Eyeing growth in mid-teens; focus on mkt share, rural penetration, stable margins: Dabur

The momentum in products like honey is good, while the market share in toothpaste and hair oil segment is showing good traction. Other segments are showing a stable to slight increase in market share.

In the oral segment they have been gaining market share, which currently is around 16 percent, said Duggal.

Moreover, categories in which their brand and Patanjali brands converge, the company is doing well.

Below is the verbatim transcript of the interview.

Latha: Just estimate this demand scenario for us? Post-harvest has it been good and how do you see FY19 considering that everyone anticipates a lot of government spends?

A: The last two quarters have been pretty sluggish. Category growths are best attending in the low to mid-single digits. So, we have seen no upsurge in demand post the monsoons. Going forward, we do see demand to accelerate, rightly by what you said. There would be government’s spending and stimulus which would lead to improved demand. A lot depends on the monsoon and if that pans out to be good then I think we should see a definite uptake in demand from the current pretty low levels.

Sonia: When you say uptake in demand what are we looking at in terms of volume growth because if I look at the last two to three quarters volume growth has been pretty decent, I mean 8 percent in Q2 about 13 percent in Q3. Is that a trend that you think is likely to sustain?

A: Q2 was decent, Q3 was even better on the back of a low base, but I talk about a category growth as reflected by the syndicated data they still show growth in the region of low to mid-single digits. So, that is not very encouraging. I think we probably seen the bottoming out of this. I always maintained that we will see acceleration in demand partly on account of a low base in the first quarter of next year and then given a good monsoon to further accelerate in the subsequent quarters. So, I am looking forward to a better 2019, 2018 is ending on a pretty subdued note.

Anuj: What about oral healthcare space? When we go to malls and place like D-Mart, obviously there is a lot of shelf space which is there for Dabur. In terms of market share where are you right now and have you picked up over the last there months?

A: We are trending at around 16 percent. We have gained share every quarter and next quarter and subsequent once we should see further acceleration in our market share gains. We are in a pretty sweet spot. When I spoke earlier about low category growth etc. we do intend to beat those by some margin. I think we are looking at growth even in the near term more in the region of around of 10 percent odd. So, we will have to outperform the market. The market tailwinds are not there. We will have to do better than what the market is growing ahead.

Latha: I take your point that it was the low base that helped your volumes look good in the third quarter, so if you can give us a 9 month view?

A: It is hard to give a 9 month view. Like I said the first quarter would look good again on the back of a low base and then the real challenge begins from the second quarter of next year when the base becomes normalised. That is when a combination of a decent monsoon and government stimulus would help us accelerate growth. We are looking at growth in the teens next year, hopefully in the mid-teens but definitely in the low-teens. This year of course has been little bit disappointing on the back of first two quarters.

We will have to not depend upon the market tailwinds to support our growth. We have to develop growth on our own through market share gains, through deeper rural penetration, to better category management and that is what the endeavour would be. So, I keep telling my team that don’t depend upon the market to support you, you have to outperform and that is the only way you can grow in the teens.

Latha: I wanted to ask you about margins. There was one analysts who was saying that this is going to be reflation after last year’s deflation or rather fall in rates and prices. Do you see that being an advantage price at all?

A: There would be some re-inflation we are seeing the inflation numbers trend ahead of what we have seen in the last two or three years. Now having said that we will be able to hold on to our margins on the back of price increases and better management of cost. So, I don’t see margin pressure being really a source a great concern at the same time improvement in margin looks a little bit hard to achieve. So the endeavour for the company would be to grow in the double digits at least in the low teens to mid-teens on the back of sustainable margins and that is really what our plan is for the next year.

Sonia: Lot of companies like Dabur were hit because of aggressive pricing from competitors like Patanjali especially in spaces like oral care and honey, has that threat faded away or does it still exist?

A: Most of the bad news is behind us. Now our honey growths are 25-30 percent of course on the back of a low base, but the momentum is very high in honey. Likewise in oral care we were never really affected likewise in Chyawanprash etc. So, I don’t think the competitive environment is now as obstructive as it was year or year and a half ago. Many of those headwinds are behind us.

Sonia: But Patanjali doesn’t think so, I mean a lot of their company officials have been indicating that they have grabbed almost half of the market share especially in segments like honey. Is that over exaggerated and how is market share doing in these spaces honey, oral care?

A: We know our market share numbers and we know their numbers while these numbers are not syndicated, so they are not publicly available. We have seen some de-growth in shares last year and I think we have fully made up that loss this year. So, there is no pressure at all. If at all Patanjali has also grown the market to some extent particularly in categories like honey and for herbal toothpaste and that has benefited us. Because we have partaken of that growth, so in the categories in which our brands and Patanjali brands converge we are actually doing pretty well. So, I don’t see any issues on that front.

Latha: In which products have you increased market share already and where do you see the trend in the next one year in terms of increasing market share?

A: The recent increases have come from toothpaste and hair oils, these are two categories where our shares have grown. They remain stable or little bit increased in many other categories like air fresheners, shampoos etc. but these two categories and these are big ones for us, we have actually seen good growth happening in the last few quarters.