Strategic

Dabur
Manageme
nt India Ltd.
Submitted to: Prof Amar KJR Nayak

Submitted by:

Sourabh Choudhary (U108109) Subhranshu

Shekhar Mandal (U108110)

Sujit Kumar Sahoo (U108111) Swarup Kumar

Kar (U108112)

Sweta Sah (U108113) Tanya Gupta

(U108114)

Thendral I (U108115) Uday Bhanu

Satpathy (U108116)

Vibhav Kumar (U108117) Vikrant

Krishnan Mahajan (U108118)
Table of Contents

Introduction............................................................................................................3

Phase –I.................................................................................................................. 4

Phase-II (1998-2003)..............................................................................................5

3.1 Phase#2 –IT perspective...............................................................................7

3.2 Phase#2 –Marketing perspective..................................................................7

3.3 Phase#2 –HR perspective.............................................................................8

3.4 Phase#2 – Finance perspective....................................................................8

Phase III (2003 onwards)........................................................................................9

4.1 Phase#3 –Financial Perspective..................................................................10

4.1.1 VISION 2010: ANALYSIS........................................................................13

4.2 Phase#3–Marketing Perspective.................................................................14

4.2.1 Dabur’s Rebranding Exercise................................................................18

4.3 Phase#3 –Information Technology Perspective..........................................19

4.4 Phase#3 –HR Perspective...........................................................................20

Operations Strategy of Dabur India Limited.........................................................26

Manufacturing...................................................................................................26

Supply Chain Initiatives at Dabur India Limited................................................28

Procurement..................................................................................................... 31

Quality.............................................................................................................. 31

Research and Development..............................................................................32

Vendor Management 3......................................................................................33

Corporate Governance.........................................................................................33

Dabur-Sustainability ............................................................................................34

Porter’s Five Forces Model for Dabur...................................................................36

EXHIBITS.............................................................................................................. 38

REFERENCES........................................................................................................ 44

2
Introduction
Dabur India Limited (DIL) is the fourth largest FMCG Company in India with
business interests in Healthcare, Personal care and Food products. It has revenue
of about US$600 Million (over Rs 2834 Crore) & Market Capitalization of over
US$2.3 Billion. Dabur India is a 126 years old company and is the world leader in
Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur since its
inception has focused on manufacturing and selling Ayurvedic products targeted
at the mass consumer segment. There are number of personal care products,
Ayurvedic tonics and oral care products which it launched between 1940 and
1970 have become leading brands today. Dabur’s top nine brands had 65% or
more market share in their respective product categories. These include the
health tonic Chyawanprash, Hajmola digestive tablets and candy, digestive Pudin
Hara, Dabur Lal Dant Manjan and Dabur Amla hair oil. Dabur manufactures over
450 products, covering a wide range in health and personal care.

Dabur India has 14 manufacturing locations—eight in India and six in contries like
Nepal, Egypt UK etc.It has three Subsidiary Group companies - Dabur
International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur
Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care
(Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria),
Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline
Inc. (USA). It has wide and deep market penetration with 50 C&F agents, more
than 5000 distributors and over2.8 million retail outlets all over India.

Dabur India limited is divided into three SBU’s.

1) Consumer Care Division: This SBU caters to the consumer needs

pertaining to Personal Care, Health Care, Home Care & Foods. The major
Brands under this SBU are Dabur, Vatika, Hajmola, Real and Fem.

2) Consumer Health Divison: This SBU pertains to the Ayurvedic medicines

and ayurvedic OTC. Major categories in traditional formulations include
Asav Arishtas, Ras Rasayanas, Churnas, Medicated Oils.

3) International Business Division: It caters to the health and personal care

needs of international consumers in middle east, north and west Africa, EU

3
 and US. This division has high level of localization of manufacturing and
sales & marketing.

Phase –I

Dabur was set up by in 1884 by Dr. S K Burman in West Bengal as a proprietary

firm for manufacturing of ayurvedic drugs .Dabur is an acronym of the name
DAktar BURrman, its founder. In the year 1896 a small manufacturing plant was
set up near Calcutta for mass production of Ayurvedic Drugs and Chemicals.
Dabur started its operations in 1896 with the manufacture of drug called Plagin
to counter the wide spread plague at that time. In the 1900’s next generation of
Burman’s took the firm further and they believed that Ayurveda was the mantra
which can be sustainable and can meet the needs of low income countrymen. As
a result a research laboratory was formed in 1919, followed by manufacturing
units at Kolkata (then Calcutta) and Bihar. In 1936, Dabur India Pvt Ltd. was
incorporated which took over the business from the proprietary firm. Dabur
expanded its distribution network in the next two decades. It launched Dabur
Amla Hair Oil in 1940 and Dabur Chyawanprash in 1949. In 1969 there was
unrest and business uncertainity in calcutta which led the family to expand its
manufacturing operations in Delhi. The next product came out in 1970 in the
form of Dabur Lal Dant Manjan followed by the Hajmola Tablet in 1976. Through
the 80s and 90s Dabur performed well but was established as a brand for the
elderly because of its image of an Ayurvedic Company Although later in 1989 it
launched Hajmola candy which was targeted towards the children segment.

In 1986, Dabur became a public limited company through a reverse merger

with Vidogum Ltd. and was renamed as Dabur India Limited. A reverse merger is
acquisition of a public company by a private company which allows the private
company to bypass the lengthy and complex process of going public. In the
following year to cater to the global market’s needs it set up a facility at Noida
Export processing Zone. In 1991,Dabur Overseas Ltd. was set up in Cayman
Islands to cater to the needs of overseas investment and this later funded the set
up of Dabur Egypt Ltd., in Cairo, which was set to manufacture personal care
and food products. In 1992, Dabur entered into 49:51 joint venture with the

4
Spanish confectionery major Agrolimen group under the name General De
Confeteria India Ltd. (GCI) by investing an amount of INR 92.3 Million. Also Dabur
entered into a biscuit joint venture named Excelcia Foods with Nestle. In 1993
Dabur decided to go to public and came up with an initial public offer in 1994
with Rs 10 face value share at a premium of Rs 85. The issue was oversubscribed
21 times and total amount raised was Rs 541.5 million. The reasons for tapping
the equity markets were:

• Additional funds were required to expand production and set up new

factories

• Launch diversified range of products and compete against FMCG MNC’s

In 1994, Dabur reorganised its business in three separate divisions of Sales,

Marketing and Operations.In 1995, Dabur launched Vatika and hoped to change
the perception in the consumers, and was successful to a certain extent too. In
1997, Foods division was carved out which consisted of Real Fruit Juice and
Homemade cooking pastas. Also in the same year the company launched a
unique initiative called STARS (Strive to Achieve Record Success) to achieve
accelerated growth in the future years.

Phase-II (1998-2003)
In 1997, Dabur had started facing issues as two out of its four flagship brands -
Chyawanprash and Hajmola - were slipping due to product life cycle issues.
Another of its flagship brand ‘Dabur Amla Hair Oil’ was also growing at a less-
than-satisfactory rate, at five per cent. Post-liberalization, with the Indian
economy opening up and foreign players entering Indian markets, Dabur realized
that competition will be picking up very soon.

In April 1997, Dabur hired the leading management consulting firm McKinsey &
Co. for mapping out a comprehensive restructuring plan for its varied businesses
and strengthen its competitive position. McKinsey primarily offered the following
advices:

1) To improve profitability, stay focused on core competencies i.e. ayurveda

and health care products

5
 2) Advised Burman family to lay off from the day-to-day operations and leave
the company in the hands of professionals.

Dabur paid a fee of Rs 10 crore to McKinsey & Co. and started following its
advice religiously. In 1999, It off loaded its entire 49 per cent stake in the
confectionery joint venture General De Confiterria to its Spanish partner
Agrolimen for Rs 35 crore. The Rs 100 crore GCI product portfolio comprised of
two categories -- Boomer bubble gum and soft-filled candies, Bonkers and
Donaldo. While setting up the confectionary jointventure GCI in 1994, DIL had
estimated that the booming candy and bubble gum market would provide it with
ample opportunity to turn the venture into a profit maker. The Spanish partner
was roped in considering the highly intensive technology nature of the
confectionery market. However, the joint venture has not worked out according
to the plan as only a handful of products saw the light of the day.

Dabur India limited also scaled down its stake in Excelsia Foods to 40 per cent,
handing over control to in favour of Nestle SA to become a minority partner.
Dabur sold its 20 per cent stake in Excelcia Foods Ltd for Rs 10.6 crores. The
company also reduced its exposure to Dabur Finance, where it held 90 per cent
stake. The finance arm sold its retail business to Birla Global Finance in 1999. It
also discontinued its Samara line of herbal cosmetics that it introduced in early
1997.

The Burman family handed over management of the company to a professional

CEO and limited their role to strategic inputs at the Board level in 1998. The
decision was taken in response to the changing dynamics of business and to
inculcate a spirit of corporate governance within Dabur India. Post-1998, the
Burman family has receded from the day-to-day operations of the Company and
has strength of 4 members in Board of Directors.

In 2001, Family Council was constituted for formalizing the promoter family’s role
in managing
the business interests encompassing all group companies. Dabur roped in
Accenture to define clear roles and responsibilities of its board of directors and
the chief executive officer to prevent any overlap. The roles of Management
Committee, Board of Directors and Family Council were defined and formalized.

In 2002, Dabur again roped in Accenture to study its sales and distribution
system. As per its
6
recommendations, Dabur restructured its Pharmaceutical business and
separated it from its FMCG business.

Dabur tried to reposition itself as a ‘herbal specialist’ rather than flogging its
ayurvedic lineage alone. Confining itself to the ayurvedic platform would have
been restrictive as the domain could only be stretched to a certain level and not
beyond.

DIL also decided to have five main brands — Dabur, Vatika, Anmol, Real and
Hajmola, and every product was to be migrated to one of these. Not only would it
have helped Dabur to focus but also it would help it to aggregate its media
spend.

3.1 Phase#2 –IT perspective

In Dabur knowledge and technology were the key resources which had helped
the company to achieve higher levels of excellence and efficiency. Towards this
overall goal of technology-driven performance, Dabur started to utilize IT. This
helped in integrating a vast distribution system spread all over India and across
the world. It also helped to cut down the costs and improve profitability.

Dabur leveraged information technology to drive supply chain efficiencies and

had invested to the tune of Rs. 12 crores by 2004 for the IT backbone of the
organisation. The company started to work on two ERP systems - Baan and Mfg
Pro in 2001, in production and distribution respectively. This was a good move to
cut down the operational costs, reduce redundancies and errors and increase
efficiency, all contributing to increase in the bottom-line. Dabur – a 114 year old
firm - showed a new path to the industry by successfully outsourcing the
complete IT infrastructure. Many other companies followed the suit thereafter.

3.2 Phase#2 –Marketing perspective

As discussed earlier, during this phase Dabur wanted to reposition its image of
an Ayurvedic company to a major FMCG player with diversified product
categories. Dabur concentrated n differentiated product offering and meticulous
brand building initiatives. The company concentrated on differentiating the brand
in all aspects, right from positioning to packaging. The biggest example is Dabur
Vatika which it positioned as value-added hair oil that contained pure coconut oil

7
enriched with natural ingredients such as Henna, Amla and lemon against the
market leader Marico’s Coconut Oil.

3.3 Phase#2 –HR perspective

DABUR’S willingness to persevere with professionals, and not family members, is
quite unique in itself. In 1998, the promoters (the Burman family) first
experimented with a non-family CEO, Ninu Khanna who had been recruited from
P&G to lead the company. That year a whole host of professionals had also been
inducted at senior positions. However, Ninu Khanna left by 2001. But instead of
abandoning its experiment, as had been widely expected, the board plumped for
Sunil Duggal, an old Dabur hand, in 2002 and the family, which still controls 75
per cent of the company’s equity, has since followed a hands-off policy.
(Currently, six of the 10 board members do not belong to the promoter family.)
In the year 2001 the company began to feel the need to put its HR systems in
place to ensure that organizational and individual goals were aligned. It began
institutionalizing empowerment in the workplace.
• Employee empowerment: The idea was to make employees feel like
stakeholders. For example, Dabur has an ESOP scheme that is democratic
by industry standards in the sense that it is not based only on seniority,
but also on the importance of the assignment of the employee.

• Preserving the Dabur values: A whistleblower policy introduced. It sought

to put a cap on business practices that were out of character with Dabur‘s
values.

• Employee Referral Programme: Existing employees could refer candidates

they thought to be suitable. Incentives would be provided to such
employees that not only provides employee with monetary benefits but
also builds a relationship based on trust and reliability.

3.4 Phase#2 – Finance perspective

Dabur India Limited has benefitted from the advice of Mckinsey in the long run.
The Profitability of Dabur India Limited increased in the long run with Net profit
margin rising from 4.64% in Mar-99 to 14.74% in Mar-09. The operating margin
has also approximately doubled from 9.83% in 1999 to 18.33% in 2009.This is
primarily due to implementation of ERP in 1999 which allowed it to integrate the
internal functions such as supply chain, purchase, stores and manufacturing. The
prime impact of this was on the cost incurred as this reduced the working capital

8
requirement by1/3rd of its usual level. As can be seen in the graph below, except
for a small dip in FY02, there has been a consistent growth in both operating
margin and net profit margin. The growth has trend has stagnated since FY06.

Phase III (2003 onwards)

In 2003, Dabur collaborated with Accenture so as to keep itself competitive. The
need of the hour was to work smarter and faster so as to improve profitability
and revenue growth. Accenture advised Dabur to focus on the following key
areas:

 Competing on core competencies, while outsourcing non-core functions to

trusted third-party providers.

 Viewing information technology (IT) as a strategic asset that creates real

values—not simply a cost to be managed.

 Streamlining processes wherever possible

Dabur implemented Accenture’s advice and went ahead with the following
strategies in each of the following functions.

9
4.1 Phase#3 –Financial Perspective

Cost Cutting Measure

In 2003-04 Dabur India procured Rs.210 crore of raw materials through e-

sourcing which was almost 50 per cent of total raw material expenditure
that it incurred. As a result of which Dabur considerably controlled raw
material costs which were on a rise. Due to e-procurement it was able to
save considerably in raw material costs which in turn, translated into
higher operating profit margins for DIL. Dabur’s net profit during the
quarter was up 30% from the year-ago period. The firm registered an
operating profit margin of around 19% compared with around 17% a year
ago. But, the savings visible on the raw material cost front was also due to
the higher inventory base that the company used when the material costs
were low.

As a result of these savings it was able to spend more on advertisements

and new launches.

10
Dabur Pharma Demerger

In May 2003, the board of Dabur India demerged the pharmaceuticals

business and created a separate entity Dabur Pharma Ltd. At that point of
time pharmaceuticals contributed around 15% of total sales.

In 2007, the company sold its non-oncology business to Alembic for Rs

159 crore to focus on its oncology segment. In 2008 German major
Fresenius Kabi acquired 73% stake in India’s largest anti-cancer drug
maker Dabur Pharma for around Rs 872 crore. With this, the Burman
family, the promoters of the company and holding 65% stake got around
Rs 775 crore and exited the pharmaceutical business so as to focus on its
core competence and come out as a pure FMCG player. Oncology (Anti-
cancer) is a lucrative segment & requires high-level research and
development (R&D) but the parent company DIL long term strategy is to
buy brands and aggressively expand its FMCG business. One of the reason
they sold the company could be that its unit in Baddi completed its 10-
year tax exemption benefit during the quarter ended December
2007.Hence it made economical sense for them not to continue with that
and sell it off to a Big Pharma player like Fresenius Kabi as Dabur Pharma
also holds a substantial number of drug registrations in Asia, Europe and
the US.

Acquisition of Balsara

In Jan 2005, Dabur India Ltd (DIL) acquired three Balsara group companies
for Rs143 crore in an all-cash deal. It mopped up Rs. 120 crores through
internal accruals and financed the remaining Rs. 23 crores through
borrowings.

As per the deal it had acquired 99.4 per cent stake in Balsara Hygiene
Products, 100 per cent in Balsara Home Products and 97.9 per cent in
Besta Cosmetics. The acquisition was part of its inorganic growth strategy
which it had planned well in advance and was in line with its plan to

11
expand the company's scale of operations and strengthen its presence in
the FMCG sector.
As 44 per cent of Balsara's revenue came from home care products and
the oral care segment accounted for nearly 56 per cent which had
witnessed growth in excess of 15 per cent, also
Balsara deal was a strategic fit in both oral and home care market as it
acquired the 2nd largest selling toilet cleaner Sanifresh in 2000 Cr. Home
care Mkt. Also its market share in tooth paste Industry grew by 6% from
1.8% to 8% which substantially covered the acquisition amount it paid for
Balsara.
Balsara had sales of Rs 199.6 crore & losses of about Rs 8 crore in the
period, But with readjustment in focus, streamlining of distribution and
reduction in the wage bill helped Dabur India turn Balsara Home Products
around. It reduced the distributors of Balsara from 500 to a few dozens
while giving business to its own distributor. This put more bargaining
power in Dabur’s hands in negotiating a reduction in distributors’ margins
as well as in making its purchases. Reduction in no of employee reduced
the wage bill by 60% along with substantial reduction in other overheads.
Also, Dabur payed 1/5th of what Balsara used to pay for advertisements,
hence, increasing its visibility and revenues. In six months of its take over
Balsara added about 11% to total revenue and showed great potential in
terms of revenue growth and profitability posting 35% growth in sales and
a net profit of Rs. 14.8 crores during the year. The Balsara acquisition
boosted its revenues and savings in excise duty (due to shifting of
manufacturing to tax-free zones) which also enhanced its profit margins
as seen in the following tables.
.

Figures in Crores
FY FY FY FY FY FY FY FY FY FY
00 01 02 03 04 05 06 07 08 09
Sales 982 110 120 128 123 141 175 208 239 283
0 0 5 6 7 7 0 6 4
Other 34 19 12 7 9 9 13 26 34 47
Income
EBITDA 128 137 144 162 164 217 300 376 443 517.
3
12
 Growth 12 9% 7% -4% 15 24 18 15 18%
in Sales % % % % %

We can see that the financial year ending 2005 had shown an increase of
15% in sales which was immediately after the acquisition of Balsara.
Hence Dabur’s acquisition of Balsara not only strengthened its position in
FMCG but also its turnaround within six months made Balsara one its
profitable subsidiary.

DABUR FEMCARE DEAL

Dabur acquired Fem care in June 2009 and the result has been
phenomenal. The market share in the skin segment increased from 1% to
6.6% within 5 months of this deal, making DIL the second biggest skin-
care company in the country behind HUL. The Fem Care brand accounts
for half of the skincare segment within the Dabur portfolio and 4.2 per
cent of Dabur’s total revenue.

First Dabur India had acquired 72.15% of Fem for Rs203.7 crore in an all-
cash deal. Further due to SEBI’s guideline (substantial acquisition of
shares and takeovers) Regulation,2007. Dabur acquired additional 20%
stake for Rs54 crore through an open offer. The deal has been done at
more than a 21% premium to the prevailing share price of Rs 656 of Fem
Care at Rs 800/share. The deal fetched a very attractive valuation for Fem
Care Pharma. With the completion of this transaction, Fem Care Pharma is
now a 100% subsidiary of Dabur India. Marico Industries and Godrej were
also reported to be in race for Fem Care Pharma but it was eventually won
by Dabur which shows its seriousness towards FEM Acquisition.

4.1.1 VISION 2010: ANALYSIS

1. Doubling of Sales Figure from 2006.

After the successful implementation of 4-year business plan from 2002 to 2006,
Dabur had launched another vision for 2010. One of the plans for 2010 was to
double the sales figure from what it had been in the year 2006. From the exhibits,
we can see that the sales figure at the end of the year 2006 was Rs. 1757 crores

13
and by the end of year 2009, it was Rs. 2834 crores which shows an increase of
61% in the sales. Though it has not yet reached the double figure, it seems close
to achieving the figure in 2-3 years.

2. Growth to be achieved through international business, homecare,

healthcare and foods

The division wise revenue is:

• Consumer Care Division (CCD) – 69%

• Consumer Health Division (CHD) – 7.9%

• International Business Division (IBD) – 18.1%

• Others – 5%

Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December
2009.

o CCD grows by 16.1%

o CHD grows by 15.8%

o IBD grows by 31.1%

3. Southern markets will remain as a focus area to increase its revenue

share to 15 per cent

The south India market share has increased from 6% in 2002 to 12% in 2009. This
is the result of the initiatives taken by Dabur to suit the south Indian market e.g.
launching herbal toothpaste in Kerala and Tamilnadu and launching Dabur Lal
Dant Manjan as Dabur Sivappu Pal Podi etc. The market share increased after the
acquisition of Balsara as Balsara had strong presence in the south and western
region. The other factors were POS promotion, customised packaging and
commercials & customised product launch.

4.2 Phase#3–Marketing Perspective

It was only after its association with its partner, Accenture, that it made radical
changes in its strategy. A company which was considerably inept to changes,

14
both organically and inorganically, now started planning acquisitions and
detailed 5 year plans for its existing segments. The reasons behind these
initiatives are as follows:
1. Its existing products were considered to be targeting the mid aged and
above aged segments, but the demography was changing in the country.
India was emerging to be a young nation and Dabur recognized the need
to have products for the younger generation, while retaining the older
segment.
2. Rise of the regional players. Players like Balsara, Zandu, Emami were fast
emerging highly competitive with more or less similar products. The
market share of Dabur was suddenly shrinking in some of the categories.
3. Rise of the Rural India. With disposable incomes rising in Rural India,
Dabur could use its distribution channel to meet the demand in Rural India
with differentiated products in newer segments at affordable prices.
4. Low penetration levels in certain categories. The acquisition of Balsara and
Fem were mostly due to this reason.

5. Expanding in the new markets, especially the international markets. With

a diversified kitty and acquisition of established players (Fem - South East
Asia, Balsara - South India), Dabur could reach out to new markets.

The initiatives required strategic changes across all functions. The marketing
strategy was the key behind these changes as FMCG business runs on the brand
value created over the years. The marketing strategy changed to a mix of
product branding and umbrella branding from being only umbrella branding in
the past. Products like Chyawanprash, Hair Oil, Hajmola retained the umbrella
branding while acquired products and new products like Odomos, Real, Vatika
adopted product branding.

The CCD division or the Consumer Care division has evolved considerably over
the last decade and so has its marketing strategy. CCD now comprises of FPD
and HCPD in addition to the Fem and Balsara. Dabur has invested hugely in the
advertisement of its products and differentiated its product offerings too. The
present structure of Dabur’s strategic units is:

DABUR

CCD (72.8%) CHD (07.3%) IB (18.5%)

HEALTH CARE --- OTC --- HAIR OIL ---

44% 57% 54%

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PERSONAL CARE --- ETHICAL --- 43% HAIR CREAM ---
37% 23%

FOOD ORAL CARE ---

--- 13% 12%

HOME CARE --- FOOD ---

06% 06%

OTHERS ---
05%

Post 2000, Dabur concentrated and differentiated product offering and

meticulous brand building initiatives. The company concentrated on
differentiating the brand in all aspects, right from positioning to packaging. The
biggest example is Dabur Vatika which it positioned as value-added hair oil that
contained pure coconut oil enriched with natural ingredients such as Henna,
Amla and lemon against the market leader Marico’s Coconut Oil.

It started with an increase in Advertisement spent by bringing in leading film-

stars (Amitabh Bachchan & Preity Zinta) and sport-stars (Dhoni & Sehwag) in its
campaigns. The frequency of the advertisements and the modes of
advertisements increased significantly.

Brand ambassadors were also changed according to the re-branding of the

products. Amitabh bachchan was replaced by Dhoni for Dabur Chyawanprash as
Dabur started to concentrate on the younger generation by launching new
variants of Dabur Chyawanprash (Chyawan Junior & Chyawanshakti). The reason
behind this rebranding was the market stagnation in the Chyawanprash
category.

Dabur targeted the institutional markets by partnering with institutional clients

(Discovery Channel, Mickey Mouse) which included hotels and airlines to increase
its market share.

It launched new packaging in several products to address the needs of the

customers in a much more efficient manner. Not only it increased the top-line
through higher volumes (low priced products are a hit among price-sensitive
rural consumers) but it also increased the bottom-line through higher margins in
these smaller SKUs.

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 With a diversified kitty, Dabur required different campaigns for different
segments. To resolve the issue, a lot of BTL activations were done so that it can
reach directly to the consumers and also solve the issue pertaining to the
segment. Some of such activations are as follows:

HAIR OIL  Dabur Launched beauty and talent shows in Rural areas of Northern
India where it has considerable presence. Initiatives like "Banke Dikhao Rani
Pratiyogita" and “Dabur Vatika Koyal Punjab Di" were launched to tap the
existing users and convert them into loyal customers of its brand.

CHYAWANPRASH Dabur organized Mobile road shows in association with

JAGRAN SOLUTIONS in 200 remote villages of UP. It emphasized on Direct
Interaction with consumers, giving information about the benefits of
Chyawanprash in their everyday life and was backed by media coverage.

Modern trade also allows more space and provides an established route to
launch new products. Modern trade accounts for about 5-10 per cent of urban
sales for FMCG companies and this can go up to 25 per cent for southern
markets.

In the modern trade segment, Dabur has opened its retail subsdiary called H&B
Stores Ltd. in NCR and South India. At present there are 11 stores functional and
there are plans of 12 stores to be opened in the future. Dabur initiated a
programme christened DARE (Driving Achievement of Retail Excellence) to
improve its effectiveness in organised retail in 2009. For Dabur, about 3 per cent
in 2008 of sales come from modern trade and it was expected to grow up to 7.5
per cent in 2010.

CATEGORIES Mark Market Major brands URBAN INDIA

et Leader of RURAL
Shar Dabur INDIA
e
Penetrati Growt Penetrati Growth
on h on
PERSONA Hair 16.0 Marico : Dabur Amla, 93% 19.4% 96% 20.2%
L CARE Oil 36.0% Vatika
Sham 6.2 HUL : Vatika, 46% 13.3% 62% 9.3%
poo 45.4% Dabur Total
Oral 12.8 Colgate : Dabur Lal, 45% 8.0% 79% 6.1%
care 48.7% Meswak,Babool
Skin 6.6 HUL : Gulabari, 19% NA 30% NA
care 58.9% Fem Skin
Diges 55.0 DABUR Hajmola, NA NA NA NA
tive Candy
HEALTH 60.3 DABUR Chyawanprash, 5% 8.75% 14% 2.5%

17
SUPPLEMENTS Glucose-D,
Honey
FOOD 45.0 DABUR Real, Real 10% NA 30% NA
Active, Real
Burrst
HOME CARE 20.0 Premium : Odonil, 20% NA 58% NA
31% Odomos, Saini
Fresh

Dabur’s acquisition of Balsara and Fem are largely to the fact that the products
they deal have low penetration levels. The skin care segment stands at 19% and
30% penetration levels for the rural and urban levels respectively, which an
attractive market is, given the rise in education, disposable income of the people
living in rural India.

The food industry too is window of opportunity, where there is a penetration level
of 10% in Rural India. With signs of slowing down of aerated drinks, Dabur can
cash in the displaced consumers to its juice business.

However the health supplement category is more of a worry than opportunity. In-
spite of its presence in rural India and the category for over 50 years, Dabur has
still not able to increase the penetration levels. As a result, market is stagnant
for years, though there are signs of recovery in the past few years.

4.2.1 Dabur’s Rebranding Exercise

In the year 2004-05 a whole new brand identity of Dabur was born. The old
Banyan tree was replaced with a new, fresh Banyan tree.

The logo was changed to a tree with a younger look. The leaves suggesting
growth, energy and rejuvenation, twin colors reflecting perfect combination of
stability and freshness, the trunk represented three people raising their hands in
joy, the broad trunk symbolized stability, multiple branches were chosen to
convey growth, and warmth and energy were displayed through the soft orange

18
color. ‘Celebrating Life’ was chosen as a new tag that completely summarized
the whole essence.

4.3 Phase#3 –Information Technology Perspective

By 2005 Dabur started to feel the pinch of maintaining two independent ERP
systems. They were facing following issues:

1. There were still data redundancies and inconsistencies at times.

2. Considerable amount of rework was necessary in just data format

conversion between the two systems.

3. It still did not provide a holistic picture and thus posed problems in
formulating a strategy or taking business critical decisions.

4. Maintenance costs climbed up because of the above stated points.

Therefore, to realize not just the operational excellence but also decision support
infrastructure, the idea of a single organization wide ERP implementation was
proposed in Dabur. So, With Accenture’s help, Dabur implemented strategic and
operational changes – by implementation of organization wide SAP core modules.

Major IT initiatives:

1. Migrated from standalone ERP systems - Baan and Mfg to centralized SAP
ERP system from 1st April, 2006 for all business units (BUs).

2. Implemented a country wide new WAN infrastructure for running

centralized ERP system.

3. Setting up of new data center at KCO head office in Ghaziabad.

4. Extension of Reach system to distributors for capturing Secondary Sales

Data to collect near real-time pipeline information was done by 20041.

5. Roll out of IT services to new plants.

Benefits from these initiatives:

1. Increase in annual sales by 17% whereas increase in profits by over 40%

showing more operational efficiency and cutting down of costs.

19
 2. The distribution network expanded by 19% bringing the total to about
630,000 sales outlets.

3. Dabur estimated about 6% of its total of 14% growth from the new
strategy alone, in the year 2007.

4. Accenture provided help in merging the systems of the entities after the
Balsara merger.

Future Challenges:

1. Forward integration of SAP with distributors and stockists.

2. Backward integration of SAP with suppliers.

3. Implementation of new Point of Sale (POS) system at stockist point and

integration with SAP ERP.

4. Implementation of SAP HR and payroll.

5. SAP roll out to Dabur Nepal Pvt. Ltd. (DNPL) and other businesses.

4.4 Phase#3 –HR Perspective

Dabur rears a culture that gives full autonomy to its employees. It cares for the
employees’ development along with the growth of the organization. Dabur
believes in nurturing a familial bond with its people by creating a harmonious
and value based work environment that encourages team spirit, and also
rewarding individual initiative. It follows more of a paternalistic approach to care
about its employees. It has implemented various training and development
programs like Young Manager Development Program, Prayas, Leading and
Facilitating Performance, Campus to Corpora and a Balanced Scorecard approach
to performance evaluation, have been implemented to help employees realize
their potential.
The company believes that good HR policies, by themselves, don’t create a great
workplace. They need to be accompanied by ambition and a sense of daring. So,
these new HR policies have also gone hand-in-hand with plenty of action on the
business front. Dabur has made its brand identity more contemporary. It has also

20
taken the first steps towards becoming a true multinational, rather than a
company that does some international business.

• Employee Bonus: In 2005, Dabur gave Bonus to its employees after 12

years. It announced issue of 1:1 Bonus share to the shareholders of the
company, i.e. one share for every one share held. This boosted the
employee morale further.
• Young Managers Development Programme (YMDP): Dabur has a two-
pronged approach in recruiting dynamic professionals as lateral
recruitments and the Management Trainee Engineer/Trainee recruitments
at entry level under YMDP. Each year, it is upgraded to make the learning
experience more enriching and rigorous with a greater focus on functional
and conceptual inputs and an objective learning evaluation system.

Acquiring Balsara: The people paradox

The deal created a lot of unrest but the biggest issue was, of course, people.
Dabur already had 2,300 people on its rolls, while Balsara had 600. There was a
huge chaos as there was no room for any duplication for posts. Though Dabur did
not retrench anybody, but close to 300 people quit. These exits were the most
painful part of Dabur India's acquisition of the Balsara group's hygiene and home
products business.
A number of people quit citing locational constraints as Balsara is a Mumbai-
based company, while Dabur is headquartered at Sahibabad, near Delhi. Despite
of these problems, some areas were integrated smoothly. For example Balsara's
R&D team was seamlessly absorbed into the larger organization. Dabur had no
experience in home care, which made integration of that division invaluable on
the other hand the oral care research division possessed skills that
complemented Dabur's own team.
Even the manufacturing facilities didn't pose too many problems. The fact that
neither of the organizations were unionized helped as well. It aided in decision
making about Balsara's three plants -- at Silvassa (Dadra & Nagar Haveli),
Kanpur (Uttar Pradesh) and Baddi (Himachal Pradesh) much easier. Also the
Kanpur factory was a small scale factory, with just 10 workers hence the decision
to stop manufacturing there didn't cause too much disruption.
The Silvassa plant was overstaffed with 100 workers, hence about 30 of them
were shifted to Baddi, a new factory, which was understaffed at just eight
employees, thus solving two problems.
21
Following Dabur policies at Balsara did mean some expense. Salaries were hiked
to bring them in line with the Dabur structure; and external consultants were
brought in to conduct detailed assessments of all employees and redeployments
were made on the basis of their recommendations.

Major issues

The major portion of trouble for the HR division lay with sales. Before the
acquisition two distinct distribution networks were in place at Dabur.
While the decision was taken to aggregate the smaller business into Dabur's
infrastructure, suitable modifications were also necessary. Dabur's original
distribution was along two verticals: Line 1 for health care and Line 2 for personal
care. Now, with new product portfolios coming in, a third line was created that to
look after home care and all oral care (including Dabur's range) products.
Dabur's consumer care frontline was made to have a total of 400 people, of
whom 120-odd were from Balsara. Had Dabur continued with just two lines
Balsara may not have got the required focus.
Since Line 3 covered Dabur and Balsara products, managed by employees of
both organisations, substantial re-training in selling techniques to match up with
that of Dabur was also required. Using the "train the trainer" module, about 55
managers conducted workshops for sales staff across the country. Dabur had to
invest in several thousand manhours of training. Inspite of the above mentioned
factors that year's wage bill was likely to be 50 per cent lower than last year's.
While the departures have meant huge savings in staff expenses, recruitment
costs also came down across the group, since Balsara people helped fill
vacancies in group companies.

Challenges faced in the modern era

Dabur is a hundred year old organization. For such an old organization to be

successful in changing times it must innovate continuously and evolve over a
period of time. This requires modernization in practically every aspect. But such
an initiation requires a very difficult milestone to be achieved, i.e. changing
mindset of the people associated with the company.
There were people who had been in the company for long, and were used to
doing things in a certain set way. To overcome this challenge, the management
ran a comparison between both, conventional ‘as per my experience’
perspective, and a more system-and-facts based decision-making model, on

22
computer-generated programs. This let the organization clearly see realistic and
practical answers to the questions raised with regards to modernization.

PEST Analysis of Dabur India Limited (Period 2005 onwards)

Political Factors

The key factors that have triggered growth for the FMCG industry in the
period include reduction in excise duties, relaxation of licensing
restrictions and reduced dominance of unorganized sector due to creation
of level playing field. With the revival in demand in the FMCG sector and
capacity planning done by all major FMCG companies in tax haven areas
the future looks promising. Also, the government thrust on agriculture and
rural economy has facilitated improved demand for the FMCG products.

The hair oil industry is witness to a large amount of unbranded oil

manufacturers that account for nearly half of the total coconut oil market.
This also provides a significant upside potential for companies like Marico
and Dabur. The implementation of Value added tax is also expected to
tilt the balance in favor of organized players. Given the fact that there is
only a moderate scope for differential in coconut oil segment, the players
concentrated on value added oils like Amla, Badam and so on. The
addition of these high margin products in the portfolio also leverage the
players against the no frills coconut oil segment. They have been
successful in the venture with brands like Vatika, Dabur Amla (Dabur) and
Hair & Care (Marico) firmly rooted in the markets.

While the coconut oil brand of Marico, 'parachute' grew by 8% in volumes

in FY '05, the growth of value added oils like Sampoorna, Shanti Amla and
Hair & Care has been comparatively faster at 14%. Even for Dabur, the
flagship brand 'Dabur Amla' reached a milestone in FY '05 by crossing a
turnover of Rs 200 crore and registered a 16% growth. This speaks of the
success of the value added products.

In 2008-09, finance minister’s decision to reduce CENVAT rate to 14% was

in line with the GST roadmap, and this coupled with lower income tax

23
incidence on individuals will accelerate disposable incomes, and thus
augurs well for the FMCG sector.
Economic Factors

Better reforms and investment policies attract foreign investments, which

ultimately improves the standard of living of the people in that country.
With improved standard of living more and more consumers prefer using
branded FMCG products which have so far remained an aspiration.
Consumers who are already using branded products will upgrade
themselves to premium products. We could expect similar recovery in our
economy in the FMCG segment in the coming years.

FMCG sector is going to be in the limelight with strong economic

fundamentals, rising demand and a growing GDP. The future growth is
expected to come from newer segments such as the youth and through
increased rural and small town penetration. The Internet and e-commerce
will change the dynamics of this industry helping companies improve their
procurement, distribution and selling efficiencies. FMCG market remains
highly fragmented with almost half of the market representing unbranded,
unorganized sector products. This presents a tremendous opportunity for
makers of branded products who can convert consumers of unbranded
products to branded products.
In the scheme of things, ‘Dabur Foods Limited' was merged with Dabur
India Ltd. in 2007. It was now an over Rs 2,200-crore entity including the
Rs 200-crore from Dabur Foods. It thus became one of the business
divisions of Dabur India, alongside consumer care division (CCD) that
encompassed all the personal care and home care products, and
consumer health division (CHD). Dabur also made retail venture under the
health and beauty format, through its wholly owned subsidiary, H&B
Stores. It envisaged selling products ranging from personal care,
cosmetics, baby care to over-the-counter drugs.

Social Factors

24
In 2004, the frequency of usage of oral care products in India as compared
to developed world was very low, giving scope for growth to the sector.
Per capita consumption of toothpaste in the country was only 70 gm
compared with 300 gm in Europe and 150 gm in Thailand. Also, a critically
low dentist to population ratio in our country, results in low oral hygiene
consciousness and widespread dental diseases. This provided a good
opportunity to expand the market and encourage people to use modern
dentifrice to improve oral hygiene.

Moreover, it is one of the larger players in the toothpowder category.

However the company is witnessing negative growth rates in the
category, as there seems to a shift of the consumer from toothpowder to
toothpaste segment. The company is compensating for the loss in the
category by launching Dabur Red toothpaste that has grown into Rs 50
crore brand in two years of its launch.

It was also worthwhile for Dabur India Ltd. to consider inorganic growth.
Even though Balsara (with brands Promise, Meswak, Babool etc.) was
making losses, it did possess synergies with the growing oral care
business of Dabur. Dabur estimated the market for this category to be Rs.
2500 crores growing @ 10% p.a., which made the market very lucrative.
Thus, acquiring Balsara was an obvious step to grow inorganically.

The penetration levels of shampoo are abysmally low in the country. The
penetration in urban areas is around 65% while it’s just 35% in rural areas.
Also the per capita consumption of shampoo is just 16 ML compared to
1000 ML in UK and US. This provides an opportunity to the players to
improve the market and their size. The Indian shampoo market is
characterized by sachets. Around 70% of total shampoo sales are through
sachets. The general trend in the international markets is to introduce a
brand through sachets and thereafter upgrade the consumer to bigger
bottles. Dabur thus shifted gears to anti-dandruff shampoo (Dabur Vatika
anti-dandruff shampoo) in 2004. It also relaunched brand Vatika in 2007.
Technological Factors

25
The market size of bleach products in India is around Rs 85 crore and is
growing at 15% with Fem holding 60% market share in it. The market size
of hair removing cream is around Rs 110 crore and is growing at 22% with
Fem having around 7% market share. The liquid soap market size in India
is around Rs 50 crore and is growing at 25%, where Fem has 2 main
competitors, Dettol and Lifebuoy.

In 2009, Dabur acquired 72.15% stake in Fem Care to provide the

company with the technology to enter high-growth skin care market with
an established brand name 'FEM'. Apart from Fem bleach, other popular
brands by the firm are Oxybleach cream, Botanica anti-ageing cream,
Stratum colour protecting hair conditioners, SAKA men's bleach and Bambi
fabric softeners.

Fem is world leader in bleaching cream category by tonnage. Fem brand is

very well placed in India and aboard. With this acquisition, Dabur will
become key player in skin care category. Fem has reach of around 25000
parlours, which can be leverage by Dabur for promoting its own Gulabari
skin care products and its Vatika brand. Dabur was thinking of launching
its products into ayurvedic skin care category, will delay its launch by
couple of months due to acquisition. The company will continue its
initiative in skin care category through Gulabari, its ayurvedic products
which will launch shortly and through Fem.

Operations Strategy of Dabur India Limited

The Operations Strategy of Dabur India Limited has changed as their business
has evolved over time. The section below tracks the various key operations
strategy such as the Manufacturing ( processes involved and locations), the
Supply chain initiatives over the years, Inventory Management, Quality
Management, Research and Development Initiatives, Procurement procedure,
Vendor Management etc over the time frame from late 1990s till 2009. The
section highlights the key defining operational strategies adopted by the
company during this period.

Manufacturing

26
By the year 2002-03 the company had 6 manufacturing facilities at Sahibabad
(Uttar Pradesh), Baddi (Himachal Pradesh), Alwar (Rajasthan), Katni (Madhya
Pradesh), Kalyani and Narendrapur (West Bengal). The APIs and formulations of
the Company are manufactured in-house at Kalyani, Sahibabad and Baddi. Fifty
per cent of FMCG products, comprising the Health care products and Ayurvedic
specialities portfolio, are manufactured in-house, while the Personal care
products portfolio, which accounts for the remaining 50 per cent, are out-sourced
to eight contract manufacturers.

Dabur was in the process of setting up a manufacturing facility at Jammu, for

manufacturing Personal care products. Jammu had been selected as the new site
in order to avail fiscal benefits offered for setting up manufacturing facilities in
that location.

Dabur has been giving considerable emphasis on improving manufacturing and

operational efficiencies. During the year under review, Dabur focused on
enhancing productivity of capital and existing assets, improving plant efficiencies
in the existing manufacturing facilities and following more stringent quality
control and supervision norms at outsourcing locations. Standardisation of
processes, tight budget controls and energy audits constituted some of the other
initiatives undertaken by the Company to improve its operational performance.

As a result of these measures, operating profit margin (excluding other income)

of the Company had improved from 9.2 per cent in 2001-02 to 10.3 per cent in
2002-03. The chart below shows the continuous improvement of the Company’s
productivity (defined as value of sales per worker), from 1998-99 to 2002-03.
Productivity increased by almost 18 per cent, from Rs.28 lacs per worker in 2001-
02 to Rs.33 lacs per worker in 2002-03, mainly due to better shop floor practices,
lower breakdowns and improved efficiency in energy use. Wastage on the shop
floor had reduced by more than 20 percent in 2002-03 over 2001-02.

Source: Dabur Annual Report 2002-03

In 2002-03, Total Quality Management (TQM) techniques were implemented on a

pilot basis at two plants in the area of statistical process control. The purpose of
implementing TQM was to achieve lower rejection of raw materials, time savings,
and make the procurement process more efficient. The Company had plans to

27
implement TQM for other functional areas in the future. In addition, Total
Production Maintenance (TPM) measures were initiated in two locations in 2003-
04, and hence TPM has become an integral part of the production processes of
your Company. This initiative is aimed at improving the productive efficiency of
capital assets

In 2004-05, Dabur successfully commissioned its largest and state-of-the-art

manufacturing facility at Rudrapur, Uttaranchal. It was set up in a record time of
four months, the plant was used to manufacture Chyawanprash, Hajmola tablets,
Amla hair oil, Vatika hair oil, Lal Tail and Janam Ghunti. While the Rudrapur
facility enjoyed similar fiscal benefits as the Jammu and Baddi plants, the
Company remained focused on leveraging higher operational efficiencies and
superior quality levels from this plant. Dabur’s Jammu plant which was
commissioned in 2003, was utilized to manufacture hair oils, shampoos,
Gulabari, Kewra water and intermediaries. This plant featured a modern and
compact shop floor design, lean organization structure, improved system
processes and stringent quality control norms. Higher batch sizes and larger
scales of production at this facility contributed to major improvements in product
quality, consistency and productivity.

As a result of the Balsara acquisition in the fiscal year 2004-05, Dabur added
three more manufacturing facilities to its fold, located at Silvassa, Baddi and
Kanpur. While the Silvassa and Kanpur facilities were primarily engaged in
manufacturing household range of products and the private label business, the
Baddi plant produced oral care products, including fluoride based toothpaste.
This plant was set up in 2004-05 and enjoyed greater tax benefits as were
available to new units in Himachal Pradesh.

Dabur Foods’ multi-fruit processing facility at Siliguri, West Bengal, became fully
operational during the year. The plant produced pulp and concentrates and
brought the Company a step closer to achieving full backward integration and
realising the resultant cost efficiencies.
The location of this plant was a major source of its competitive strength. It was
located at the heart of a major fruit-producing and trading area, thus, giving it
access to a variety of fruits including litchi, guava, mango and tomato at
competitive prices. Moreover, it was in close proximity to the Dabur Foods’ juice
plant located in Nepal, thereby reducing time and cost of transportation.
In 2004-05, Dabur Foods acquired a new facility near Jaipur for manufacturing
fruit juices. The plant had manufacturing facilities for 200 ml packs. This plant
was upgraded to manufacture 1 litre and 200 ml packs of ‘Real’ brand of fruit
juice and the ‘Coolers’ range of products.

The success of DIL's manufacturing lies in is its ability to regularly produce and
meet requirements of the sales plan. This is achieved through an efficient
production planning system that is a part of the overall supply chain initiative
called project Garuda. The initiative has helped reduce stocks and, therefore,
requirement of space with the CFAs. The ability to sustain much higher levels of
growth with the same level of inventory as 2006-07 bears testimony to efficiency
of DIL's production and supply chain system.

Supply Chain Initiatives at Dabur India Limited

1) In 2001, Dabur decided to tackle its extended supply chain of over 30
factories, six key warehouses, and 52 stocking points distributing over 1,000
28
SKUs to 10,000 stockists countrywide. The company needed a system to
accurately control distribution and sales forecasting to reduce inventory in the
pipeline.A2

Dabur built a system using Visual Basic and ASP with SQL Server 2000 as the
database. Dabur had purposely decided not to use a packaged SCM solution due
to high cost. Fifty-five Ku Band TDMA VSATs were used to link primary
distributors to the system. Factories were hooked up using PAMA (Permanent
Assigned Multiple Access) VSATs. At some locations VPNs had to be used
because it was not possible to set up a dish. The zonal offices in Mumbai were
hooked up in a similar manner. The hardware was mostly owned by the primary
CFA (Carry and Forward Agent) except for the networking equipment, which was
owned by Dabur. A

The integrated primary and secondary system had a number of unique features.

The features included

 tight integration of schemes

 stockists credit limit control

 automated banking of cheques

 online cheque reconciliation

The incorporation of these top stockists into its supply chain was a first for any
FMCG company in India.

A 'My Page' feature allowed the dealer to "see if the details of yesterday for in-
transit shipments, carrier information, copies of orders, account status, the
status of checks, credit notes and dealing with complaints”. The integrated
system allowed each Area Manager to plan for the month's sales forecasts,
stockists performance, and sales officers' performance.

The integration allowed better control on pipelines in primaries and secondaries,

brings down inventories, and offers better control on production and sales
against a confirmed forecast.

The BenefitsA

By integrating its primary and secondary supply chains, Dabur intended to

reduce the days of inventory carried in the pipeline by four days from the present
29 days. The main aim was to save Rs 5 crore by means of this system.

Beyond this, the system could forecast seasonal spikes in sales and manufacture
accordingly. The aim was to shift focus to the stockists rather than the CFAs to
get a true picture of what's happening in the market and react faster.

2A
http://www.networkmagazineindia.com/200312/events05.shtml
29
2) Efficient supply chain management had always been critical to Dabur, which
markets over 600 SKUs. The supply chain integrates a wide range of functions
encompassing production scheduling to materials planning and procurement to
primary distribution.

Information Technology (IT) has played a major role in strengthening the supply
chain management by improving operational efficiencies in procurement,
production and delivery systems. With the implementation of Baan and Mfg Pro,
supply chain management has benefited from stable and more efficient
production planning on the basis of accurate secondary sales and stock data.
Efficient supply chain management has enhanced the flexibility of
operations;lowered operation cycles and finished goods inventories;reduced
delivery costs, while improving customer-servicing levels. In addition to meeting
tight budgetary controls, these improvements have resulted in substantial
reduction in costs due to freeing up of extra working capital.

Dabur had over 500 vendors through which they source their raw materials.
During 2002-03, the Company followed a strategy of rationalising its vendor
base. The Company also appointed Freemarkets, a leading e-procurement
company,to assist the Company in implementing its e-sourcing initiatives. During
the year, the Company conducted successful reverse auctions for two raw
materials – saffron and jadi-booti – as well as for fixing freight rates. These
initiatives resulted in a saving of around 7 per cent to 8 per cent on current
prices of these raw materials. The Company adopted plans to procure more
products through the reverse auction route. This initiative would help rationalise
and upgrade the vendor base of the Company, while at the same time result in
substantial savings and greater transparency in the procurement process.

3) During the year 2004-05, Dabur continued to realize procurement efficiencies

and reduce its input costs in spite of inflationary pressures. In fact, Dabur was
one of the few companies in the FMCG industry which had reduced its input costs
consistently over the last few years by focusing on high degree of skills in the
area of procurement and materials management. Through usage of innovative
procurement strategies and modern forecasting and research tools, the
Company’s material cost as percentage of sales came down from 43.7 percent in
2003-04 to 42.9 per cent in 2004-05.

During the year the Company successfully deployed the ‘Spend Visibility’
programme in collaboration with ‘Ariba’ (earlier FreeMarkets) to further
strengthen its procurement efficiencies. This program had significantly enhanced
the quality of information and visibility in sourcing priorities of the Company.

4) The Company was also intent upon creating a backward integration platform
for herbal inputs, especially those on the endangered list. To this end, Dabur
made a foray into contract farming for selected herbs as part of the
Agrobiotechnology initiative. Under this initiative, a number of backward
integration programmes had been set up in Andhra Pradesh, Tamil Nadu,
Haryana, Uttar Pradesh, Himachal Pradesh, Uttaranchal , Jammu and Kashmir
and Nepal to develop sustainable cultivation of these engendered species
through contract farming and buy back arrangements. Dabur entered into
30
contract farming agreements with farmers through a local coordinator. The
Company also organized quality-planting material with promising genetic
potential to farmers on no-profit-no-loss basis and provides additional technical
support.

5)” Project Garuda “was launched by DIL in the year of 2006, along with the
software services major “ Accenture”. Project Garuda was expected to improve
business and capital efficiency and reduce working capital requirements.

Other important benefits of the project would have been to decrease the total
delivery costs and a supply chain system which would VAT-compliant, which
came force in 2005.

Procurement
Controlling costs in the inflationary scenario was one of the biggest challenges
faced by DIL over the years. The company effectively tackled this challenge on
the strength of its strategic futuristic planning, use of calibrated hedging
mechanisms and e-sourcing initiatives. One of the key factors that enabled the
Company to keep costs under control was the short and medium-term planning
programme that ensured regular forecasts from its team of strategic planners
within each division and departanent. Three-month forecasts on the industry
scenario were provided by these planners to the brand teams for taking effective
measures to combat inflation. Concurrently the creation of a Dabur Inflation
Basket focusing on the commodities most relevant to the Company's operations
helped maintain and manage costs effectively. The Dabur Inflation Basket, which
was linked to WPI( whole sale price index), helped the Company come out with
actual Inflation figures that enabled it to plan ahead in a more focused manner.

Quality

Dabur remains resolute in its commitment to enhance quality levels across its
product portfolio. In this regard, over the last few years, the Company has
maintained a sharp focus on upgrading technology and improving manufacturing
processes at all its plants. As part of its quality assurance programme, it
undertakes regular factory quality audits by trained quality auditors, ensures
compliance with ISO 9000 procedure and implementation of established standard
operating procedures across its manufacturing bases.

Examples

Through significant technological up-gradation, the manufacturing process of

Hajmola Anardana Goli was made free from human touch, thus, bringing in
improvement in hygiene. The production process of Hajomla candy was
upgraded to convert the product into depositor form, thus giving it a smoother
finish.

31
The Honitus and Nature Care product lines at the Baddi plant was set-up to meet
appropriate standards of safety, quality, performance and effectiveness as set by
Medicines and Healthcare Products Regulatory Agency (MHRA) — the executive
agency of the Department of Health, Government of UK. Apart from this, the
plants manufacturing Chyawanprash, Glucose and Honey received Hazard
Analysis and Critical Control Point (HACCP) certifications. Dabur Honey has
stringent measures of quality. The process of making honey has been
mechanised completely and the final product confirms the statutory
requirements of Agmark and the PFA.

Dabur, in order improve its production and operation management, has

gone into kaizen, automation, debottlenecking and wastage control. Food
products industry is something which needs primary emphasis on quality
improvement and standard control. This has been achieved in Dabur India
also.

Research and Development

Dabur with its rich experience in health care and consumer products
industry has its knowledge base and research as its main asset.
Traditional Ayurvedic products had been the primary focus of Dabur India
and it continues to take advantage on the value by effective Research and
Development. This has been facilitated by Dabur Research Foundation
which was set up in 1979. The research facilities in the research
foundation are modern and there are scientists from all the relevant fields
to contribute to the research and innovation process.

The research not only focuses on upgrading the current consumer

products but also to make a mark on highly specialised areas and in
significant aspects of health care like cancer therapy. There are over ten
diverse areas in which Dabur Research Foundation carries out research
besides conducting tests and trials. They are Ayurvedic Research,
Pharmaceutical research, Phytopharmaceuticals, Biotechnology,
Agronomy, Personal care products, analytical, synthetic chemistry,
oncology research, peptide research, food research and clinical research.

It could be observed that before 1994, the Research process was

concentrated in healthcare and such products and after the Joint ventures
from 1995, we could observe that the range of research has been
diversified which would be analysed in detail later.

32
Vendor Management 3

Dabur is in continuous process of developing strong vendor base for varied

variety of items procured. Every vendor is rated yearly on the basis of
parameters laid down to gauge vendor performance. Vendors are communicated
about the same with an objective to improve their performance and build long
term relationship.

Suppliers of quality items procured by Dabur have been welcomed to furnish

details of their products, establishment and other parameters as mentioned
in Vendor Registration Form. A well-defined process has been laid out for
qualification of a supplier as Approved Vendor. It includes obtaining samples
from suppliers for quality assurance and visit of Dabur team to vendor location.
Quality parameter of inputs, which in turn determine the quality, and cost of
output is laid down meticulously for each items and strictly followed and adhered
to in procurement process.3

Corporate Governance

Corporate Governance refers to the blend of law, regulations and voluntary

practices that are able to attract the best of capital and talent. Strong corporate
governance is indispensable for safeguarding the interests of shareholders and
other stakeholders. Excellence in governance and superior financial performance
go hand in hand. Dabur is a strong proponent of efforts towards improving
transparency in operations.

The Burman family - promoters of Dabur - has reduced its strength on the Board
of Directors to 4 members and provides only broad policy guidelines for growth
and diversification. The promoters provide the strategic direction to the
Company and the group, besides evaluating newer avenues for growth.

In 2004 itself, Dabur came up with a process of performance evaluation system

for its board of directors. As per the process, an evaluation committee
comprising its 10 board members will assess the performance of each board
member including Chairman VC Burman, Vice-chairman Dr Anand Burman and
other directors.

The three broad areas around which the board members will be evaluated are:
the guiding strategy; monitoring management performance and
development/compensation and statutory compliance and corporate governance.
3
http://www.dabur.com/

33
Within that, each member will have to score on various parameters like role in
defining the mission, policies and long-term goals/plan for the company; role in
setting up annual business plan; role in reporting major performance
deficiencies; role in succession planning for senior management and others.

Besides above, the other initiatives of Dabur on corporate governance include:

• Professionalization of the board

• Lean and active Board (reduced from 16 to 10 members)

• Less number of promoters on the Board

• More professionals and independent Directors for better management

• Governed through Board committees for Audit, Remuneration, Shareholder

Grievances, Compensation and Nominations

• Meets all Corporate Governance Code requirements of SEBI

Dabur-Sustainability
Conservation of natural resources and the environment is of great importance at
Dabur. Dabur incorporates the concept of sustainability by a three pronged
approach:

a) Conservation of Energy

Dabur has been undertaking a host of energy conservation measures like

use of bio-fuels in boilers, generation of biogas and installation of energy
efficient equipment. Successful implementation of various energy
conservation projects have resulted in a 13.8% reduction in the
Company’s energy bill in the 2008-09 fiscal alone. This reduction has
come despite an 8-9% volume increase in manufacturing, and an average
11.7% increase in cost of key input fuels. These measures helped to lower
the cost of production, besides reduce effluent and improve hygiene
conditions & productivity.

b) Technology Absorption

Dabur has also made continuous efforts towards preserving natural

resources by technology absorption and innovation, like:

34
 • Improvement in water treatment plant through introduction of RO
(Reverse Osmosis) system for DM water, reutilization of waste water
from pump seal cooling and RO reject waste-water management

• Introduction of water efficient CIP system with recycling of water in fruit

juice manufacturing

• Minimum use of water in process by pre-concentration of herbal extract

and reduction in concentration time

• Development of in-house technology to convert fruit waste into organic

manure by using the culture Lactobacilus burchi

• Uniform heating in VTDs by hot water as against steam earlier,

resulting in 30% reduction in bulk wastage by using non-stick coating
and formulation change

The Company has achieved a host of significant benefits in terms of

product improvement, cost reduction, product development, import
substitution, cleaner environment and waste disposal by these measures.

c) Health Safety & Environmental Review

Dabur addresses to the safety of its three core resources – People,

Technology and Facilities by having a dedicated “Safety Management
Team”, that would not only work towards the prevention of untoward
incidents at the corporate and unit level, but also educate & motivate
employees on various aspects of Health, Safety and Environment.

Other efforts include:

• Continuously monitoring its waste in adherence with the pollution

control norms

• Conserve and maintain the ground water level by rain water

harvesting

• Initiated a Carbon footprint study with an aim of becoming a carbon

positive company in near future

35
Porter’s Five Forces Model for Dabur

1) Threat of competitors

• The threat of competitors is high because there are a lot of players in the
Market.

• The ayurvedic platform is also being used by other players like Emami and
Ayur.

• Premium personal care products face competition from international

brands as well as boutique products.

• Existing players are entering new segments which will increase the
competition e.g. Casper entering the vaporizer segment and Good Knight
the personal spray and gel segment.

2) Threat of New Entrants

• In case of home care segment the entry barriers are low since the costs to
set up manufacturing facility is not very high.

• The exit barriers are low and thereby firms can enter and exit easily.

• But the entry barriers in terms of building a national brand as well the
distribution network is high. So is the exit barrier.

3) Threat of Substitute Products

• Substitutability is highest in Food category followed by Personal care

category, where product innovation is high

• Home grown and traditional substitutes to Home care products e.g.

traditional insect repellents.

4) Threat of Buyers Bargaining Power

• The buyer’s bargaining power is low since they cannot influence the prices
to such a great deal.

• Even in case of Modern trade the buyer’s bargaining power is moderate as

it generates less than 10% of FMCG sales.

• Price sensitivity is high especially in the Food and Home Care category

36
5) Threat of Supplier’s Bargaining Power

• The number of suppliers is low for the Home Care category e.g. Certain
oils are not available everywhere which increases the raw material
supplier’s bargaining power when negotiating the price with Godrej etc.

SWOT Analysis for Dabur India Limited

Strengths

• Unique “Ayurvedic and Health” Positioning

• Extensive market penetration with 50 C&F agents, more than 5000

distributors and over 2.8 million retail outlets all over India*

• High brand awareness and perception of Dabur, Vatika, Hajmola, Réal

• Monopoly status in multiple product categories like digestives (90% MS),

branded honey(75% MS) and Chyawanprash(65% MS)

Weaknesses

• Low Penetration in Rural areas in Food, Health Supplements and Home

care categories. (Appendix 5)

• Dabur’s R&D work is low and insignificant, which is a major weakness in

FMVG as it is constantly creating new products.

Opportunities

• Packaged Foods category

• Sugar free food and health care substitutes e.g. Sugar Free Chyawanprash

• Expanding size of pie in Home care segment due to efforts by firms like
GodrejSara Lee and niche products like Jyothy laboratories

• Increasing Modern trade is a good indicator for Personal care segment as it

provides higher visibility, higher rotations and a personal touch(relevant
for premium products).

Threats
37
 • Counterfeit products in the Food and Home care category

• Increasing competition from private labels

• Increasing bargaining power of modern trade especially in the Personal

Care segment

EXHIBITS

38
Product Category Products

Hair oil Vatika, Amla, Sarso

(Anmol coconut)

Shampoo Vatika heena conditioning, root-

strengthening
Anmol-natural shine, silky

Baby & Skin Care Vatika fairness, Gulabari, Vatika

fairness face pack
Janmaghutti, Olive oil, Gripewater,
Dabur lal tel

Digestive Hajmola range, Hingoli, Pudin hara

Health Supplements Chyawanprash, chyawanshakti, Dabur

Honey, Glucose

Oral Care Babool (rural market), Meswak (unani

method), promise, Lal paste, Binaca,
Promise

Home Care Odomos, Odonil, Odopic, Sanifresh

Financial Ratios 2009

Liquidity Ratios
Current Ratio 1.19
Quick Ratio 0.99

Management
Efficiency Ratios
Receivables 22.63
Turnover
Inventory Turnover 10.94
Asset Turnover 4.84
Ratio

Financial Leverage
Ratios
Debt Ratio 0.21
Debt to Equity 0.27
Ratio
Interest Coverage 38.34
Ratio

Profitability Ratios
Gross Profit Margin 17.19
Return on Assets 23.73

39
 Return on Capital 38.8
Employed
Return on Net 48.4
Worth

Dividend Policy
Ratios
Dividend Yield 0.2052
Payout Ratio 47.41

Ten Year Highlights

RS Crores

FY00 FY01* FY02** FY03 FY04*** FY05 FY06# FY07^ FY08 FY09

Operating Results:

Sales 982 1100 1200 1285 1236 1417 1757 2080 2396 2834

Other Income 34 19 12 7 9 9 13 26 34 47

EBITDA 128 137 144 162 164 217 300 376 443 517.3

EBITDA Margins (%) 13.0 12.5 12.0 12.6 13.3 15.3 17.1 18.1 18.5 18.3

Profit Before Tax (PBT) 81 85 82 106 124 176 257 319 384 445

Taxes 4 7 14 14 15 19 30 39 52 54

Tax Rate (%) 4.5 8.5 16.6 13.3 12.0 10.8 11.7 12.1 13.4 12.1

Profit After Tax (PAT) 77 78 64 85 107 156 214 282 333 391

PAT Margins (%) 7.9 7.1 5.4 6.6 8.6 11.0 12.2 13.5 13.9 13.8

Financial Position:

Fixed Assets (Net) 251 243 371 257 250 295 512 379 465 559

Current Assets, Loans &

412 393 504 522 340 408 471 640 774 951
Advances

Current Liabilities &

108 158 183 241 294 400 436 452 732 808
Provisions

Net Working Capital 304 235 322 281 46 8 35 189 42 143

Days of Sales 113 78 98 80 14 2 7 33 6 18

40
Total Assets 609 558 705 640 433 543 624 670 749 1081

Share Capital 29 29 29 29 29 29 57 86 86 86.5

Reserves & Surplus 292 334 365 388 257 335 440 393 531 731

Shareholders Funds 320 362 393 417 286 364 497 480 618 818

Loan Funds 289 196 304 964 132 164 121 160 99 228

Total Capital Employed 609 558 705 640 433 543 624 670 749 1081

Return Ratios:

ROCE (%) 17.0 19.5 12.6 16.1 28.6 31.3 39.0 45.7 47.6 38.8

RONW (%) 24.7 22.0 16.6 20.6 38.1 43.5 46.1 61.3 55.3 48.4

Equity Share Data:

Earnings Per Share (Rs) 27.1 2.7 2.3 3.0 3.7 5.4 3.7 3.3 3.9 4.5

Dividend Per Share (Rs) 10.0 1.0 0.5 1.4 2.0 2.5 1.8 1.42 1.5 1.75

No of Shares (In Crs) 2.9 2.9 28.6 28.6 28.6 28.6 57.3 86.3 86.4 86.5

Manufacturing Locations of Dabur India Limited in India and

Abroad.

41
Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from
company website www.dabur.com

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from
company website www.dabur.com

The Research and Development Strengths of Dabur India Limited

42
Source: DIL Investor Presentation Goldman Sachs Conference, August 2009,
taken from company website www.dabur.com

Dabur Hair Care BCG Matrix

Dabur Chyawanprash BCG Matrix

43
Dabur Real Juice BCG Matrix

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44
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45
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