Dabur India — Q4 FY25 earnings call

And the ones which stand out is that we shall weed and feed our portfolio and portfolio rationalization will happen and a clear exit path for some of the categories, which are the non-performers, have been identified to release capital, which is what I mentioned. So the categories that we will get out from is the tea category, and our baby diaper category, the sanitizing category, which actually happened and the Vita category.

Management detailed specific categories to be exited (tea, baby diapers, sanitizing, Vita) as part of the portfolio rationalization strategy.

Asked by Abneesh from Nuvama

So, I think sequential recovery is what we are also seeing. And we should also end the year with high single digit, if not double-digit or near double-digit kind of growth for the full year. That's the guidance that we can give by looking at the macroeconomic situation at the moment.

Management provided a forward-looking guidance for FY26 full year value growth, indicating sequential recovery.

Asked by Abneesh from Nuvama

So as far as commissions are concerned, we have not changed any channel margins. We have not changed any channel margins other than out-of-home portfolio where we have kind of increased our channel margins a little bit to compete with this Campa Cola war, which is being played out. So for our out-of-home portfolio, we have increased the margins slightly. Growth expectation actually low to mid-single digit as far as this beverage portfolio is concerned.

Management clarified channel margin adjustments and provided a conservative growth outlook for the beverage portfolio in FY26 due to competitive intensity.

Asked by Abneesh from Nuvama

If you look at the urban and rural, our rural in tertiary is growing by around 13%, 14%. That's what Nielsen tells us for the Q4 data. So, the business fundamentals are fine. We are growing by 14% and urban is what is flat, and which is there with the category. It's in line with the category. But overall, we are growing ahead of the category. So what's happened is, we have kind of rationalized some sort of schemes or have not given the scheme, because we did not load. Because we did not load, we did not give extra credit, we did not give extra schemes, because of which the little bit of inventory in the wholesale has, I think, gone down and STRs have gone down.

Management provided granular detail on rural vs. urban growth trends and explained the impact of inventory correction on primary sales vs. resilient secondary sales.

Asked by Prakash Kapadia from Spark PMS

Yes. So, Kunal, we are setting up a cadence of looking at monitoring of the strategy that McKinsey has recommended. So that journey should begin as we speak from this quarter onwards. And the exact timelines as we are still working on it, the exercise we just finished. So, I can't give you right now, but we'll start from current year onwards itself. Even the GTM rekindlement should start from the current year itself is what we'd be looking at. And also, just to add on the premiumization margin, there will be specific guardrails where every new product launch will have to have an accretive margin to the core product of it. And therefore, it will lift the overall gross margin profile.

Management confirmed the immediate start of premiumization initiatives and committed to accretive margins for new premium products.

Asked by Kunal Vora from BNP Paribas

Yes. I think you see almost 240 bps of contraction in our stand-alone in quarter 4 and our inflation is the highest in this quarter in this year. So almost 80% of the inflation of the year has come in this quarter itself, which has impacted this almost 250 bps itself. And most of the price increases we took, they were by and large negated by certain trade promotion intensities and hence, the gross margins got impacted. To rephrase, I think, it's all linked. I think its inflation, which is a key issue. So we had an inflation of around inflation 4.5%- 5% and price increase was to an extent of 3.5%, and because of competitive intensity, we could not take the full inflation into the price increase. And that is why this GM contraction of 247 basis points that you see.

Management provided a clear explanation for the Q4 gross margin contraction, attributing it to high inflation and inability to pass on full price increases due to competitive intensity.

Asked by Harit Kapoor from Investec

So premiumization, we've not embarked upon. Like in Hair Care, especially, I think we were very busy consolidating our portfolio and trying to gain back market share that we lost to competition in Dabur Amla, especially because you had a competitor who was half at your price point. So now that we've got our strategy in place and we've gained all-time high market share of 19.1% from 14% around 3 years back. We will start on the journey of premiumization and premiumization is more urban linked for us. And e-commerce, quick-commerce, all these channels actually help us to get on to the premiumization journey, which is fairly easy to do. As far as rural is concerned, INR10, INR20 price points and INR50 or INR100 price points also in Hair Care, just ride our rural infrastructure. There's not as much of brand trending that you not need to do on at the bottom of the pyramid. It is at the top of the pyramid that you need to do that, so which we have not done it. So like I was telling you, serums, masks, conditioners, etc. that should come in and help our premiumization journey. I don't see both of them conflicting with each other at all.

Management clarified how it plans to pursue both premiumization (urban-focused, e-commerce) and mass-market strategies (rural, small packs) without conflict.

Asked by Harit Kapoor from Investec

So as far as recycled plastic is concerned, our use of recycled plastic is fairly limited like all other players in the industry, and therefore, we've represented to the government also on the same because the recycled plastic today is more dearer in the market as compared to the regular plastic. And moreover, we are a health care company. In a health care company where 50%-60% of the portfolio is coming from wellness foods and they're coming from health care, we are very reluctant to use recycled plastic in food products and also in our Ayurvedic product. Like in pharmaceutical industry, you don't use recycled plastic. So we are reluctant. As far as personal care is concerned, yes, with the 50% of the portfolio, we can use recycled plastic, but that is today dearer than the existing packaging material and will have an implication on the gross margins and the operating profit of the company. That's why the representation has happened to the government, because the demand of recycled plastic is higher than the supply.

Management explained the challenges and cost implications of recycled plastic regulations, their reluctance to use it in certain categories, and their representation to the government for more time.

Asked by Manoj Trivedi from SP Securities