Here’s How Dabur India Looks To Overcome Slowing Consumption

Dabur India Ltd. looks to mainstream Ayurveda in its healthcare business and allocate “disproportionate media expenditure” to brands that contribute a chunk of its revenues even as Indians consume less in a slowing economy.

The consumer goods maker informed analysts at a recent interaction these measures were part of its medium-term strategy to boost growth, while identifying the macro-economic weakness as “temporary”.

While rural growth has fallen below urban growth for the industry, it remains a faster-growing segment, the company said. Dabur maintained its target of mid-to-high single-digit volume growth for 2019-20.

Here’s what Dabur told analysts:

Focus On Ayurveda

The healthcare business has gained importance for the company’s new chief executive officer, Mohit Malhotra, who intends to drive growth in the segment through Ayurveda, CLSA said.

All strategies are directed towards mainstreaming Ayurveda, the brokerage said, adding the Indian system of medicine will “touch all the products and serve as the backbone for new launches”.

IDFC Securities agreed, saying Dabur is uniquely positioned given its “Ayurveda lineage” and is benefiting from the “Naturals wave”. “One of its key challenges will be making brands more contemporary through renovations and innovating a diversified line of offerings in the space.”

Promote Power Brands

The company said the company’s near-term strategy would be to focus on its power brands—or those that contribute over 70 percent of its revenue.

“Dabur has identified eight power brands in India and plans to invest disproportionately in these brands,” Macquarie said in a research note. Against an overall increase of six percent in media expenditure towards the company’s overall portfolio, the power brands saw a rise of 20 percent in FY19, the note said.

The maximum allocation was to the healthcare segment, with Dabur Chyawanprash, Honey, Lal Tail, Honitus and Pudin Hara ranking atop. In the home and personal care segment, Red Paste, Dabur Amla and Vatika brands are priorities.

But Problems Persist

Despite a credible strategy, execution is key, there is near-term concern due to the weak macro environment, poor sentiment and the liquidity crunch, according to CLSA. Dabur said its medium-term outlook is positive led by its Ayurveda moat, potential for market share gains and improvement in execution.

Dabur’s system inventory is stable, though there is increase in credit periods on an exceptional basis across the chain given the liquidity pressures in the market, according to Citi.