Annual Report Reviews Companies August 26, 2020August 26, 2020 JST Investments Dabur India Annual Report Summary 2020 and Key Takeaways! Table of Contents Dabur at a glanceGeographical Presence and Market leadershipRevenue and Geography breakupAbout DaburManufacturingHistoryPresent Day DaburInnovation at DaburCovid CommentaryVocal For LocalFootprint2020 FinancialsChanging Dynamics of the FMCG SectorAyurvedic Products – Old is Gold?Home & Personal care IndustryFoods IndustryProfit & LossCredit RatingBalance SheetCash Flow Reading Time: 13 minutes Dabur at a glance Geographical Presence and Market leadership Revenue and Geography breakup About Dabur Dabur touches millions of lives every day. Built on a legacy of quality and experience of over 136 years, Dabur India Limited is the world’s largest Ayurvedic and Natural Health Care Company with a portfolio of over 250 Herbal/Ayurvedic products. Known as the ‘Custodian of Ayurveda’, Dabur has been marrying traditional wisdom with modern-day science to develop products for consumers across generations and geographies. Today, brand Dabur evokes feelings of Trust, Health & Well-Being in the minds of their consumers. Dabur today operates in key consumer products categories like Hair Care, Oral Care, Health Care, Skin Care, Home Care, and Foods. The Company has a wide distribution network, covering over 6.7 million retail outlets with high penetration in both urban and rural markets. Dabur’s products also have a huge presence in the overseas markets and are today available in over 100 countries across the globe. Its brands are highly popular in the Middle East, Africa, SAARC countries, the US, Europe, and Asia. Dabur’s overseas revenues account for 28.2% of the total turnover. Manufacturing They have 8 international and 12 Indian Manufacturing locations. History The story of Dabur began with a small, but visionary endeavor by Dr. S. K. Burman. With missionary zeal and fervor, Dr. Burman provided people with effective and affordable cure for fatal diseases of those days, like cholera, malaria, and plague. Soon the news of his medicines traveled, and he came to be known as the trusted ‘Daktar’ or Doctor who came up with effective cures. In 1884, Dr. Burman set up Dabur to produce and dispense Ayurvedic medicines, reaching out to a wide mass of people who had no access to proper treatment. The name Dabur is derived from the Devanagari rendition of Daktar Burman, a combination of ‘DA’ from Daktar and ‘BUR’ from Burman. Present Day Dabur Over the years, Dabur has transformed itself from a fledgling medicine manufacturer in a small Calcutta house to a transnational Indian enterprise with a manufacturing footprint spanning four continents and its product reaching out to over 100 countries across the globe. Today, its brands are household names! Dabur is home to over 400 trusted products and over 1,000 SKUs. In order to provide adequate focus and investment to key brands, Dabur has put in place a Power Brand strategy. Dabur has identified 9 Power Brands – Dabur Chyawanprash, Dabur Honey, Dabur Lal Tail, Dabur Honitus, Dabur Pudin Hara, Dabur Red Paste, Dabur Amla Hair Oil, Vatika and Réal fruit juice – that account for more than 70% of its total sales. Disproportionate investments are being put behind these brands to not just improve visibility, but also enhance distribution and to increase the pace of innovation by way of a new product, variant, and format launches. As part of this strategy, the Company has sharply increased advertising and media spends for power brands. In addition, to make each of these brands relevant to the millennial population, a number of initiatives are being planned through new packaging, new formats, communication, marketing mix, etc. There is also a greater focus on digital communication with each of these brands to improve the connection with the millennials and Gen-Z. A majority of these Power Brands fall in the Health Care space, where Dabur – as the country’s leading natural and Ayurvedic Healthcare Company – has the right to win. With this strategy, Dabur seeks to not just grow the categories where it is currently a market leader, but also sizeably increase its presence and market share in some large categories where its brands are relatively smaller in size. Dabur Chyawanprash – The flagship health supplement brand from the House of Dabur and a leader in the category, Dabur Chyawanprash today commands over 60% share in the branded Chyawanprash market in India. The Company is also working on introducing modern formats and communication targeting youth and kids. Dabur Honey – Another leading brand from its Health Care portfolio, Dabur Honey is the largest player in the branded Honey market and has been synonymous with fitness and a healthy lifestyle. In addition to highlighting the health benefits of Honey, the Company is stepping up innovation by launching a range of premium variants, besides moving it from the medicine cabinet to the breakfast table by increasing its usage as a food product and immunity booster. Dabur Lal Tail – Dabur Lal Tail is a leading player in the Baby Massage Oil category. The Company is focussing on gaining market share in this category by communicating its clinically proven benefits and Ayurvedic positioning, besides expanding the distribution footprint for the product. Dabur also plans to expand its presence in the Baby Care market by creating a bigger portfolio of Baby Care products. Dabur Honitus – An Ayurvedic medicine for cough relief, Dabur Honitus is clinically proven and provides fast relief against acute cough and throat irritation. They are working towards growing the market share in the cough and cold category in India by reinforcing Ayurvedic positioning and distribution enhancement, besides launching a host of new formats and variants Dabur Pudin Hara – Pudin Hara is an ayurvedic medicine for indigestion, Gas, and Acidity. It is known for providing quick relief from stomach ailments. As part of the growth strategy for this Power Brand, Dabur has started connecting with millennials through digital media, besides scaling up its powder fizz format Real Fruit Power – The youngest brand in the Dabur portfolio, Réal has been the fastest brand to grow to Rs1,000 crores. The company plans to extend the portfolio under Réal in adjacent areas, offer value-priced drinks in addition to adding premium variants on the wellness platform. Vatika – One of the youngest and largest brands in the Dabur portfolio, Vatika has a large presence outside India with overseas sales accounting for a lion’s share of the brand’s overall turnover. Dabur is now working towards scaling up the Vatika franchise in India with the launch of new variants besides extending its distribution beyond south India. The Company is also working towards cross-pollinating Vatika’s highly successful international portfolio in India. Dabur has also rolled out project RISe (Regional Insights and Speed in execution), an analytics-based project for capturing regional market opportunities. India is an amalgamation of different clusters with each cluster having distinct consumer beliefs, patterns, and preferences. Dabur today views India from the lens of 12 different geographical clusters. As part of this project, the Company has been capturing consumer, packaging, and media insights from the different clusters and transforming these ideas into quality products and communications which provide new growth opportunities. Focussed trade interventions, activations, distribution initiatives, and consumer promotions have also been put in place, in addition to launching region-specific products and variants suited to the local consumer preferences. Innovation at Dabur The first steps in this journey can be traced back to the year 1919 when Dabur established its dedicated Research laboratory for Ayurvedic medicines. since then, it has been a story of continuous innovation from diversification into Ayurvedic and natural Personal Care with the launch of Dabur Amla Hair Oil in 1940 to the introduction of India’s first packaged and branded Chyawanprash in 1949. The year 1970 saw Dabur enter the oral care market with the launch of Dabur Lal Dant Manjan, a conveniently packaged herbal toothpowder made available at affordable prices. Another major step forward in this journey was the decision to brand and launch an Ayurvedic digestive medicine as Hajmola in 1978. Hajmola, which continues to be the most preferred digestive tablet in the country with its unique chatpata taste, was soon extended to the confectionery market with the launch of Hajmola Candy, which became an instant hit. There have been several such examples over the past century, the most notable among them being Dabur’s decision to roll out its highly efficacious and popular toothpowder Dabur Lal Dant Manjan in a paste format with Dabur Red Paste, in the year 1995. The launch of Réal Fruit Juices soon followed in 1997, which pioneered the concept of packaged fruit juices in India. subsequently, Dabur also rolled out ethnic cooking pastes and chutneys with the brand Hommade. The year 2004 saw Dabur step outside India’s shores with a unique game plan to establish a local supply chain and manufacturing base in the overseas countries. While they followed the same brand architecture as in India, with brands like Dabur Amla and Vatika, the products introduced under these brands were tailored to suit the needs of the local populace there. This has been one of the key ingredients of their success abroad. As reports of the spread of CoronaVirus started coming in, Dabur stepped up efforts to protect the health of its employees. Covid Commentary Dabur altered its media mix by discontinuing ads in newspapers, General entertainment Channels, and shifting focus to news channels, which were drawing high visibility. They increased our focus on marquee events on TV like Prime Minister Narendra Modi’s Address to the nation and ‘Mann Ki Baat’ programs. The lockdown put the entire sales system in complete disarray with stockists unable to open their outlets and availability of vehicles, manpower for product delivery emerging as key challenges. With consumers indulging in panic buying of daily use products, most retail outlets were also staring at stockouts in the initial days of the lockdown. To meet these emerging challenges, Dabur overhauled its Go-to-Market strategy and put in place several new steps to ensure uninterrupted supplies of our products. these included – Motivating our stockist network to operate from home and take delivery early in the morning Supplemented Stockist staff with our Salesforce Deployed third-party delivery vehicles to assist stockists in ensuring timely and uninterrupted supplies to retailers Provided Health Insurance cover to over 2,200 sales personnel at stockists to cover COVID emergencies Incentive scheme launched for delivery boys who report on duty and stockists who open for business Dabur reached out to local people in areas around its manufacturing units and even secured permissions from state authorities to hire and transport people from as far away as Jharkhand to its manufacturing units in Jammu, Uttarakhand, and Baddi to bridge the gap. Today, all their manufacturing units are operational and are working at near-normal operating capacity. As they commenced operations, several steps were taken to ensure the smooth functioning of its units and safety of their workmen. These included – Fumigation of all areas with a disinfectant on a weekly basis Placing hand sanitizers at all areas Deploying special buses to transport workers from nearby areas to the plants, with social distancing maintained inside the bus Thermal screening of employees and truck drivers during entry and exit at the Security Gates Sanitizing of delivery vehicles Restricting the number of employees traveling together in elevators Regular cleaning of all high contact areas Vocal For Local As the world prepares for life after COVID-19, Economies across the globe are more likely to look inwards. The same holds true for India with the ‘Made in India’ tag being a key unifying factor for millions of Indian consumers with the power to influence purchase decisions. In the days following the COVID outbreak, millions of Indians have rediscovered the power of Ayurveda. The Ministry of AYUSH, in its guidelines, advocated the use of Ayurvedic remedies and Yoga to boost immunity to fight against the pandemic. This was followed by our Prime Minister Mr. Narendra Modi’s clarion call for an Atma Nirbhar Bharat (self-dependent India) and being ‘Vocal for Local’. Responding to this call, Dabur rolled out a series of campaigns that not only harnessed India’s traditional knowledge like Ayurveda but also talked about diversity and their indigenous products that are an integral part of Dabur identity. As a brand, Dabur evokes feelings of Trust, Health, and Well-Being in the minds of consumers. With their ‘Vocal for Local’ campaign, they are highlighting the Indian roots of Dabur and their 136-year-old heritage of caring for every Indian household’s health and well-being. Their brand communications around #Vocal4Local reflect the Ayurvedic and Indian heritage, and a strong sense of pride about ‘Made in India, by Indians, for Indians’. These campaigns were promoted on digital media and also on mainstream media like television, particularly news channels. Two videos were specially created as a part of this initiative. The first campaign, with the anthem “Ye Bharat Hai Hamara, Ye Dabur Hai Hamara” (https://www.youtube.com/ watch?v=dxZ90b_6AvE), sought to showcase the strong legacy of the various Dabur brands and their role in the everyday lives of their consumers. Footprint They also continued to expand distribution footprint, particularly in the hinterland, taking up village coverage to 52,000 villages by the end of March 2020 as against 44,000 villages in March 2019. Their direct retail coverage has also increased from 1.1 million outlets to 1.2 million outlets during the year. With the lockdown restrictions easing now, they are continuing the strategy of distribution expansion and plan to increase the village network to 60,000 villages by the end of the current financial year, besides increasing the direct coverage to 1.5 million outlets over the next 2 to 3 years. 2020 Financials Changing Dynamics of the FMCG Sector The FMCG landscape is undergoing a sea change with the emergence of COVID-19, which is also impacting consumer behavior across markets and geographies. Dabur expects the following consumer trends to pick up in the post-COVID world: Increased consumer focus on healthcare, particularly preventive healthcare, with a preference for Ayurvedabased solutions that boost immunity. Greater focus on Personal Hygiene with demand for hand and home sanitizers expected to grow exponentially. Discretionary spending would be curtailed due to the shift of priorities towards essentials. A movement towards financial security to gain momentum. Technology to act as a catalyst for convenient, safe, and enhanced consumer experiences. Local kirana (grocery) stores have seen a resurgence as proximity and availability of products came into prominence. According to Nielsen, the effects of the disruptions caused by COVID-19 would linger on for the rest of the year, prompting the market researcher to slash its 2020 growth outlook for India’s FMCG sector to 5-6% from its earlier projection of 9-10%. Ayurvedic Products – Old is Gold? As per a report by IMARC, released prior to the COVID pandemic spread, the Indian Ayurvedic products market is expected to grow at a CAGR of 14% during 2019-2024. A key factor driving the Indian ayurvedic products market is the increasing popularity of natural and herbal medicines and their benefits among the consumers. Factors such as rising health concerns and awareness about the side-effects of western medicines are further driving the consumer preference for Ayurvedic products in the country. Furthermore, the distribution network of ayurvedic products has improved significantly, increasing the accessibility of these products across both urban and rural regions. Within a month of the outbreak, ‘Immunity’ became one of the most searched words on Google, reflecting the shift in consumer preference. The word ‘Immunity’ saw a 500% increase while ‘Vitamin C’ searches went up by over 150% in 2020. There is today a significant interest in immunity building, health, and hygiene products, and the adoption rates are improving as well. Home & Personal care Industry India’s home and personal care industry encompasses home care products like household cleaners, detergents, toilet cleaners, air fresheners, and personal care products like hair oils, oral care products, skincare, and cosmetics. India’s household care industry, on the other hand, saw high single-digit growths on the back on rising awareness about health and hygiene. Foods Industry The Food sector contributes to 57% of the overall FMCG market, comprises broad categories like packaged Atta, rice, edible oil, dairy products, beverages, baby food, etc. During the year, this category witnessed a growth of 8-9%. While the Food sector, riding on the demand for consumer staples, has been growing at a good pace, the Juices & Nectars segment saw some pressure over the past year on account of downtrading by the consumers to lower-priced alternatives such as milk-based and carbonated beverages/drinks. Profit & Loss Credit Rating During the year the Company has sustained its long term bank facility credit rating of AAA (stable) which has been reaffirmed by CRISIL. The highest credit rating of AAA awarded by CRISIL reflects the highest degree of safety regarding timely servicing of financial obligations. Further CRISIL has reaffirmed the rating of the NCD program of the Company as AAA (stable). The rating indicates the highest degree of safety regarding timely servicing of financial obligation. The rated instrument carries the lowest credit risk. The Company`s short term bank facility credit rated as A1+ by CRISIL has been reaffirmed. The rating of A1+ for Commercial Paper has also been reaffirmed by CRISIL. This highest rating of A1+ indicates a very strong degree of safety with regard to the timely payment of interest & principal. Such instruments carry the lowest credit risk. Further ICRA has reaffirmed the rating on the NCD program of the Company as AAA (stable). The rating indicates the highest degree of safety regarding timely servicing of financial obligation. The rated instrument carries the lowest credit risk and the outlook on the long term rating is stable. Balance Sheet Cash Flow Dabur generated a Free Cash Flow of Rs 1264.78 Cr in 2019. In Comparison, it generated Rs 1196.16 Cr in 2020 Source Link Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers. Join Them Now! Email address: Leave this field empty if you're human: Please Share :) JST Investments JST Investments is a Mumbai-based investment firm that believes in long-term wealth creation. It's a brainchild of Aditya Kondawar, Aditya Shah, and Anish Moonka.