Patanjali pulling biz from other competitiors, not us: Dabur CEO

While there are reports of Baba Ramdev’s Patanjali eating into share of other fast moving good companies (FMCG), Dabur seems to be confident of retaining its market share despite growing competition. “Patanjali is drawing business away from other competitors, not us,” says Dabur’s CEO Sunil Duggal. On the contrary, added competition has expanded the market for ayurvedic and health products, he says. Key stress point for the company this year is revenue. Monsoon is panning out reasonably well and rural demand will pick-up in the second half of the year, he says. Weak demand continues to be a concern for the company. “Headwinds are considerable in terms of demand, but not margins,” Duggal says.On Goods & Services Tax Bill, Duggal says rate and slabs will be closely watched. Benefits are, however, expected in supply chain.Below is the verbatim transcript of Sunil Duggal's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: We know that there is no direct correlation between a good monsoon and higher fast moving consumer goods (FMCG) sales. It is just that sentiment improves. What is the sense you are getting. What could the volume growth be over the next two-three months?A: It is not just a sentiment; there is definitely an uptick in terms of rural demand consequent to good monsoon. So there is some correlation. We are as straight forward as think but we do have some link between good monsoon and good rural demand. So with the monsoon now panning out reasonably well, we can look forward to rural demand lifting up perhaps in the second half of the year. It wouldn't happen immediately but second half, starting from perhaps September should be much better for us than the last few quarters have been.Latha: Last year you all had the advantage of lower raw material prices and many companies therefore could show better EBITDA and better margins. You showed better margins as well. What will be the key theme for FY17? Will it be revenues or will it be EBITDA and margins?A: The key stress point is revenue, not margins. For us the margin profile looks pretty strong, the pockets of inflation aren't impacting us because we do not buy into those commodities; things like pulses and food staples with exception of sugar which is only substantial quantity we buy - those are ones which are on fire but many other commodities including oil derivatives surprisingly enough are stable. So inflation is not a concern.However, demand stress is there, it continues, there is no respite from that and we are looking forward to monsoon improving sentiment and lower base of last year starting from third quarter, helping us. So the second half of the year would be definitely better but as we speak, the demand stress continues. Latha: To what extent is the pressure on revenue and volume and demand coming from rural distress and lack of demand or is it because of disruptive competition coming in from Patanjali?

A: I do not think the disruptive competition is important in the scheme of things. The demand stress continues across sectors, across companies. So it is pretty secular and it is largely rural driven because the rural demand seems to have fallen off a cliff and that is where the monsoon plays such an important role in reviving that demand.

There are other headwinds in terms of Pan Card requirement for the wholesale trade, which means that the wholesale demand had dried up in the recent past. These are of course short-term issues which will play themselves out but at this point in time the headwinds are considerable in terms of demand but fortunately not in terms of margins.

Sonia: I want to take up the point about disruptive competition. In Q4 your oral care segment was quite resilient despite competition coming in from Patanjali but if you look at different brands while Red toothpaste and Meswak did well. It was Babool that faced a bit of pressure in the economy segment probably because of Dant Kanti, we cannot be sure. What are you guys at Dabur doing in order to strengthen yourself in the oral case segment?

A: The demand for Babool has been subdued for the last two or three years because of our efforts to take up prices. It was a low price brand and we weren't making adequate amount of margins, so there was pressure on us to take up the price which we did and there was some fall in demand, as a consequence. The oral care portfolio doesn't seem to be impacted at all. Patanjali is drawing business from other competitors, not from us. Our sales remain resilient and pretty much on track as compared to the last couple of years.