Dabur India: Innovation to ensure brand sustainability

15 Feb 2024 , 01:47 PM

Analysts of IIFL Capital Services met with the management of Dabur at IIFL’s 15th Enterprising Bharat – Global Investors’ Conference in Mumbai. The management stated their aim of growing the top-line in high single digits in the near term on the back of steady growth in the existing core product categories and continued focus on innovation and increasing the share of NPDs. With softening of RM prices, cost cutting measures and improvement in sales mix (focusing on premuimisation), the margins (ex legal cost) are higher than the pre-Covid levels. 

NPD’s contribute to ~3-4% of sales: 

Dabur continues to focus on NPDs so as to ensure the longetitivty of life span for its brands. NPDs contribute to ~3-4% of sales, out of which, about half is contributed from new product categories (no threat for cannabalization) and the balance half is from NPDs in adjacencies of the existing products. The focus on NPDs is more so on the products and categories which are adjacent to Dabur’s existing portfolio and not on ahead of the curve products (this is the reason the NPD success for Dabur has been higher vs compared to competitors). For Dabur, the success of any NPD is determined by what % of sales for a particular product category is being contributed by NPDs. Example for some of the successful NPDs: Ratanprash and sugarfree chyawanprash contribute to ~10% of chyawanprash sale, organic honey (only sold on e-com) contribute to ~5-6% of honey sales on e-com. 

Rural markets are an important constituent for Dabur: 

Dabur follows mass-premium pricing (i.e premium but attainable). The company does not want to alienate the rural markets on the back of premiumisation as ~40- 45% of their revenues come from rural. They want to focus on premuimisation of portfolio products which have high urban salience (for eg: Chyawanprash, herbal toothpaste, etc). The company believes that there is a large headroom for growth in expanding the distribution footprint in rural markets and as a result increase category penetration. Currently, Dabur has a reach only to about 0.1mn villages in India vs a total of 0.6mn villages in the country. 

Baby care segment to bank on doctor advocacy: 

The recently launched baby care segment (under the brand name Dabur Baby) clocked a revenue of ~Rs200mn in FY23 and is on track to clock an ARR of ~Rs400- 450mn for FY24. Dabur is banking on increase in penetration and doctor advocacy for its products to grow in this category.