Dabur’s Long Bet On Ayurveda Pays Off In Pandemic
With the coronavirus around, individuals are looking for robust ways to strengthen their immunity. And as regards our desi folks, they always turn to Ayurveda, the ancient medical science often regarded as the “Mother of All Healing”.
This kind of favorable transition in consumer preferences along with increased consumer spending towards immunity boosters has become a blessing in disguise for Dabur India.
The Fast-moving Consumer Goods (FMCG) company has reported strong growth since April, backed by sustained efforts in driving demand for its Ayurvedic Healthcare, Hygiene, and Nutrition products, coupled with strong innovation to meet the emerging consumer needs in the wake of the COVID pandemic.
Chyawanprash ka Prabhaav, Corona se Bachaav
Chyawanprash sales across the FMCG industry grew 283% in June 2020 and branded honey rose 39%, some media reports said quoting research firm Nielsen.
The Health Supplements business for Dabur reported a whopping 71% growth during Jul-Sep.
The 136-year-old company and one of India’s largest ayurvedic product suppliers, Dabur India has recorded robust sales of Dabur Chyawanprash & Dabur Honey.
During Jul-Sep 2020, the company witnessed 2x sales of Dabur Chyawanprash and in the Apr-Jun quarter, the company saw a nearly 7-fold growth in demand for Chyawanprash and over 60% surge in demand for Dabur Honey.
Sailing through COVID-19
In the recent earnings press release, the company said that its healthcare vertical, especially immunity-boosting products continued its outperformance which is in line with the company’s strategy of focusing on Consumer Health categories.
The Home & Personal care business also reported a recovery, growing by high single digits, while the domestic Foods Business saw a strong revival with in-home consumption returning to near-normal levels. However, this category was impacted by the continued closure of Hotels, Restaurants, and Institutional businesses.
The e-commerce business for Dabur grew by over 200% in the second quarter of FY20-21 and has a saliency of 6% as compared to 2.1% a year earlier.
The Ayurvedic over-the-counter range grew by over 56% while the Ayurvedic Ethicals reported over 26% growth in the second quarter (Jul-Sep).
Dabur’s Oral Care Sales was up over 24% with its flagship Dabur Red Paste reporting strong double-digit growth.
“Our domestic Healthcare business reported a strong 49% growth, with the recent consumer-relevant innovations contributing to around 5-6% of our revenue,” Dabur India’s Chief Executive Officer, Mohit Malhotra said.
Let’s talk numbers
Dabur ended the second quarter of FY20-21 with a 13.7% growth in Consolidated Revenue at Rs 2,516 Crore as compared to the previous year. This is the highest revenue growth reported by the Company in the last couple of years.
Its Consolidated Net Profit surged 19.5% to Rs 481.7 Crore a year earlier.
Dabur’s India FMCG Business led the growth with a 19.8% surge, with an underlying FMCG Volume Growth of 16.8% during the Second Quarter.
“While COVID-19 continues to impact people around the world, Dabur’s strategic business transformation exercise to develop and implement aggressive growth strategies in the core business areas and successfully address the emerging challenges helped us deliver a healthy topline growth accompanied by an expansion in the margin,” Malhotra said.
Favorable monsoon and enhanced stimulus announced by the Government as part of its overall thrust on boosting the rural economy is expected to further drive rural demand in the coming months.
The government has announced an increase in Minimum Support Price(MSP) for six Rabi crops, an additional allocation of funds for MGNREGA, availing of loans under the MUDRA scheme and so on is also expected to aid rural demand.
The company also said that its continued focus on strengthening its core Healthcare portfolio with the introduction of new innovations, coupled with heavy investments behind its Power Brands and expanding its distribution has enabled it to grow ahead of categories and gain market share across the portfolio.
As Dabur continued to move forward on its distribution expansion strategy in the hinterland, rural demand grew ahead of urban.
Several tailwinds by way of enhanced user consciousness towards good health, the potential of deepening of the healthcare segment, new product launches, and recovery in international business may enable the company to sustain its growth prospects. Additionally, the ongoing efforts to save cost in brand spendings may facilitate improvement in margins in the long term.
Fundamental & Technical dose
Data as of Nov 9, 2020; Source – BSE, NSE