Professional Documents
Culture Documents
Dabur
Manageme
nt India Ltd.
Submitted to: Prof Amar KJR Nayak
Submitted by:
Introduction............................................................................................................3
Phase –I.................................................................................................................. 4
Phase-II (1998-2003)..............................................................................................5
Manufacturing...................................................................................................26
Procurement..................................................................................................... 31
Quality.............................................................................................................. 31
Corporate Governance.........................................................................................33
Dabur-Sustainability ............................................................................................34
EXHIBITS.............................................................................................................. 38
REFERENCES........................................................................................................ 44
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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.
3
and US. This division has high level of localization of manufacturing and
sales & marketing.
Phase –I
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:
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:
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.
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.
7
enriched with natural ingredients such as Henna, Amla and lemon against the
market leader Marico’s Coconut Oil.
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.
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
10
Dabur Pharma Demerger
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
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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 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.
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
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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.
• Others – 5%
Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December
2009.
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.
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,
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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.
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
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PERSONAL CARE --- ETHICAL --- 43% HAIR CREAM ---
37% 23%
OTHERS ---
05%
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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.
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.
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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.
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
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color. ‘Celebrating Life’ was chosen as a new tag that completely summarized
the whole essence.
3. It still did not provide a holistic picture and thus posed problems in
formulating a strategy or taking business critical decisions.
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).
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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:
5. SAP roll out to Dabur Nepal Pvt. Ltd. (DNPL) and other businesses.
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
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taken the first steps towards becoming a true multinational, rather than a
company that does some international business.
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.
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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.
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computer-generated programs. This let the organization clearly see realistic and
practical answers to the questions raised with regards to modernization.
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.
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incidence on individuals will accelerate disposable incomes, and thus
augurs well for the FMCG sector.
Economic Factors
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.
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.
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
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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.
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
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.
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 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 BenefitsA
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.
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
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.
32
Vendor Management 3
Corporate Governance
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.
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.
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
b) Technology Absorption
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
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.
• 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.
• 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.
• The buyer’s bargaining power is low since they cannot influence the prices
to such a great deal.
• Price sensitivity is high especially in the Food and Home Care category
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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.
Strengths
Weaknesses
Opportunities
• 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
Threats
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• Counterfeit products in the Food and Home care category
EXHIBITS
38
Product Category Products
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
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
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Total Assets 609 558 705 640 433 543 624 670 749 1081
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
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
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
42
Source: DIL Investor Presentation Goldman Sachs Conference, August 2009,
taken from company website www.dabur.com
43
Dabur Real Juice BCG Matrix
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44
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