This action might not be possible to undo. Are you sure you want to continue?
Project Report on Dabur
Submitted by:Chandra Prakash Mishra PGP20102085 Ph-)+919911002896
THE COMPANY ADDRESS]
³Words often fail to express one¶s feelings of gratitude and indebtedness to one¶s benefactors, but then it is the only readily available medium through which the undersigned can express their sincere thanks to all those who are associated with the work in one way or another.´ A project can never exist and thrive in solitude. Project work is never the work of an individual. It is more a combination of use, suggestion and contributions and work involving many individuals. This project also bears the impact of many people. Thus, one of the most pleasant parts of writing this report is the opportunity to thank all those who have been active part in it. I am thankful to for his vital inputs and valuable suggestions and continuous guidance, which have gone a long way in providing necessary impetus to our efforts in consummating this report. I am thankful to our professors from Marketing department for their vital inputs regarding the project work. I am also thankful to friends who helped me in understanding of the topic given in an easier way.
Table of content
y y y y y y y y y y y y y y
Dabur India Ltd. ±Company Profile Milestone of Dabur Product Line, Depth and Width Overview of FMCG Sector in India SWOT Analysis of Dabur Pest Analysis Porter¶s Five Forces Model Competitors Analysis Distribution ANSOFF¶S Product Market Expansion Grid The role of Dabur in FMCG Sector The Reason for Dabur Success Recommendation Conclusion
Dabur India Ltd. ± Company Profile
Dabur India Ltd is one of India¶s leading FMCG Companies with Revenues of about US$750 Million (over Rs 3416 Crore) & Market Capitalisation of over US$3.5 Billion (over Rs 16,000 Crore). Building on a legacy of quality and experience of over 125 years, Dabur is today India¶s most trusted name and the world¶s largest Ayurvedic and Natural Health Care Company. Dabur India is also a world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur's FMCG portfolio today includes five flagship brands with distinct brand identities -- Dabur as the master brand for natural healthcare products, Vatika for premium personal care,Hajmola for digestives, Réal for fruit juices and beverages and Fem for fairness bleaches and skin care products. Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care and Foods. The company has a wide distribution network, covering over 2.8 million retail outlets with a high penetration in both urban and rural markets. Dabur's products also have a huge presence in the overseas markets and are today available in over 60 countries across the globe. Its brands are highly popular in the Middle East, SAARC countries, Africa, US, Europe and Russia. Dabur's overseas revenues stands at over Rs 500 Crore in the 2008-09 fiscal, accounting for about 20% of the total turnover. The 125-year-old company, promoted by the Burman family, had started operations in 1884 as an Ayurvedic medicines company. From its humble beginnings in the bylanes of Calcutta, Dabur India Ltd has come a long way today to become one of the biggest Indian-owned consumer goods companies with the largest herbal and natural product portfolio in the world. Overall, Dabur has successfully transformed itself from being a family-run business to become a professionally managed enterprise. What sets Dabur apart from the crowd is its ability to change ahead of others and to always set new standards in corporate governance & innovation.
1884: Birth of Dabur 1972: The Company shifts base to Delhi from Kolkata 1986: Registered as Public Limited Company 1994: Listed in BSE
1998: Professional team inducted to run the company 2000: Crosses Rs 1000 crore turnover 2003: Pharma Company de-merged to focus on core FMCG business 2004: Profit exceeds Rs 100 crore
2005: Acquires Balara strengthening oral care &provided entry into Home care segments 2006: Dabur figures in top 10 great places to work 2007: Dabur ranks Asia¶s best under a billion enterprises by Forbes 2008: Acquires Fem Care Pharma entering the mainstream skin care segment
2009: strong growth momentum continued in spite of economic downturn. 2009: Dabur Red Toothpaste joins 'Billion Rupee Brands' club. Dabur Red Toothpaste becomes the Dabur's ninth Billion Rupee brand. Dabur Red Toothpaste crosses the billion rupee turnover mark within five years of its launch 2010: Dabur stock ranked 14thin Value 100 list, a ranking of attractively priced stocks of firms with real earnings. Dabur Amla Hair Oil & Real voted as Most Loved FMCG Brands with highest top-of-the-mind recall Dabur Chairman Dr Anand Burman amongst India's most powerful CEOs, placed at No. 41 on the list. Dabur India Ltd ranked as India's Most Customer Responsive FMCG Company. Dabur Uveda ranked amongst most successful brands launched in 2009 Brand Derby
PRODUCT LINE and Product Width:Foods Real Real Active Hommade Lemoneez Capsico Shankha Pushpi Dabur Balm Sarbyna Strong
Personal Care Hair Care Oil Amla Hair Oil Amla Lite Hair Oil Vatika Hair Oil Anmol Sarson Amla
Hair Care Shampoo Anmol Silky Black Shampoo Vatika Henna Conditioning Shampoo Vatika Antidandruff Shampoo Anmol Natural Shine Shampoo Oral Care Dabur Red Gel Dabur Red Toothpaste Babool Toothpaste Dabur Lal Dant Manjan Dabur Binaca Toothbrush
Gulabari Vatika Fairness Face Pack
PRODUCT WIDTH Consumer care: Hair care, oral care, health supplements, digestives, home care, skin, and baby care. Some of its major brands include, Vatika, Meswak, Hajmola, Babool and Odomos among others.
Consumer healthcare Ayurvedic products Foods(juices, nectars, drinks and food)
OVERVIEW OF FMCG SECTOR IN INDIA The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by a wellestablished distribution network, intense competition between the organized and unorganized segments and low operational cost. Availability of key raw materials, cheaper labor costs and presence across the entire value chain gives India a competitive advantage.According to a study by the McKinsey Global Institute (MGI), 'Bird of Gold': The Rise of India's Consumer Market, Indian incomes are likely to grow three-fold over the next two decades and India will become the world's fifth largest consumer market by 2025,moving up from its 2007 position as the world's 12th largest consumer market.India ranks second in the Nielsen Global Consumer Confidence survey released on January 7, 2010²an indication that recovery from the economic downturn is faster in India with consumers more willing to spend. The survey showed that in addition to the emerging markets of Indonesia and India, eight of the top ten most confident markets in the fourth quarter of 2009 came from the Asia Pacific region. The FMCG market is set to treble from US$ 13.1 billion in 2009 to US$ 33.4 billion in2015.Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the untapped market potential. Burgeoning Indian population, particularly the middle class and the rural segments, presents an opportunity to makers of branded products to convert consumers to branded products. Growth is also likely to come from consumer 'upgrading' in the matured product categories. With 200 million people expected to shift to processed and packaged food by 2010, India needs around US$ 28 billion of investment in the food-processing industry. According to a FICCI-Technopak report, despite the economic slowdown, India's fast moving consumer goods (FMCG) sector is poised to reach US$ 43 billion by 2013 and US$ 74 billion by 2018. The report states that implementation of the proposed Goods and Services Tax (GST) and the opening of Foreign Direct Investment (FDI) are expected to fuel growth further and raise the industry's size to US$ 47 billion by 2013and US$ 95 billion by 2018. The Ministry of Food Processing Industries is also planning to double the market size of the food processing industry to US$ 165.1 billion by 2009-10 and trebling it to US$271.8 billion by 2014-15. Demand for personal care products such as shampoos, toothpastes and hair-oils grew
faster in rural areas than urban areas during April-September 2009, a period that includes the peak monsoon months, as per the numbers released by market researcher AC Nielsen. As socio-economic changes sweep across India, the country is witnessing the creation of many new markets and a further expansion of the existing ones. According to Pradeep Kashyap, chief executive officer of MART Rural Solutions, speaking at the Calcutta Management Association Rural Marketing Meet, over 300 million people would move up from the category of rural poor to rural lower middle class between 2005 and 2025and rural consumption levels are expected to rise to current urban levels by 2017.
SWOT ANALYSIS OF DABUR
STRENGTHS Strong presence in well defined niches( like value added Hair Oil and Ayurveda specialties) Core knowledge of Ayurveda as competitive advantage Strong Brand Image Product Development Strength Strong Distribution Network Extensive Supply Chain IT Initiatives R & D ± a key strength
WEAKNESS Seasonal Demand( like chyawanprash in winter and Vatika not in winter) Low Penetration(Chyawanprash) High price(Vatika) Limited differentiation (Vatika) Unbranded players account for the 2/3rd of the total market(Vatika)
OPPORTUNITIES Untapped Market(Chyawanprash) Market Development Export opportunities. Innovation Increasing income level of the middle class Creating additional consumption pattern
THREATS Existing Competition( like Himani, baidyanath and Zandu for Dabur Chyawanprash and Marico,Keo Karpin, HLL and Bajaj for Vatika Hair Oil) New Entrants Threat from substitutes (like Bryllcream for Vatika hair oil)
PEST ANALYSIS Political y y y y Stable political government. Restrictions in import policies. Rise in customs duty on petrol & diesel. Partial withdrawal of stimulus packages
Economical y y y y Social y y y Rising rural India. Consumerism. Demography Growth in GDP Inflation rate Increase in disposable income. Indian FMCG Recorded 16% Sales Growth in last fiscal.The FMCG sector is the 4thlargest sector of Indian economy with market size of more than 60,000crore
Technological y y y Volatility Research and development intensity Information technology
Porter¶s Five Forces:-
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 playerslike emami and ayur. Premium personal care products face competition frominternational brands as well as boutique products. Existing players are entering new segments which will increase the competition. E.g goodnight entering the personal spray and gel segment.
Threats of New Entrants The t hreat of new ent rant s is low because ent r y barr iers int er ms of building a nat io nal brand as well as t he dist r ibut ion network is high and also the exit barrier is also high.
Threat of substitute products Substitutability is highest in food category followed by personal care category, where product innovation is high.
Threat of buyer¶s bargaining power The buyer¶s bargaining power is low since they cannot influence the prices to such a great deal.
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 is bargaining power.
COMPETITOR ANALYSIS The key competitor¶s of Dabur in the Hair Oil segment are Keo Karpin, Emami, Bajaj, Marico, HLL which together with Dabur have about 64% of India's domestic market. Dabur is one of India's largest players in the hair oil segment and the fourth largest producer of FMCG. It was established in 1884, and had grown to a business level in 2003 of about 650 million dollars per year. Dabur Hair Oils have a market share of 19%. We have tried to analyse the competition for Dabur in the Hair Care segment as follows:
Keo Karpin, a fifty-year old brand, is a pioneer in the light hair oil category. The pleasantly perfumed hair oil has its main market in the Hindi belt and also has significant presence in eastern and western India. Its share is 6% of the total hair oil market. Emami has existence in hair oil market through Himani Navratan oil and Himani Oil. Emami has taken Madhuri Dixit as brand ambassador for emami oil and Amitabh Bachchan for Himami Navratan Oil. Overall it has a share of 4% in hair oil market. Bajaj has two flagship oil brands - Bajaj Brahmi Amla and Bajaj Almond Drops currently
have a value share of 19 per cent and 12 per cent in their respective oil categories as per ORGMarg. Besides, the company has also decided to enhance its retail presence by nearly 20 per cent from the existing 5 lakh retail outlets in an attempt to reach the rural parts. Overall it has a market share of 4% in hair oil market.
Marico¶s Parachute is premium edible grade oil, a market leader in its category. Synonymous with pure coconut oil in the market, Parachute is positioned on the platform of purity. In fact over time it has become the gold standard for purity. Parachute's primary target has been women of all ages. The brand has a huge loyalty, not only in the urban sections of India but also in the rural sector. It has a market share of 28%. HUL has two products, Clinic plus Hair Oil and All Clear Clinic Hair Oil. Overall it has a 3% share in hair oil market. The key competitor¶s of Dabur in the Chyawanprash segment are Baidyanath, Zandu and Himani, which together with Dabur have about 85% of India's domestic market. Dabur Chyawanprash (herbal honey) has a market share of 61%.We have tried to analyse the competition for Dabur in the Chyawanprash segment as follows:
Sri Baidyanath Ayurvedic Bhawan Ltd. (Baidyanath for short) was founded in 1917 in Calcutta, and specializes in Ayurvedic medicines, though it has recently expanded into the FMCG sector with cosmetic and hair care products; one of its international products is Shikakai (soap pod) Shampoo. Its Chyawanprash has a market share of 10%. Zandu Pharmaceutical Works was incorporated in Bombay in 1919, named after an 18thcentury Ayurvedic. The company focuses primarily on Ayurvedic products (in 1930, pharmaceuticals were added, but the pharmaceutical division was separated off about 30 years later).
The Emami Group, founded in 1974, provides a diverse range of products, doing 110 million dollars of business annually, though only a portion is involved with Ayurvedic products, through its Himani line; the company is mainly involved with toiletries and cosmetics, but also provides Chyawanprash and other health products. Its market share is 12%.
Supply chain: Dabur has steadily improved its procurement and distribution systems to achieve a significant reduction in material costs. Dabur has an extensive supply chain and distribution network that has grown and spans 29 factories, 47 stocking points, 4 zonal offices, a dozen manufacturing locations, six mother-warehouses and over 50 Carrying and Forwarding Agents(CFAs) that distribute more than 1,000 SKU¶s to several thousand stockists and dealers. MIS: An in-house developed, easy-to-use, Intranet based data-warehouse displays as-ofyesterday sales, stock, receivables, banking, and other MIS. Over 5,000 ASP pages meet almost all reporting requirements and make this a single source of MIS for all levels of decision makers. VSATs: This Success paved the ground for the company's supply chain initiative. 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 integrated primary and secondary system has a number of unique features. The features like tight integration of schemes, stockist¶s credit limit control, automated banking of cheques, and online cheque reconciliation has obvious advantages in the primary distribution. These are basically extensions to the MFG/PRO ERP system and not core customizations. The integrated system allows each Area Manager to plan for the month's sales forecasts, stockists¶ performance, and sales officers' performance. The integration allows better control on pipelines in primaries and secondaries, brings down inventories, and offers better control on production and sales against a confirmed forecast. The idea is to increasingly shift focus from primaries to secondaries. Schemes based on secondary volumes will help control secondary pipelines and sales. Primary
sales will therefore come from a resultant 'pull' from secondary replenishments. Further, sales order servicing can be improved by taking orders through the Internet, and by setting stocking norms and replenishing stocks to improve ROI of stock holders.
ANSOFF¶S PRODUCT MARKET EXPANSION GRID
MARKET PENETRATION: The new campaigns, featuring Amitabh Bachchan and, for the first time, Vivek Oberoi, makes an aggressive attempt to establish the relevance of Chyawanprash in an increasingly tough and demanding lifestyle, for the entire family. As a market leader, Dabur¶s focus has been to increase the relevance of this time-tested and proven product in the family - both for users and non users - and increase penetration. In their new campaign they have tried to establish the fact that Chyawanprash, with its µwell - being¶ properties, gives an edge to the users and dispel the myth that it should be consumed in illness or is meant only for Children or the aged. MARKET DEVELOPMENT: Dabur has identified exports as a major thrust area for the future. An international business division has been set up within the company to promote exports and it expects this business to grow steadily in the coming years. The company plans to focus on Russia and CIS countries along with Afghanistan, West Indies and the Asia Pacific region. It has also entered the North American markets by appointing distributors and initiating marketing of products to the ethnic Indian segment. The company has already been
exporting hair oils, shampoos and Hajmola candies to Afghanistan. In Bangladesh, Dabur is entering into a joint venture with a local partner to manufacture and market its products. Dabur will hold a majority stake in this joint venture.
Role of Dabur in FMCG sector:The FMCG sector is the fourth largest sector of the economy, and is expected to grow at an average CAGR of 8.5% from USD 11.6bn in 2003 to USD 33.4bn in 2015. India is one of the largest emerging markets with a population of over 1 billion. It is also one of the largest economies in terms of purchasing power with a very strong base of middle class. While the FMCG industry¶s size is accorded to the large population base, in terms of per capita consumption and FMCG¶s penetration levels, the industry lags its emerging market peers, offering huge potential for growth as income levels increase, and demographics show a growing middle class and youth population with a shift towards urbanization.
Consumer Profile Population
Population <25 years of age
Around 45 percent of the population in India is below 20 years of age and the young population is set to rise further. Aspiration levels in this agegroup have been fuelled by greater media exposure, unleashing a latent demand with more money and a new mindset.
Investment Rationale Dabur has a robust model for developing its products overseas. It has established market share in Africa and Middle East while maintaining margins around 14%. The growth potential in newer markets is higher than India. Thus, the international division grew 40% relative to Dabur India which recorded 15.6% growth vis-à-vis the industry growth of 14.5%
Dabur has a disciplined policy of maintaining or increasing ROE and ROCE and this is visible in its dividend policy and capex development.
Dabur has concentrated on North Indian markets with only 6% of its total sales coming from South India. This is highly unusual for a national brand owner like Dabur. The company has initiated marketing efforts in the south which should contribute to overall growth. It aspires to see that south will contribute 10%of its revenue.
The retail venture is a limited effort relative to the size of Dabur¶s balance sheet. The concern¶s enveloping this endeavor and the resultant impact on market capitalization far exceeds the impact of the venture upon consolidation.
Amongst FMCG companies Dabur has successfully maintained market share while earning one of the highest EBITDA in the industry. Consistent 12%-15% growth with high ROE makes Dabur distinctive as an investment in these turbulent times.
Valuation: The stock currently trades at 15.2X for 2009 and 12.5x and 10.4xits 2010 and 2011 expected EPS of Rs.5.19 and Rs.6.26 respectively.
The company¶s low beta of 0.48 offers a safer investment avenue in these turbulent markets. On a DCF computation, the Fair Value given the current conditions gives us a value of Rs.110 per share. The stock should trade 20X forward in average market conditions.
We believe that bear markets allow long term investors to investin high quality brands and franchise businesses at attractive valuations. At current levels or lower Dabur¶s stock can easily yield a 15% compounded return over 3 years.
Strategic Business Units:-
Sales (Rs./crs.) CCD CHD IBD Retail
458 39 108 1
417 31 77 0 5
10 25 40 20
1830 155 376 0 36
1599 147 299 0 35
14 5 25 2
Miscellaneo 6 us Total 612
Consumer care divison:The consumer care divison consist a portfolio of 4 product categories : Health Care: Share of 45% of CCD revenues. It comprises of Health supplements, oral care, digestives and confectionery.
Personal Care: Contributes to 35% of CCD sales and comprises of hair care, skin care and baby care. Home Care: This segment became a part of the portfolio after the acquisition of Balsara and has a 6% share in CCD sales.
Foods: This segment contributes about 14% to CCD revenues. Its main products are juices and culinary additives.
Rs./crs. Health Supplements Digestives &Confection ery Oral Care Hair Care Baby Oils and Skin Care Home Care Foods Total Health care:1-Oral Care
Growth % 19.1
Growth % 16.3
87 151 26
82 131 27
5.5 14.8 -5.3
361 522 104
314 455 100
15 14.7 4
25 71 458
25 62 417
0.8 14.5 9.8
108 241 1830
97 202 1599
11.3 19.3 14.4
Dabur¶s toothpaste portfolio grew by 27% with Meswak, Red and Babool growing by 40%, 23%, 30% respectively
Oral care Market:-
2-Health Supplements Within this portfolio Glucose sales grew by 32% against the overall category growth of 9% and sales now exceed Rs.50crs
Chyawanprash grew by 6% while the Chyawanprash market was pretty much stagnant and as a result managed to cement its place as the leader with its 61% market share.
Dabur is also the leading player in Honey with sales exceeding Rs.100crs. and demonstrating growth of 26%.
3- Digestives and Confectionery
The Digestive market in India is worth Rs.500crs. Dabur with sales of Rs.150crs. commands a 30% share. Pudin Hara registered a 16% increase in sales while Hajmola sales grew by 9%. Dabur¶s candy portfolio consisting of Hajmola candy, and the three new flavors; Kachcha Aam, Natkhat Nimbu and Mint Masala registered a 22% increase.
Glaxo 19.00% pfzier 19% Other 22.00%
Personal Care:Hair Care
1-Hair Oils Dabur managed to maintain its market share as the hair oil market grew 13%. The Amla franchise with sales of about Rs.250 crs. grew by an impressive 18%. The Anmol brand also performed well with a healthy 17.3% growth.
Hair Oil Market:Dabur Marico
Hair Oil Market Bajaj
2-Shampoos with its Vatika range of shampoos Dabur increased its market share as the market grew 15% and the company¶s range grew by 25%. The hair care segment with sales of Rs.522crs. contributed 29% to FY08 revenues
Shampoo Market Dabur CavinKare HUL L'Oreal P and G
Food and home care:-
1-Food Dabur recorded a healthy 19% growth in the foods segment and with sales of Rs.241crs. enjoys a healthy 51% market share.
Tropicana Dabur 51.00% 34.00%
2-Home Care The home care market is estimated to be worth Rs.2000crs. Dabur records a revenue of Rs.100crs through its presence in air fresheners and mosquito repellant cream category where it commands 94% and 91% market share respectively.
International Business Division:The International Business division manages Dabur¶s business in Middle East and North Africa (MENA). The division contributes about 16% to Dabur¶s annual revenues. Sales have grown by 25.5% from Rs.299crs. to Rs.376crs. In FY08.The company has built its brand architecture in these regions with the Dabur andVatika brands.
The company has divided its target markets into Focus, Potentialand Opportunistic markets. While the initial focus of the company was to cater to the Indian population in the MENA region, the company now has moved towards identifying needs of consumers in these regions of localizing the products portfolio on offer. Also the company is not relying on its portfolio of domestic products for international sales. The company has been proactive and in line with its innovation strategy, is launching products catering the specific needs of consumers in various target markets abroad. Its has launched of Vatika Olive and Vatika Cactus have helped the Vatika brand increase its revenues 90%. It has also outsourced Italian technology and developed intensive hair treatment masks under the Vatika Naturals Hamam Zaith brand.
Consumer Health Division:This division comprises Dabur¶s range of ayurvedic products which have use in health related issues. This division consist of the OTC market and the ethical brands and classical segment. The OTC forms about 57% of this market and the ethical and classical segment 43%. The OTC market in India is estimated at Rs.7500crs and the ethical at Rs.500crs. The consumer health division is relatively small and contributesabout 7.5% to Dabur¶s annual revenue. However given the low levels of penetration, thecompany believes there is considerable scope in this business. The company also believes that the growing preference for herbal/ayurvedic healing without side-effects will lead to improved performance going forward. Sales increased by 5.4% from Rs.147crs. in FY07 to Rs.155crs. InFY08. This division is currently in a consolidation phase. The company is following a two pronged approach to enhance growth in this segment. The first is to build upon the existing offerings by improving the products line. So far over 50% of the OTC portfolio has undergone extensive package up gradation. The second part involves the aggressive launch of new products across OTC categories. In the first half of FY09 this division has grown 12% as effects of consolidation have started kicking in.
Retail:Dabur has forayed into the retail segment through its wholly owned subsidiary H&B Stores Ltd. The company will run a chain of retail stores across India under the brand new. The stores will retail the latest branded cosmetics, fragrances, skin, face, baby and family care along with fashion accessories and jewelry. The stores are to be located at airports, business parks, high street markets and such specialized locations. The company launched its first store in March 2008, and there are six operational outlets. The company plans to have 12-13 operational by the end of FY09 and targeting 350 stores in the next 5 years. The company has planned a equity investment of Rs.140crs. In this venture over the next 3 years. During FY09 the company will launch products under its private label, leveraging its expertise in ayuervedic and herbal products. While the venture will require investments in the initial years, the company expects the venture to reach optimal scale in about 2 year¶s time.
Financial Performance ofDabur in5years:Dabur has achieved consistent growth in return on equity from 20% in 2003 to 54% in 2008. While the company has reduced leverage from 1.5 in 2003 to1.2 in 2008, it has improved capital efficiency substantially, increasing the asset turnover from 2 times in 2003 to 3 times in 2008. Other than the improvement in capital efficiency the main driving force behind the improvement in ROE has been the increase in net profit margins from 6.7% in 2003 to 14.1% in 2008. The average receivables days for the company has come down to 24days and is in line with industry standards. The company¶s average inventory turnover period at 86 days is also now in line with industry standards. The days payable period varies through the industry. The company's cash conversion cycle has halved from 142 days in 2003 to 69 days in 2008 resulting in higher free cash flows for the company. On the margin front Dabur has seen deterioration in gross margins in the past two years, however continual improvement in operational efficiency has seen EBIDTA margins improve from 12.3% in 2003 to 16.5% in 2008.
THE REASONS FOR DABUR'S SUCCESSDabur India has consistently delivered sales growth of 15-18 per cent for over five years and there seems to be no stopping the momentum. Its 2009-10, sales were up almost 20 per cent, largely driven by higher volumes, which grew 13.3 per cent. Notably, its sales and profit growth are expected to hover at over 15 per cent in the next two years. Additional surprises in the form of acquisitions could prop up growth rates further.
All-round growth over the years, Dabur has successfully transformed itself from a company known for its health supplement, Chyawanprash, to a multi-product, fast moving consumer goods (FMCG) player. Strong brand equity, ability to understand customer needs and launch products accordingly, identification of new growth areas and expansion of distribution reach are among the reasons for Dabur's success and robust growth rates. For 2009-10, too, it reported a healthy 19.6 per cent top line growth (including 3 per cent contribution from Fem Care's acquisition), with most segments clocking growth rates of 11-26 per cent.
Operating profit margins also improved 150 basis points to almost 20 per cent, led by lower input prices and cost-management measures, thereby boosting net profits by almost 30 per cent.
"Even when the industry is facing the negative impact of rising food inflation, aggressive cost management initiatives helped Dabur expand Ebitda margins for the consolidated business for 2009-10. The company continues to register sales growth ahead of the market in several key categories, and this growth is almost entirely volume-driven," said Dabur India [ Get Quote ] CEO Sunil Duggal.
The hair care business, the largest sales contributor to Consumer Care Division (CCD, which accounts for two-thirds of Dabur's consolidated sales), saw shampoo sales jump 27 per cent, led by an impressive 40 per cent growth in Vatika Normal shampoo.
Although the 30 per cent drop in sachet prices to Re 1 impacted sales growth in the March 2010 quarter, analysts expect growth rates to pick up from the second quarter of 2010-11 helped by new launches like Vatika Enriched Almond Oil and Dabur Amla Flower Magic as well as 4-5 per cent price hikes. The management expects the business to return to double-digit volume growth in 2010-11. Dabur's oral care business improved its market share by 100 basis points to 10.3 per cent. While its Red Tooth Paste and Meswak brands clocked 17-27 per cent rise in sales, the Babool brand clocked 19.4 per cent growth, helped by the launch of Babool Mint Gel at an attractive price point. The foods business also did well, wherein Dabur forayed into the fruit drinks category with Real Burrst. While Dabur's skin care sales jumped 33 per cent, Fem Care sales grew at a healthy 17 per cent helped by re-launch of some products and expansion of parlour coverage. Analysts expect these three businesses to grow 20-25 per cent in 2010-11. Notably, Dabur's international business division (IBD, a sixth of consolidated sales) did exceptionally well with the top line growing 26 per cent on the back of new product launches, among others. The management hopes IBD will grow 20-25 per cent in 2010-11. Investment rationale on the back of its strong brands, product development capabilities and innovative strategies, Dabur should report strong domestic sales, as well as further improve its position in foreign markets. Analysts expect Dabur to clock sales growth of over 15 per cent, sustain margins at 18-20 per cent and report an earnings per share (EPS) growth of 17-20 per cent annually in 2010-11 and 2011-12. At Rs 182, the stock trades at 22 times its 2011-12 estimated earnings and can be considered on dips.
RECOMMENDATIONS y y y y Focus on growing core brands across categories. Reaching out to new geographies, within and outside India. Improve operational efficiencies by leveraging technology. Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing the deep knowledge of ayurveda and herbs with modern science. y y Provide consumers with innovative products within easy reach. Vatika hair care centre: On the lines of Marico¶s Kaya Skin Clinic, Dabur could start a venture called Vatika hair care centre which would provide total hair care solutions. It could have hair care experts to solve hair problems. Services could include dandruff treatment, straightening of hair, treatment for split ends, etc. y Position Dabur Chyawanprash as not more of a medicine but as something which is necessary for health. y More initiatives like ³Dabur ki Deewar´ to increase brand visibility. It is an initiative to occupy shelf space.
CONCLUSIONS The Chyawanprash Industry is yet to capture the beverage market in full swing. Packed Chyawanprash followed by Amla, Ashwagandha, Hareetaki, Dashmul, Ghrit and several other herbs and herbal extracts. The consumer¶s patriotic love for tea and coffee is unfared. Chyawanprash are yet to establish their supplement use in the average household here in lies the great opportunities. Within the market, it is safe to conclude that dabur has hit off rather well with the masses. Dabur has clearly lost it head start advantage and thereby acquiring just 35% of the market share while others enjoy rest of the market share. This could be well attributed to dabur successful ATA (Availability, Taste and Affordability) marketing module, the attributes most rated by the consumers. Lack of publicity has hampered the growth progress of the brand so aggressive advertising is needed to promote Chyawanprash and Vatika hair oil brand .The brands such as that of Chyawanprash by vednath, Chyawanprash with its µsonacahndi, µMinute- made¶ and also US food giantssDel Monte are ready to hit the Chyawanprash market very soon. Vatika hair oil has no major competition except an Australian Product Tobasco. As a new product so people are not able to digest it yet Dabur is getting 8 Crores from Vatika hair oil in which accounts for 4 Crores, Lemoneez 1 Crore & others 3 Crores . As the strategies of the companies keeps on changing, be it in Chyawanprash industry, a company has to create perceptions and cover them into realities. It is an expensive proposition requiring huge expenditure on advertising, sponsorships and media.Thus, the ideal company will be the one which combines the high end technology with consumer insight. As 16% of the excise duty is exempted on food products in this budget, many food companies including Dabur got benefited from it. On the analysis of survey it was found that target Market of Chyawanprash want quality benefit rather then Price benefit, so it is better to stress on quality rather than on decreasing price to increase sales and profit. To increase market share Dabur should give slight price benefit on Dabur brand so that customers of other Juice brand should switch from other brand to Dabur brand. As Vatika hair oil is a new product introduced by Dabur and as Dabur is getting excise benefit from the Government so Dabur should pass slight Price benefit to the target market so that target market should use the Vatika hair oil and adopt it in making daily food thereby
increasing the market share of Vatika hair oil. In the other segment the company is also getting competition but at a smaller level. Hence in other segments the company does not have to take two much worry but keep updating the products regularly according to the market conditions and competitors.
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.