Dabur India Continues to Invest in Rural Infrastructure
Urban sales are recovering and trending better than rural sales, which is presently very resilient after the second wave of COVID-19 pandemic, and Dabur India is continuously investing in rural infrastructure as it is 'hopeful on the macroeconomics', a top company official said.
“Notwithstanding the uptick in sales, urban markets are still not in line with pre-COVID growth and are on a recovery path helped by the comeback of modern trade channels, e-commerce sales and improvement of mobility as restrictions are eased out,” Mohit Malhotra, CEO at Dabur India, said.
The sales network of Dabur India covers around 83,500 villages. The company aims to cover 90,000 villages directly by next year.
"In my view, rural will keep trending well going forward as compared to urban at least for us, and we are also putting up infrastructure improvement in place," Malhotra said in an investors' conference call last week.
In the long-term, going forward, 'rural will be resilient', which is growing almost at around 12 percent coming on the back of 26 percent base.
"So rural is trending well. Urban growth is in the range of around 9 percent coming on the back of an 18 percent base. Rural is trending well for us and the annual monsoon has been great, the harvest has been fantastic, MSPs have not been rolled out, MGNREGA arrangement is good, unemployment rates in rural areas are kind of lowest at this time," Malhotra added.
The company, however, is concerned about inflationary pressures on raw materials, which are continuing in the October-December quarter.
"We thought that there will be little softening of inflation, which will happen in Q3, but the projection that we are getting for Q3 is that inflation is only picking up from there, and we are not seeing any signs of softening happening in inflation," he said.
Combating with Market Pressure
To offset that impact of inflation and continued sustained pressure, the company has taken price increases in its several categories and has taken some cost-saving measures also.
However, it would not go for any ‘aggressive price increases’ as demand is also recovering.
"Also, the market is pretty competitive here. That is what we are waiting and watching," Malhotra said.
While talking about D2C (Direct-to-consumer), the company is making an effort towards this and by December end, hopefully, the company would have a platform that has a direct D2C connection.
This would be beside the regular conventional e-commerce connect on D2C that it already has, Malhotra added.
Over the new product development, the company would continue its e-commerce exclusive initiatives, terming it as a cradle of innovation for the company.
"We are launching exclusive e-commerce brands, our innovation rate in an e-commerce portal, which is around 5 percent of the overall business, is in the range of around 10 to 12 percent also, besides the food and beverage business. E-commerce new product developments (NPDs) are racing much ahead because there is a cradle for us to see a lot of innovations," Molhotra said.
Growing the Brands
Dabur will also keep seeding brands, which have D2C connect exclusively on shared portals, like Amazon and try to create its portal also for a D2C connection with the consumer.
While talking about the demand outlook of its international business, Malhotra said the company expects double-digit growth from the segment as all the markets are doing well.
"We would anticipate double-digit growth in international business if the COVID third wave and any lockdowns do not happen in the international market," he said.
During the quarter, sales of Chyawanprash' and 'Honey' have shown some moderation after having a strong tailwind during the pandemic. As there is little fatigue in terms of healthcare products but overall, their penetration level has gone up from 4 percent to 7 percent.
"Chyawanprash is a small category and to expand the category, we are doing all it takes to expand the category, to rope in more consumers into it," Malhotra said.
As far as honey is concerned, other players are entering into the honey market increasing the size of the penetration levels and Dabur is a beneficiary of that.
"Unlike last time wherein we were not very competitive and not very aggressive, we lost market share to Patanjali. This year we are being competitive and we are gaining our market share and we gained market share in e-commerce, modern trade. We are also extending honey into multiple other formats," Malhotra said.
Last week, Dabur India had reported an increase of 11.98 percent to Rs 2,817.58 crore in its revenue from operations for the July-September quarter, while its net profit was up 4.64 percent to Rs 505.31 crore.