EXCLUSIVE: Dabur targets no 2 slot in toothpaste on the back of Red, shakes up Vatika with relaunch

“Red is doing very well. We have got Red gel, that is also doing well. I believe that the Red toothpaste is going to grow much further. See today in oral care, we have a 15 percent volume share and Unilever has a 17 percent share. Colgate, of course, is much higher. We want to take the number two position in oral care in the next one to two years after Colgate. And Red will be the key driver of this growth. As a standalone brand, it’s already the number three brand,” Duggal told Moneycontrol.

Colgate-Palmolive India’s Colgate Dental Cream sits on top of the Rs. 6,700-crore Indian toothpaste market. Unilever’s Close-Up is number two.

Dabur has plans to launch more toothpaste brands on the ayurvedic platform. Asked to comment if it would be a white ayurvedic toothpaste, as long speculated, Duggal said, “I am sure we will be launching other toothpastes, ayurvedic toothpastes. But whether they are white or you know green, that is not really the issue. They will have a proposition which is quite different from our existing toothpastes. Like our Red is a very different product. Even that would be a very different product.”

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He said the company could affect a price hike in the oral category by the end of the year.

Surely, a 400-product company can’t be banking on a climb up in one toothpaste category to keep its machines humming. So while clearly, the Burman family-promoted company is eyeing a bigger share of the toothpaste market, among its other moves are a launch of a new brand of beverage and relaunch of its Vatika shampoo on the product side. On the investment side is a higher allocation to spend on media and beefing up of sales infrastructure.

New beverage brand

Dabur’s Real brand of fruit juices and drinks lords over the market which counts Pepsico’s Tropicana and ITC’s B Natural as other competitors. Real is an over Rs. 1200-crore brand and has several sub-brands under it— Activ, Wellnezz, Volo and JuC—and if all goes as per plan, the company will have added one more name to its portfolio of drinks by next summer.

Dabur is coming with another beverage brand beside Real which is an over Rs. 1200-crore brand.

“This will be under a different brand, not under Real brand. This will be more value add, value priced beverages which will be under a different brand. It will be a sub-brand under Real, so the architecture will be under Real. But the sub-brand will be the dominant feature of that product. This will be next summer, maybe around February or so because these lower price point drinks are very summer-centric. So we will be launching it. We tested the market this year, next year we will be doing a bigger launch. This will be more in terms of fruit drinks, the biggest market is in drinks,” Duggal, a graduate of BITS Pilani and IIM Calcutta said.

As a preparation for the launch of the beverage brand, Duggal said the company had invested in setting up a new line at its Pantnagar plant in Uttarakhand. This could also lead to a Rs. 50-crore bump up in the company’s capital expenditure for the ongoing financial year though Duggal insisted that it was still likely to be the previously estimated figure of Rs. 350 crore. The company’s capex last year was higher at Rs. 550 crore—a result of company’s new and largest plant being commissioned at Tezpur in Assam.

Vatika relaunch

Launched around 15 years ago, a fatigue had set into the company’s Vatika brand of shampoos. The ‘natural’ platform has become crowded over the years with even the multinationals like L’Oreal jumping into it. The company’s market share has remained around 5 percent in the last few years. Dabur, therefore, has steered the brand more and more to the ayurvedic platform.

The company is basing the new Vatika on the concept of ‘satposhan’ or power of seven natural ingredients. A little help from Kareena Kapoor as the brand ambassador has been engaged.

“So we are flushing out the old stocks and not putting in a new one in this quarter. So this quarter may be little deep for shampoos but the inherent brand has got huge strength, especially in rural areas and we expect strong double-digit growth to start from the third quarter,” Duggal said.

Sales and media spends

The company plans to significantly up its spending on its sales infrastructure and advertising spend in FY18. To begin with, the company has brought on its rolls sales representatives who were earlier doing its rural sales as part of the company’s contract with staffing company TeamLease Services. While the company continues to add people in India, it’s been rationalizing staff deployment at its overseas locations.

The company’s employee expenses may have come down from their FY16 levels but as a percentage of sales, the company is shelling out more. It incurred an expense of Rs. 789.6 crore on employees in FY17, lower by 0.6 percent from a year ago but higher by 20 basis points in terms of percentage of sales.

With winters—when chyawanprash and honey sales jump—a month away, a refreshed Vatika in tow and a reinvigorated Babool needing all the publicity, the company’s media spend is set to jump after last year’s demonetisation forced the company to cut back on advertising. The company spent Rs. 646.1 crore on advertising and publicity in FY17, lower by 16.3 percent year-on-year.

“These two areas (sales infrastructure and advertising spend) you see. Let’s say, the media growth, we are looking at almost at 20 percent growth for the balance of the year. I’m talking about Q2, Q3, Q4. For Q1 it was lower because of GST there was no point in spending too much on media. But balance of the year, 15 to 20 percent growth is what we are seeing. In Q2, Q3, Q4, y-o-y, it will be 15 to 20 percent growth in terms of media spend which is much more than our topline,” he said.

He said the company had doubled the number of people for its rural initiatives. “And all that costs a lot of money but it is worthwhile because our rural growth is now becoming much better than our urban growth,” he said.

So where does that leave the topline growth and margins?

“We want to rebuild the topline. It is important for us to grow volumes in the higher single digits. We may or may not do it but that is the endeavour immediately. And If are able to do it, then margins will automatically improve,” he said.

Demonetisation and competition dented the company’s FY17 topline by 2.2 percent to Rs. 7,680 crores even as it improved its operating margin 30 basis points to 19.6 percent.

Comfortable with the current margins, Duggal’s focus is thus clear: it’s the topline that deserves all the attention.

“We don’t do outlooks but I think the volume growth for this year would be in the region of 5 percent to 10 percent despite the fact that the first quarter was a negative growth of around 5 percent. We still are hopeful that we can get, maybe not to 10 percent, get into higher single digit through the balance of the year and 5 percent to 10 percent for the full year. Balance of the year means Q2, Q3 and Q4,” he said.

If Duggal succeeds, he may well have proved: While ‘Give me Red’ may beat in the heart, Dabur’s own tagline ‘The Science of Ayurveda’ has a mind of its own.

Click to read the complete transcript of the interview