Urban sales still not in line with pre-Covid growth: Dabur India CEO

Urban sales are recovering and trending better than rural sales, which is presently ‘very resilient’ after the second wave of COVID-19 pandemic, and Dabur India is continuously investing in rural infrastructure as it is ‘hopeful on the macroeconomics’, a top company official said.

Notwithstanding the uptick in sales, urban markets are still not in line with pre-COVID growth and are on a recovery path helped by the comeback of modern trade channels, e-commerce sales and improvement of mobility as restrictions are eased out, according to Dabur India CEO Mohit Malhotra.

The sales network of Dabur India covers around 83,500 villages and the company aims to cover 90,000 villages directly by next year.

“In my view, rural will keep trending well going forward as compared to urban at least for us, and we are also putting up infrastructure improvement in place,” Malhotra said in an investors’ conference call last week.

In the long-term, going forward, ‘rural will be resilient’, which is growing almost at around 12 per cent coming on the back of 26 per cent base.

“So rural is trending well. Urban growth is in the range of around 9 per cent coming on the back of an 18 per cent base,” Malhotra said.

“… Rural is trending well for us and the annual monsoon has been great, the harvest has been fantastic, MSPs have not been rolled out, MGNREGA arrangement is good, unemployment rates in rural areas are kind of lowest at this time,” Malhotra added.

The company, however, is concerned about inflationary pressures on raw materials, which is still continuing in the October-December quarter.

“We thought that there will be little softening of inflation, which will happen in Q3, but the projection that we are getting for Q3 is that inflation is only picking up from there, and we are not seeing any signs of softening happening in inflation,” he said.

To offset that impact of inflation and continued sustained pressure, the company has taken price increases in its several categories and has taken some cost-saving measures also.

However, it would not go for any “aggressive price increases” as demand is also recovering.

“Also, the market is pretty competitive here. That is what we are waiting and watching,” Malhotra said.

While talking about D2C (Direct-to-consumer), Malhotra said, the company is making an effort towards this and by December end, hopefully, the company would have a platform that has a direct D2C connection.

This would be beside the regular conventional e-commerce connect on D2C that it already has, he added.

Over the New Product Development, Malhotra said it would continue its e-commerce exclusive initiatives, terming it as a cradle of innovation for the company.

“We are launching exclusive e-commerce brands, our innovation rate in an e-commerce portal, which is around 5 per cent of the overall business, is in the range of around 10 to 12 per cent also, besides the food and beverage business. E-commerce new product developments (NPDs) are racing much ahead because there is a cradle for us to see a lot of innovations,” he said.

Dabur will also keep seeding brands, which have D2C connect exclusively on shared portals, like Amazon and try to create its own portal also for a D2C connection with the consumer.

While talking about the demand outlook of its international business, Malhotra said the company expects double-digit growth from the segment as all the markets are doing well.

“We would anticipate double-digit growth in international business if the COVID third wave and any lockdowns do not happen in the international market,” he said.

During the quarter, sales of ‘Chyawanprash’ and ‘Honey’ have shown some moderation after having a strong tailwind during the pandemic.

As there is little fatigue in terms of healthcare products but overall, their penetration level has gone up from 4 per cent to 7 per cent.

“Chyawanprash is a small category and to expand the category, we are doing all it takes to expand the category, to rope in more consumers into it,” Malhotra said.

As far as honey is concerned, there are other players entering into the honey market increasing the size of the penetration levels and Dabur is a beneficiary of that.

“Unlike last time wherein we were not very competitive and not very aggressive, we lost market share to Patanjali. This year we are being competitive and we are actually gaining our market share and we gained market share in e-commerce, modern trade… We are also extending honey into multiple other formats,” he said.

Last week, Dabur India had reported an increase of 11.98 per cent to Rs 2,817.58 crore in its revenue from operations for the July-September quarter, while its net profit was up 4.64 per cent to Rs 505.31 crore.

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