Dabur: Rural Road To Growth
Dabur under Amit Burman is betting on deeper rural penetration, product innovation and a focus on naturals and ayurveda to power its next leg of growth
Photo Credit : Himanshu Kumar
Critics say that India is no longer the “only bright spot” in a gloomy world economic environment. The slowdown in the economy is for real. Auto sales are at a historical low. Even sectors like FMCG have been hit.
The FMCG growth is declining — both in urban and rural areas. A Nielsen report of July says that while lower spending in urban centres is the cause, it’s the sluggish rural growth (rural India accounts for 37 per cent of India’s FMCG spends) that has accounted for the FMCG slowdown.
The April-June period saw the third consecutive quarter of FMCG slowdown. The Nielsen report thus revised its growth forecast for the sector to 9-10 per cent from its earlier estimate of 11-12 per cent for the year.
It’s interesting that against this backdrop, Dabur — one of India’s oldest FMCG companies — has its youngest chairman Amit Burman at the helm, who, at 50, has been given the mandate for pushing the growth agenda with a renewed vigour for the Rs 8,500-crore conglomerate.
The ‘Real’ Story
In the Dabur fraternity, Burman’s name is synonymous with the Real juice success story. Dabur ventured into this territory when there were no players. Today, Real is the undisputed leader in this domain, and Burman is credited with conceiving, nurturing the brand and making it a category leader.
Initially, the juice packs had ‘Dabur’ and ‘Real’ logos. But such was the success of the Real brand that the Dabur logo became smaller, and was eventually taken off, says Burman during an interaction with BW Businessworld.
Under Burman, Dabur has identified Real juice, Amla hair oil, Vatika shampoo and five other products to power its next-generation growth.
Promoted by the Burman family, Dabur, the 135-year-old ayurvedic company, started operations in 1884 as an ayurvedic medicine company. Today, it has a portfolio of over 250 herbal/ayurvedic products and is the world leader in ayurveda. It is also the market leader in the packaged fruit juice category with its Real brand. The other Dabur products that are market leaders are Chyawanprash, Honey, Odomos mosquito repellent creams, Odonil air fresheners and Fem facial bleach.
Dabur has many competitors in its domain — Lever, ITC, Patanjali, to name a few. With every home care and personal care product seeking to ride the ayurvedic boom, the competition will only grow in the days to come. For instance, Colgate offers Vedshakti to counter Dabur’s herbal offering in the toothpaste category.
But Dabur insiders aver it always has the first-mover advantage along with its vast rural network that one can only envy.
In recent years, however, the rise of Patanjali has posed the stiffest challenge to Dabur’s supremacy. This, however, begs the question: given Dabur’s strong ayurvedic legacy, how did Baba Ramdev’s Patanjali manage to make a dent in the marketshare of Dabur Honey and subsequently Dabur Chyawanprash as early as 2015?
Patanjali’s aggressive pricing to entice consumers proved to be a good strategy for a new entrant in the segment. Ramdev’s charm, yoga, and soft power, too, helped give an additional boost to his products.
Of course, Dabur moved into action to regain its lost market share. Instead of reducing the price of their products they decided to give more for the same price. So essentially, they increased the quantity. It worked, and soon Dabur was able to regain its position as the market leader in both honey and chyawanprash.But why did it take a Baba Ramdev to draw attention to ayurveda? Why couldn’t Dabur do it? “Dabur has been the original custodian of ayurveda and we have always talked about the science of ayurveda. Seventy-five per cent of our portfolio was always ayurveda but we were not overtly talking about ayurveda. When ‘Baba’ came in, a lot of non-users came into this category and the size of the pie increased. When the size of the pie increased, we as an original ayurveda player benefited from it,” says Burman.
What is left unsaid is that Dabur, the original ayurveda trailblazer, was not instrumental in growing the pie size, notwithstanding its undisputed legacy.
Dabur of late has faced challenges on account of an ever-growing interest in nature-based products and a number of FMCG players introducing products in the segment. “Naturals as a segment is growing fast and that growth will be sustained. The one crucial factor though is for this category to keep itself relevant to the millennials for sustained growth,” says Debashish Mukherjee, Partner, Asia Pacific, AT Kearney.
This clearly means that there would be room for newer entrants and a new disruptor could create newer headaches for the market leader.
Another challenge is the economic slowdown, the effects of which can be seen across sectors like automobiles, FMCG and durables, among others.
“Historically, if you look at the FMCG sector growth, the range was between 5-8 per cent volume growth, and a total growth of 12-15 per cent. Over the last two years, inflation has been low, therefore, pricing increase has not taken place. Secondly, post-GST because of the anti-profiteering laws, the FMCG sector has been very cautious about increasing prices. Thirdly, volume growth itself has slowed down,” says Abheek Singhi, Senior Partner and Managing Director at The Boston Consulting Group.
This echoes the Nielsen report and should worry the FMCG players, including Dabur.
Dabur’s strategy to stay top of mind in the face of these challenges has been a focus on rural penetration. Going forward, they will be looking at innovation in their product range to stay ahead in the game. Nature-based products and ayurveda have become a key focus of the Indian FMCG market, according to Mohit Malhotra, CEO, Dabur. “Natural and herbal segment in the FMCG sector is growing at 25 per cent and Dabur brands definitely benefit. It is necessary for us to press the pedal on innovations so that we are ahead in the ayurveda and herbal space, and this certainly is our focus,” says the newly-appointed CEO, in a conversation with BW Businessworld at his Koshambi office.
In terms of rural penetration, with coverage of 45-46 per cent, they have gone from 44,000 villages to 48,000 in one quarter and plan to increase it to 65,000 by 2021. According to Malhotra, 45 per cent of their business comes from the rural sector, which is a key growth driver from them.
In addition to increasing penetration, they have launched LUPs (low unit price) products for most of their brands in the home and personal care range, food range and also the healthcare range. For instance, one would now find Pudin Hara in a Rs 5 sachet and a Dabur Red toothpaste in a Rs 10 pack, thereby increasing accessibility of these products for consumers suffering from the effects of a stressed economy. Activations at the wholesale point is another key strategy for driving rural demand.
The rural FMCG market in India is expected to grow to $220 billion by 2025 from $23.6 billion in FY18, says a report. Dabur, naturally, sees a huge opportunity in rural India.
Going Digital And Global
While the rural sector stays the focus for the company, digital is another area which they are developing. “We only started working actively about two years ago in the digital space. About 1.5 per cent of our total turnover now comes from digital. Going forward we are focusing on making tailor-made products for e-commerce channels,” says Burman.
He says that because platforms like Amazon do not sell products that are priced lower than Rs 250 and most of the Dabur products are, in fact, priced lower than Rs 250, they had to upgrade and launch new products for this space. Keeping the brand architecture the same, they created specific products for e-commerce such as Dabur Ratnaprash, Dabur Lal Tail and Dabur Shilajit Gold, etc.
In terms of communication they are making tailor-made films for YouTube, Facebook and other social media platforms to engage audiences. The Dabur #WomenCan video, which celebrated women undertaking multifaceted roles at Dabur, was released on the occasion of International Women’s Day this year, and has since reached more than 5.1 million users on social media, garnered more than 3 million views and has been shared over 52,000 times.
In the international markets, they have focused largely on nature-based personal care products. Almost 27 per cent of their total revenue comes from it. For the international markets, while they follow the same brand architecture, the products are tailored for the local consumer. Even the ingredients are local. For instance, in the Middle East under the brand Vatika they have a cactus hair-oil, olive shampoo, hair creams and hair gels, which are available only in that region.
Dabur has a Rs 3,000-crore corpus for making newer acquisitions, but nothing is in the pipeline for the immediate future. Dabur officials say that they are looking at mid to high single-digit volume growth for FY20.
With Burman at the helm, and Malhotra as the CEO, the focus is on consolidating the market leader slot (in the categories where they are the leaders) and trying to be numero uno in the categories where they are not the leader. More importantly, the group wants to tell the consumer that it’s Dabur that is the custodian of Indian ayurveda, notwithstanding the claims by Patanjali. And, yes, for sustenance, it will look more towards rural India, even when it’s getting more global in its outlook.