Dabur India

Abhipsita Singh Anuj Kedia Rajesh Raja Sunil Kardam

Agenda
Analysis of FMCG Industry Dabur : An Overview The Restructuring of 2004 Business Profile of Consumer Care Division(CCD) The Road Ahead: Growth Strategy for Dabur CCD

Porters 5 Force Model

Barriers To Entry: Economies of Scale: High Expected Retaliation High R&D costs

Suppliers: Bargaining Power - Low Undifferentia ted raw materials

Competitors: Highly Fragmented Plagued by grey market Competition from MNCs Less Capital Intense but High advertising cost

Buyers: Distributors and sellers Bargaining Power: High

Substitutes: Traditional homemade remedies Unorganized unbranded product Counterfeit product

Buyers

Distributors and sellers

Few distributors have strong channels in specific regions and act as suppliers as well as retailers in the region

kirana stores can influence choice of products Visibility of products Access

Bargaining Power: High

Agenda
Analysis of FMCG Industry Dabur : An Overview The Restructuring of 2004 Business Profile of Consumer Care Division(CCD) The Road Ahead: Growth Strategy for Dabur CCD

Dabur Overview
One of the largest FMCG companies in India Consolidated Turnover of Rs.15.4 billion ( USD 350 mn) Differentiated products Strong herbal and natural profile More than 100 years of experience in Ayurveda Wide distribution network Covering 1.6 million retail outlets High penetration in urban and rural areas Brand strength Strong brands in diverse categories of health and personal care Mother brand Dabur trusted for natural and herbal healthcare PRESENCE IN INDIA

Dabur Group - Overview

Bus ess D v s o s
10% 11%

Largest I d a Perso al & Health care Compa y Revenue of over $ 420 Mn Market Cap > $1.7 Bn

8% 71% Con umer Care Divi ion n erna iona u ine Divi ion Con umer Hea h Divi ion ood u ine

World Leader In Ayurveda Portfolio of over 400 Herbal / Ayurvedic Products

Strong Internal Competencies Robust Manufacturing Set-up & state of the art R & D Facilities

Agenda
Analysis of FMCG Industry Dabur : An Overview The Restructuring of 2004 Business Profile of Consumer Care Division(CCD) The Road Ahead: Growth Strategy for Dabur CCD

The Restructuring of 2004

Assessment Summary
Internal inefficiencies organization structure Market Factors too diverse portfolio Capital market and financial issues

Evidence
Dabur Op. Margin s ROCE P/E 12 17 24 Industry 18 27 40

Drivers

Process

Phase I: Consolidation 5 core units, change in structure Shift to professional management Cost management Phase II: Pharma Demerger

Non-core units divested Centralized procurement, supply chain New entity Dabur Life Sciences

Results

Improved market performance Improved efficiency Significant improvement in capital market parameters

2004 Op. Margin s ROCE P/E 13.2 21.2 29.3 12 17 24

1997

Rigorous Brand Building

CELEBRITY ENDORSEMENT

REJUVENATION OF BRANDS

Performance Before Restructuring

Operating Margins (1997) 6 ROCE (1997)

a ur

o gate

a ur

o gate

Debt/Equity (1997)

Net Working Capital (1997)

a ur

o gate

H a ur n ustr

Days

Performance After Restructuring

Sales Growth Market Performance 1 1 4 0 4

00

003 abur

004 ndustry

00

Cost Optimization

Operating margins improved to 13 within 1 year Reduction in inventory Reduction in costs from purchase, supply chain Only 4 Burmans on a board of 10 directors Professional culture Competitive compensation packages

Management & HR

Performance After Restructuring

40

ROCE

Net Working Capital 120 100 80 60 40 20 0

2002 2004

20

0 1998 2000

1998

2000

2002

2004

Debt/Equity
150 100 50 0 1998 2000 2002 2004

Agenda
Analysis of FMCG Industry Dabur : An Overview The Restructuring of 2004 Business Profile of Consumer Care Division(CCD) The Road Ahead: Growth Strategy for Dabur CCD

Consumer Care Division

Hair care Skin care and baby care Digestives and Confectionary Health Supplements Oral Care Home Care

Hair Care Segment

Niche Segment - Ayurvedic Products: Leader in the segment Tough competition from unorganized segment and local brands  Launched Anmol economy brand to compete with low price products Ayurvedic Products Leader in Value added segment (premium)
Strategic Group of Dabur: Value Added Hair Oils
Value Added Hair oils yVatika yMarico ( Hair and Care) yHLL (Clinic Plus Lite)

Basic Product Dabur Anmol Parachute HLL Nihar

Price

The Skin Care Story

Initial move into Skin care: A failure
1996, Samara brand launched in Chandigarh and Delhi with 15 products Failure due to bad distribution and marketing Revamping of the brand in late 1997, Spanish co. Antonio Puig co-ordinated Promoted select productsfairness cream & lotion, facial scrub, anti-acne cream etc. The range completely withdrawn in 1998 Reasons for failure of Samara: Products projected as need-based and not on glamour plank Insufficient advertising and promotional support Skin care solution relaunched in 2004 under the brand Vatika So far three basic products launched The segment has tremendous potential for expansion

Co-Branding with Vatika

Natural positioning of Vatika made brand extension feasible Advertising costs reduced, no fresh brand building needed Vatika Superbrand : from hair care solution to value added natural personal care for women VATIKA BRAND BUILDING

Creating Awareness: Other brands dont offer solution to problems caused by pollution, hard water and chemicals

Vatika Woman: Young, contemporary, multi-faceted, achievement-driven and confident.

Promotional Activities Vatika Supermodel 2001 Give a cosmetic and glamorous image to the brand. .

Baby Care Segment

High customer loyalty in the baby hair care and toiletries J&J undisputed leader Difficult for Dabur to break into this segment Skin care: highly fragmented mostly home-made concoctions used Preference for natural/herbal product Dabur entered with ayurvedic massage oils and baby digestive tonic Present situation: Market leader with 22 share

Babycare market

Daburs entry

Sustaining the position

Refrained from products not directly related to Ayurvedic Expertise (e.g. toiletries) Maintained competitive prices in the market

Baby Care Com pany Share by

Karnat aka Soaps Det ergent s 1% Dey's edi al c 4% L'Oreal 0% Ot ers 7%

alue Ot

Baby S i Care C m pany S ares Dabur al ail 22%

Wi ro p 9%

Dabur 12%

Differentiati n

J&J 67%

J B Dabur Baby Olive Oil 2% Wipro Baby Soft Oil 11%

' Oil 17%

K o Karpin 8%

Babycare segment: C mpetiti n In the value ffered

Dabur il and t nic

J hnson & Johnson Himalaya Baby products

Marico Sparsh

Price

Digestives Category
Flagship brand worth Rs. 100 crore Market Leader with 75 market share in digestive tablets category Oldest brand in the Rs. 90 crore digestive market in India The power brand of Dabur had grown to be a mature brand several revival strategies: Unique Positioning : Not as a digestive remedy(medicinal aspect) Launching of Hajmola Candies : Different Flavors Celebrity Endorsement : Amitabh Bachchan as brand ambassador Competitive Profile

Redefining the Image of Mature Brand

Hajmola Candy Different flavors are Albela Aam, Pangebaaz pineapple, Rangeela santra , Chulbuli imli Hajmola Candy Fun 2 available in three flavors : peach, green mango and litchi Twice the fun and twice the taste as hajmola candy Hajmola Anardana - first branded churan in the market with a unique chatpata taste. Hajmola Mast Masala - Spices market with dual benefit of taste and health.

DIFFERENTIATION

PROMOTION

Moved away from the medicinal aspect and focuses on the mischievous aspect Fun-filled digestive tablets Candies and yumsticks Dual benefits of health & taste Competitors focus only taste

Celebrity endorsement Kapil Dev, brand ambassador in 1995 Amitabh Bachchan, brand ambassador in 2004 Virender Sehwag, brand ambassador for yumstick Fine distribution network in both rural and urban areas

Health Supplements Category

Dabur pioneered the Chyawanprash category Has been a market leader since its launch Adding relevance to the categoryChyawanprash variant Chyavanshakti Legal battle with Emami over the promotion of Amritprash Dabur Honey: Largest national player in branded honey Redefining honey usage in food products Dabur Glucose Energy source to remain fresh and fight fatigue Legal battle with Heinko over the name Glucose D initially, similar to its product Glucon D

Oral Care Segment

Initial Brands Dabur Red Toothpowder Dabur Red Toothpaste Problems: No differentiation too few products Declining tooth powder market

Competitive Profile

What Balsara Acquisition brought :  Babool : Economy segment

 Meswak: Premium segment  Promise: Popular product

Wider distribution network in Western India With Daburs better distribution in India, all the acquired brands grew at more than 30

Home Care Segment

Dabur entered the category with the Balsara acquisition Odonil : A generic name in Air freshener segment Odomos : Dominant share of personal application insect repellants Odopic : Dishwashing and surface cleaner with strong equity in West India Sanifresh :No.2 in toilet cleaner market Total market size estimate at about Rs.20 billion Attractive categories with CAGR of 15-25 and low penetration levels Acquiring the Leader Insect Repellant PAP

Solid deodorizer

Agenda
Analysis of FMCG Industry Dabur : An Overview The Restructuring of 2004 Business Profile of Consumer Care Division(CCD) The Road Ahead: Growth Strategy for Dabur CCD

THE ROAD AHEAD FOR DABUR

Proposed Strategies for Organic and Inorganic Growth

SWOT Analysis
Strengths: Strong Brand Strong financial position Robust distribution network Ideal product portfolio for international business Niche player Opportunities: Huge untapped international market Huge potential for Private Labels business Booming Indian retail sector Untapped South Indian market Foray into health clinic concept Weaknesses: Key flagship brands like Chyawanprash, Lal Dant Manjan and Hajmola have matured Skewed presence in the country, lagging in the Southern parts Low on glamour and style quotient Threats: Fierce competition in the FMCG sector Uncertain commodity prices and dependence on agri-based products Price sensitive customers

Growth Strategy
PLATFORMS
Natural

Herbal

Ayurveda Current categories North, East & West India New categories

CATEGORIES
South India Global Markets

MARKETS

Current Product Portfolio

Expanding Reach of existing products

Acquisitions

The Road Ahead

Retailer push to customers: tie-ups with retail majors like Big Bazaar, Spencers, Foodworld etc. Unconventional distribution for rural markets , as done by Emami

Innovation

Product Innovation Completing product portfolio at different price points Innovative packaging Smaller SKUs e.g. sachets Redesigning of products for the Southern market

SCM Innovation Fwd. Integration of ERP For suppliers to the Stockists and retailers Participative relationship With the stockist less Inventory , better estimate Of demand.

Marketing Innovation Special Branding exercise for the Southern market Restructuring of brands: Separating Vatika from Dabur And establishing it as a complete Natural Beauty solution brand Independent of Dabur.

Parameters for Acquisition

 Brand Fit  Minimum overlap of product offerings  High Growth Potential  Access to new customer group  Complimentary distribution channel

The Acquisition Picture

Parameter
Turnover Exports Presence: Overall

Dabur
2000 Crores 11% of Sales

Cavin Kare
572 crores 8% of Sales Personal Care, Foods, Home care Extensive (Hair, skin creams, talc, deodorant) Not very Strong Doesnt Exist Extensive South focused

Vicco Labs
150 crores 15% of Sales Personal Care Focus

Ayur Herbal
100 crores

8% of Sales Strong Herbal Beauty Product Focus Strong (exceeding level of depth)

Across Segments

Personal Care

Limited (Hair Oil and Face Pack) N.A. Strong Very Strong

Limited (Turmeric based cream)

Brand Image Fit Baby Care Distribution Network

Very Strong Doesnt Exist Limited

Very Strong Doesnt Exist Strong Dealer Network

Ayur Range of Products

Ayurs Case The Rationale

 Access to a wide range of skin care, hair care, face and body care products  Herbal image is aligned with Daburs  Brands are modern and youthful  Strong dealer network specially in north and west India  Products can be used in Vatika beauty clinics  Value for money offerings  Affordable proposition  Renowned research academy

Strategies for the Future

Packaging
Up-gradation from sachets New attractive packaging

Brand
Dissociate Vatika from Dabur Further rationalize brand image

Vatika Skin and Beauty Clinics

Vatika woman has a premium image Market Size for beauty treatment: 100 crores Competition: Kaya Skin Clinic Shehnaz Hussein Beauty Clinics Kaya Skin Clinic 1.5lakh customers,43 clinics across India Turnover of 43 crores Rs.1200-1500 per sitting Services constitute 85 percent of revenues Products sold at 50 per cent premium

Proposed Model
Gradual roll out of around 50 clinics around the country Start with Metros Expand to Tier-1 and Tier-2 cities Projected Figures Rs. 89 crores in revenues in 4 years with 30 clinics Rs. 1 crores in profits Operating breakeven for a Clinic: 5- months Project breakeven: 3 months Define Criteria for success of Pilot tests Operating breakeven at least in under a year

Strategies for South

Brand endorsement with local artists & sportspersons Following regional advertising norms Product adjustment to suit the regional needs Develop distribution network in South

THANK YOU