Mohit Malhotra (MM): In FY 2022-23, the global supply chain faced disruptions due to geopolitical issues, which resulted in significant increases in commodity prices. This, in turn, led to unprecedented levels of inflation worldwide. Although inflation started to wane towards the end of the year, pockets of stress remained. In response to this inflationary pressure, central banks around the world raised interest rates, causing a slowdown in demand and currency challenges in key markets. Syndicated data showed volume decline across the FMCG sector in India during the first nine months of the year. However, there was some growth observed in the later part of the fourth quarter, mainly driven by the food sector. Rural markets lagged urban markets due to high inflation and consumers shifting to lower-priced alternatives.
In this challenging environment, Dabur achieved consolidated revenue of over 11,000 Crore, closing the year at 11,530 Crore, and recording a growth of 6%. The India business grew by 6.2%, while the international business achieved a growth rate of 11.1% in constant currency terms. Over the past three years, the CAGR for the India business has been 11.2%, with nearly double-digit CAGRs in healthcare and home and personal care, and strong double-digit growth in the food and beverage sector. This sustained double-digit CAGR reflects the company’s ability to expand and capture market opportunities over an extended period. It signifies that the company has been successful in implementing effective strategies, developing competitive products and meeting the evolving needs of its customers. It also demonstrates resilience and adaptability, which are crucial for longterm success. Another positive aspect of the year was the strong performance of new-age distribution channels which became more salient. Dabur was able to ride this trend and consolidate its position in these channels. The company saw expansion in its market shares in 90% of its portfolio. FY2022-23 has been a challenging year but the Company was able to mitigate the challenges and end the year successfully.
MM: Our healthcare portfolio is a unique and highly differentiated part of our business, and it represents a wealth of knowledge emanating out of Ayurveda, the traditional Indian system of medicine. The fiscal year 2022-23 presented challenges for our healthcare portfolio, primarily due to the high base established in the previous years which saw the tailwinds from the Covid pandemic. As Covid receded there was a moderation in consumption of immunity linked products, but we registered a near double digit 4-year CAGR (vs pre-Covid).
As we come out of the Covid bases, our healthcare portfolio is expected to rebound. The penetration of nature-based health supplements, over-the-counter (OTC) medications, and Ayurvedic products in India is still relatively low compared to our Western counterparts. This provides a significant growth opportunity for us to tap into. Moreover, there is a growing inclination towards health consciousness, a resurgence of interest in natural and Ayurvedic practices, increasing incidence of lifestyle-related ailments, and a preference for alternative medicines. All these factors continue to create enormous growth prospects for Ayurveda products and remedies in the future.
Ayurveda, with its timeless wisdom, holds answers to many of the lifestyle ailments faced by the modern generation. We have been working towards making traditional Indian knowledge accessible to contemporary consumers. Even our personal care and food portfolios have health and wellness as their central theme, incorporating natural ingredients that promote overall well-being. Moving forward, we will remain strategically focused on the “Herbal and Natural” proposition, both in India and internationally. Our emphasis on health and wellness serves as our unique selling proposition (USP), differentiating us in the consumer products market. Therefore, we will continue to leverage this philosophy as a competitive advantage to increase our market share across our operating categories.
MM: The Food and Beverage (F&B) business saw significant growth in the past year and is expected to continue on this upward trajectory in the coming year. Despite the challenges faced during the Covid-19 pandemic, our F&B business has made an impressive recovery. In FY2022, we achieved a remarkable 49% growth, and building upon that success, we achieved a robust 30% growth in FY23.
We attribute this success to our strategic initiatives aimed at expanding our total addressable market and great execution in the marketplace. We have introduced new fruit drinks and expanded our foods portfolio to include popular products such as pickles, condiments, sauces, and ghee under our Hommade and Dabur brands. On account of this, we have been successful in gaining market share across our product range.
During the year, we added spices to our portfolio through the acquisition of 51% stake in Badshah Masala. This acquisition is in line with Dabur’s strategic intent to expand its Foods business to 500 Crore in 3 years and expand into new adjacent categories, and it marks Dabur’s entry into the over 25,000 Crore branded spices and seasoning market in India.
MM: Innovation has been a central focus of our strategy, and it has played a significant role in keeping us connected with consumers. During the Covid years, our new product developments (NPDs) contributed to 4-5% of our revenues. We launched products that catered to the specific needs of that time. As the impact of Covid has lessened, we have continued to introduce relevant and compelling NPDs that have the potential to succeed in the market.
Over the past year, we have launched several note worthy products, including Dabur Gur Chyawanprash, Dabur Vedic Tea, Hajmola Amla Candy, Dabur Red Bae Fresh Gel, Vatika Neelibhringa21 Oil, Real Drinks and Real Frappe range. Additionally, we recently entered the Cooling Hair Oil segment with the launch of Dabur Cool King Hair Oil. The success of our innovations is evident, with Real Drinks surpassing 200 Crores in sales and other launches such as Vatika Ayurvedic Shampoo, Dabur Herbal Toothpaste Range, Hajmola LimCola and ChatCola variants, Badam Amla Hair Oil, and Dabur Baby performing well. Some of the Covid contextual launches which lost their relevance post Covid have been weeded out in line with our ‘weed and feed’ strategy for NPDs.
Looking ahead, we firmly believe that innovation will continue to be a vital driver of growth for us. Going forward, we will also focus on making larger investments and scaling up recent successful launches.
MM: The Power Brand strategy is central and core to our strategic roadmap. It has played a pivotal role in propelling our growth ahead of the market, allowing us to gain market share, focus investments on these key brands, and strategically drive innovation. As we look to the future, the Power Brand strategy is evolving into a Power Platform strategy, which involves extending our brands into adjacent spaces, expanding the total addressable market of our portfolio, and elevating these brands to new heights.
To illustrate this strategy, let’s consider the example of Real. In the past, Real was primarily known as a brand focused on the Juices and Nectars category. However, today it encompasses a diverse range of products, including fruit drinks, a PET portfolio, aloevera based drinks, plant-based drinks like Soya and Almond, aerated fruit beverages, milkshakes, coconut water, superfoods such as Real Seeds, and most recently, the introduction of Real Peanut Butter. This strategic expansion has fueled remarkable growth for the brand, with revenues surpassing 1,600 Crores and it is on track to surpass the 2,000 Crore milestone in the next few years.
By leveraging the Power Platform strategy, we anticipate continued exceptional growth for our brands. We will continue to explore new avenues, expand into complementary product categories, and scale our brands to even greater achievements.
MM: In the fiscal year 2023, we experienced a material inflation rate of approximately 12% for the Company. To mitigate this impact, we implemented price increases and initiated cost-saving measures. However, despite these efforts, we did observe some contraction in gross margins.
Fortunately, we are now witnessing a reversal in the commodity cycle, resulting in reduced prices for most of our key commodities, with the exception of the F&B basket. This development allows us to anticipate an expansion in gross margins for the current year. This expanded gross margin will be allocated in two primary ways. Firstly, a portion will be allocated towards advertising and promotion (A&P) investments, which have experienced some moderation due to high inflation. Secondly, the remaining portion will contribute to gradual improvement of our operating margin.
In the current year we are also embarking upon a host of cost-saving initiatives to drive efficiencies across our functions be it supply chain, procurement, packaging and indirect overheads. These measures, coupled with the moderation in inflation, provide a positive outlook for Dabur, allowing us to capture potential cost advantages and enhance our financial performance.
Annual Report 2022-23