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Informist, Thursday, Jan. 30, 2025

By Avishek Rakshit & Simran Rede

KOLKATA – Even as consumer demand remains tepid, especially in urban centres due to macro-economic headwinds, Dabur India Ltd. will increase prices of some of its products in the coming days to maintain margins. Besides, it will increase its focus on product extensions of existing brands and also premiumise the portfolio further for better margin gains.

Speaking to sector analysts at a teleconference after declaring its December quarter results, Chief Executive Officer Mohit Malhotra said, "Price increases will happen in toothpaste also and in juices, but it will be very calibrated, observing the competitive intensity in the marketplace as to not to become uncompetitive in the market."

Allaying concern about losing market share or sales volume in case of price hikes under poor demand conditions, Malhotra said, "As far as oral care is concerned, there is still a head-room of taking a price increase in oral care especially in the areas of premium oral care where there's a huge delta available between the market leader and us. So, I don't think in oral care, taking price increase will ever be an issue for us while growing volume."

Malhotra reasoned that Dabur was expecting its production costs to go up and a 5% inflation hitting the company in the coming months which will necessitate passing over cost pressures to consumers.

Historically, the rural consumer products focussed company has maintained its margins between 20% and 22%.

On account of weak consumer demand, the company is expecting its sales to grow in mid-single digit in Jan-Mar. In Oct-Dec, the company's revenues were up by 3% on year to around INR 33.6 billion, primarily on account of sales in rural India growing nearly double compared with urban centres. Mostly focussed on rural centres, Dabur made market share gains in most of the product segments.

"I think that inflation should be mitigated by price increases and cost-saving initiatives that we are embarking on, so we expect a mid-single if not high growth to come in and there will be a sequential improvement. Definitely the business will be much better than quarter three for what we have done," Malhotra said.

In the hair oil segment, Dabur's market share is at an all-time high of 18% after the company gained 150 basis points market share in Oct-Dec. Dabur also reported a 101-basis-point gain in air freshener market share and a 318-basis-point gain in juices and nectars market share during the quarter.

Dabur's toothpaste business, led by continued demand for its flagship Dabur Red Toothpaste and premium brand Meswak, ended the quarter with a 9.1% growth. The skin and salon business reported a 5.6% growth while hair oils grew by 3.1% during Oct-Dec.

However, delayed winters and erratic temperatures across the country impacted the high-margin healthcare business, comprising 26% of its sales portfolio.

With Dabur's long-term plans getting upset due to macro-economic headwinds, the company is revisiting its growth plans and has roped in its trusted consultant McKinsey & Co. which is vetting Dabur's internal growth estimates. Malhotra said that the consultant will submit its report in March, and based on the findings, the consultant may be engaged further to drive sales.

Back in 1997, it was McKinsey & Co. which had advised the Burman family--the promoters of Dabur--to give up executive roles and instead appoint professionals to grow the company. That decision transformed Dabur's avatar from being a promoter-driven company into a professionally run company.

Dabur's consolidated profit and revenue of INR 5.2 billion and INR 33.6 billion, respectively, were in line with the Street's expectations which was based on a business performance update for Oct-Dec which Dabur submitted to bourses.

The company reported its earnings for the December quarter during market hours Thursday. Post the earnings, shares of the company rose as much as 4.2% to touch an intraday high of INR 540, but pared some of its gains and closed at INR 533.70, up 3%, on the National Stock Exchange. End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Akul Nishant Akhoury

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