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    Dabur India

    DABUR
    Fast Moving Consumer Goods·30 Jan 2025
    Management Summary

    Dabur India reported a mixed Q3 FY25, with consolidated revenue growing 3.1% (INR) and 5.6% (constant currency) amidst a challenging demand environment and delayed winters. International business and HPC (especially Oral Care and Home Care) showed strong growth, while Healthcare and Beverages faced headwinds. The company is undertaking strategic initiatives, including a partnership with McKinsey, to refine its vision and address category-specific challenges, aiming for sequential improvement in demand and margin expansion.

    Highlights

    6

    • Consolidated revenue grew by 3.1% in INR terms and 5.6% in constant currency terms.

    • International business exhibited strong growth of 18.9% in constant currency terms, with double-digit growth in Middle East, North Africa, Egypt, UK, US, and Bangladesh.

    • HPC portfolio performed well with 5.7% growth, with Oral Care growing 9.1% and Home Care growing 5%.

    • Foods business demonstrated strong performance with Culinary growing 30% and Badshah domestic portfolio growing 15%.

    • Gained market share in Hair Oil (125 and 236 bps), Odomos (574 bps), Air Freshener (101 bps), Chyawanprash (140 bps), and Juices & Nectar (320 bps).

    • Dabur Red toothpaste received accreditation from the Indian Dental Association (IDA), the first Ayurvedic toothpaste to do so.

    Concerns

    5

    • Challenging operating environment marked by unfavorable weather conditions and a slowdown in consumption, with delayed and contracted winters.

    • Healthcare portfolio was flat, impacted by delayed and contracted winters, leading to soft performance in Health Supplements (Chyawanprash and honey).

    • Odomos portfolio was under pressure due to cyclones in South India and delayed winters.

    • Juices and Nectar category was impacted by muted festive season demand and price-driven competitive intensity.

    • INR 81 crores of translation loss was recorded in international business due to currency devaluations in emerging markets.

    Key financials

    Single quarter

    07 metrics
    1. 01Consolidated Revenue (INR)—+3.1%YoY
    2. 02Consolidated Revenue (Constant Currency)—+5.6%YoY
    3. 03India Business Growth—+1.7%YoY
    4. 04India Business Volume Growth—+1.5%YoY
    5. 05International Business Growth (Constant Currency)—+18.9%YoY

    Segment breakdown

    HPC Portfolio
    5.7% Growth
    Oral Care Portfolio
    9.1% Growth
    Hair Oil Portfolio
    3.1% Growth
    Home Care
    5% Growth
    Healthcare Portfolio
    0% Growth
    Foods Business (Culinary)
    30% Growth
    Foods Business (Badshah domestic)
    15% Growth
    List

    Guidance & targets

    11
    CategoryTargetPriority
    Inflation
    Expected Inflation
    5%
    		High
    Profitability
    Margins
    Maintain
    		High
    Profitability
    Margins
    Improve
    		High
    Profitability
    Margins
    Maintain
    		High
    Profitability
    Margins
    20-21%
    		Medium
    Profitability
    Margins
    Maintain but slightly improve
    		Medium
    Oral Care
    Growth
    Best growth
    		Medium
    International Business
    Profitability
    Better
    		Medium
    Overall Company
    Top-line Growth
    Mid-single digit
    		High
    Overall Company
    Growth
    Mid-single kind of growth
    		Medium
    McKinsey Engagement
    Conclusion
    End of fiscal year (March end)
    		High

    Q4 FY25 Top-line Growth

    next quarter
    CurrentQ3 FY25 India business growth 1.7%
    TargetMid-single digit top-line growth

    Why it matters

    To assess if demand environment is improving and company's initiatives are yielding results.

    Before I get to full year next year, at least for quarter 4, our intent is at a mid-single digit top-line growth, we will try to maintain our margins for quarter 4.

    How to verify

    key_financials.metrics[label='India Business Growth']

    Risks & concerns

    7
    RiskSeverity

    Unfavorable weather conditions and delayed winters

    Delayed and contracted winters impacted Health Supplements (Chyawanprash, honey) and Odomos, leading to flat or muted performance. — Management acknowledged

    high

    Slowdown in consumption and urban demand moderation

    Urban demand showed signs of moderation, contributing to overall challenging operating environment. — Management acknowledged

    medium

    Inflationary pressures

    Faced inflationary pressures this quarter and expect 5% inflation to hit going forward, requiring calibrated price increases. — Management acknowledged

    medium

    Competitive intensity in Juices and Nectar category

    Muted festive season demand and price-driven competitive intensity impacted the category, especially from players like Campa Cola. — Management acknowledged

    high

    Currency devaluations leading to translation loss in international business

    INR 81 crores of translation loss was recorded due to currency devaluations across emerging markets like Egypt, Nigeria, Bangladesh. — Management acknowledged

    medium

    Chyawanprash penetration problem post-COVID

    Chyawanprash penetration went up significantly during COVID, creating a headwind post-COVID, which the company is addressing with new formats and positioning. — Management acknowledged

    medium

    Food inflation impacting rural discretionary spending

    High food inflation (8%) could cause rural consumers to prioritize food over discretionary items, potentially impacting rural demand. — Management acknowledged

    medium

    Q&A highlights

    6

    “Now comes to Chyawanprash. That is the only brand. The turnover of Chyawanprash is around INR 500 crores for us. In this 500 crore portfolio, which did so well during COVID, post COVID we had little headwind because Chyawanprash penetration really went up in the country to settle that problem, which is a big problem for us as we see. So, we are trying to come out with modern formats of Chyawanprash. like tablets, liquid, powder Chyawanprash, capsules of Chyawanprash, whole format extension. That is underway and that is doing well.”

    Addresses the stagnation in the key Healthcare segment, detailing specific challenges for Chyawanprash and the strategies (new formats, target group expansion, all-weather positioning) to revive growth.

    asked by Mihir P. Shah from Nomura

    2 min read7 chapters

    Detailed Narrative

    01

    Q3 FY25 Performance Overview

    Dabur India reported consolidated revenue growth of 3.1% in INR terms and 5.6% in constant currency for Q3 FY25. The India business, including Badshah, grew by 1.7%, underpinned by a volume growth of approximately 1.5%. International business demonstrated strong performance, growing 18.9% in constant currency terms. Despite inflationary pressures, operating profit increased by 2.1% and PAT grew by 1.8%.

    02

    Domestic Business Performance by Category

    The HPC portfolio performed well with 5.7% growth. Oral Care recorded a robust 9.1% growth, driven by the Red franchise and Meswak, with the Gels toothpaste portfolio growing 50% year-on-year. Hair Oil grew by 3.1%, gaining market share of 125 and 236 bps in coconut and perfumed oils respectively. Home Care grew 5%, with Odonil showing double-digit volume growth and gaining 574 bps market share, while Air Freshener gained 101 bps market share.

    03

    International Business & Profitability

    The international business recorded strong growth of 18.9% in constant currency, with double-digit growth across key markets including the Middle East, North Africa, Egypt, UK, US, and Bangladesh. However, currency devaluations in emerging markets resulted in an INR 81 crores translation loss. Management expects future profitability to improve due to reduced legal costs and favorable dollar-denominated currencies.

    04

    Strategic Vision & McKinsey Engagement

    In response to a volatile geopolitical landscape and uncertain macroeconomic indicators, Dabur has revised its strategic vision cycle from four to three years. The company has partnered with McKinsey & Company to refine and align its strategy, covering all categories including beverages and Chyawanprash. This exercise, aimed at validating strategies and identifying growth opportunities, is expected to conclude by the end of the fiscal year.

    05

    Healthcare & Health Supplements Challenges

    The Healthcare portfolio remained flat, primarily due to delayed and contracted winters impacting Health Supplements like Chyawanprash and honey. Chyawanprash, a ₹500 crore brand, saw a 3% decline against a market decline of 6%, but new formats and target group expansions are underway. Odomos also faced pressure from cyclones and delayed winters. However, new initiatives within Healthcare, representing 2.5% of the portfolio, are performing well.

    06

    Beverage Segment Headwinds & Strategy

    The Juices and Nectar category was impacted by muted festive season demand and intense price-driven competition, particularly from new entrants like Campa Cola. Dabur's Nectar portfolio was most affected, especially in 200ml packs in metro cities. To counter this, the company plans communication revamp, consumer value offers (reducing price from ₹130 to ₹100 via offers), and introducing a new economical range with a price index around 2 to Colas.

    07

    Rural vs Urban Demand Trends

    While urban demand showed signs of moderation, the rural market remained resilient, outperforming urban for the fourth consecutive quarter. Syndicated data indicates rural market growth at 10% versus urban at 5%, with Dabur's India business reflecting this trend with rural growth at 2% and urban at 0.6%. Management noted that real wage growth is higher in rural India, but cautioned that high food inflation (8%) could potentially shift rural spending from discretionary items to food.

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