Dabur India on Thursday said that the products in its masala portfolio are not sprayed with ethylene oxide in the domestic market, while its use in international markets is within prescribed limits.
The Dabur management comments came after the recent ban of Indian spice blend market leaders MDH and Everest in Singapore and Hong Kong due to elevated levels of the "cancer-causing pesticide" ethylene oxide. Following the development, the US Food and Drug Administration (FDA) and Australian food safety authority have put the Indian spice firms under the scanner.
Dabur's masala portfolio consisting of the Badshah brand has not been banned anywhere, the management said in a post-earnings concall.
For international regulations, the Indian Spice Board oversees the company's batches for export markets, ensuring they meet the required standards, it said. Dabur's ethylene oxide treatment, commonly used to prevent microbial growth, complies with the limits established by the Indian Spice Board for exports, it said.
“We are within the prescribed limits. So we think we are on the safer side,” said Mohit Malhotra, CEO, Dabur, in a post earnings conference call.
On the quality side, the company has established a micro lab to ensure sterilisation of their export batches. Instead of ethylene oxide, the company has opted for steam sterilisation for export batches, it said.
Read more: Dabur Q4 net profit rises 16.5% to Rs 341 crore, declares Rs 2.75 dividend
Responding to analyst queries in its post earning call, the company said that in terms of regulatory oversight they adhere strictly to the guidelines set by the domestic regulatory body Food Safety and Standards Authority of India (FSSAI). As ethylene oxide is not part of FSSAI regulations, the company does not spray their products with ethylene oxide in the domestic market.
However, recent reductions in limits by the EU have posed challenges for market leaders, the management noted.
Read more: Dabur Q4 results: Company's rural focus fuels 400 bps growth outpacing urban markets
Dabur acquired Badshah Masala, which operates in ground and blended spices and seasonings, in a Rs 600 crore deal last year. Badshah Masala had some presence in a few foreign markets.
Limited opportunity
The management said that it sees limited upside due to the issue and it does not open up any opportunity for their spice portfolio. “I hope the issue is behind the entire industry and the whole market should grow,” said Malhotra.
In this largely unbranded market, there's a significant potential for establishing brand presence both domestically and internationally. Badshah witnessed over 20 percent growth last year, driven partly by price adjustments and partly by increased volume.
The company noted that deflation has started in the spice market. To stimulate volume growth, the company has initiated some price adjustments. Overall, there was a 20 percent increase in value, attributed to geographical expansion and portfolio growth, including international markets.
The company is optimistic about a margin increase in their Badshah portfolio.
Dabur India on May 2 reported a consolidated net profit of Rs 341.22 crore for the March quarter, a growth of 16.5 percent from Rs 292.76 crore in the same quarter of the previous financial year.
In Q4FY24 the total revenue of the company was Rs 2,814.64 crore, up 5.11 percent from Rs 2,677.80 crore in the year-ago quarter, the FMCG major said in a regulatory filing.
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