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Dabur India Ltd.


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Dabur India Ltd.

  1. 1. DaburStrategicManagement India Ltd. GROUP MEMBERS
  2. 2. IntroductionDabur India Limited (DIL) is the fourth largest FMCG Company in India with business interests inHealthcare, Personal care and Food products. It has revenue of about US$600 Million (over Rs 2834Crore) & Market Capitalization of over US$2.3 Billion. Dabur India is a 128 years old company andis the world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabursince its inception has focused on manufacturing and selling Ayurvedic products targeted at themass consumer segment. There are number of personal care products, Ayurvedic tonics and oralcare 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 PudinHara, 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 UKetc.It has three Subsidiary Group companies - Dabur International, Fem CarePharma and newu and 8 step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur EgyptLtd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), AfricanConsumer 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, morethan 5000 distributors and over2.8 million retail outlets all over India.Dabur India limited is divided into three SBU’s. 1) Consumer Care Division: This SBU caters to the consumer needs pertaining to Personal Care, Health Care, Home Care & Foods. The major Brands under this SBU are Dabur, Vatika, Hajmola, Real and Fem. 2) Consumer Health Divison: This SBU pertains to the Ayurvedic medicines and ayurvedic OTC. Major categories in traditional formulations include Asav Arishtas, Ras Rasayanas, Churnas, Medicated Oils. 3) International Business Division: It caters to the health and personal care needs of international consumers in middle east, north and west Africa, EU and US. This division has high level of localization of manufacturing and sales & marketing.
  3. 3. Phase –IDabur was set up by in 1884 by Dr. S K Burman in West Bengal as a proprietary firm formanufacturing of ayurvedic drugs .Dabur is an acronym of the name DAktar BURrman, its founder.In the year 1896 a small manufacturing plant was set up near Calcutta for mass production ofAyurvedic Drugs and Chemicals. Dabur started its operations in 1896 with the manufacture of drugcalled Plagin to counter the wide spread plague at that time. In the 1900’s next generation ofBurman’s took the firm further and they believed that Ayurveda was the mantra which can besustainable and can meet the needs of low income countrymen. As a result a research laboratorywas formed in 1919, followed by manufacturing units at Kolkata (then Calcutta) and Bihar. In 1936,Dabur India Pvt Ltd. was incorporated which took over the business from the proprietary firm.Dabur expanded its distribution network in the next two decades. It launched Dabur Amla Hair Oilin 1940 and Dabur Chyawanprash in 1949. In 1969 there was unrest and business uncertainity incalcutta which led the family to expand its manufacturing operations in Delhi. The next productcame out in 1970 in the form of Dabur Lal Dant Manjan followed by the Hajmola Tablet in 1976.Through the 80s and 90s Dabur performed well but was established as a brand for the elderlybecause of its image of an Ayurvedic Company Although later in 1989 it launched Hajmola candywhich was targeted towards the children segment. In 1986, Dabur became a public limited company through a reverse merger with Vidogum Ltd. andwas renamed as Dabur India Limited. A reverse merger is acquisition of a public company by aprivate company which allows the private company to bypass the lengthy and complex process ofgoing public. In the following year to cater to the global market’s needs it set up a facility at NoidaExport processing Zone. In 1991,Dabur Overseas Ltd. was set up in Cayman Islands to cater to theneeds of overseas investment and this later funded the set up of Dabur Egypt Ltd., in Cairo, whichwas set to manufacture personal care and food products. In 1992, Dabur entered into 49:51 jointventure with the Spanish confectionery major Agrolimen group under the name General DeConfeteria India Ltd. (GCI) by investing an amount of INR 92.3 Million. Also Dabur entered into abiscuit joint venture named Excelcia Foods with Nestle. In 1993 Dabur decided to go to public andcame up with an initial public offer in 1994 with Rs 10 face value share at a premium of Rs 85. Theissue was oversubscribed 21 times and total amount raised was Rs 541.5 million. The reasons fortapping the equity markets were:
  4. 4. Additional funds were required to expand production and set up new factories Launch diversified range of products and compete against FMCG MNC’sIn 1994, Dabur reorganised its business in three separate divisions of Sales, Marketing andOperations.In 1995, Dabur launched Vatika and hoped to change the perception in the consumers,and was successful to a certain extent too. In 1997, Foods division was carved out which consistedof Real Fruit Juice and Homemade cooking pastas. Also in the same year the company launched aunique initiative called STARS (Strive to Achieve Record Success) to achieve accelerated growth inthe future years.Phase-II (1998-2003)In 1997, Dabur had started facing issues as two out of its four flagship brands - Chyawanprash andHajmola - were slipping due to product life cycle issues. Another of its flagship brand ‘Dabur AmlaHair Oil’ was also growing at a less-than-satisfactory rate, at five per cent. Post-liberalization, withthe Indian economy opening up and foreign players entering Indian markets, Dabur realized thatcompetition will be picking up very soon.In April 1997, Dabur hired the leading management consulting firm McKinsey & Co. for mappingout a comprehensive restructuring plan for its varied businesses and strengthen its competitiveposition. McKinsey primarily offered the following advices: 1) To improve profitability, stay focused on core competencies i.e. ayurveda and health care products 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. In1999, It off loaded its entire 49 per cent stake in the confectionery joint venture General DeConfiterria to its Spanish partner Agrolimen for Rs 35 crore. The Rs 100 crore GCI product portfoliocomprised 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 boomingcandy and bubble gum market would provide it with ample opportunity to turn the venture into aprofit maker. The Spanish partner was roped in considering the highly intensive technology nature
  5. 5. of the confectionery market. However, the joint venture has not worked out according to the plan asonly 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 overcontrol to in favour of Nestle SA to become a minority partner. Dabur sold its 20 per cent stake inExcelcia 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 in1999. It also discontinued its Samara line of herbal cosmetics that it introduced in early 1997.The Burman family handed over management of the company to a professional CEO and limitedtheir role to strategic inputs at the Board level in 1998. The decision was taken in response to thechanging dynamics of business and to inculcate a spirit of corporate governance within Dabur India.Post-1998, the Burman family has receded from the day-to-day operations of the Company and hasstrength of 4 members in Board of Directors.In 2001, Family Council was constituted for formalizing the promoter family’s role in managingthe business interests encompassing all group companies. Dabur roped in Accenture to define clearroles and responsibilities of its board of directors and the chief executive officer to prevent anyoverlap. The roles of Management Committee, Board of Directors and Family Council were definedand formalized.In 2002, Dabur again roped in Accenture to study its sales and distribution system. As per itsrecommendations, Dabur restructured its Pharmaceutical business and separated it from its FMCGbusiness.Dabur tried to reposition itself as a ‘herbal specialist’ rather than flogging its ayurvedic lineagealone. Confining itself to the ayurvedic platform would have been restrictive as the domain couldonly be stretched to a certain level and not beyond.DIL also decided to have five main brands — Dabur, Vatika, Anmol, Real and Hajmola, and everyproduct was to be migrated to one of these. Not only would it have helped Dabur to focus but also itwould help it to aggregate its media spend.
  6. 6. Phase III (2003 onwards) In 2003, Dabur collaborated with Accenture so as to keep itself competitive. The need of the hour was to work smarter and faster so as to improve profitability and revenue growth. Accenture advised Dabur to focus on the following key areas:  Competing on core competencies, while outsourcing non-core functions to trusted third- party providers.  Viewing information technology (IT) as a strategic asset that creates real values—not simply a cost to be managed.  Streamlining processes wherever possible VISION 2010: ANALYSIS1. Doubling of Sales Figure from 2006.After the successful implementation of 4-year business plan from 2002 to 2006, Dabur had launchedanother vision for 2010. One of the plans for 2010 was to double the sales figure from what it hadbeen in the year 2006. From the exhibits, we can see that the sales figure at the end of the year 2006was Rs. 1757 crores and by the end of year 2009, it was Rs. 2834 crores which shows an increase of61% in the sales. Though it has not yet reached the double figure, it seems close to achieving thefigure in 2-3 years.2. Growth to be achieved through international business, homecare, healthcare and foodsThe division wise revenue is: Consumer Care Division (CCD) – 69% Consumer Health Division (CHD) – 7.9% International Business Division (IBD) – 18.1% Others – 5%Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December 2009. o CCD grows by 16.1%
  7. 7. o CHD grows by 15.8% o IBD grows by 31.1%3. Southern markets will remain as a focus area to increase its revenue share to 15 per centThe south India market share has increased from 6% in 2002 to 12% in 2009. This is the result of theinitiatives taken by Dabur to suit the south Indian market e.g. launching herbal toothpaste in Keralaand Tamilnadu and launching Dabur Lal Dant Manjan as Dabur Sivappu Pal Podi etc. The marketshare increased after the acquisition of Balsara as Balsara had strong presence in the south andwestern region. The other factors were POS promotion, customised packaging and commercials &customised product launch. Dabur’s Rebranding Exercise In the year 2004-05 a whole new brand identity of Dabur was born. The old Banyan tree was replaced with a new, fresh Banyan tree. 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 color. ‘Celebrating Life’ was chosen as a new tag that completely summarized the whole essence.
  8. 8. PEST Analysis of Dabur India Limited (Period 2005 onwards)Political FactorsThe key factors that have triggered growth for the FMCG industry in the period includereduction in excise duties, relaxation of licensing restrictions and reduced dominance ofunorganized sector due to creation of level playing field. With the revival in demand in theFMCG sector and capacity planning done by all major FMCG companies in tax haven areasthe future looks promising. Also, the government thrust on agriculture and rural economyhas facilitated improved demand for the FMCG products.The hair oil industry is witness to a large amount of unbranded oil manufacturers thataccount for nearly half of the total coconut oil market. This also provides a significantupside potential for companies like Marico and Dabur. The implementation of Value addedtax is also expected to tilt the balance in favor of organized players. Given the fact thatthere is only a moderate scope for differential in coconut oil segment, the playersconcentrated on value added oils like Amla, Badam and so on. The addition of these highmargin products in the portfolio also leverage the players against the no frills coconut oilsegment. They have been successful in the venture with brands like Vatika, Dabur Amla(Dabur) and Hair & Care (Marico) firmly rooted in the markets.While the coconut oil brand of Marico, parachute grew by 8% in volumes in FY 05, thegrowth of value added oils like Sampoorna, Shanti Amla and Hair & Care has beencomparatively faster at 14%. Even for Dabur, the flagship brand Dabur Amla reached amilestone in FY 05 by crossing a turnover of Rs 200 crore and registered a 16% growth.This speaks of the success of the value added products.In 2008-09, finance minister’s decision to reduce CENVAT rate to 14% was in line with theGST roadmap, and this coupled with lower income tax incidence on individuals willaccelerate disposable incomes, and thus augurs well for the FMCG sector.
  9. 9. Economic FactorsBetter reforms and investment policies attract foreign investments, which ultimatelyimproves the standard of living of the people in that country. With improved standard ofliving more and more consumers prefer using branded FMCG products which have so farremained an aspiration. Consumers who are already using branded products will upgradethemselves to premium products. We could expect similar recovery in our economy in theFMCG segment in the coming years.FMCG sector is going to be in the limelight with strong economic fundamentals, risingdemand and a growing GDP. The future growth is expected to come from newer segmentssuch as the youth and through increased rural and small town penetration. The Internetand e-commerce will change the dynamics of this industry helping companies improvetheir procurement, distribution and selling efficiencies. FMCG market remains highlyfragmented with almost half of the market representing unbranded, unorganized sectorproducts. This presents a tremendous opportunity for makers of branded products whocan convert consumers of unbranded products to branded products.In the scheme of things, ‘Dabur Foods Limited was merged with Dabur India Ltd. in 2007.It was now an over Rs 2,200-crore entity including the Rs 200-crore from Dabur Foods. Itthus became one of the business divisions of Dabur India, alongside consumer care division(CCD) that encompassed all the personal care and home care products, and consumerhealth division (CHD). Dabur also made retail venture under the health and beauty format,through its wholly owned subsidiary, H&B Stores. It envisaged selling products rangingfrom personal care, cosmetics, baby care to over-the-counter drugs.Social FactorsIn 2004, the frequency of usage of oral care products in India as compared to developedworld was very low, giving scope for growth to the sector. Per capita consumption oftoothpaste in the country was only 70 gm compared with 300 gm in Europe and 150 gm inThailand. Also, a critically low dentist to population ratio in our country, results in low oral
  10. 10. hygiene consciousness and widespread dental diseases. This provided a good opportunityto expand the market and encourage people to use modern dentifrice to improve oralhygiene.Moreover, it is one of the larger players in the toothpowder category. However thecompany is witnessing negative growth rates in the category, as there seems to a shift ofthe consumer from toothpowder to toothpaste segment. The company is compensating forthe loss in the category by launching Dabur Red toothpaste that has grown into Rs 50 crorebrand in two years of its launch.It was also worthwhile for Dabur India Ltd. to consider inorganic growth. Even thoughBalsara (with brands Promise, Meswak, Babool etc.) was making losses, it did possesssynergies with the growing oral care business of Dabur. Dabur estimated the market forthis category to be Rs. 2500 crores growing @ 10% p.a., which made the market verylucrative. Thus, acquiring Balsara was an obvious step to grow inorganically.The penetration levels of shampoo are abysmally low in the country. The penetration inurban areas is around 65% while it’s just 35% in rural areas. Also the per capitaconsumption of shampoo is just 16 ML compared to 1000 ML in UK and US. This providesan opportunity to the players to improve the market and their size. The Indian shampoomarket is characterized by sachets. Around 70% of total shampoo sales are throughsachets. The general trend in the international markets is to introduce a brand throughsachets and thereafter upgrade the consumer to bigger bottles. Dabur thus shifted gears toanti-dandruff shampoo (Dabur Vatika anti-dandruff shampoo) in 2004. It also relaunchedbrand Vatika in 2007.Technological FactorsThe 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 isaround Rs 110 crore and is growing at 22% with Fem having around 7% market share. The
  11. 11. liquid soap market size in India is around Rs 50 crore and is growing at 25%, where Femhas 2 main competitors, Dettol and Lifebuoy.In 2009, Dabur acquired 72.15% stake in Fem Care to provide the company with thetechnology to enter high-growth skin care market with an established brand name FEM.Apart from Fem bleach, other popular brands by the firm are Oxybleach cream, Botanicaanti-ageing cream, Stratum colour protecting hair conditioners, SAKA mens bleach andBambi fabric softeners.Fem is world leader in bleaching cream category by tonnage. Fem brand is very well placedin India and aboard. With this acquisition, Dabur will become key player in skin carecategory. Fem has reach of around 25000 parlours, which can be leverage by Dabur forpromoting its own Gulabari skin care products and its Vatika brand. Dabur was thinking oflaunching its products into ayurvedic skin care category, will delay its launch by couple ofmonths due to acquisition. The company will continue its initiative in skin care categorythrough Gulabari, its ayurvedic products which will launch shortly and through Fem.SWOT Analysis for Dabur India LimitedStrengths Unique “Ayurvedic and Health” Positioning Extensive market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India* High brand awareness and perception of Dabur, Vatika, Hajmola, Réal Monopoly status in multiple product categories like digestives (90% MS), branded honey(75% MS) and Chyawanprash(65% MS)Weaknesses Low Penetration in Rural areas in Food, Health Supplements and Home care categories. (Appendix 5)
  12. 12. Dabur’s R&D work is low and insignificant, which is a major weakness in FMVG as it is constantly creating new products.Opportunities Packaged Foods category 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 Increasing Modern trade is a good indicator for Personal care segment as it provides higher visibility, higher rotations and a personal touch(relevant for premium products).Threats Counterfeit products in the Food and Home care category Increasing competition from private labels Increasing bargaining power of modern trade especially in the Personal Care segment