Rural push has worked well for Dabur: Amit Burman6 min read . Updated: 21 Dec 2013, 12:46 AM IST
Focus on value for money has turned out to be a successful strategy for Dabur, says its vice-chairman
Mumbai: Dabur India Ltd, the maker of Vatika oil and Real juice, has grown faster than rivals such as Emami Ltd by focusing on its value-for-money positioning and on rural and international markets in the face of an economic downturn that has prompted urban Indian consumers to cut back on spending. With the consumer packaged goods space becoming more competitive, the company, the country’s biggest maker of ayurvedic medicines will now focus on its healthcare portfolio, in which it has a lead on the competition, vice-chairman Amit Burman said in an interview in his New Delhi office. In addition, Burman, 43, has planned an investment outlay of ₹ 50 crore in his own venture Lite Bite Foods Pvt. Ltd, a restaurant chain. Burman plans to more than double the number of restaurants from 55 to over 120 in the coming year. Edited excerpts from the interview:
Shares of Dabur India have outperformed its peers with a 22.22% jump in the fiscal year to date, ahead of Emami’s 15.13% and Hindustan Unilever Ltd’s 18.98% gain in the same period. Can you tell us what has worked for you?
The growth has happened due to the rural drive as we went deeper into the villages. This has worked well for us and we are going to go ahead and put more into that area. We are also seeing growth in the international business and in Vatika. Haircare grew at a fast pace due to amla oil growing at 14-15%. Also the food growth has been at 22-23%, driven by consumers shifting from carbonated beverages to Real and Activ (juices).
How has the slowdown affected the discretionary categories in your portfolio?
We have a value-for-money proposition at Dabur and that has worked for us. So even though the overall category grew at 7-8% we grew at a higher rate as we play in the niches and have had new launches. Our new launches like Vatika almond oil has done ₹ 25 crore of business in just one year. Likewise, juices have also seen similar growth. We have a good new product pipeline. So we should end the year with similar growth rates as last year.
Does that mean you have gained market share from peers this year?
In oral care we have taken significant market share; in home care it’s similar. In hair care and digestives, we are the largest player—we have taken market share and the category has also grown.
Will you manage to maintain the growth momentum in FY2015? Where will the growth come from?
Next year, you will see some cash flow coming into the system before the elections. So a lot of consumption happens in the rural, urban, rural-urban economies. FY14 has been a year of experiment.
We like what we have seen and there are a lot of areas that we still can get into where we are not present. Rural can give us an incremental growth of 2-3% if we do it well. We have to tread carefully and not spread ourselves too thin. There are pharmacies as well and selling our mainstream products from that channel.
Are you looking at inorganic growth?
Our ears and eyes are open for any kind of inorganic growth.
Any geographies that you are looking at now?
The two geographies that would work for us are Europe and Southeast Asia. We are present in both but in the traditional form. We are not in the mainstream supermarkets or hypermarkets. We are not looking at China, but emerging geographies like the Philippines, Burma, Vietnam and Thailand—these are more westernized and they can adopt products from us and from the Western world.
Any budgets for these acquisitions?
We have done a $100 million acquisition with Namaste (a US personal care group). We have the appetite to go up to that. But if something looks like it would create more shareholder value for us and makes sense for us to integrate with our business, geography and category, then budget is not a criteria. In terms of raising capital, we are a zero-debt company and again 70% shareholding by the family allows us to do that.
What new categories are you looking at for growth?
Mid-sized multinationals in India are now looking at scaling their operations and doubling and tripling their turnovers to be ₹ 10,000 crore in the next 3-5 years. What does this mean for companies like you?
We are a value-for-money company and are a trusted company. We are present in a lot of different categories and are not betting everything in one boat. We will see more competition in FMCG (fast moving consumer goods). However, we are going to focus more on healthcare. We will see how everything pans out and then bet our monies accordingly.
Marketing spending has been on the higher side for a while now...
We usually spend about 15% of our topline on marketing. That has been going on for last 4-5 years. It will continue in the coming year.
What about high inflation and increasing commodities prices? Did that have an impact?
We have been hit by the packaged foods as commodity prices have increased. This is true for even Lite Bite. Lite Bite didn’t see much growth on a like-to-like basis. The growth has been about 7-10%, led by pricing and new store openings.
What are consumers looking for when they eat out?
In Delhi and NCR, our north Indian brand Punjab Grill works the best. We are a value-for- money brand. At lunchtime, our buffets attract high footfalls. In the malls, people coming in for a movie want to have a quick meal and go. On the weekends they may have a little bit more time and they want to have a glass of wine or beer with their food. So again a lot of combos work. So you know, in Fresco (Italian restaurant chain) a glass of wine with food, in Punjab Grill, a beer with food, works. In quick service restaurants there is a need to have low-priced items like the ₹ 25 rajma chawal that we have at Street Foods of India. Customers come to buy that and they also get water or a beverage or a thali. There has to be a catching point to let customers come in.
So, what will be the growth driver for Lite Bite?
Mumbai for us is going to be a huge growth driver. We will be opening close to 50-55 restaurants there in the next one year. Currently, we have 55 restaurants, of which in Mumbai we have five and most of the remaining are in the Delhi-National Capital Region and some in Pune.
What about an initial public offering for Lite Bite?
We will take a call in September after seeing how Mumbai pans out. We will have about 120 outlets by then. We plan to close the financial year 2014 with revenue of ₹ 120 crore and FY2015 with ₹ 200 crore revenue.
In your own capacity you acquired an Italian restaurant chain, Scalini, in London in March. Do you plan to bring the brand to India?
This is a 25-year-old institution and we plan to take it and franchise it to geographies like Abu Dhabi, Dubai, Russia, Shanghai, and may be not India immediately. The average ticket price at Scalini is £70. Where in Delhi can you put this kind of a restaurant unless it’s a five-star.