE

In the year 2010-11, Dabur continued to strengthen its market presence throughprogrammes targeted at key urban channels and the rural markets. Point of purchase is themost critical dimension impacting the buying decision of the consumer and appropriateinterventions are crucial to generate impact amidst the clutter. Apart from investments tostrengthen shelf presence, the stores were also offered merchandising solutions to enhancethe effectiveness of the brand communication. Overall, merchandising investments have beentripled to deliver required impact.

RURAL MARKETS

Rural & semi-urban India contributes to about half of the business for CCD and isalso the largest source of growth. The recent years have seen a steady growth in income inrural India. Thanks to the spurt in commodity prices and the employment generation schemesand fiscal sops announced by the government, the rural consumers today have more money intheir pockets. During the course of the year, Dabur initiated a detailed study tounderstand the rural landscape and identify emerging pockets of higher growth.

Comprehensive benchmarking was done on rural coverage across 8 key states - UttarPradesh, Uttaranchal, Rajasthan, Bihar, West Bengal, Maharashtra, Madhya Pradesh andChhattisgarh. Markets were mapped integrating road networks and economic data to identifypotential for coverage. The plan is to extend rural distribution reach by penetrating tovillages with population of ~3000 in these states.

The strategy is to improve distribution reach, customize trade promotions and providefocused servicing through a dedicated sales team exclusive to these markets. Fieldresources are significantly increased in high potential districts of these states toincrease contact frequencies and improve coverage.

Operations

At Dabur, we recognize operations as an important source of competitive advantage. Astrong back-end support in Procurement, Manufacturing, Research & Development andHuman Resource Management has been key to Dabur’s sturdy performance through the2010-11 fiscal. A large number of initiatives was rolled out by the Company to improveproductivity through effective application of technology and advancement in manufacturingprocesses, besides adoption of lower cost energy options.

MANUFACTURING

In India, Dabur has 13 production facilities organized around two main factories atBaddi Cluster (Himachal Pradesh) and Pantnagar (Uttaranchal); and nine factories which arelocated at Sahibabad (Uttar Pradesh), Jammu, Silvassa, Nasik, Alwar, Katni, Narendrapurand Pithampur. The Foods Business is catered to by manufacturing facilities in Newai(Rajasthan) and Siliguri (West Bengal).

During the 2010-11 fiscal, the Company increased capacities in toothpaste, shampoo,hair oils, Hajmola and Glucose. In addition, an increase in throughputs in our existingunits enabled us to meet higher volumes with existing capacities without additionalcapital investment. Introduction of Automatic Tray feeding system to Poly shrink machinefor Juices at our Newai unit is expected to not only enhance throughput, but also improvequality and reduce wastage. TPM initiatives at Baddi, Silvassa and Pantangar Unitsgenerated "Kaizens", which led to reduction in down time of machines.

Initiatives were taken in various manufacturing units to reduce cost, reduce impact onenvironment, new product/pack introduction, improve safety awareness and qualityimprovement.

The installation of new herbal extractors at Baddi, Pantnagar and Sahibabad, replacingthe old extractors, has had a positive impact by reducing cost and impact on environment(energy efficiency), and has led to a safer working environment and better spaceutilisation.

Some new energy conservation and waste management initiatives were taken, such asherbal waste used as a fuel in boiler e.g.: conversion of herbal waste into dry biobriquettes, crushing herbal waste and using the same in the USAB reactor in ETP togenerate more methane (Bio gas) which in turn will be used as boiler fuel and usingdirectly herbal waste as a fuel in the boiler. For more information on Dabur’ssustainability initiatives please refer to the section on Corporate SustainabilityInitiatives. In our existing manufacturing units, we undertook various initiatives toconserve/ reduce environmental impact, by adapting to green manufacturing and concept of"Reduce, Reuse and Recycle". These include:

• Replacement of boiling pans with the herbal extractors to reduce steamconsumption

• Replacing energy inefficient equipments with new technologies, which are energyefficient

• High-pressure jet pump is installed to reduce water consumption

• Efficient Maintenance of Capacitor Bank for improvement of Power Factor

• Effective utilization of ETP treated water used in toilets flushing &irrigation/gardening

• Replacement of conventional bulb with CFL to save energy

• Reuse of vacuum pump cooling water for make up in cooling tower

We believe, quality improvements benefit by reducing risk to employees, customers andsuppliers. In our constant endeavour to improve quality, we received the followingcertifications:

• Certification of 3 manufacturing locations with OHSAS 18001 and ISO 14001integrated management system

• In the process of preparing 5 more manufacturing locations for the certificationof OHSAS 18001 and ISO 14001 integrated management system

• Risk assessment of all manufacturing locations, done with a system of plannedinspection product wise, resulted in the reduction of all injury rate (AIR) and TotalRecordable Frequency rate (TRFR)

Dabur has a number of manufacturing facilities in International business as well. Ourlargest facility in GCC markets is at Ras Al Khaimah which caters to GCC as well asneighboring markets. We have a manufacturing facility in Egypt which caters to the largeand fast growing personal care business in Egypt. In addition the facility at Nigeriacaters to oral care products for Nigerian market.

Dabur’s Food business is supported by two manufacturing units, the larger andolder facility is in Nepal and another in Newai, Rajasthan. Fast growth of this businesshas led to addition in lines for augmenting capacity and the Company is consideringadditional capital expenditure for building fresh capacity in the future.

Dabur’s Bangladesh facility was well utilized with good growth emerging from haircare and oral care categories in the country. The Company is planning to enhance itscapacities in Bangladesh and a new manufacturing facility is being added which will beoperational in a year’s time.

Human Resources

Dabur’s people are the Company’s most important asset and source ofcompetitive advantage. All employees of Dabur are considered leaders and encouraged totake responsibility to do their best that they can while meeting business needs. Oursuccess depends entirely on the strength of our talent pool which we build by fostering anenvironment and continually investing in them to enable them to deliver superiorperformance. Our Human Resource strategy is aimed at talent acquisition, development,motivation and retention.

People always have been and shall be central to Dabur’s growth story. TheCompany’s commitment can be gauged by the fact that Dabur absorbed all the employeesof the acquired entities-Hobi Kozmetik and Namast Laboratories LLC.

The belief "great people create great organizations" has been at the core ofthe Company’s approach to its people. Hence the Company has made significantinvestments for training in the areas of marketing excellence, customer service andbuilding higher skill sets. Recently Dabur embarked upon a Leadership developmentinitiative called "LEAD - Leadership Excellence Achievement @ Dabur" inpartnership with a renowned HR consultant. This initiative seeks to provide a DaburLeadership Framework for analyzing and addressing individual and team performancedevelopment opportunities. LEAD program will focus on questions such as - What are theleadership competencies required to build the organization for the future, what processshould Dabur follow for identifying these competencies and assess our leaders on the same;and to ascertain whether our leadership pipeline is robust enough to provide futureleadership. Towards this end, a core group comprising top 55 managers at Dabur has beenidentified and assessed using a series of tools and a 360 degree assessment on the DaburLeadership Framework. This group will be further taken through two four days off-site"Making Great Leaders" program where they will be helped with feedback anddevelopmental inputs to hone their leadership style.

As an organization we have taken a lot of initiatives to ensure that ample careerdevelopment opportunities are provided to our employees. In this regard, Dabur’s HRteam has been managing the "Career Development Centre (CDC)" process with thepurpose of developing people with high potential for the next responsibility levels andtaking up future leadership roles. As part of the CDC process we have completed over 600in-house assessments of our employees to hone their abilities to be able to take up higherlevel roles. For senior level managers, we have partnered with a Global HR consultant toprovide specialized role-wise tools and simulations for assessment.

Dabur’s reward programs reflect the Company’s values and philosophy aboutpeople management. It is linked to individuals and teams contribution, is competitivelypositioned and is aligned with company’s other management systems and processes.Besides base pay, statutory benefits, short term and long term incentives (includingESOP), the Company offers its employees host of medical benefits, asset buildingopportunities and an institutionalized recognition program called "Applause"that has helped in sustaining high employee engagement.

The Human Resource team played an effective business partner role in supporting theSales function. The business required a new approach to sell beauty products of the newlyacquired FEM Care business and Uveda Brand through Beauty Advisor (BA) route. Actingswiftly on the new requirements, the HR team hired 250 BA’s within 4 months.

Riding on these initiatives, the attrition levels at Dabur continue to remain muchlower than industry levels.

As of 31st March 2011, the Company employed 5,300 people in various parts of itsbusiness.

Industrial Relations: The Company continues to have an excellent track record ofIndustrial relations, which, by and large, remained congenial during the year.

Financial Review (on a consolidated basis)

During 2010-11 fiscal, the Consolidated sales of your Company increased by 20.3%,primarily driven by volume growth of 12.7% and acquisitions contributing to 5.1% ofgrowth. While sales growth remained strong the Company faced headwinds with respect toinflation and cost pressures. The Company dealt with these challenges and was able tomaintain its margins in a highly inflationary environment through calibrated priceincreases and efficient management of costs.

EBITDA margin of the Company was stable at 19.9% vis--vis 19.8% in FY2009-10. Theincrease in rate of Minimum Alternate Tax (MAT) led to the effective tax rate increasingfrom 16.7% to

19.6%.

The Profit After Tax of the Company increased by 13.4% during 2010-11 with the ProfitAfter Tax (PAT) margin going down slightly mainly on account of increased taxation.

Abridged P&L account and profitability ratios are given below:-

DIL’S ABRIDGED PROFIT AND LOSS STATEMENT, ON A CONSOLIDATED BASIS

KEY PROFITABILITY RATIOS

KEY BALANCE SHEET RATIOS

NET WORKING CAPITAL

During the year, the Company acquired Turkey based Hobi Group and U.S. based NamastLaboratories LLC. Hobi’s financials have been consolidated w.e.f. October 7, 2010 andNamaste’s financials have been consolidated w.e.f. January 1, 2011.

As these acquisitions were completed in the second half of fiscal 2010-11, major partof the additions to capital employed happened towards the end of the year. On account ofthis timing mismatch, the ROCE and RONW as shown are not comparable and the ratios for2010-11 are not representative for the full year.

Net operating working capital of the Company increased as compared to last year due tothree reasons. Firstly there was an increased stocking of raw and packing materials in thedomestic business. Secondly the receivables from institutional trade were higher at theend of the year and thirdly the two overseas acquisitions added to the overall net workingcapital though their sales were consolidated only for part of the year.

The Company incurred Capital expenditure of Rs 130.9 crores during the year which wasinvested in expansion of manufacturing capacities and regular maintenance expenditure. Thecost of the two overseas acquisitions viz. $69 million for Hobi Group and $100 million forNamast Laboratories LLC. was funded though foreign currency loans. As a result of theseborrowings, the net debt to equity at a consolidated level went up to around 0.4 as on31st March 2011.

The total dividend for the year has been at 115% of par value. This translates into apayout ratio of 43% of standalone net profit for 2010-11 fiscal.

Internal Control Systems

Dabur has a robust internal audit and control system managed by qualified andexperienced people. Price Waterhouse Coopers is the internal auditor for the Company andits subsidiaries.

The Company follows Standard Operating Procedures (SOPs) that are in line with the bestglobal practices, and have been laid down across the process flows, along with authoritycontrols for each activity.

Dabur has also introduced the COSO framework for internal controls and adequacy ofinternal audit. Under this framework, various risks facing the Company are identified andassessed routinely across all levels and functions, and suitable control activities aredesigned to address and mitigate the significant risks.

The internal audit department reports to the Audit Committee of the Board of Directors,which recommends control measure from time to time. To read the report of the AuditCommittee on internal control and adequacy, refer to the section on Corporate Governanceof the Annual Report.

Risk Management

Dabur, like any other enterprise having national as well global business interests, isexposed to business risks which may be internal as well as external. In the broadestsense, we define risk as the eventuality of not achieving our financial, operative, orstrategic goals as planned. To ensure our long-term corporate success, it is thereforeessential that risks be effectively identified, analyzed and then mitigated by means ofappropriate control measures. We have a comprehensive risk management system in place,which enables us to recognize and analyze risks early and to take the appropriate action.This system is implemented as an integral part of our business processes across the entireDabur operations and includes recording, monitoring, and controlling internal enterprisebusiness risks and addressing them through informed and objective strategies.

The risk management system is spearheaded by the Chief Risk Officer (CRO) of theCompany, who is responsible for, and ensures, effective risk management - both riskidentification and mitigation. A team of risk officers at each Company location supportsthe CRO. Each employee is entitled to identify risk and report it to the concerned riskofficer, who in turn reports it to the CRO.

The strategic risk mapping process at Dabur is a 3*3 risk matrix. The two variables -likelihood and business impact - are mapped on a 3 level scale ranging across Low,Moderate and High levels. The CRO then discusses the potential risks with SBU andfunctional heads. The occurrence of likelihood variable is quantified as low probability,if chance of happening is less than or equal to 30% and high if greater than or equal to50%.

One of the key risks faced by the Company in today’s scenario is the risinginflationary trend and high food prices which can lead to compression in demand for nonfood consumption activities. Increase of imitation/fake products and brands can hamper ourgrowth. Any unexpected changes in regulatory framework pertaining to fiscal benefits andhealth related issues which may impact parts of our business or profitability is one ofrisks faced by the Company. A slowdown in overall economic growth can lead to pressure ondisposable incomes and spending power of people.

The Company is well aware of these risks and challenges and has put in place mechanismsto ensure that they are managed and mitigated with adequate timely actions.

Cautionary Statement

Statements in this Management Discussion and Analysis describing the Company’sobjectives, projections, estimates and expectations may be ‘forward lookingstatements’ within the meaning of applicable laws and regulations. Actual results maydiffer substantially or materially from those expressed or implied. Important developmentsthat could affect the Company’s operations include a downward trend in the domesticFMCG industry, rise in input costs, exchange rate fluctuations, and significant changes inpolitical and economic environment in India, environment standards, tax laws, litigationand labour relations.