Description
The report explaining about Dabur Strategy.
Study of –DABUR– Corporate Strategy Over The Years
Executive Summary
Established in 1884, Dabur is a classic example of an indigenous Indian company that evolved from an ayurvedic medicine manufacturer to the country’s 5th largest FMCG. Over the years, Dabur faced several challenges such as: maintaining operational efficiency, threat from competitors, scaling up production, adopting technology, portfolio diversification, geographical expansion, etc. But the company retained its market strength and maintained its brand equity throughout the years by making timely strategic interventions to adapt to the business environment. There were changes in the organizational structure starting with the professional management of the family-owned business followed by SBU consolidation in the 2000s. These were followed by portfolio diversification, geographical expansion, brand rejuvenation, and a number of HR, IT and supply chain initiatives. In the year 2002-03, a 4-year strategy was crafted, with a specific sales target in mind (till 2006) and its implementation involved significant strategic changes to the organizational structure and brand management. Further, in 2006, the management revealed a vision for the company for a 4 year timeframe (till 2010) based on a three-prong strategy of expansion, acquisition and innovation. Empirical evidence till date points out to the success of the execution of this ‘Vision 2010’. The essence of the case lies in the fact that Dabur has been able to sustain itself in the market place for such a long time because of its ability to - identify the changing market landscape for a given period of time, make focussed strategic changes to its vision and targets for that particular timeframe and lastly, ensure successful implementation of its formulated strategies.
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Introduction
On 29th March 2006, Mr. Sunil Duggal, CEO Dabur India Limited unveiled Dabur’s four year strategy and business plan which envisioned doubling the turnover and net profit by the year 2010. Christened ‘Vision 2010’, this announcement came on the back of successful completion of the previous four-year business plan. “The timing marks the end of our previous four year business plan that was crafted for the year 2002-06 and comes to an end with this fiscal.The new plan envisages an aggressive strategy built around three pillars – Expansion, Acquisition and Innovation – across various markets and product segments, to drive growth. We expect to double our sales and profits by the end of fiscal 2009-10 with this plan” said Mr. PD Narang, Group Director. Elaborating on the plan, Mr Duggal said, “As a part of our vision strategy, we plan to develop a more balanced portfolio of business. International business, Homecare, Healthcare and Foods will be our main drivers of growth. We plan to increase our presence across new segments & categories along with renewed thrust on entering new market areas. We will also aim at increasing the revenue share of southern markets to 15 per cent.” Thus, the broad objectives of ‘Vision 2010’ were:
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Doubling of the sales figure from 2006. Focus on expansion, acquisition and innovation. Although Dabur’s international business had done well — growing by almost 29 per cent to Rs.292 crore in 2006-07, plans were to increase it by leaps and bounds. Growth to be achieved through international business, homecare, healthcare & foods. Southern markets to remain as a focus area to increase its revenue share to 15%.
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With smoothly sailing through its previous plans, this vision seemed possible. Time and again, Dabur had made decisions that have led to success. However, if Dabur could be more aggressive in its approach, it could rise to unprecedented levels. Did this three-prong strategy of acquisition, expansion and innovation help Dabur achieve its vision for 2010?
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Company Profile
With missionary zeal and fervour, Dr. Burman undertook the task of preparing natural cures for the killer diseases of 1880’s, like cholera, malaria and plague. Soon the news of his medicines travelled, and he came to be known as the trusted 'Daktar' or Doctor who came up with effective cures. And that is how his venture Dabur got its name - derived from the Devanagri rendition of Daktar Burman. A classic case of a family owned business since 1884 which became a public limited company in 1986, a company making timely strategic interventions to adapt to the business environment and maintaining its brand equity over the years. From its humble beginnings Dabur India Ltd has come a long way and today, after more than 120 years, Dabur is known for its trustworthiness more than anything else. During this passage of time, Dabur went through several structural and strategic changes to maintain its market strength. Early 1900’s saw Dabur emerge as the first company to provide health care through scientifically tested methods. It achieved significant improvements after setting up Research and Development centres and manufacturing automation. The launch of Dabur’s Amla hairoil and Chyawanprash was a boon to the expanding business. To keep up with the times, Dabur computerized its operations in 1957. However with a large product portfolio in the market, Dabur had to maintain operational efficiency. To make sure it adjusted to the business environment it became a public limited company in 1986 followed by diversification in Spain in 1992. A major change came when Dabur came up with its IPO in 1994. Because of its position, Dabur’s issue was 21 times oversubscribed. In 1998, for the first time in the history of Dabur, a non-family member took charge and Dabur handed over the operations to professionals. Successful implementation of procedures, timely changes and maintaining its essence, Dabur achieved its highest-ever sales figure of Rs 1166.5 crore in 2000-01.
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As FMCG sector was struggling with the slow growth in the Indian economy, Dabur decided to take numerous strategic initiatives, reorganize operations and improvise on its brand architecture beginning 2002. It decided to concentrate its marketing efforts on Dabur, Vatika, Anmol, Real and Hajmola to strengthen their brand equity, create differentiation and emerge as a pure FMCG player recognized as a herbal brand. Also, larger retailers were making their foray into the FMCG market. Apart from HLL, P&G, Marico and Himalya, ITC was also posing a challenge. The supply chain of Dabur was becoming complex because of the large array of products. Southern markets share in the sales figure was negligible. These factors posed a threat to Dabur and hence small changes were not enough. Following its plans, Dabur made significant changes in the time period 2002-2007 through Brand Rejuvenation, HR Initiaves, IT initiatives and Supply chain Initiatives. Today, Dabur India Limited (DIL) is the fifth largest FMCG Company operating in India with a turnover of more than Rs. 2,834.11 crores (FY09). ? It operates under three business categories namely Consumer Care Division (CCD), Consumer Healthcare Division (CHD) and International Business Division (IBD) ? Subsidiary Group companies - Dabur International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria),Weikfield International (UAE), Jaquline Inc. (USA) and Naturelle LLC (Ras Al Khamiah-UAE) ? Master brands are : Dabur (Ayurvedic healthcare products), Vatika (Premium hair care), Hajmola (Tasty digestives), Réal (Fruit juices & beverages) and Fem (Fairness bleaches & skin care products) ? ? ? ? Focus markets are : Egypt, Nigeria, Bangladesh, Nepal and US 17 ultra-modern manufacturing units spread around the globe Products marketed in over 60 countries Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India
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DABUR: Since Inception (1884 – 1900)
Vaidya Zandu Bhatta of Jamnagar, an Ayurvedic physician who established Zandu Rasayansala at Jamnagar in 1860 which was engaged in preparing Ayurvedic medicines on a large scale and sell them to the Hospitals of Navanagar State and other Ayurvedic physicians of his family. This experiment was a success and later commercial companies came into existence when Dr SK Burman set up Dabur as a proprietary firm for the manufacture of Ayurvedic drugs. Dr Burman set up the firm with a goal of meeting the healthcare needs of poor Indians. Initially the company marketed an allopathic drug, Plagin, to combat the then prevalent epidemic of plague. With growing demand, Dr Burman established a manufacturing plant in Kolkata in 1896, and Dabur became the first company to massproduce Ayurvedic formulations under modern scientific methods.
Key Events (1900-1990)
1900: FOCUS ON AYURVEDIC MEDICINES Dabur (an acronym of the name Dr. SK Burman),was set up in West Bengal as a proprietary firm for manufacturing of ayurvedic drugs. It started off with a direct mailing system to send medicines to villages in Bengal. In 1896, Dr. Burman set up a small manufacturing plant at Garhia near Calcutta for mass production of chemicals and Ayurvedic drugs. In the early 1900s, the next generation of Burmans took a conscious decision to focus more on the Ayurvedic medicines market. 1919: ESTABLISHMENT OF RESEARCH LABORATORIES In 1919, Dabur set up its Research & Development laboratory for Ayurvedic medicines. The search for processes to suit mass production of Ayurvedic medicines without compromising on basic Ayurvedic principles led to the setting up of the first Research & Development laboratory at Dabur. This initiated a painstaking study of Ayurvedic medicines as mentioned in age-old scriptures, their manufacturing processes and how to utilize modern equipment to manufacture these medicines without reducing the efficacy of these drugs.
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1920: FURTHER EXPANSION A manufacturing facility for Ayurvedic Medicines was set up at Narendrapur and Daburgram. Dabur expanded its distribution network to Bihar and the northeast. 1936: DABUR INDIA PVT. LIMITED INCORPORATED In 1936, Dabur India Pvt. Ltd., was incorporated to take over the business of the proprietary firm. 1972: SHIFT TO DELHI It expanded its personal care portfolio by adding oral care products in 1970. Dabur Lal Dant Manjan was the first product to be launched. In 1972, Dabur shifted base to Delhi from Calcutta and started production from a hired manufacturing facility at Faridabad. 1979: SAHIBABAD FACTORY/ DABUR RESEARCH FOUNDATION The Dabur Research Foundation (DRF), an independent company, was set up to spearhead Dabur's multi-faceted research. Commercial production started at Sahibabad. This was one of the largest and most modern production facilities for Ayurvedic medicines in India at that time (and even at this time also). 1986: DABUR WENT PUBLIC Dabur became a public limited company through reverse merger with Vidogum Limited, and was re-christened Dabur India Limited. The chief strategist of the company decided that in order to grow, Dabur needed to go public. While it had a solid roster of products and a tremendous following in the country, Dabur needed additional funds to expand its production, establish new factories, launch a more diversified line of products and remain competitive as large multinational companies entered the market. Needless to say, the family members running the business were somewhat sceptical. However, public issue was oversubscribed and the share price remained strong. The company grew at a pace that outpaced their industry.
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DABUR-Journey (1990-2000)
1992 : JOINT VENTURE WITH AGROLIMEN OF SPAIN Dabur entered into a joint venture with Agrolimen of Spain for manufacturing and marketing confectionery items such as bubble gums in India. The company introduced products such as Boomer, Bonkers and Donald in the domestic market. However in 1999 Dabur India Ltd had sold its complete 49 per cent stake in its confectionery joint venture- General de Confiteris India Ltd (GCIL) - to its Spanish partner Agrolimen for Rs 35.24 crore. With this sell-off GCIL has become 100 per cent subsidiary of Argolimen. The disinvestment is in line with Dabur's strategy to concentrate on areas of its core competence and move out of ventures in unrelated areas 1993 : CANCER TREATMENT Dabur entered the specialised health care area of cancer treatment with its oncology formulation plant at Baddi in Himachal Pradesh. Dabur is now setting up a 100% subsidiary in UK called Dabur Oncology. 1994 : PUBLIC ISSUE Dabur India Ltd raised its first public issue. Due to market confidence in the company, shares were issued at a premium and were 21 times oversubscribed. The Rs.10 share is issued at a premium of Rs.85 per share. While it had a solid roster of products and a tremendous following within the country, Dabur needed additional funds to expand its production, establish new factories, launch a more diversified line of products and remain competitive as large multi-national consumer goods companies entered their market. 1995 : JOINT VENTURES Expanding its Global partnerships, Dabur entered into joint venture with Osem of Israel for food products. The joint venture was named as Excelcia Food Pvt Ltd had the Rs.15 paid up capital in which Dabur had 60 per cent stake while Osem will had the rest 40 percent holding
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in the company. It also entered into a joint venture with Bongrain of France for cheese and other Dairy products. The new company formed was called Dabon International Ltd 1996 : 3 SEPARATE DIVISIONS For better operation and management, Dabur created 3 separate divisions according to its product mix – Health Care Products Divison, Family Products Divison and Dabur Ayurvedic Specialities Limited. 1997: FOOD DIVISION/ PROJECT STARS Dabur entered full scale in the nascent processed food market with the creation of the Food’s division. The company extended its range of real fruit juice by offering mixed fruit juice and tomato juice. Project STARS (Strive To Achieve Record Successes) was initiated by the company to achieve accelerated growth in the coming years. The scope of this project was strategic, structural and operational changes to enable efficiencies and improve growth rates. 1998: PROFESSIONAL MANAGEMENT OF THE COMPANY In 1997 Dabur initiated a major study and redefined the roles of family mem-bers in management of the company. The study concluded that in order to attract, hire and install an experienced professional management team to lead the company, family members would have to leave executive roles in the company. This was a major undertaking and a necessary step to demonstrate to outside investors that Dabur was seriously ready to compete in international markets. Thus with changing demands of business and to inculcate a spirit of corporate governance, the Burman family inducted professionals to manage the company. For the first time in the history of Dabur, a non-professional CEO took the helm of the company. 2000: TURNOVER OF Rs.1000 CRORES Dabur established its market leadership status with a turnover or Rs1000 Crores. From a small beginning and upholding the values of its founder, Dabur now entered the august league of large corporate businesses.
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VISION I: 2002-2006
In the year 2002-03 Dabur laid down its long-term plan of transforming to a focused and transformed FMCG player. Accordingly, a four-year strategy, Vision –I, was crafted, which targeted sales of Rs 2000 crore by the year 2006. FORMULATION & IMPLEMENTATION OF VISION I One of the first moves by the company in its journey towards becoming a focused FMCG player was to demerge its pharmaceuticals business as a separate entity- Dabur Pharmaceuticals Ltd. Within the FMCG space, Dabur’s blueprint involved developing and implementing marketing initiatives based on a clear strategic plan with restructured brand architecture, continuously introducing a stream of new products and creating a niche for the company in the FMCG segment based on the “herbal and natural” products segment. In early 2002, Dabur had undertaken a study in association with consulting firm Accenture, to understand its brand equity. The key finding: Dabur’s brand perception was of a herbal specialist. The herbal segment was one of the fastest growing in FMCG sector and could be leveraged across both, urban and rural markets. However, in the past Dabur’s products had come to be associated with the 35 plus age group. With almost half the country’s population in the below 30 years age bracket, the company ran the risk of missing the next generation consumers. Hence a need was felt to contemporise the current logo and make it more relevant. At the same time it was also important to maintain continuity with the banyan tree that was so closely identified with Dabur.
Another area of change was the organization structure prior to 2003, Dabur operated through two divisions- the family products and healthcare products divisions. However in 2003, considering the commonalities in marketing, distribution, retailing and sales, the
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company decided to merge them as one. This division- now referred to as Consumer Care Division (CCD) - consists of a diverse product portfolio and focuses on further growing the business. The CCD brands adopted a successful strategy of communication through focused positioning and celebrity endorsers such as Amitabh Bachchan, Rani Mukherjee, Virender Sehwag and Vivek Oberoi.
In 2004, second phase of organizational restructuring was undertaken and another divisionConsumer Healthcare Division (CHD) - was created. The increasing consumer preference for holistic, Ayurveda-based, health remedies indicated high growth potential for this business. Moreover, the strong Ayurvedic origins of Dabur’s brand equity; it constituted a major focus area for the company. Dabur realized that there was a growing trend towards selfmedication. The inadequate healthcare facilities, absence of public health cover and low regulatory control lead to a higher propensity for self-medication amongst Indian consumers. Looking at this opportunity, it was decided that in addition to the prescription based Ayurvedic medicines, the over-the –counter (OTC) business would be included in CHD.
Dabur Foods- During 2004, the company realized a need to clearly position its offerings and put in place a well-segmented product strategy. This resulted in three distinct brands across the fruit juice category-Real, Activ and Coolers- with each occupying a distinct positioning.
In 2004, the company realized the need of streamlining manufacturing and procurement processes to improve efficiencies and maintain margins in foods- a competitive, tight margin business. At the close of March 2006, the company had three manufacturing facilities: Nepalits traditional supplier, Siliguri- to process fruit pulp and Jaipur- for blending and packaging.
International business- The company was well positioned to develop existing markets and enter new markets, by leveraging the herbal platform. In 2004, the company formulated a structured strategy for its international foray. Firstly, it identified 20 focus countries- where it would set up manufacturing and/or marketing presence.
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VISION - 2010
After the successful implementation of the 4-year business plan from 2002 to 2006, Dabur launched another plan for 2010. The main objectives are:
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Doubling of the sales figure from 2006 The new plan to focus on expansion, acquisition and innovation. Although Dabur’s international business has done well — growing by almost 29 per cent to Rs.292 crore in 2006-07, plans are to increase it by leaps and bounds.
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Growth to be achieved through international business, homecare, healthcare and foods.
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Southern markets to remain as a focus area to increase its revenue share to 15 per cent.
In Vision 2010, Dabur clearly outlines its target of doubling sales and profits in four years. To achieve this target the company has decided to adopt a three-pronged strategy - Expansion, Acquisition and Innovation. This is based on the company’s projections of the various challenges and opportunities each business expects to face in the coming future coupled with the strengths and capabilities the company has developed and strengthened over the past years. FUNCTIONAL STRATEGIES Astra- Dabur laid down a business strategy called Astra to boost rural sales and to achieve a steady growth in retail. It runs refresher-training courses every six months. Under Astra, Dabur has categorized its sales and distribution channels into finer segments, such as key grocers, mass grocers, chemist, wholesale, small outlet and modern trade.
Role Of Accenture- Accenture and Dabur team optimized the company’s internal logistics and distribution processes for mega retail customers. Accenture helped Dabur by implementing a new sales and distribution strategy, developing a new supply chain management capability, optimizing Dabur’s ERP capabilities and Leveraging IT for business initiatives.
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Acquisition- In line with its strategy of growing aggressively in foreign markets, it acquired a Nigerian firm - African Consumer Care in late 2007. Also after successfully acquiring 72.15% of Fem Care Pharma Ltd the acquisition offers Dabur a strong platform to enter newer product categories and markets. The acquisition of these firms will serve as fuel for the company’s growth and enhance the shareholder value.
Expansion- International business will be spearheaded by two business heads one based in Dubai and the other in India. For the developed markets in the US and Europe, Dabur is looking at alliances with distributors, focusing mainly on over-the counter herbal healthcare products. It targeted to achieve Rs 300 crore turnovers from overseas businesses by 2007, increase penetration in South India; turnover to increase from 10% to 15% within 4 years, upgrade Potential markets to Focus after evaluating size and relevance, acquire technologies, brands, distribution to enter new markets and tap existing International Business Division(IBD) Focus markets through calibrated investments.
Retail- The other key development in 2007-08 has been the company's foray into the retail business. The company had announced its strategic entry into the retail business through its subsidiary company, H&B Stores Limited. On 13 March 2008, the company successfully launched its first fully operational beauty, health and wellness retail outlet in New Delhi. The retail outlets are named 'New U' and have a truly international appeal.
Distribution- Dabur had initiated a program titled 'DARE- Driving Achievement of Retail Excellence' aimed at improving distribution during the year to improve the share of Dabur brands in the modern retail formats. The strategy focused on: Building an effective servicing and activation system to address complexities of multiple formats and supply chain configurations, creating a distinct identity for Dabur brands that is relevant for shoppers and aligning organisational structure and developing information management capability. As part of the rural module of DARE, Dabur identified six rural focus states where focused initiatives were rolled out to improve distribution reach, develop innovative trade promotions and provide focused servicing through a dedicated sales team exclusive to these markets.
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DABUR – Current Scenario
Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Its story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to partners and stakeholders. The results of the policies adopted and the initiatives taken speak for themselves. In its Strategy and Business Plan – Vision 2010 – Dabur aimed at doubling its Sales and Profits by 2010. The Sales figures of Rs. 2834 crores and a Net Profit (Profit after Tax) of Rs. 391 crores for the financial year 2009 clearly reflect that Dabur is on its way to achieve its target. Today Dabur's products are available for people in more than 60 countries across the world, helping them move towards a healthy, natural and holistic lifestyle. Dabur's overseas business has, over the years, transformed from being a small operation into a multi-location business spanning the Middle East, North Africa, West Africa, South Asia, EU, the UK and the US. The overseas business has been growing at a CAGR of 36% in the past 6 years and today accounts for almost 20% of Dabur's overall sales. Dabur acquired Fem Care Pharma in June,2009 for Rs 300 crore. Thereafter, the fast moving consumer goods (FMCG) major has seen its market share in the skin care segment shoot up from a mere 1 per cent to 6.6 per cent. Fem Care has helped Dabur, which has its own skin care brand called Uveda, the third largest player in the skincare market. To scale up presence in the skincare segment, Dabur has taken two major initiatives. Firstly it has acquired Fem Care, for entering the mainstream skincare segment. The Fem acquisition consolidates Dabur’s position as one of the leading consumer goods company in India with presence in skincare, oral care, hair care, healthcare and foods. It will contribute not only to its top-line but will also generate significant cost synergies. Secondly, it has launched Uveda, a range of premium Ayurvedic skin-care products. This range including moisturizing, face wash and fairness products would be positioned in the mid-priced segment. Given Dabur’s track record of successfully positioning new brands, strong hold in the Ayurvedic segment and wide distribution network, this new launch holds good potential.
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The international business division of the company contributes nearly 20% to the total revenues. The revenue from this segment grew by 52.9% YoY during Q1FY10 led by 80% growth from Bangladesh, 65% from GCC countries, 63.4% from Egypt, and 62% from Nepal. The company is looking at increasing its contribution from international business. For this it is on a look out for acquisition opportunities in the sub-Saharan Africa for which it plans to spend Rs.10bn. The company is capable of funding such acquisition from internal accruals with minimal borrowings. Also to increase its presence in the US market, the company is planning to build a proper distribution network. Dabur’s retail business posted a loss of Rs.240m in FY09. This loss had however reduced by less than 50% in FY09 as compared to FY08. Dabur plans to further reduce the loss and break-even by FY11 as it plans cost cutting by adopting a revenue sharing model with the land owners instead of paying rent. This model which is less risky will ensure faster breakeven. The company operates its retail business through its subsidiary H&B stores and operates its retail chain under the brand name ‘Newu’. Moving forward on its retail expansion plan, Dabur India Ltd is opening newu outlets in Bangalore and other places. With this, the newu presence has now grown and has spread across North and South India. Dabur India had planned capex of Rs.1.5bn during FY10 of which nearly half the amount has already been spent. This amount is largely being spent on plant expansion in Uttaranchal and Himachal Pradesh. Some of the positives for Dabur are: ? ? Strong brand portfolio – many of them are market leaders in the respective product category. Few examples are Dabur Hair Oil, Dabur Honey, Dabur Chyawanprakash Largest over the counter company (OTC) in India
Some of the concerns for Dabur are: ? ? ? ? Slowdown in the global economy Inflationary environment in the commodity market Huge outlay in brand promotion and distribution network Intense competition in the domestic market as well as foreign international brands
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Recommendations
? The Indian economy is on a new growth path. As disposable income increase throughout India, and as more and more households join the burgeoning middle class, the FMCG industry will leverage this new growth impetus and at this juncture the company should introduce new products, discover new markets and derive greater operational efficiencies. ? Optimize the company’s internal logistics and distribution processes for mega retail customers, and put metrics and incentives in place to drive specific goals such as consistency of sales in grocery stores, improved service to drug stores and increased sales via wholesale channels. ? As they are focusing on rural selling, Dabur should give more stress on strengthening demand forecasting capabilities, which would result in greater operational efficiencies and lower inventory costs. ? The retail stores currently opened by Dabur are few and they could invest in opening a many more outlets in the near future. They should also open some in Southern region so as to have a reality check of their distribution. ? Dabur should come up with advertising strategy like radio advertisements or television advertisements which are directly targeting the rural people so that they could get higher results. ? Rural plan i.e. ASTRA is only operated in south region of India which should be implemented in northern area as well since it is the main hub of Dabur.
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Annexure
Annexure 1: SWOT Analysis for DABUR
STRENGTHS
•Strong presence in well defined niches( like value added Hair Oil and Ayurveda specialities) •Core knowledge of Ayurveda as competitive advantage •Strong Brand Image •Product Development Strength •Strong Distribution Network •Extensive Supply Chain •IT Initiatives •R & D – a key strength
WEAKNESSES
•Seasonal Demand( like chyawanprash in winter and Vatika not in winter) •Low Penetration(Chyawanprash) •High price(Vatika) •Limited differentiation (Vatika) •Unbranded players account for the 2/3rd of the total market(Vatika)
SWOT
THREATS
•Existing Competition( like Himani, baidyanath and Zandu for Dabur Chyawanprash and Marico,Keo Karpin, HLL and Bajaj for Vatika Hair Oil) •New Entrants •Threat from substitutes (like Bryllcream for Vatika hair oil)
OPPORTUNITIES
•Untapped Market(Chyawanprash) •Market Development •Export opportunities. •Innovation •Increasing income level of the middle class •Creating additional consumption pattern
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Annexure 2: DABUR – Over The Years
COMPANY HISTORY-DABUR
1884
BIRTH OF DABUR
1896
SETTING UP A MANUFACT URING PLANT
Early 1990s
AYURVEDIC MEDICINES
1919
ESTABLISHM -ENT OF RESEARCH LABORATORIES
1920
EXPANDS FURTHER
1936
DABUR INDIA PVT. LTD. (DR. S.K. BURMAN)
1972
SHIFT TO DELHI
1979
SAHIBABAD FACTORY/ DABUR RESEARCH FOUNDATION
1986
PUBLIC LIMITED COMPANY
1992
JOINT VENTURE WITH AGROLIMEN OF SPAIN
1993
CANCER TREATMENT
1994
PUBLIC ISSUES
1995
JOINT VENTURES
COMPANY HISTORY-DABUR
1996
3 SEPARATE DIVISIONS
1997
FOOD DIVISION/ PROJECT STARS
1998
PROFESSIONAL TO MANAGE THE COMPANY
2000
TURNOVER OF RS. 1000 CTORES
2003
DABUR DEMERGES PHARMA BUSINESS
2005
DABUR ANNOUNCES BONUS AFTER 12 YEARS
2005
DABUR ACQUIRES BALSARA
2006
DABUR CROSSES $2 BILLION MARKET CAP, ADOPTS US GAAP
2006
APPROVES FCCB/GDR/ ADR UPTO $200 MILLION
2007
CELEBRATIN G 10 YRS OF RETAIL & FORAYING INTO ORGANIZED RETAIL
2007
DABUR FOODS MERGED WITH DABUR INDIA
2008
ENTERS MAINSTREA M SKIN CARE, ACQUIRES FEM CARE PHARMA
2009
STRONG GROWTH DESPITE ECONOMIC SLOWDOWN
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Annexure 3: Competitor Analysis
Companies HUL Dabur India Colgate Godrej Consumer Marico P and G Gillette India Godrej Ind Emami Jyothy Labs
List Price 228.5 159.9 714.5 263.95 109.7 1,900.25 1,425.00 144.4 588.8 168.55
Market Cap.(Rs. cr.) Sales Turnover 50,540.29 20,601.56 13,843.82 2,417.91 9,716.69 1,770.82 8,134.68 1,088.01 6,684.30 1,921.85 6,168.35 772.81 4,643.39 661.51 4,586.50 880.97 4,454.27 722.35 1,223.15 350.85
Net Profit 2,496.45 373.56 290.22 161.55 142.12 178.85 113.13 19.33 87.52 40.88
Total Assets 2,483.46 877.17 220.98 599.8 676.21 440.02 490.89 1,628.10 736.1 352.51
Balance Sheet Comparison: Sources Of Funds:
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Dabur India Mar '09 86.51 86.51 0 0 651.69 0 738.2 8.26 130.72 138.98 877.18 HUL Mar '09 217.99 217.99 0 0 1,842.85 0.67 2,061.51 144.65 277.3 421.95 2,483.46 Colgate Mar '09 13.6 13.6 0 0 202.7 0 216.3 0 4.69 4.69 220.99 Godrej Consumer Mar '09 25.7 25.7 0 0 511.22 0 536.92 14.89 48 62.89 599.81 Marico Mar '09 60.9 60.9 0 0 306.78 0 367.68 107.51 201.02 308.53 676.21
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Application Of Funds:
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
Dabur India Mar '09 518.77 210.45 308.32 51.71 232.05 261.72 112.36 32.16 406.24 455.65 111.53 973.42 0 381.87 315.1 696.97 276.45 8.64 877.17 174.15 8.53
HUL Mar '09 2,881.73 1,274.95 1,606.78 472.07 332.62 2,528.86 536.89 190.59 3,256.34 1,196.95 1,586.76 6,040.05 0 4,440.08 1,527.98 5,968.06 71.99 0 2,483.46 417.26 9.45
Colgate Godrej Consumer Mar '09 Mar '09 425.26 266.54 251.33 96.75 173.93 169.79 4.67 2.5 38.33 97.89 82.42 126.67 11.13 9.86 43.69 23.67 137.24 160.2 232.48 126.14 207.45 320.89 577.17 607.23 0 0 411.93 244.67 161.19 32.94 573.12 277.61 4.05 329.62 0 0 220.98 599.8 46.46 45.42 15.9 20.9
Marico Mar '09 262.16 146.25 115.91 45.61 112.58 273.69 61.05 13.37 348.11 275.8 11.59 635.5 0 202.52 30.87 233.39 402.11 0 676.21 26.32 6.04
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Annexure 4: DABUR - Financial Parameters
6.00 5.00 4.00 3.00 2.00 1.00 0.00 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Face Value Dividend Per Share Earnings Per Share
The Divided Per share has decreased over the years, it indicates that company has sources to invest the funds rather than distributing it among the shareholders.
20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Net Profit Margin(%) Operating Profit Margin(%) Gross Profit Margin(%)
The operating profit margin has improved over the past 5 years. The Gross Profit though has more or less remained constant throughout the 5 years the Net Profit Margin has improved which indicates that the company has been able to reduce its selling and distribution expenses.
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Annexure 5: Porter’s Five Force Analysis
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doc_935227540.pdf
The report explaining about Dabur Strategy.
Study of –DABUR– Corporate Strategy Over The Years
Executive Summary
Established in 1884, Dabur is a classic example of an indigenous Indian company that evolved from an ayurvedic medicine manufacturer to the country’s 5th largest FMCG. Over the years, Dabur faced several challenges such as: maintaining operational efficiency, threat from competitors, scaling up production, adopting technology, portfolio diversification, geographical expansion, etc. But the company retained its market strength and maintained its brand equity throughout the years by making timely strategic interventions to adapt to the business environment. There were changes in the organizational structure starting with the professional management of the family-owned business followed by SBU consolidation in the 2000s. These were followed by portfolio diversification, geographical expansion, brand rejuvenation, and a number of HR, IT and supply chain initiatives. In the year 2002-03, a 4-year strategy was crafted, with a specific sales target in mind (till 2006) and its implementation involved significant strategic changes to the organizational structure and brand management. Further, in 2006, the management revealed a vision for the company for a 4 year timeframe (till 2010) based on a three-prong strategy of expansion, acquisition and innovation. Empirical evidence till date points out to the success of the execution of this ‘Vision 2010’. The essence of the case lies in the fact that Dabur has been able to sustain itself in the market place for such a long time because of its ability to - identify the changing market landscape for a given period of time, make focussed strategic changes to its vision and targets for that particular timeframe and lastly, ensure successful implementation of its formulated strategies.
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Introduction
On 29th March 2006, Mr. Sunil Duggal, CEO Dabur India Limited unveiled Dabur’s four year strategy and business plan which envisioned doubling the turnover and net profit by the year 2010. Christened ‘Vision 2010’, this announcement came on the back of successful completion of the previous four-year business plan. “The timing marks the end of our previous four year business plan that was crafted for the year 2002-06 and comes to an end with this fiscal.The new plan envisages an aggressive strategy built around three pillars – Expansion, Acquisition and Innovation – across various markets and product segments, to drive growth. We expect to double our sales and profits by the end of fiscal 2009-10 with this plan” said Mr. PD Narang, Group Director. Elaborating on the plan, Mr Duggal said, “As a part of our vision strategy, we plan to develop a more balanced portfolio of business. International business, Homecare, Healthcare and Foods will be our main drivers of growth. We plan to increase our presence across new segments & categories along with renewed thrust on entering new market areas. We will also aim at increasing the revenue share of southern markets to 15 per cent.” Thus, the broad objectives of ‘Vision 2010’ were:
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Doubling of the sales figure from 2006. Focus on expansion, acquisition and innovation. Although Dabur’s international business had done well — growing by almost 29 per cent to Rs.292 crore in 2006-07, plans were to increase it by leaps and bounds. Growth to be achieved through international business, homecare, healthcare & foods. Southern markets to remain as a focus area to increase its revenue share to 15%.
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With smoothly sailing through its previous plans, this vision seemed possible. Time and again, Dabur had made decisions that have led to success. However, if Dabur could be more aggressive in its approach, it could rise to unprecedented levels. Did this three-prong strategy of acquisition, expansion and innovation help Dabur achieve its vision for 2010?
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Company Profile
With missionary zeal and fervour, Dr. Burman undertook the task of preparing natural cures for the killer diseases of 1880’s, like cholera, malaria and plague. Soon the news of his medicines travelled, and he came to be known as the trusted 'Daktar' or Doctor who came up with effective cures. And that is how his venture Dabur got its name - derived from the Devanagri rendition of Daktar Burman. A classic case of a family owned business since 1884 which became a public limited company in 1986, a company making timely strategic interventions to adapt to the business environment and maintaining its brand equity over the years. From its humble beginnings Dabur India Ltd has come a long way and today, after more than 120 years, Dabur is known for its trustworthiness more than anything else. During this passage of time, Dabur went through several structural and strategic changes to maintain its market strength. Early 1900’s saw Dabur emerge as the first company to provide health care through scientifically tested methods. It achieved significant improvements after setting up Research and Development centres and manufacturing automation. The launch of Dabur’s Amla hairoil and Chyawanprash was a boon to the expanding business. To keep up with the times, Dabur computerized its operations in 1957. However with a large product portfolio in the market, Dabur had to maintain operational efficiency. To make sure it adjusted to the business environment it became a public limited company in 1986 followed by diversification in Spain in 1992. A major change came when Dabur came up with its IPO in 1994. Because of its position, Dabur’s issue was 21 times oversubscribed. In 1998, for the first time in the history of Dabur, a non-family member took charge and Dabur handed over the operations to professionals. Successful implementation of procedures, timely changes and maintaining its essence, Dabur achieved its highest-ever sales figure of Rs 1166.5 crore in 2000-01.
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As FMCG sector was struggling with the slow growth in the Indian economy, Dabur decided to take numerous strategic initiatives, reorganize operations and improvise on its brand architecture beginning 2002. It decided to concentrate its marketing efforts on Dabur, Vatika, Anmol, Real and Hajmola to strengthen their brand equity, create differentiation and emerge as a pure FMCG player recognized as a herbal brand. Also, larger retailers were making their foray into the FMCG market. Apart from HLL, P&G, Marico and Himalya, ITC was also posing a challenge. The supply chain of Dabur was becoming complex because of the large array of products. Southern markets share in the sales figure was negligible. These factors posed a threat to Dabur and hence small changes were not enough. Following its plans, Dabur made significant changes in the time period 2002-2007 through Brand Rejuvenation, HR Initiaves, IT initiatives and Supply chain Initiatives. Today, Dabur India Limited (DIL) is the fifth largest FMCG Company operating in India with a turnover of more than Rs. 2,834.11 crores (FY09). ? It operates under three business categories namely Consumer Care Division (CCD), Consumer Healthcare Division (CHD) and International Business Division (IBD) ? Subsidiary Group companies - Dabur International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria),Weikfield International (UAE), Jaquline Inc. (USA) and Naturelle LLC (Ras Al Khamiah-UAE) ? Master brands are : Dabur (Ayurvedic healthcare products), Vatika (Premium hair care), Hajmola (Tasty digestives), Réal (Fruit juices & beverages) and Fem (Fairness bleaches & skin care products) ? ? ? ? Focus markets are : Egypt, Nigeria, Bangladesh, Nepal and US 17 ultra-modern manufacturing units spread around the globe Products marketed in over 60 countries Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India
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DABUR: Since Inception (1884 – 1900)
Vaidya Zandu Bhatta of Jamnagar, an Ayurvedic physician who established Zandu Rasayansala at Jamnagar in 1860 which was engaged in preparing Ayurvedic medicines on a large scale and sell them to the Hospitals of Navanagar State and other Ayurvedic physicians of his family. This experiment was a success and later commercial companies came into existence when Dr SK Burman set up Dabur as a proprietary firm for the manufacture of Ayurvedic drugs. Dr Burman set up the firm with a goal of meeting the healthcare needs of poor Indians. Initially the company marketed an allopathic drug, Plagin, to combat the then prevalent epidemic of plague. With growing demand, Dr Burman established a manufacturing plant in Kolkata in 1896, and Dabur became the first company to massproduce Ayurvedic formulations under modern scientific methods.
Key Events (1900-1990)
1900: FOCUS ON AYURVEDIC MEDICINES Dabur (an acronym of the name Dr. SK Burman),was set up in West Bengal as a proprietary firm for manufacturing of ayurvedic drugs. It started off with a direct mailing system to send medicines to villages in Bengal. In 1896, Dr. Burman set up a small manufacturing plant at Garhia near Calcutta for mass production of chemicals and Ayurvedic drugs. In the early 1900s, the next generation of Burmans took a conscious decision to focus more on the Ayurvedic medicines market. 1919: ESTABLISHMENT OF RESEARCH LABORATORIES In 1919, Dabur set up its Research & Development laboratory for Ayurvedic medicines. The search for processes to suit mass production of Ayurvedic medicines without compromising on basic Ayurvedic principles led to the setting up of the first Research & Development laboratory at Dabur. This initiated a painstaking study of Ayurvedic medicines as mentioned in age-old scriptures, their manufacturing processes and how to utilize modern equipment to manufacture these medicines without reducing the efficacy of these drugs.
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1920: FURTHER EXPANSION A manufacturing facility for Ayurvedic Medicines was set up at Narendrapur and Daburgram. Dabur expanded its distribution network to Bihar and the northeast. 1936: DABUR INDIA PVT. LIMITED INCORPORATED In 1936, Dabur India Pvt. Ltd., was incorporated to take over the business of the proprietary firm. 1972: SHIFT TO DELHI It expanded its personal care portfolio by adding oral care products in 1970. Dabur Lal Dant Manjan was the first product to be launched. In 1972, Dabur shifted base to Delhi from Calcutta and started production from a hired manufacturing facility at Faridabad. 1979: SAHIBABAD FACTORY/ DABUR RESEARCH FOUNDATION The Dabur Research Foundation (DRF), an independent company, was set up to spearhead Dabur's multi-faceted research. Commercial production started at Sahibabad. This was one of the largest and most modern production facilities for Ayurvedic medicines in India at that time (and even at this time also). 1986: DABUR WENT PUBLIC Dabur became a public limited company through reverse merger with Vidogum Limited, and was re-christened Dabur India Limited. The chief strategist of the company decided that in order to grow, Dabur needed to go public. While it had a solid roster of products and a tremendous following in the country, Dabur needed additional funds to expand its production, establish new factories, launch a more diversified line of products and remain competitive as large multinational companies entered the market. Needless to say, the family members running the business were somewhat sceptical. However, public issue was oversubscribed and the share price remained strong. The company grew at a pace that outpaced their industry.
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DABUR-Journey (1990-2000)
1992 : JOINT VENTURE WITH AGROLIMEN OF SPAIN Dabur entered into a joint venture with Agrolimen of Spain for manufacturing and marketing confectionery items such as bubble gums in India. The company introduced products such as Boomer, Bonkers and Donald in the domestic market. However in 1999 Dabur India Ltd had sold its complete 49 per cent stake in its confectionery joint venture- General de Confiteris India Ltd (GCIL) - to its Spanish partner Agrolimen for Rs 35.24 crore. With this sell-off GCIL has become 100 per cent subsidiary of Argolimen. The disinvestment is in line with Dabur's strategy to concentrate on areas of its core competence and move out of ventures in unrelated areas 1993 : CANCER TREATMENT Dabur entered the specialised health care area of cancer treatment with its oncology formulation plant at Baddi in Himachal Pradesh. Dabur is now setting up a 100% subsidiary in UK called Dabur Oncology. 1994 : PUBLIC ISSUE Dabur India Ltd raised its first public issue. Due to market confidence in the company, shares were issued at a premium and were 21 times oversubscribed. The Rs.10 share is issued at a premium of Rs.85 per share. While it had a solid roster of products and a tremendous following within the country, Dabur needed additional funds to expand its production, establish new factories, launch a more diversified line of products and remain competitive as large multi-national consumer goods companies entered their market. 1995 : JOINT VENTURES Expanding its Global partnerships, Dabur entered into joint venture with Osem of Israel for food products. The joint venture was named as Excelcia Food Pvt Ltd had the Rs.15 paid up capital in which Dabur had 60 per cent stake while Osem will had the rest 40 percent holding
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in the company. It also entered into a joint venture with Bongrain of France for cheese and other Dairy products. The new company formed was called Dabon International Ltd 1996 : 3 SEPARATE DIVISIONS For better operation and management, Dabur created 3 separate divisions according to its product mix – Health Care Products Divison, Family Products Divison and Dabur Ayurvedic Specialities Limited. 1997: FOOD DIVISION/ PROJECT STARS Dabur entered full scale in the nascent processed food market with the creation of the Food’s division. The company extended its range of real fruit juice by offering mixed fruit juice and tomato juice. Project STARS (Strive To Achieve Record Successes) was initiated by the company to achieve accelerated growth in the coming years. The scope of this project was strategic, structural and operational changes to enable efficiencies and improve growth rates. 1998: PROFESSIONAL MANAGEMENT OF THE COMPANY In 1997 Dabur initiated a major study and redefined the roles of family mem-bers in management of the company. The study concluded that in order to attract, hire and install an experienced professional management team to lead the company, family members would have to leave executive roles in the company. This was a major undertaking and a necessary step to demonstrate to outside investors that Dabur was seriously ready to compete in international markets. Thus with changing demands of business and to inculcate a spirit of corporate governance, the Burman family inducted professionals to manage the company. For the first time in the history of Dabur, a non-professional CEO took the helm of the company. 2000: TURNOVER OF Rs.1000 CRORES Dabur established its market leadership status with a turnover or Rs1000 Crores. From a small beginning and upholding the values of its founder, Dabur now entered the august league of large corporate businesses.
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VISION I: 2002-2006
In the year 2002-03 Dabur laid down its long-term plan of transforming to a focused and transformed FMCG player. Accordingly, a four-year strategy, Vision –I, was crafted, which targeted sales of Rs 2000 crore by the year 2006. FORMULATION & IMPLEMENTATION OF VISION I One of the first moves by the company in its journey towards becoming a focused FMCG player was to demerge its pharmaceuticals business as a separate entity- Dabur Pharmaceuticals Ltd. Within the FMCG space, Dabur’s blueprint involved developing and implementing marketing initiatives based on a clear strategic plan with restructured brand architecture, continuously introducing a stream of new products and creating a niche for the company in the FMCG segment based on the “herbal and natural” products segment. In early 2002, Dabur had undertaken a study in association with consulting firm Accenture, to understand its brand equity. The key finding: Dabur’s brand perception was of a herbal specialist. The herbal segment was one of the fastest growing in FMCG sector and could be leveraged across both, urban and rural markets. However, in the past Dabur’s products had come to be associated with the 35 plus age group. With almost half the country’s population in the below 30 years age bracket, the company ran the risk of missing the next generation consumers. Hence a need was felt to contemporise the current logo and make it more relevant. At the same time it was also important to maintain continuity with the banyan tree that was so closely identified with Dabur.
Another area of change was the organization structure prior to 2003, Dabur operated through two divisions- the family products and healthcare products divisions. However in 2003, considering the commonalities in marketing, distribution, retailing and sales, the
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company decided to merge them as one. This division- now referred to as Consumer Care Division (CCD) - consists of a diverse product portfolio and focuses on further growing the business. The CCD brands adopted a successful strategy of communication through focused positioning and celebrity endorsers such as Amitabh Bachchan, Rani Mukherjee, Virender Sehwag and Vivek Oberoi.
In 2004, second phase of organizational restructuring was undertaken and another divisionConsumer Healthcare Division (CHD) - was created. The increasing consumer preference for holistic, Ayurveda-based, health remedies indicated high growth potential for this business. Moreover, the strong Ayurvedic origins of Dabur’s brand equity; it constituted a major focus area for the company. Dabur realized that there was a growing trend towards selfmedication. The inadequate healthcare facilities, absence of public health cover and low regulatory control lead to a higher propensity for self-medication amongst Indian consumers. Looking at this opportunity, it was decided that in addition to the prescription based Ayurvedic medicines, the over-the –counter (OTC) business would be included in CHD.
Dabur Foods- During 2004, the company realized a need to clearly position its offerings and put in place a well-segmented product strategy. This resulted in three distinct brands across the fruit juice category-Real, Activ and Coolers- with each occupying a distinct positioning.
In 2004, the company realized the need of streamlining manufacturing and procurement processes to improve efficiencies and maintain margins in foods- a competitive, tight margin business. At the close of March 2006, the company had three manufacturing facilities: Nepalits traditional supplier, Siliguri- to process fruit pulp and Jaipur- for blending and packaging.
International business- The company was well positioned to develop existing markets and enter new markets, by leveraging the herbal platform. In 2004, the company formulated a structured strategy for its international foray. Firstly, it identified 20 focus countries- where it would set up manufacturing and/or marketing presence.
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VISION - 2010
After the successful implementation of the 4-year business plan from 2002 to 2006, Dabur launched another plan for 2010. The main objectives are:
? ?
Doubling of the sales figure from 2006 The new plan to focus on expansion, acquisition and innovation. Although Dabur’s international business has done well — growing by almost 29 per cent to Rs.292 crore in 2006-07, plans are to increase it by leaps and bounds.
?
Growth to be achieved through international business, homecare, healthcare and foods.
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Southern markets to remain as a focus area to increase its revenue share to 15 per cent.
In Vision 2010, Dabur clearly outlines its target of doubling sales and profits in four years. To achieve this target the company has decided to adopt a three-pronged strategy - Expansion, Acquisition and Innovation. This is based on the company’s projections of the various challenges and opportunities each business expects to face in the coming future coupled with the strengths and capabilities the company has developed and strengthened over the past years. FUNCTIONAL STRATEGIES Astra- Dabur laid down a business strategy called Astra to boost rural sales and to achieve a steady growth in retail. It runs refresher-training courses every six months. Under Astra, Dabur has categorized its sales and distribution channels into finer segments, such as key grocers, mass grocers, chemist, wholesale, small outlet and modern trade.
Role Of Accenture- Accenture and Dabur team optimized the company’s internal logistics and distribution processes for mega retail customers. Accenture helped Dabur by implementing a new sales and distribution strategy, developing a new supply chain management capability, optimizing Dabur’s ERP capabilities and Leveraging IT for business initiatives.
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Acquisition- In line with its strategy of growing aggressively in foreign markets, it acquired a Nigerian firm - African Consumer Care in late 2007. Also after successfully acquiring 72.15% of Fem Care Pharma Ltd the acquisition offers Dabur a strong platform to enter newer product categories and markets. The acquisition of these firms will serve as fuel for the company’s growth and enhance the shareholder value.
Expansion- International business will be spearheaded by two business heads one based in Dubai and the other in India. For the developed markets in the US and Europe, Dabur is looking at alliances with distributors, focusing mainly on over-the counter herbal healthcare products. It targeted to achieve Rs 300 crore turnovers from overseas businesses by 2007, increase penetration in South India; turnover to increase from 10% to 15% within 4 years, upgrade Potential markets to Focus after evaluating size and relevance, acquire technologies, brands, distribution to enter new markets and tap existing International Business Division(IBD) Focus markets through calibrated investments.
Retail- The other key development in 2007-08 has been the company's foray into the retail business. The company had announced its strategic entry into the retail business through its subsidiary company, H&B Stores Limited. On 13 March 2008, the company successfully launched its first fully operational beauty, health and wellness retail outlet in New Delhi. The retail outlets are named 'New U' and have a truly international appeal.
Distribution- Dabur had initiated a program titled 'DARE- Driving Achievement of Retail Excellence' aimed at improving distribution during the year to improve the share of Dabur brands in the modern retail formats. The strategy focused on: Building an effective servicing and activation system to address complexities of multiple formats and supply chain configurations, creating a distinct identity for Dabur brands that is relevant for shoppers and aligning organisational structure and developing information management capability. As part of the rural module of DARE, Dabur identified six rural focus states where focused initiatives were rolled out to improve distribution reach, develop innovative trade promotions and provide focused servicing through a dedicated sales team exclusive to these markets.
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DABUR – Current Scenario
Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Its story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to partners and stakeholders. The results of the policies adopted and the initiatives taken speak for themselves. In its Strategy and Business Plan – Vision 2010 – Dabur aimed at doubling its Sales and Profits by 2010. The Sales figures of Rs. 2834 crores and a Net Profit (Profit after Tax) of Rs. 391 crores for the financial year 2009 clearly reflect that Dabur is on its way to achieve its target. Today Dabur's products are available for people in more than 60 countries across the world, helping them move towards a healthy, natural and holistic lifestyle. Dabur's overseas business has, over the years, transformed from being a small operation into a multi-location business spanning the Middle East, North Africa, West Africa, South Asia, EU, the UK and the US. The overseas business has been growing at a CAGR of 36% in the past 6 years and today accounts for almost 20% of Dabur's overall sales. Dabur acquired Fem Care Pharma in June,2009 for Rs 300 crore. Thereafter, the fast moving consumer goods (FMCG) major has seen its market share in the skin care segment shoot up from a mere 1 per cent to 6.6 per cent. Fem Care has helped Dabur, which has its own skin care brand called Uveda, the third largest player in the skincare market. To scale up presence in the skincare segment, Dabur has taken two major initiatives. Firstly it has acquired Fem Care, for entering the mainstream skincare segment. The Fem acquisition consolidates Dabur’s position as one of the leading consumer goods company in India with presence in skincare, oral care, hair care, healthcare and foods. It will contribute not only to its top-line but will also generate significant cost synergies. Secondly, it has launched Uveda, a range of premium Ayurvedic skin-care products. This range including moisturizing, face wash and fairness products would be positioned in the mid-priced segment. Given Dabur’s track record of successfully positioning new brands, strong hold in the Ayurvedic segment and wide distribution network, this new launch holds good potential.
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The international business division of the company contributes nearly 20% to the total revenues. The revenue from this segment grew by 52.9% YoY during Q1FY10 led by 80% growth from Bangladesh, 65% from GCC countries, 63.4% from Egypt, and 62% from Nepal. The company is looking at increasing its contribution from international business. For this it is on a look out for acquisition opportunities in the sub-Saharan Africa for which it plans to spend Rs.10bn. The company is capable of funding such acquisition from internal accruals with minimal borrowings. Also to increase its presence in the US market, the company is planning to build a proper distribution network. Dabur’s retail business posted a loss of Rs.240m in FY09. This loss had however reduced by less than 50% in FY09 as compared to FY08. Dabur plans to further reduce the loss and break-even by FY11 as it plans cost cutting by adopting a revenue sharing model with the land owners instead of paying rent. This model which is less risky will ensure faster breakeven. The company operates its retail business through its subsidiary H&B stores and operates its retail chain under the brand name ‘Newu’. Moving forward on its retail expansion plan, Dabur India Ltd is opening newu outlets in Bangalore and other places. With this, the newu presence has now grown and has spread across North and South India. Dabur India had planned capex of Rs.1.5bn during FY10 of which nearly half the amount has already been spent. This amount is largely being spent on plant expansion in Uttaranchal and Himachal Pradesh. Some of the positives for Dabur are: ? ? Strong brand portfolio – many of them are market leaders in the respective product category. Few examples are Dabur Hair Oil, Dabur Honey, Dabur Chyawanprakash Largest over the counter company (OTC) in India
Some of the concerns for Dabur are: ? ? ? ? Slowdown in the global economy Inflationary environment in the commodity market Huge outlay in brand promotion and distribution network Intense competition in the domestic market as well as foreign international brands
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Recommendations
? The Indian economy is on a new growth path. As disposable income increase throughout India, and as more and more households join the burgeoning middle class, the FMCG industry will leverage this new growth impetus and at this juncture the company should introduce new products, discover new markets and derive greater operational efficiencies. ? Optimize the company’s internal logistics and distribution processes for mega retail customers, and put metrics and incentives in place to drive specific goals such as consistency of sales in grocery stores, improved service to drug stores and increased sales via wholesale channels. ? As they are focusing on rural selling, Dabur should give more stress on strengthening demand forecasting capabilities, which would result in greater operational efficiencies and lower inventory costs. ? The retail stores currently opened by Dabur are few and they could invest in opening a many more outlets in the near future. They should also open some in Southern region so as to have a reality check of their distribution. ? Dabur should come up with advertising strategy like radio advertisements or television advertisements which are directly targeting the rural people so that they could get higher results. ? Rural plan i.e. ASTRA is only operated in south region of India which should be implemented in northern area as well since it is the main hub of Dabur.
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Annexure
Annexure 1: SWOT Analysis for DABUR
STRENGTHS
•Strong presence in well defined niches( like value added Hair Oil and Ayurveda specialities) •Core knowledge of Ayurveda as competitive advantage •Strong Brand Image •Product Development Strength •Strong Distribution Network •Extensive Supply Chain •IT Initiatives •R & D – a key strength
WEAKNESSES
•Seasonal Demand( like chyawanprash in winter and Vatika not in winter) •Low Penetration(Chyawanprash) •High price(Vatika) •Limited differentiation (Vatika) •Unbranded players account for the 2/3rd of the total market(Vatika)
SWOT
THREATS
•Existing Competition( like Himani, baidyanath and Zandu for Dabur Chyawanprash and Marico,Keo Karpin, HLL and Bajaj for Vatika Hair Oil) •New Entrants •Threat from substitutes (like Bryllcream for Vatika hair oil)
OPPORTUNITIES
•Untapped Market(Chyawanprash) •Market Development •Export opportunities. •Innovation •Increasing income level of the middle class •Creating additional consumption pattern
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Annexure 2: DABUR – Over The Years
COMPANY HISTORY-DABUR
1884
BIRTH OF DABUR
1896
SETTING UP A MANUFACT URING PLANT
Early 1990s
AYURVEDIC MEDICINES
1919
ESTABLISHM -ENT OF RESEARCH LABORATORIES
1920
EXPANDS FURTHER
1936
DABUR INDIA PVT. LTD. (DR. S.K. BURMAN)
1972
SHIFT TO DELHI
1979
SAHIBABAD FACTORY/ DABUR RESEARCH FOUNDATION
1986
PUBLIC LIMITED COMPANY
1992
JOINT VENTURE WITH AGROLIMEN OF SPAIN
1993
CANCER TREATMENT
1994
PUBLIC ISSUES
1995
JOINT VENTURES
COMPANY HISTORY-DABUR
1996
3 SEPARATE DIVISIONS
1997
FOOD DIVISION/ PROJECT STARS
1998
PROFESSIONAL TO MANAGE THE COMPANY
2000
TURNOVER OF RS. 1000 CTORES
2003
DABUR DEMERGES PHARMA BUSINESS
2005
DABUR ANNOUNCES BONUS AFTER 12 YEARS
2005
DABUR ACQUIRES BALSARA
2006
DABUR CROSSES $2 BILLION MARKET CAP, ADOPTS US GAAP
2006
APPROVES FCCB/GDR/ ADR UPTO $200 MILLION
2007
CELEBRATIN G 10 YRS OF RETAIL & FORAYING INTO ORGANIZED RETAIL
2007
DABUR FOODS MERGED WITH DABUR INDIA
2008
ENTERS MAINSTREA M SKIN CARE, ACQUIRES FEM CARE PHARMA
2009
STRONG GROWTH DESPITE ECONOMIC SLOWDOWN
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Annexure 3: Competitor Analysis
Companies HUL Dabur India Colgate Godrej Consumer Marico P and G Gillette India Godrej Ind Emami Jyothy Labs
List Price 228.5 159.9 714.5 263.95 109.7 1,900.25 1,425.00 144.4 588.8 168.55
Market Cap.(Rs. cr.) Sales Turnover 50,540.29 20,601.56 13,843.82 2,417.91 9,716.69 1,770.82 8,134.68 1,088.01 6,684.30 1,921.85 6,168.35 772.81 4,643.39 661.51 4,586.50 880.97 4,454.27 722.35 1,223.15 350.85
Net Profit 2,496.45 373.56 290.22 161.55 142.12 178.85 113.13 19.33 87.52 40.88
Total Assets 2,483.46 877.17 220.98 599.8 676.21 440.02 490.89 1,628.10 736.1 352.51
Balance Sheet Comparison: Sources Of Funds:
Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities Dabur India Mar '09 86.51 86.51 0 0 651.69 0 738.2 8.26 130.72 138.98 877.18 HUL Mar '09 217.99 217.99 0 0 1,842.85 0.67 2,061.51 144.65 277.3 421.95 2,483.46 Colgate Mar '09 13.6 13.6 0 0 202.7 0 216.3 0 4.69 4.69 220.99 Godrej Consumer Mar '09 25.7 25.7 0 0 511.22 0 536.92 14.89 48 62.89 599.81 Marico Mar '09 60.9 60.9 0 0 306.78 0 367.68 107.51 201.02 308.53 676.21
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Application Of Funds:
Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)
Dabur India Mar '09 518.77 210.45 308.32 51.71 232.05 261.72 112.36 32.16 406.24 455.65 111.53 973.42 0 381.87 315.1 696.97 276.45 8.64 877.17 174.15 8.53
HUL Mar '09 2,881.73 1,274.95 1,606.78 472.07 332.62 2,528.86 536.89 190.59 3,256.34 1,196.95 1,586.76 6,040.05 0 4,440.08 1,527.98 5,968.06 71.99 0 2,483.46 417.26 9.45
Colgate Godrej Consumer Mar '09 Mar '09 425.26 266.54 251.33 96.75 173.93 169.79 4.67 2.5 38.33 97.89 82.42 126.67 11.13 9.86 43.69 23.67 137.24 160.2 232.48 126.14 207.45 320.89 577.17 607.23 0 0 411.93 244.67 161.19 32.94 573.12 277.61 4.05 329.62 0 0 220.98 599.8 46.46 45.42 15.9 20.9
Marico Mar '09 262.16 146.25 115.91 45.61 112.58 273.69 61.05 13.37 348.11 275.8 11.59 635.5 0 202.52 30.87 233.39 402.11 0 676.21 26.32 6.04
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Annexure 4: DABUR - Financial Parameters
6.00 5.00 4.00 3.00 2.00 1.00 0.00 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Face Value Dividend Per Share Earnings Per Share
The Divided Per share has decreased over the years, it indicates that company has sources to invest the funds rather than distributing it among the shareholders.
20.00 18.00 16.00 14.00 12.00 10.00 8.00 6.00 4.00 2.00 0.00 Mar '05 Mar '06 Mar '07 Mar '08 Mar '09 Net Profit Margin(%) Operating Profit Margin(%) Gross Profit Margin(%)
The operating profit margin has improved over the past 5 years. The Gross Profit though has more or less remained constant throughout the 5 years the Net Profit Margin has improved which indicates that the company has been able to reduce its selling and distribution expenses.
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Annexure 5: Porter’s Five Force Analysis
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