Take a fresh look at your lifestyle.

Rural comeback should be more enduring trend going forward: Dabur India CEO

0 225

Rural comeback should be more enduring trend going forward: Dabur India CEO

Rural demand was growing for the company driven by introduction of bridge packs, growing distribution coverage, and a general uptick in demand, Dabur CEO said

New Delhi: Consumer goods Dabur India Ltd will continue to expand its portfolio across price points and build on its power brands, said Mohit Malhotra, CEO, Dabur India. During the June quarter, the maker of Vatika shampoo and Hajmola candy reported a 8% jump in rural volumes much ahead of the market that grew 4%. Malhotra said rural demand was growing for the company driven by the introduction of bridge packs, growing distribution coverage, and a general uptick in demand. Edited excerpts.

You’ve been fairly bullish on rural demand rebounding. Can you elaborate?
Why we talk about rural so much is because the contribution of Dabur’s business coming out of rural areas is relatively higher when compared to our peers. They will be in the range of 30- 35%, we are in the range of 45-50%.

Rural areas are good for us. We have put up a lot of infrastructure—sub-stockists and rural yodhas etc. Over the last one or two quarters, we’ve seen rural growth kind of picking up. Volume is the barometer of our assessment of rural business, so the volume has now turned from red to black. Last year around this time, inflation in our basket of raw materials was in double-digits, now we see inflation in the range around 2-2.5%… the cost of products is coming down for the consumer, and there is more money in the hands of the consumer. Therefore, spending is going up. Some of the macro factors behind a good rural performance are that the crop (rabi) has been good. The harvest was impacted because of unseasonal rains, but going forward, even the sowing of rice, which requires a lot of rain, has been good. MSP or minimum support price has gone up since it is an election year. Wage rates in MNREGA have gone up, however, one sign which is not so great is that MNREGA enrollments are up. Ideally, with the infrastructure development unemployment should be going down—so that’s a negative. But rural should come back in my view, it got reflected in our results. I think, it should be more enduring a trend going forward.

Since Dabur’s salience in rural markets is already high, what will drive growth for you in those markets over the next five years?
You may say our penetration is high but as far as I’m concerned most of our categories that you see, rural offers a huge growth headroom for us because 70% of the population is there.

Our direct reach in rural villages is only 1,00,00 villages today. That’s nothing compared to the coverage universe of around 6,00,000 to 7,00,000 villages today. Every village is now getting more urbanized. As villages urbanize, infrastructure becomes better, they become more approachable to the feeder market; more branded products will get consumed there. That offers a huge headroom and opportunity for us. Categories where we are market leaders, like chyawanprash, the penetration is less than 10% pan-India. As I bring my price points down from ₹100 to ₹50, it becomes affordable. In hair oils, for instance, category penetration is 90%; in toothpaste, category penetration, too, is above 90%, but my market share is between 16% and 17%. So we are trying to get into more affordable price points and an entire pack price architecture that can be used by a rural consumer, a semi-urban consumer, urban consumer and an e-commerce consumer. So that’s what we are looking at, brand after brand.

Does this mean Dabur will always focus on mass-market products?
No, horses for courses. So there is e-commerce which caters to the premium segment, which is now 10% of the overall business of the company; there is modern trade, which is urban-centric and premium which is another 15%. The general trade market, which is 70% of our business, within that, urban market contributes to 70% of the business, the rest is rural (for Dabur). Rural is a low unit pack strategy; urban is completely focussed on premiumization and large packs.

With input costs moderating, has Dabur taken direct price cuts?
Our price elasticity to the consumer is not very high since we are into branded, considered purchases. Once we take up prices, we don’t roll them back. As inflation converts itself into a deflationary environment, we will give some benefit to the consumer because we are making more money. We will provide value in terms of consumer promotions, so that effective price comes down. We pass on some benefits to trade also. You have to become more competitive at the trade level, provide better value to the consumer, but don’t bring down the MRPs. We also come up with bridge packs—between a ₹10 and ₹50 pack, there will be a ₹20 pack. These are more affordable packs. We’ve introduced a couple of bridge packs in Dabur Amla, for instance.

With the Badshah Masala acquisition behind you, what is your plan for the food portfolio?
Food is a good space for us. Foods is a mass market, volume business builder for us, in which there are two parts—beverages and foods. In beverage, we have a structured playbook with the Real brand which is getting extended to nectars and carbonates. So that’s the power brand to power platform strategy that Real will straddle eventually. In foods we didn’t have a similar playbook; packaged food is growing at a fast pace in the country, especially staples. Badshah, is a power platform in the foods space. That’s why we acquired the company, so that we can get into the branded foods space.

What is Dabur’s outlook on acquisitions, especially around new-age brands?
We’ve got ₹6,000 crore lying on our balance sheet, it’s meant for acquisition purposes. We keep scouting for strategic fits. That said, we have a guardrail of profitability. So anything which is margin accretive to us, is what we will acquire. If a good strategic fit comes my way then we will acquire. It has to be an excellent fit in terms of the healthcare space or in home and personal care or in value-added foods etc.

Will Dabur look at international acquisitions?
International is extremely volatile at the moment with so much currency fluctuation, we can’t take too much risk at this point in time. India is where we have great bandwidth, we have distribution, we have fantastic equity, and we are able to assimilate the newly acquired companies, so India will be our first port of call for any acquisitions, international not so much. That said, within international, southeast Asia is where we are not present. So we keep scouting for targets there to improve our presence.

Several companies recently pointed to the presence of local players which is leading to market share loss. Has Dabur been affected by the emergence of such brands?
We are not present in the commodity categories. So that’s a cyclical phenomena and more relevant in commoditized markets. We haven’t experienced that because our products are more “considered” purchases i.e. they are more thought about. But we have a brand in home care, Odonil—a lot of unorganized players have come in there. They mushroom as prices soften. We also sell rose water, in that a lot of smaller players have mushroomed in the market. We are value-adding there. But we have not seen too much of an impact on our healthcare portfolio, for instance.

 

News Source

#ruralindia #ruraltv #rural #nature #agricultura #farmlife #farming #india #rurallifestyle #ruralarchitecture #ruralhouse #ruraltourism #ruralexploration #ruralliving #rurallifestyle #ruralwomen #health

Leave A Reply

Your email address will not be published.