New Delhi Jul 31, 2020 (Thomson StreetEvents) — Edited Transcript of Dabur India Ltd earnings conference call or presentation Thursday, July 30, 2020 at 10:30:00am GMT

Anived Portfolio Managers Pvt. Ltd – Principal Officer

* Prasad G. Deshmukh

Spark Capital Advisors (India) Private Limited, Research Division – VP of Research

Ladies and gentlemen, good day, and welcome to the Q1 Results Investor Conference Call of Dabur India Limited. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you.

Gagan Ahluwalia, Dabur India Limited – Senior General Manager of Corporate Affairs [2]

Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this conference call pertaining to results for the quarter ended 30th June 2020.

Present here with me are Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Adarsh Sharma, Executive Director, Sales; Mr. Lalit Malik, CFO; Mr. Ashok Jain, Senior Vice President, Finance and Company Secretary; and Mr. Ankush Jain, Head, Financial Planning and Analysis.

We will now start with an overview of the company’s performance by Mr. Malhotra, followed by a Q&A session. I now hand over to Mohit. Thank you.

Thank you, Gagan, madam. Good afternoon, ladies and gentlemen. Thank you for joining us on Dabur India Limited’s conference call pertaining to the results for the quarter ended 30th June 2020. I sincerely hope that all of you are safe and healthy. The COVID-19 pandemic continues to impact our lives and livelihood across the globe with number of confirmed cases increasing to 16.3 million globally and 1.3 million in India. While the world waits for the COVID vaccine to become a reality, the global community is adapting to this new normal and lockdowns are being gradually eased across the globe. COVID has impacted economy significantly and the world GDP is expected to decline by 5% during 2020 calendar year.

In these challenging times, our company has stayed true to its vision of being dedicated to the health and well-being of every household. This is demonstrated by our recent launches that are anchored on growing consumer need for immunity, health and hygiene.

Coming to our performance for the quarter, we saw a 12.9% decline in consolidated revenue from operations. Our domestic FMCG business saw a decline of 6.9%. While April was complete washout on account of lockdowns, we saw sequential improvement in the months of May and June, with business returning to a near-normal level. While our consolidated profit after tax declined by 5.9%, the stand-alone profit actually grew at 12.3% in net profit aided by aggressive and proactive cost management in India business.

Our range of relative — of relevant immunity product — building products and innovative new product launches helped the health care portfolio record a strong 29.2% growth. This was supported by a series of topical marketing campaigns, localized sales activations and sustained investments behind our power brands. The health supplement business grew by 52.6%, led by 7x surge in sales of Dabur Chyawanprash, strong double-digit growth in Dabur Honey. Dabur Chyawanprash and Dabur Honey saw an increase of around 600 basis points and 300 basis points in their market share, respectively. Digestives category recorded a decline on account of restricted outdoor activity, minimal outside food consumption and closure of restaurants and HoReCa business.

OTC business reported a strong growth of 34.4% on back of robust performance of Honitus and NPDs like Tulsi Drops, Haldi Drops, Ashwagandha tablets, Dabur Immunity Kit, et cetera. The Ethical business also performed very well, reporting a 10.7% growth on back of strong demand for immunity boosting products such as Dabur Ayush Kwath, Ashwagandha, Giloy Ghan Vati, an expansion of our Churna range.

Within HPC business, Toothpaste portfolio recorded a growth of 2.6% with Dabur Red Toothpaste continuing to outperform the category and growing at 8.1%. Our market share in the Toothpaste category witnessed a 60 basis point gain vis-à-vis last year. The quarter also marked the test launch of a new ayurvedic toothpaste, Dabur Dant Rakshak, in select markets where the equity of Dabur Red Paste is weak.

Hair Oils reported a decline on account of continued slowdown in the category. Dabur Sarson Amla posted a high single-digit growth during the quarter. Our market shares increased by 20 basis points in the Coconut Oil category and 40 basis points in the value-added Hair Oil category. We are witnessing a higher demand for economy offerings in the Hair Oils category as we continue to pursue the flanker brand strategy with investments behind our power brand, Dabur Amla.

The Shampoo portfolio recorded a 9.3% decline. In comparison, the overall shampoo category reported a decline of 25% during the quarter. Our market share in shampoo market increased by 120 basis points, touching 6.4%. Our focus continues on increasing the bottle saliency and widening our portfolio on Ayurvedic/Herbal platforms.

Home Care and Skin Care categories reported a muted performance during the quarter due to discretionary nature of the portfolio. That said, our recently launched product such as Dabur Sanitize Hand Sanitizers and the cleaning and disinfectant range under Dabur Sanitize and DASL brands posted a strong performance. In fact, the newly launched Dabur Sanitize brand has registered a growth of INR 90 crores during the quarter.

With the institutional, HoReCa, enterprise and CSD businesses shut down due to the COVID lockdown, the Foods business reported a decline of 34%. The minimal out-of-home consumption and consumers staying away from cold beverages due to the fear of getting cold and cough further hurt this business. That said, our market shares in J&N category saw an increase of 300 basis points, reaching 60%.

We have expanded our Foods portfolio with the launch of Real Mango drink in the pet bottle and milkshake under the Real brand, which marks our entry into the value-added milk category. The culinary business under Hommade brand recorded a growth of 6%. We are expanding our portfolio under Hommade with the introduction of chutneys and pickles, which were launched during the quarter.

International business recorded a decline of 21.6% during the quarter, while markets like Turkey, Bangladesh and U.S. witnessed a strong growth. The overall business was dragged down by declines in MENA, SSA and Nepal markets. MENA continued to face macroeconomic headwinds due to lower crude prices and outward movement of expats, which has led to shrinkage in the population and hence decline in categories. We are trying to mitigate these headwinds by tapping into newer categories, driving sales aggressively.

We are also looking at cost optimization initiatives across the business, which would help us manage our profitability. We have stepped up innovation across the categories. In addition to the products I mentioned in the last call, we have launched a range of new products to address emergent consumer needs in the health and hygiene segment. The new launches during the first quarter include Tulsi and Ashwagandha variants of Dabur Honey, Dabur Ashwagandha tablets and capsules, Ayush Kwath and Kadha, Honitus Adulsa Cough Syrup and Lal Shar, which is ayurvedic calcium supplement for kids in the health care space.

In the household and personal hygiene category, we have expanded the Dabur Sanitize brand with the introduction of antiseptic liquids, germ protection soap, air sanitizers, besides launching a Veggie wash under the Dabur brand.

Going forward, we intend to drive our business by staying focused on health and hygiene, driving innovation, broadening our play in select markets, focusing on e-commerce and modern trade besides expanding and enhancing our efficiency in our distribution network. These initiatives will be further coupled with cost and cash flow management to ensure healthy margins.

I would like to take this opportunity to acknowledge the superlative efforts of each and every member of the Dabur family from our plants to the sales organization who have gone above and beyond their call of duty to ensure uninterrupted supply of our products to consumers in these extremely challenging times. The pandemic has also transformed Dabur into a stronger, more agile enterprise with the entire organization working together as a cohesive team to ensure profitable growth. We have significantly enhanced our risk-taking ability as an organization, moving from a fearful to a fearless attitude. COVID has, in fact, acted as a catalyst for change.

Going forward, we will continue to build on this transformation and take our business on a stronger trajectory — growth trajectory by leveraging our power brands, exploring new opportunities and broadening our portfolio potential across categories.

With this, I’ll now open the Q&A and invite your questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Manoj Menon from ICICI Securities.

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Manoj Menon, ICICI Securities Limited, Research Division – Research Analyst [2]

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Mohit and team, absolutely brilliant performance actually in the context. My first question is actually on the new launches, which you had had. Now 2 ways of looking at it. One, there are lot of new launches which you had, which appears tactical, quite a few of them structural and quite a few of them possibly for the medium term. Just wanted to pick your brain on 2 things: One, with these number of launches which you have done, is it now one, more of a consolidation for the rest of the year and maybe even for a couple of years? Is that 1 way to look at it? And second question here is, some of the launches, specifically, let’s say, the toothpaste launch, just trying to understand what is the need gap, which you’re trying to address?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [3]

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Right. Manoj, thanks for your compliments. I think, indeed, a superlative work done by the team here, like I mentioned. So on the new product launches, I think new products contributed to 6.1% of our overall turnover that we registered in the first quarter. I think this is completely stupendous. Since I took on the business here, I wanted to embark on innovation in Dabur, which is taking its time. But I think because of this COVID time, we could really usher in this fearless attitude of doing innovation. So doing innovation in the company is very structural. It’s very planned. It’s extremely strategic. It is not at all tactical. I think in all product categories wherever we are representing, we have to innovate. Innovate whether it’s in adjacencies or innovation in packaging or innovation in appeal or innovation in improvement of products, that, in any case, any company has to do if it has to survive over a longer period of time.

So now coming to your question over the tactical, structural. I think we have launched NPDs in the areas wherever we saw contextual relevance here. So we saw contextual relevance happening in immunity-based products. So you see the entire health care portfolio that we have launched during this period is extremely immunity-led, it’s very relevant, and therefore, it’s extremely structural and strategic. I don’t think post COVID, it will disappear in any which way. Giving you some illustrative examples, like Tulsi Drops, Haldi Drops that we launched, this market was already there. And the way Chyawanprash came into Dabur’s portfolio some years back, so has Tulsi Drops now come in. So whether it’s Tulsi Drops or Tulsi tablets or Tulsi powder, this is very, very structural for us, and it already existed in our ethical portfolio.

So what we’ve actually done is we have expedited the transition or the movement from ethical range to OTC range and started giving it a facelift and making it available to the grocery channel and the mainstream chemist channel rather than going through a doctor prescription route. So health care, extremely strategic. The hygiene products that we’ve rolled out, sanitizers, in which we’ve got a sale of roughly around INR 80-odd crores on the global business, that is also structurally done because it was extremely contextual at this time, and most of the FMCG companies went into sanitizers. Whereas sanitizer as a business will perpetuate and sustain, I cannot say, but the way COVID is going and the cases are increasing, I think hygiene as a habit will get more ingrained and will sustain over a longest period of time. Not to the extent sales we’ve seen now, it will mute, but it will sustain as a habit. In the home hygiene, whatever we’ve launched, personal and home hygiene, some of them are structural and some of them are tactical in nature. So broadly, I think it’s more strategic, the way we’ve gone. If you look at our power brand strategy also, in Oral Care, we saw a gap, a sweet spot of around INR 40 price point, which we were not there. Our Dabur Red is at INR 50 price point for 100 gram. Patanjali occupies this INR 40 sweet spot with the consumer, which we were not plugging the gap. So we have just test marketed in the Hindi-speaking belt where Dabur Red happens to be weak, and we are testing it out offering. The product is extremely good. The initial response is around 20% to 30% repeat. But we’ve just started advertising. So early days yet for us to talk about it.

In Hair Oil business, we’ve introduced a lighter format under Dabur Amla, strengthening the Dabur Amla franchise. This is also extremely strategic for us. Yes. I think I’ve answered your question.

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Manoj Menon, ICICI Securities Limited, Research Division – Research Analyst [4]

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No, no, understood. Understood, Mohit. In fact, I just — when you were speaking, I was thinking about the first meeting I had with you, maybe a couple of years back or even before that when you’d just come back to India. I think lot of those which you told me just reverberated as you were speaking, actually just playing in front of my eyes. Good luck. Now second question on top-down, and then I have a few brand questions, which I’ll take separately after the call. Is all your thoughts currently on, let’s say, the new ways of working, new ways of, let’s say, looking at costs, new ways of reaching the consumer, the customer, the telecalling, the new CRS, just some thoughts at this point in time on 3 or 4 big changes which you would think will stay with the organization and potentially competitive advantage after the noise of COVID hopefully gets over in a few months.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [5]

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Yes. So I think first I’ll talk about the GTM. In GTM, there are some structural changes that we’ve made. I think, first, I’ll talk about immediate changes, which just came into being and some of the changes that we were planning for a long run, which has happened to fructify right now. The first immediate change which actually happened post COVID is actually post March. In March, we could not actually do a preseason loading. So therefore, we corrected our pipelines in March. And we further corrected the pipelines going forward in the month of April due to the lockdown and then in May and June. And we’ve not filled up the pipeline. Our pipeline used to be in the range of around 21 to 22 days, which has now got corrected to around 16 days. I think there is still a further scope of correcting the pipeline. It is what we wanted to maintain a hygiene at this time because we wanted to ensure ROI of the distributor because liquidity is in a big crunch with the distributor. So we wanted to correct the pipeline and it happened so that we’ve been able to correct the pipeline while increasing secondaries with the NPDs coming in. So the turnover did not suffer and we could correct the pipeline in our regular power brand. So that’s first structural change that we’ve done by reducing the pipeline. Because we could reduce the pipelines, we’ve embarked on secondary-based sales monitoring system. When we say secondary-based sales monitoring system, this has been implemented because the pipelines have got reduced. Now we are monitoring the secondary, and we are maintaining a norm of the inventory and secondary translating into primary, and this is the CRS that we are implementing on a system basis, a continuous replenishment model. That’s the second change that we are doing.

The third change what we have done is we have upgraded our Drishti. Drishti is the retail app in which the salesperson actually books the order and we have the visibility. We had a old system called Core Stocky. We’ve actually based Stocky to Core Stocky. We’ve actually upgraded our Drishti system. So that is the third change, which has actually happened for us.

The fourth change which has happened is because we were monitoring the debtors very closely; earlier, we were dependent on the stockist’s check leaves. We used to take the checkbook from the stockist. And we have converted that physical transmission of payments to digital mode of transmission of payment by implementing NACH, et cetera, and digital payment through. It’s a system that we’ve already implemented. Around 75% of the stockists have already moved on. Balance 25% also we are closely monitoring and will actually move on. Then we are settling the claims, which used to be paper-based, now completely paperless claims will be there.

During the COVID situation, what happened, demand was yo-yoing. We did not really know that where the demand would be. And to estimate the demand, it is very important for us to indicate to supply chain as to how is the demand moving so that the production capacity could be spruced up, manufacturing could be spruced up to suit the demand. Therefore, we embarked on rapid S&OP meetings. Instead of doing a sales and operation planning meeting every month, now we are doing sales and operation planning meeting every week. That has really helped us to understand the pulse of the business and to be able to deliver on time in full to e-commerce, to modern trade and also to the stockist end.

Then we are also putting up a system wherein we are monitoring the inventories at the stockist level at the SKU level. So minimum quantities will be kept at the stockist level and the norms would be formed. These are some of the structural changes which will endure over a period of time as far as S&D is concerned for us.

The second big structural change within the organization is that we’ve become very nimble and agile. Now we’ve found a formula on how to crunch the new product launch time line from maybe 1, 1.5 years to almost like 2 months and not to compromise on the quality of the product. Thanks to COVID. So we’ve become more agile and nimble as an organization and also more fearless in terms of the culture of the company.

So these are the broad changes. There are a lot of other changes also in HR that we have done, et cetera, but I think we can take it off-line from here.

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Manoj Menon, ICICI Securities Limited, Research Division – Research Analyst [6]

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Understood. That was extremely detailed. Just only 1 aspect. Thanks for covering the front-end part of it. Just also, if any comments on the — anything on the cost side, which is going to stay with you for longer?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [7]

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Yes. So we’ve embarked on a project called Project Samriddhi. So what we are doing in Samriddhi Project is we are looking at all aspects of the value chain in the company right from sourcing to raw material, to packaging material, to supply chain, direct costs, indirect costs, fixed costs, variable costs, infrastructure costs, CapEx, everything is being seen fine toothcomb here, and we are trying to benchmark ourselves to the best-in-class. So we are seeking some expertise from outside consultants, and we are actually benchmarking our raw material, packaging material prices. And we’ve already budgeted a INR 40 crore of saving in the budget that we’ve taken. And we expect around INR 100 crores to INR 120 crores saving coming out of Samriddhi Project. All that will not flow into the operating margin, that will be required for deploying it back in the brand building.

So this exercise of Samriddhi is also not one-off. This is an ongoing activity. So we have started right now because we had to become very cost conscious because there was a deleverage happening from top line depression. So we had to embark on cost-saving activities. So — but this will endure over a period of time. So this could be Samriddhi 1 and Samriddhi 2.0, et cetera, et cetera, which will keep perpetuating going forward. Even in terms of international business, we’ve taken on cost-saving projects there.

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Operator [8]

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The next question is from the line of Latika Chopra from JPMorgan.

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Latika Chopra, JPMorgan Chase & Co, Research Division – Senior Analyst [9]

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Mohit, my first question was on the revenue growth momentum, clearly in this quarter was supported by health care portfolio. How sustainable you think these trends are particularly for Chyawanprash? And how much of this growth could be opportunistic in the sense that you would have got new consumers in — on board. And how much of this demand do you think will stay sticky? What I’m just trying to understand is, you’ve typically always highlighted that 8% to 10% is a more normalized growth momentum for Dabur. Do we see a case now with all these initiatives in place, where this could be increased?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [10]

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Yes. Okay, Latika, as far as — I already added some color to it. Health care, in my mind, is not all the new initiatives that we’ve taken in health care. They are not tactical in nature. They are more strategic in nature, and we are also trying to get into more mainstream categories. I did not add here we propose to get into value-added teas also, which is extension of thoughts from our Honitus brand and Dabur launching a Kadha. So we are, therefore, introducing a value-added immunity tea also. So these trends will endure because those categories are huge, and we will only gain share in those categories. And also, we might take Chyawanprash into a different format. So that is also being explored. And that in the next quarter, you’ll see some action happening on that.

So these trends will endure, and they are not tactical in nature. As far as Chyawanprash surge of sales is concerned, yes, this is off-season for Chyawanprash. Last year, around INR 10-odd crores, and this year we’ve done a 7x kind of growth in Chyawanprash. So a huge surge that we’ve seen. This may not sustain over a period of time, but this will get compensated by a lot of new other entries that we guys are doing.

So that will structurally sustain in the business. But overall, I feel health care contribution to business will increase. In this quarter it’s gone up by 10 percentage points. So from 30% contribution, it’s almost like 40% contribution now. And I think health care contribution, which is also profitable and more accretive — margin accretive to us will only go up from here.

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Latika Chopra, JPMorgan Chase & Co, Research Division – Senior Analyst [11]

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Sure. Then just next one on — here, sir, you mentioned about you want inventory levels to be lower in the channel structurally. Are you now back to comfortable inventory levels? Or is still more to go at a retail level as the full reopening of economy happens? And also, any comments on your direct reach impact?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [12]

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Yes. So inventory levels are actually okay. So we are pretty much at the peak of hygiene level, then we could have 16 days of inventory is fine. But if you ask me, is this the best-in-class? Answer is no. I think there is a fair amount of inventory correction still required of around 4, 5 days of inventory still needs to be corrected if we really need to be operating as best-in-class inventory management company with the stockist. So but for that, we have to improve our SQ level availability, our range level availability at the stockist end, which is what we are looking at. Today, our RA level availability at the stockist is in the range of around 70%, 75%. The moment it goes up to around 90 percentage point level, we’ll be in a position to reduce this inventory by another 5 days and bring it to around 11 to 12 days level, so that the market servicing is not impacted, and there’s no loss of sales because we have such a huge portfolio.

So there is a bit of inventory correction. We will try to do that during the course of this year. But depending upon how the business trends and how our new products fare, we will have to look at the inventory corrections more. So what was the second part of the question?

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Latika Chopra, JPMorgan Chase & Co, Research Division – Senior Analyst [13]

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I was just trying to understand, so what you’re saying is that sequentially you feel from a channel selling perspective, there is no further scope in the current quarter for you to grow because April you would have seen correction inventory levels, then you would have increased it through the course of the quarter?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [14]

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Yes. So whatever downside that we had in the month of April, got compensated. So whatever STRs were lost at the retail level, that got more than filled in, in the month of May and June. And even if we look at July, we are almost trending at the levels of June business. So whatever we lost in terms of inventory that already got — that’s already plugged in. And in July also we are seeing similar trends. But that said, there are pockets where — of disturbances and there are pockets of channels where still things have not really come to a near normal. Like CSD has not opened up, like cash and carry has not opened up, like institutionals, HoReCa channel. That is impacting our food business. So that is still yet to get into the recovery path. And whatever pipelines that we have lost there will get plugged in, in those channels as and when those channels also open.

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Operator [15]

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The next question is from the line of Percy Panthaki from IIFL.

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Percy Panthaki, IIFL Research – VP [16]

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Congrats on a good set of numbers. My first question is on your gross margins. So your gross margin has on a Y-o-Y business — sorry, Y-o-Y basis remained flat. So just wanted to understand if, I mean, there is any adverse mix effect which has led to this? Because crude is down and across the board this quarter, promotional expenses are down in FMCG. So gross margin should have expanded. Also the fact that your Foods business is down much more. So that’s actually a positive mix, at least on that count. So why is it that your gross margins are sort of flat Y-o-Y?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [17]

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Yes. So Percy, if you look at the India business, the gross margin’s actually expanded by around 126 basis points. And that expansion is on account of benign raw material prices. And to your point, also the crude prices have been low, and that’s the benefit that we’ve had in our HPC business. That said, HPC business actually declined about 15% for us. So it wasn’t too much exaggerated this impact. And also, the consumer promotions and trade promotions have been lower. To that extent, gross margins have got increased. Plus, there was a 1.5% of price increase carryover, which happened from last year, that has also led to this 125 basis points of gross margin increase in the India business.

Now when you look at international business, the things reversed. In international business, our [PPCP] actually went up because there was so much of pressure in the market, we had to give consumer promotions. So therefore, the gross margin came down, plus the MENA business, which is a high gross margin business went down to around 42% where other businesses like Turkey and U.S., which are low gross margin business increased. So country mix unfavorably impacted the gross margins in the international business. So the sum of 2, you see almost flattish sort of gross margins. But in India, gross margin definitely expanded. And that has flowed down to the operating margin. That’s why you see operating margin growth of more than 250 basis points.

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Percy Panthaki, IIFL Research – VP [18]

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But Mohit, the fact that even in India, pricing is up 150 basis points. And even if costs were flat, that should have given 150 basis points. The fact is cost is down, pricing is up, mix is favorable and promotions are lower. So it should have been much higher than 125, isn’t it?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [19]

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Not really. Our agri commodity market has actually gone up, Percy. We see — we are seeing an inflation in our agri commodity because Amla — because of surge in Chyawanprash, amla fruit wasn’t available, and there’s been a surge in prices of Dabur Amla fruit, and this happens to be off-season for us. So that has led to an agri basket increase inflation, I think. So we are seeing a 3% inflation, whereas 1.5% was the price increase. So to that extent, there was a dent. But your point is right, even the food business, which is a low-margin business, was dilutive. So that’s also happened. Plus, there were some other impact of area based exemption also which we lost. That’s also impacting our gross margins in the India business.

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Percy Panthaki, IIFL Research – VP [20]

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So how do we look at this number going ahead? Because this quarter, as I said, you had several tailwinds. Going ahead, your Foods business will improve, so the mix will actually, from a margin point of view worsen. Your promotions will increase from a very low base that you’ve seen in June. No further benefit will come in terms of cost. So unless you’re going to increase prices in the near future, this 125 basis points will sort of disappear going ahead. Is that right?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [21]

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So not really, the crude prices still remain benign. So a part of our portfolio is definitely impacted, which is going to be margin accretive to us in gross margin. Foods portfolio, yes, there will be improvement, so that will negatively impact the gross margin. But our health portfolio continues to see a surge. So I don’t see Chyawanprash — and the season of Chyawanprash is approaching and season of Honey is approaching being winter. So there also this is a high-margin season for us because our health care portfolio goes up, that’s the second piece.

So we see a 3% inflation happening in agri commodity, but that will be, to a certain extent, offset by the price increases that we will have to do. And we don’t have so much of competitive intensity in health portfolio that we cannot take up this price increase. We are the price makers in the marketplace. So we will take up that price increase also. So that is the third factor. Plus, we told you that we are embarking on Samriddhi as a project, and we’ve already budgeted INR 40 crores of savings on account of Samriddhi. That will also kick in. As we speak those savings will come in.

So I will see an increase in the gross margin for sure. Now that will not flow down into operating margin because I have to fund Adpro also for new products. So it will be partially funded and partially there will be a flow-through into the operating margin. So we are not overtly worried on this operating margin at the moment at least.

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Percy Panthaki, IIFL Research – VP [22]

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Understood. My second question is, could you give some idea on what is the secondary sales growth in June in India?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [23]

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Our secondary sales growth in June in India will be in the range of around 7% to 8%, roughly. 7% will be our secondary sales growth. If we look at the whole quarter also, while the business has gone down by around 6.8%, our secondary business is only down by 5%, and we’ve done that pipeline correction to that extent. So secondary business is trending at around 7% despite HoReCa, institutions, CSD, modern trade, all not firing.

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Percy Panthaki, IIFL Research – VP [24]

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Okay. And this 7% growth that you’ve seen in June on a secondary basis, again, here, the data is not very clearly available. So I will go with whatever your best estimate is. How much of that is pipeline fill into the retail or wholesale?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [25]

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Very difficult for us to estimate. As I told you, there is not much of pipeline fill because we see a similar secondary trend happening in the month of July also. So I don’t think it’s so much. So I think it may not be sustainable, but there are a lot of channels, which are still not operating at the near-normal level, like modern trade is not operating at a near-normal level. It’s still shut. Big Bazaar, it’s still down. CSD has not opened up. So broadly, I think we should be in a position to sustain around that kind of a secondary level.

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Percy Panthaki, IIFL Research – VP [26]

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And on the point of channels, could you give some idea on what is online channel now as a percentage of your sales? And what kind of growth you’re seeing there?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [27]

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Yes. So online has been a star. In this period, like Chyawanprash is a star in our portfolio, in channels, online has been a star. E-commerce, percentage of business from 1.5% has gone up to 5.6%, and it’s only trending up from here. So that’s doing exceedingly well for us.

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Percy Panthaki, IIFL Research – VP [28]

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Okay. And also, I mean, if you could give some granularity, this 5.6%, is it like split across different channel partners? Or is it that sort of only 1 strong player is actually taking all the gains?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [29]

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So I think it’s a cross. So it’s a very secular growth that we’re seeing across different platforms, whether it’s the grocery channel, which is bigbasket and Grofers, or pharmacy channel, it’s PharmEasy or Netmed and others, or we see the likes of Amazon and Flipkart. So all the 3 channel types are seeing a growth and which is secular across.

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Percy Panthaki, IIFL Research – VP [30]

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So the reason why I ask this is that a lot of people are scared that if online becomes large enough, then sort of they have power to squeeze margins or launch their own private labels, et cetera. So I’m just asking in that context because if online is big as a whole, but each individual player still remains small, then I think that risk is not there, right?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [31]

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Yes. Because there are so many players, Percy, there is no risk of they arm twisting us and bargaining power shifting in their hands because there are so many players, unlike in the U.S. market, where it is a complete monopoly of one, Amazon, which is handling, big boy. Here, there’s Grofers, there’s bigbasket, there is Amazon, Flipkart, there’s Netmed, there’s 1mg, there are so many players here. So I don’t see that risk happening at all. What we’ve actually done during this period is that earlier we were dependent on a stockist who serviced these online platforms, now we’ve gone direct with them. When we go direct with them, we have a saving of around 5% of that margin that we were giving to the intermediary. So all these channels have now become very profitable for us.

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Percy Panthaki, IIFL Research – VP [32]

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Right. So I thought this is just a good point to address because there’s a lot of sort of questions coming across on this. In a 5-year, 7-year view what can happen if online becomes really big. Do we see bargaining power shifting away from FMCG consumers, et cetera?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [33]

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I don’t think that will ever happen in a country like India, which is so entrepreneurial, and private equity investment keeps flowing into this country. So it will not happen.

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Operator [34]

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The next question is from the line of Arnab Mitra from Crédit Suisse.

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Arnab Mitra, Crédit Suisse AG, Research Division – Research Analyst [35]

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Mohit, congratulations on a very good performance in this context. My first question was on — again, on the new launches. It seems like very well thought out, the launches, the products looked quite good. I was just concerned that because you’ve done so many launches in such a short period of time, is there a risk that you’re running that some really good product could actually fizzle out. Because the consumer needs to be aware that such a product is there, like sort of flavored honey. But the distribution has (inaudible) find it when he wants to buy. That retail — that distribution channel has to handle a lot of new things. So how are you kind of protecting against that risk. That you do a lot of good launches, but actually in so much bunch together that it kind of many of them fail.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [36]

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Yes. So Arnab, you’re right. But I think we are to be — otherwise, we waited for 2 decades for the time to be right for our NPD to be launched. After, I think, around 1 or 2 decades, we’ve seen the time was right for our NPDs, which are there in the ethical business for us to actually launch because the consumer mind is now quite skewed or inclined towards adopting these NPDs, which are more immunity-led. So I think rather than looking at our focus, we looked at more consumer space and I think our sales force was hungry for NPD. So you’re right, NPD success rate is generally in the range of around 10%, 20%. For us, I think, even if it is around 50%, 60%, we are fine with it. Yes.

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Gagan Ahluwalia, Dabur India Limited – Senior General Manager of Corporate Affairs [37]

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And to add to that, Arnab, we also have the e-commerce platform, which makes the product available. It’s otherwise — it’s pretty — it’s very hard to ramp up the new product. So that is 1 benefit, which we will channel — which we will utilize to scale up these NPDs.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [38]

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And to Gagan ma’am’s point, a lot of NPDs that we’ve launched like Veggie wash, et cetera, they are exclusively for e-commerce, and they’ll be scaled up, and we’re launching an entire baby range also which is e-commerce exclusive. So what’s happening is Amazon and Flipkart are also asking for exclusive brand launches. Like apple cider vinegar that we’ve rolled out is also exclusively for Amazon, on Amazon. So only once it scales up, do we extend it to modern trade, et cetera. So that gives us a cradle to actually test all the NPDs first.

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Arnab Mitra, Crédit Suisse AG, Research Division – Research Analyst [39]

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Right. And in terms of just making these products aware to the consumer because they are relatively small and you have so many of them. Is it a digital approach to make people aware that such a product exists? I mean, I’m just trying to see how you bridge that gap, let’s say, of a kulfi or [flavored honey?] Or is it still for mass media or other routes that you think this job will be done?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [40]

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No, so we are using definitely mass media and digital to advertise and also e-commerce platform. So one, I think digital is really helping us. Our digital investment has gone up from 4% to 14% as we speak. So a lot of these NPDs, which have been played out and e-commerce are being activated digitally, and we are spreading the awareness on digital also for the products, which are showing promise. And like Tulsi Drops, in 1 quarter, it’s become INR 7 crores for us. It’s showing a very good promise for us. This we have immediately shifted to mass media. Toothpaste will be mass media. So the products in which we don’t find too much of traction, they will be more digital initially. Once they scale up, then we’ll shift the investments to mass media also as and when we see the turnover is coming in.

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Arnab Mitra, Crédit Suisse AG, Research Division – Research Analyst [41]

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Okay. And my last question was on this recovery in June and July that you’ve spoke about to positive secondary sales. Is it across the board? Or are you seeing the weaker segments like Foods and personal care which were deeply negative for the full quarter have come back much more while the health care business growth is similar to the full quarter levels? And any sense of the recovery in the weaker parts of the business?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [42]

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So you’re right, Arnab. So we are seeing recovery also in shades. For example, in Hair Care, the recovery, the brands and the categories are still in the negative trajectory. In Home Care also it’s negative. In Skin Care also it’s negative. In health care, we are seeing an even positive trajectory happening. In home and hygiene, there is a positive trajectory. But in the areas where there was negative trajectory, there is definitely a recovery. In Foods, which was down by almost 50%, is now down to a level of around 17-odd percent. In Hair Care, which was down — Hair Oils, which was down by around 25%, now we see the business down by around 12 percentage point level. So that’s the kind of recovery what we’ve seen. But not in every category have we seen green recovery, which is completely in positive.

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Operator [43]

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The next question is from the line of Prakash Kapadia from Anived PMS.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd – Principal Officer [44]

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Yes. I had 2 or 3 questions. On health supplements, we’ve done wonderfully well, congrats for the new pipeline and the new launches. My question was, what is the consumer behavior which you are seeing? Because historically, what I understand, Mohit, Chyawanprash taste acceptance was always a big challenge for us. So now what are the trends you’re seeing in consumer behavior based on our leadership in this category? And is there a plan to launch smaller SKUs induced trials and then get consumers to migrate to larger scale, especially in Chyawanprash?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [45]

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Right. So Prakash, consumers are actually shifting towards ayurvedic based health supplements as prevention and prophylactic sort of prevention for COVID and therefore, Chyawanprash comes in to expand immunity or help the immunity aid for sure. So therefore, what’s happening is penetration of Chyawanprash used to be low single digit. I would anticipate the results are yet to be out from a consumer panel, but I think the penetration of Chyawanprash would have drastically gone up. And these are these black swan events, which actually take up the penetrations of product categories like Chyawanprash and honey. So definitely that behavior change has actually happened, and now people have got used to the taste.

And if there’s a barrier to try a brand and once the barrier is released because of the COVID or whatever the situation is, then the continuity will be established and the penetrations actually go up. The second point to your question is, are we launching newer formats or affordable SKUs? Yes, we are launching newer formats, which are — which will bring the price down. So I can’t talk on that right now. But yes, we are planning newer formats, which will take down the prices and also make Chyawanprash available in better formats. Powder, I alluded to before. But there are other formats also in the pipeline that we guys are planning on Chyawanprash. And this is the best time to extend Chyawanprash into other convenient formats for the consumers to try.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd – Principal Officer [46]

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And if I looked at the Foods business from a longer-term perspective, it’s been, I think 5 or 6 years now, we’ve been around that INR 1,000 crores. So what is the biggest challenge? Is it repeat purchases from existing consumers not happening, which is why we might be (inaudible) kind of a trend? And what has been the contribution of HoReCa and CSD because that can have a near to midterm impact, given what is currently happening in this space.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [47]

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Yes. So what’s happening in Food, the category is actually declining by more than 50% in Food. And we guys are — I mean, they are increasing our market share. Our market share has actually gone up by 300 basis points in the Real brand. So we are definitely ahead of the curve as far as other companies are concerned in beverage business, especially J&N business. So what’s happening to the beverage business, why the business is down is people are moving to cheaper alternatives and also moving to milk-based alternatives here. Milk has really seen a surge during this time. And because people were not moving out, out-of-home consumption got impacted and 200 mL, which is the SKU for out-of-home consumption contributes to more than 40% of our business. So that got impacted quite a bit. And people were also not wanting to drink cold beverages, and juices are invariably hard cold. So therefore, they were avoiding those also. And sugary drinks also people were avoiding. So this is not completely sugar free. So that’s why that also took a toll on our Foods business. As far as channels are concerned, HoReCa, enterprise and modern trade — HoReCa, enterprise, these businesses contribute around 15% — 10% to 15% of the turnover in quarter 1, which happens to be the season comes from these channels, they were completely shut down. But now if I have to give you what is the future of this. If you look at pre 3 months back, the growth of beverage business in the month — in the last quarter before March was around 10 percentage points.

Now we think we should go back post normalcy to this trajectory of around 10-odd percentage point levels once these channels normalize in Foods.

And not just to operate in J&N category, we’ve also extended ourselves into larger categories, which is a pet bottle and also INR 10 price point in coolers. And now we’ve gone into milk-based beverages and also launched Real Apple variant in INR 10. So I think on back of all these initiatives and innovations, we should turn the bend on Foods. So I know I’ve been saying that since many calls, but we get interfaced with these one-off events like COVID and all and nobody could help that.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd – Principal Officer [48]

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And is it repeat purchases not happening by existing consumers a bigger challenge or is it from the newer consumers not getting the nector and juices category a bigger challenge?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [49]

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Sorry, I didn’t get the last part of the question.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd – Principal Officer [50]

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I’m saying, in the Foods business, is repeat purchases not happening a bigger issue for growth or newer consumers not coming in a bigger challenge?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [51]

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So I think it’s both. It’s both. It’s just not one. A, newer consumers are not coming and existing consumers are down-trading to cheaper alternatives, which prior to COVID was more soft drinks and more others. So I think — and out-of-home consumption has got severely impacted because people are not moving out. Existing consumer base is not moving out. So if they don’t move out, 200 mL as a pack gets impacted. While 1 liter has seen recovery in the month of June and July, we are seeing a major recovery happening in 1 liter, which is in-home consumption. But out-of-home consumption of 200 mL is still declining for us. So it’s both in a sense.

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Prakash Kapadia, Anived Portfolio Managers Pvt. Ltd – Principal Officer [52]

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And lastly, we’ve seen all of these product launches. Are these available online across the country? So we can experiment and feedback is much faster across wide spectrum of market. Or still they are to be done and certain are on Amazon or Flipkart or Big Bazaar? How is the order?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [53]

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Yes. So the NPDs will be available. So we are giving a first priority to e-commerce because that’s the first board of call for any consumer to go to e-commerce channels and purchase. So that we are doing. And — but distribution expansion will only take its own time. So while we are making the products available to 40,000 to 50,000 outlets, but to go to a 1.2 million or 1 million outlets will definitely take its own time, but we are making an attempt to make them available on online platforms for sure. So if you see majority range should be available on Amazon. And to add it up, we’ve also opened up dabur.com. So dabur.com can also go on to dabur.com and place the order there, and that order is redirected to Amazon if the product is available there. And if it’s not available there, we are also opening up e-commerce service through Dabur itself. That will take another month or so, but that’s also being opened up. Yes.

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Operator [54]

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(Operator Instructions) The next question is from the line of Vivek Maheshwari from Jefferies.

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Vivek Maheshwari, Jefferies LLC, Research Division – Equity Analyst [55]

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My question, both the questions are on new launches only. First, Mohit, you mentioned about inventory days going down the endeavor to use this as an advantage. But when you’re launching products so aggressively, is it possible to actually prune down the overall channel inventory because there will be a build-out phase, right, when you’re launching product across the basket. So why — and how will it happen?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [56]

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Yes. So Vivek, inventory is more so in the existing products. The new products have just come in. So I think that’s what we are trying to do. We are trying to cut and bring the hygiene in the existing product portfolio that we have, where the inventories were very high and it was impacting the business and the distributor ROI. The NPDs that we are launching are more health care, so they are actually ROI accretive to the distributor, so he will also be willing to add inventory of these products. As the existing inventory of products goes down, only then will be — we, I mean, able to get into the newer inventory. So that’s what we are trying to balance. And we are putting in a CRS system in place for that, which is also going to be helping the NPDs as well. So whatever secondary sales happen will be the primary sales. So it’s both for the existing products and also the NPDs going forward.

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Vivek Maheshwari, Jefferies LLC, Research Division – Equity Analyst [57]

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Okay. Okay. And the other bit is philosophically speaking, let’s say, the way in which I look at your portfolio, at least the 1 that you had in the past, let’s say, Real in Foods and, let’s say, Odomos in Home Care. In both these cases, Dabur was not at the center, the brand Dabur, but it was more the Real and the Odomos. Whereas when I look at your Home Care and even Hommade portfolio, Dabur is right at the center. Do you see any risk to Dabur as a brand, what it stands for because, let’s say, a pickle and a chutney doesn’t fit into that Dabur architecture. So how do you think about, is there any risk whatsoever from that perspective?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [58]

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So not really. We’ve kept Dabur away from brands where we feel there could be an issue, for example, Odonil or Odomos that’s why and Fem brand, which is an epilatory brand. So therefore — barring that, I think we are existing in all the categories which are more health and wellness. And food and health and wellness extends to Foods also. So Hommade as a brand is actually a brand in itself, but Dabur provides credibility, it provides the trust, it provides that legacy of trust to the brand. So it only adds to the Dabur. And the brand introduction also adds back if the product quality is good. So in health care, definitely it makes eminent sense for us. In Real, we’ve kept it Real, but the new amla juices and the other juices, the health juices that you see, they are coming under the Dabur brand, the Dabur Amla Juice is what we’ve introduced. So I don’t think in Hommade, Dabur has played up as much. Hommade is a brand in itself, and Dabur is just providing that kind of umbrella branding or trust in it. We have no intent of getting away from Hommade and only having Dabur. Actually, it’s the other way round. Once the brand is established, gradually, slowly, we will move Dabur out, and it will become an independent brand called Hommade. That’s the way it happened in Dabur Vatika also in international business. Earlier, it was Dabur Vatika, Dabur providing trust as the brand becomes bigger, we release the Dabur name and we get the clutches out of the brand and the brand becomes independent, but in the beginning, before we were to establish the brand, we definitely want to keep the word Dabur here as long as there is no negative impact of the category on Dabur, and which is a study that we do.

Only if Dabur lends credibility to the brand and the category where we are rolling it out, we put Dabur, like in Sanitize, we have put Dabur because Sanitize as a brand is all about health and wellness to the consumer, whether it’s antiseptic liquid or it is a sanitizer or it is a soap. So we are very conscious and cognizant of the fact that we don’t dilute equity of the brand Dabur.

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Vivek Maheshwari, Jefferies LLC, Research Division – Equity Analyst [59]

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Sure. Sure. And lastly, what — in terms of measuring the success, what are the milestones that you’re looking at for all your launches? Is it — and where do you see NPD as a percentage of overall revenues in 3 years?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [60]

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See, NPD as a percentage of revenue used to be around 1%. From 1%, we’ve actually moved to around 5%, 6% in the quarter because we’ve just launched. We’ll be okay if we move to around 3% and 4% of the total turnover coming from the new product launches, that should be fine because a lot of NPDs may not be successful, and we are conscious of the fact that it may not be, but that’s fine as long as it is 3% to 4%. But we want innovation to be right across the portfolio of the company. Whether to reposition or to revamp or to repackage or to improve the formulation, et cetera, that will happen.

We’ve not given ourselves a threshold level of turnover for it to be successful or not to be successful. So we want to gain share in the category that we are entering. That’s the milestone that we keep ourselves, that are we gaining share from the category. Earlier what used to happen is we used to look at if a brand does 100 — INR 10 crores, only then will it be successful. So we have taken off those guardrails now of turnover for a brand to be successful because if you put those guardrails, then there is the internal reluctance on the brand team and the marketing team to launch the product. If the product doesn’t click and doesn’t do INR 10 crores, then they would be reluctant to launch it.

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Operator [61]

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The next question is from the line of Tejash Shah from Spark Capital.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [62]

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Mohit, just if we move to — if we go back to pre COVID days, we were working with the power brand construct and then COVID opened up new tactical opportunities in health and hygiene. So today, looking ahead, obviously, health and hygiene has priority in everybody’s strategy. But where does it leave the power brand strategy now?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [63]

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So Tejash, power brand strategy still remains. In my conference call address also I mentioned that power brands [are doing better.] If you look at the total turnover of the company, we declined by 12.9%. And — but power brands were almost at around 1.2%, 1.3% decline. So Chyawanprash happens to be a power brand, Honey happens to be a power brand, Honitus happens to be a power brand, Real is a power brand, which is under pressure and so is Dabur Amla under pressure. So we continue with the power brand strategy and the flanker brand strategy on Hair Oils. Dabur Red happens to be a power brand, that has actually grown by 8%, whereas the overall portfolio has only grown by 2.6%.

So across the board, if you see, we are focusing on power brands. And power brands are the ones which are taking our growth forward, and we are increasing our innovations in power brands. But to your point, hygiene has come in as a separate, and we did not have a power brand in hygiene, not that we are introducing Sanitize as a power brand, but we’ve — to capitalize on the existing opportunities, it is important for us to get into this category and therefore, Dabur Sanitize and Odomos, Odonil and DASL they are the ones which have come up. I hope I’ve been able to answer your question.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [64]

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Sure. Yes, this was helpful. Second, Mohit, you spoke about being fearless? Hello, am I audible?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [65]

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I can hear you, Tejash.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [66]

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Yes. So Mohit, you spoke about being fearless and going for boldness and NPD also, and that is very much visible in last year or so. So what is the stencil, so how are we going about this in terms of how can we improve the strike rate of new products? Second, what is the GM stencil or benchmark, gross margin benchmark, that we are using to select or eliminate potential new launches?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [67]

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So Tejash, we are very conscious on the gross margin levels and the categories that we are getting in. So if you look at Dabur is existing in 2 categories or 2 portfolios of products in which we gain market share, in which we create market. So if you see the new product launches also that we’ve done, we’ve done it very consciously in the 2 portfolios. One portfolio — am I audible?

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Gagan Ahluwalia, Dabur India Limited – Senior General Manager of Corporate Affairs [68]

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I think (technical difficulty)

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [69]

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Perhaps we can redial. Is it possible for us to redial?

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Operator [70]

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Sure sir. Participants, we request you all to please stay connected while we redial the management. (Operator Instructions)

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [71]

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Hello?

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [72]

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Yes. Hello.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [73]

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Yes, Tejash, so I answered your question on the power brand.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [74]

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Sir, you were just talking about NPDs and gross margin and the strike rate improvement.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [75]

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Yes, that’s right. So as I told you that we don’t have a strike rate target right now on these NPDs because there are so many NPDs that we guys are rolling out. So — but on the gross margin, there is definitely a guardrail that we put in place. So we are looking at — I think there’s a lot of disturbance. So I think we’ll go on the other line and connect back if that’s okay because there’s lot of disturbance here.

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Operator [76]

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Participants, we are reconnecting the management. We request you all to please stay connected. Please do not disconnect your lines. (Operator Instructions)

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [77]

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Yes. Tejash, apologies for this connection disturbance. But coming back to your question. So on the NPDs, if you look at the Dabur’s portfolio, we have 2 types of portfolios, 1 portfolio in which we identify the markets in which we enter and therefore gain market share. The market size should be sizable enough and which is essentially our HPC portfolio and the Foods portfolio. The second part is where we are market creators. Like in health care, we are market creators. Like in Chyawanprash, we have the market lead and we are the ones who create the market there.

So if you look at the NPD launches, there also we’ve done the same thing. We’ve identified the key markets of home and hygiene, which are big enough markets, and we’ve entered those markets, be it a sanitizer or an antiseptic soap or an antiseptic liquid or an air sanitizer, et cetera, these are big markets in which we would take share. And in health care, we are market creators like Tulsi Drop market doesn’t exist. Haldi Drop market doesn’t exist. Ayush Kwath market doesn’t exist, or in tea where the market is existing, and we will be gaining share. So therefore, that’s our strategic approach to go after those markets.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [78]

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Great, sir. Sir, last 1 question, if I may squeeze in one. Sir, 2 quarters back you had touched upon on opportunities of nonlinearity in margins coming from employee cost. So any update on that or any firm plan there?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [79]

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Sorry, I didn’t quite get your question.

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Tejash Shah, Spark Capital Advisors (India) Private Limited, Research Division – VP of Research [80]

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Sir, you had called out that there is an opportunity to expand margins through employee costs or — not controlling, but rationalizing that line item. So any firm plan on that?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [81]

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Yes. As part of the Samriddhi Project, what one is actually doing is we are looking at a span of control in the organization and looking at and benchmarking ourselves in terms of employee cost to sales and cost to profit ratios and trying to do some rationalization. So that’s also very much a part of the Samriddhi Project, and redefining the span of controls in the sales and marketing and across the board, all the functions.

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Operator [82]

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The next question is from the line of Sanjay Manyal from ICICIdirect.

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Sanjay Manyal, ICICIdirect.com, Research Division – Analyst [83]

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Sir, just 2 questions, 1 specifically on hand sanitizer or Dabur sanitizer you mentioned. If I’m not wrong, you mentioned INR 90 crore sales in the quarter?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [84]

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That’s right. That’s right. Almost INR 90 crores sales across India and IBD — and international business.

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Sanjay Manyal, ICICIdirect.com, Research Division – Analyst [85]

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Okay. So where would it fit in, in the subcategories in India?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [86]

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Yes, we fit it into Skin Care. Otherwise, that’s what I said in Skin Care, a decline is actually 50% odd because of sanitizers, you see a decline of around 12.5% in Skin Care.

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Sanjay Manyal, ICICIdirect.com, Research Division – Analyst [87]

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Okay. Okay. Which means that current sale is INR 72 crores, so a large part of it is only the sanitizers?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [88]

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Yes, quite a bit of sanitizer is here because the Fem brand and the Gulabari brand had a major headwind in terms of they being discretionary categories and out-of-home consumption and salon visits were quite restricted. And that’s the reason hand sanitizers really came in as a savior.

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Sanjay Manyal, ICICIdirect.com, Research Division – Analyst [89]

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Right sir. Sir, secondly, as you mentioned that this is an off-season for Chyawanprash, how it has been for the Honey because — and what would be the growth rates in Honey in this particular quarter?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [90]

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So honey has actually grown by almost 69% for us. And again, off-season for honey. Honey also picks up during the winter season. But because honey is adjuvant and actually used as a junk with all the churans and ayurvedic product, that’s why there was a surge in the honey market also. And we did all tactical, topical marketing campaigns in Honey and honey being used as a big immunity booster. So that has helped. So Honey has really done very well. We actually had a shortage of Honey in between and last quarter Honey was not available and we had to approach the government and get the permissions and finally we had to get it going. So we lost some sales in the bargain around a week or so because of the lockdown period. But it’s behind us, we’ve grown about 70% odd here.

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Sanjay Manyal, ICICIdirect.com, Research Division – Analyst [91]

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And sir, if I just can ask last one, specifically on the rural growth. Are you really seeing some impact of the pandemic spreading in the hinterland?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [92]

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We’re not seeing an impact. Actually, we see a positive impact because the reverse migration happening to the rural areas. We see rural business actually growing by 1% and urban business declining by 13% for us. So rural is showing a surge. As per the Nielsen figures also, we see a surge in the rural by around 12.5%. I don’t know how correct those numbers are. I’m seeing those numbers with a lot of doubt because all the surveys of Nielsen happened by staying at home by telephone calls. So there could be an issue there. But that said, the rural recovery is — was much faster as compared to the urban recovery. And because of the population scarcity or population spread out in the rural area, social distancing is very natural there. So spread of COVID wasn’t as much in rural. I understand the instance of COVID spreading now in Bihar and the situation is exacerbated by the floods and all. So at the moment, we are not seeing too much of impact. Our superstockist, substockist network is doing far better as compared to the urban business.

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Operator [93]

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The next question is from the line of Rahul Maheshwari from AMBIT Asset Management.

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Unidentified Analyst, [94]

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Fantastic set of numbers in such tough times. I have (technical difficulty)

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Operator [95]

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Excuse me, this is the operator. Mr. Maheshwari, your voice is breaking.

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Unidentified Analyst, [96]

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Right now — am I audible now?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [97]

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Yes.

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Unidentified Analyst, [98]

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Good set of numbers to entire Dabur team. Sir, my 2 questions are there. First, as you in last 1 year, you tried to fix the domestic portfolio in terms of the new product launches and the distribution and — across the project, which is there. And as Mohit, you have spent the most of the time into the international division, more than a decade, how you would be changing the structural thing at international because there is lot of inconsistency. I’m not talking from just 1 quarter point of view, but throughout the many years. And going forward, in terms of the launches, in terms of the contribution to the overall consolidated and also from the capital allocation point of view. Any color from long-term point of view, how international business would be looking from an overall journey for Dabur?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [99]

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See, international business continues to trend well except that MENA region wherein we are market leaders in most of the categories where we exist and it’s facing severe headwinds because of the crude prices being lower and the economy being dependent on the crude prices. And moreover what’s happening because of COVID, a lot of population shrinkage is also happening because expats are leaving this country. And — but that said, our market share is, because of local Arab population, and we are entering into newer categories and looking at TPs and CPs to expand those categories and get into newer ones. So I think that business should recover on its own. We are in a very good space as far as MENA is concerned, and we are used by the captive population there. I don’t see — it’s a momentary issue. So which I think once the macroeconomic headwinds, which are not controllable by us, once they are not there, I think the MENA business should trend back.

As far as other pockets are concerned, in Egypt, we are market leaders, and Egypt continues to grow except for this COVID where it declined by 26%, again because of corona pandemic. I think post that it will be back on recovery. Our Turkey business, which wasn’t doing very well, has now started doing very well. It’s turned the leaf, it’s grown by around 33%. Our U.S. business, which was also not doing well because the headwind of the category due to corona what’s happened there. People have resumed the usage of relaxers because the salons are shut. So people are using relaxers at home now, and we are the market leaders in relaxers and that business has picked up. As we speak in the quarter, while all other businesses declined, our U.S. business actually grew by 12.5%. Our Sub-Sahara Africa business is also doing reasonably well. In the COVID, it declined by 40% because of the curfew in a lot of markets in Sub-Sahara Africa.

So then — Bangladesh business, we’ve done a management change and Bangladesh business during COVID times also has grown by 14%. Now Nepal business was the one which suffered quite a bit. More than 50% decline in COVID because of the juice reliant and out-of-home consumption being very big there, and there was a curfew situation, which has just got lifted in the month of July. Barring that, I think our international business is in a good space and extremely profitable. I don’t see there’s a long-term problem there. And there’s a huge headroom for growth because our Oral Care market shares are still in the range of low single-digit — low double-digit there. Our shampoo’s into low double digit. And Hair Oils, we are the market leaders. In Hair Creams, we are the market leader. And we are getting into a lot of other categories where we will only gain share.

If you look at America also, we’ve gone into styling category, where also we are into low single-digit market share. There’s a huge headroom for growth in all the markets for us. So I think it will trend up long-term pretty well for us. There are pockets, but those pockets will be corrected. And that said, we are now being very cost conscious on international business also because if the headwind persists in MENA region, then we’ll have to curtail our cost to ensure profit protection.

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Unidentified Analyst, [100]

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Sir, from ROI point of view from — basically from international business, it’s equivalent to India business? Or it’s — or how is the trajectory in return on investments or the capital which is being deployed for international business. Any highlight? And second, also the — you told about the Nepal business because of the curfew and as a Food — the juice business is one of the good part of our domestic business. Earlier also, there was an issue, and we had some facility in Sri Lanka. Can you give some color that how much dependency is there from Nepal? And in case if there are further more restrictions or any such uneven, how much impact can be there? Or we have created a backup and there won’t be any such kind of supply chain problem for the juices business?

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Unidentified Company Representative, [101]

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Sure. So I think I’ll just talk with regard to ROI perspective. If you look at MENA region, I think in view of the product mix categories, the ROI is much better because it is less capital intensive. And therefore, the ROE wise, it is better. And even when we look at Namaste because it is outsourced, ROI wise it is much better. It is Nepal, which is a juice category, where it requires a high capital investment in terms of the plant and machinery, that is where the ROI is comparatively lower than the other categories.

Now coming to the question with regard to Sri Lanka. Sri Lanka has been as a backup plant for us in case if there is any supply constraint. And we observed that a couple of years back when Nepal was shut down, we were able to get the supplies from Sri Lanka, and that has been very useful for us in terms of export to India. And at the same time, now we are also utilizing the capacity to export even beyond India to other countries, including U.S. and other countries also.

So therefore, Sri Lanka is a very useful plan for us strategically to derisk in case of any eventualities in other markets for the manufacturing. And therefore, that works very well in those times when it is required. Though having said that, we are not utilizing the capacity at current level to fullest, and we are trying to utilize by exploring other markets, but it certainly acts as a very important backup in case of Nepal or any other manufacturing units.

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Unidentified Analyst, [102]

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Thank you so much to entire team, and Mohit, especially to you the kind of agile and fearless attitude which you bought to the entire company that’s phenomenally encouraging.

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Operator [103]

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The next question is from the line of Krishnan from Motilal Oswal.

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Krishnan Sambamoorthy, Motilal Oswal Securities Limited, Research Division – VP of Research of FMCG [104]

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Congrats on a very good set of numbers in the current environment. Mohit, my question was more on the baby range that you talked about where you’ll pitch your logic for e-commerce. I know you’ve spoken in the past that this was a bit of a lost opportunity for you, given the space vacated by Johnson & Johnson and which Himalaya was able to successfully capture. A, will this be under the Lal Tail brand? Has this range been already launched? Or is it under — it’s (inaudible)?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [105]

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Yes. So as we speak, we are waiting for the Big Day in Amazon, and we’ll be rolling out this as an exclusive Amazon launch on the Big Day of Amazon. So it will be rolled out. So earlier, the problem was that we only had 1 brand Lal Tail as compared to J&J, which existed as a whole — full range of baby. And when the mothers buy into the full range, whether it’s a soap or a powder or a oil, et cetera, there are gift hampers. So we didn’t have that range. We had created a range in international business. So we have rolled out that range in India also, and it’ll be now launched in Amazon. And if the traction is there, then we’ll roll it out in modern trade and in general trade also. And this is a very big [plate,] rightly identified as Johnson, a little weak player as compared to Dabur. But we will not have a new brand as Baby Care is also extension of health care for kids therefore, we are extending Dabur. We call it Dabur Baby and not Lal Tail or any other brand. So it will be under the Dabur brand, with that trust and quality assurance.

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Operator [106]

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The next question is from the line of Avnish (sic) [Amnish] Aggarwal from Prabhudas Lilladher.

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Amnish Aggarwal, Prabhudas Lilladher Pvt Ltd., Research Division – Head of Research [107]

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Very good set of numbers in the current situation. I have a couple of strategic questions. If I look back at the history number, Dabur always had a lot of products under its belt. But somehow or the other, the issue always was to support so wider portfolio. Now the kind of launches we have done, I think perhaps this is a maximum number of launches if we will put together last 5, 10 years. So how much of these launches do you think are strategic and you would like to scale them up in the long term, while some of them may be a sanitizer or even — and some of these are surface sanitizer and some of these they may — as an industry, only they may try to fizzle out say after a few months?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [108]

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Yes. So therefore, we have 2 sets. If you look at the categories where we’ve actually launched, we’ve launched either in health care, which is Immunity-led product or we’ve launched products in personal and home hygiene. So if you look at the health care, most of the products that we’ve rolled out are category created, like Tulsi Drops, Haldi Drops, single herb ranges for us, Ayush Kwath, they will all be very strategic for us, and we will want to create categories out of these. The way Chyawanprash became a category or Giloy Ghan Vati will become a category in our mind. So like that, they’ll be very strategic. And these don’t require high-decibel advertising or resources behind them because competitive intensity is not there, and we will be category creators. So 1 advertising is 100% share of voice here.

So we don’t see an issue in these brands. And potentially, they are very big in terms of scaling up. So I don’t think that’s an issue.

Now number two is other tactical efforts like personal care and — personal and home hygiene category where we’ve rolled out. If sanitizer mutes as a category, we will also mute, but I think we’ve capitalized on the situation, and we’ve established ourselves as first mover in Sanitize. But that said, the habit of personal and home hygiene has got ingrained now with the consumer because COVID has lasted, and it’s going to last for almost a year. It’s not disappearing. So these habits will get ingrained in the consumer behavior. So I don’t think they will disappear overnight. And Home Care is a very strategic part of our business. So to that extent, they will live under our portfolio, may not be under the power brand architecture, but definitely will live under the portfolio the way the other portfolio is existing. That said, we are looking at a lot of rationalization of portfolio of the tail products and SKUs that we have with the company. The company will undertake an exercise of reducing the tail, which doesn’t have a turnover or which are not margin accretive to the company, we would be embarking on a project of cutting out on the tail so that there’s not too much of pressure as far as the back end is concerned. But a lot of products also will be e-commerce first for us, which will be margin accretive, which will be exclusively for e-commerce.

In the past, when Dabur had launched, there was no e-commerce as a channel, now e-commerce contribution is almost 5.6%. I think we’ll end up the year with also 5% contribution, which is a very sizable contribution, and that calls for a lot of e-commerce exclusive products. Like Veggie wash that we’ve introduced as an e-commerce exclusive, baby range will be e-commerce, apple cider vinegar will be e-commerce. And as and when it scales up on e-commerce, then as it scales up, the way we scale up products in ethical business, we will scale up the products for upmarket consumer or urban consumer in the e-commerce. As and when it scales up, we will roll it out in the GT business. Where we see immediate traction, they will be rolled out in GT, for example, Ayush Kadha or Kwath, which is desired. Immunity Kit was desired, Tulsi Drops, Haldi Drops were desired. Single Herb range was designed, they will be rolled out to mass markets. So I think we should have a 40% to 50% acceptance rate in the marketplace, even for our new product launches.

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Amnish Aggarwal, Prabhudas Lilladher Pvt Ltd., Research Division – Head of Research [109]

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Okay. My second question, Mohit, is regarding the international business, where particularly 2 of our acquisitions, one is your Hobi in Turkey and one is Namaste. So there, it is more like a switch on and off, sometimes this seems to be coming on track and then again they go off track. So would like your comment on whether do you see now them moving strategically in any particular direction where we can see higher amount of profitability and growth over there?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [110]

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Yes. So it’s like any other business [Amnish.] So businesses are cyclical. So when there is a headwind, business gets into a trough and whenever there’s a tailwind, the business gets into a crest, so you can’t have a constant business surge happening in any business. So at the moment, what we see in Hobi, we are seeing a tailwind because of COVID, it’s a hand wash, body wash, kind of a portfolio. So that’s doing exceedingly well, and the profitability is also improved in the Hobi business. So that’s trending very well for us. Even the Namaste business has got a tailwind as I told you relaxer business is now on a surge. In between, there was a trend towards new naturals. So therefore, relaxers were out and naturals were in, and now relaxers are back again.

So I think the market dynamics and the consumer sentiment dictates as to how the business is doing. And we keep recalibrating our strategies basis what the consumer behavior demands. So we launched styling products under the Curls Unleased when the relaxers were down. And now the relaxers are up, so we are now focusing back again on relaxers. So I think that kind of a cyclical dynamism will happen in the consumption as we speak. But structurally and strategically, these 2 businesses have improved their profitability now, and they are trending at very good double-digit profits for us.

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Operator [111]

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(Operator Instructions) The next question is from the line of Harit Kapoor from Investec.

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Harit Kapoor, Investec Bank plc, Research Division – Analyst [112]

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So my questions were regarding the innovation intensity. So the first thing was on — if you look at the India business for the last 4, 5 years, your ad spend as a percentage has been in the 8% to 9% range, actually more 8 than 9. So just wanted to get your sense on how you’re looking at it going forward, given the intensity has been so sharp on the innovations over the last 2, 3 quarters. Is there a material step-up on the ad spend side, which you expect going forward and stay there from there on?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [113]

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Yes. So Harit, absolutely right. So I think our ad spends are low, and we are cognizant of the fact that our ad spends are low, and we are making attempts to see an increase in the ad spends going forward. So going forward for the budget also, we’ve now planned an increase in the ad spend, especially to support the NPDs and also the power spends. And a part of the Samriddhi saving would be used for increasing our above the line spend and generate demand for our power brands and also new products. So we are cognizant and we are investing in the same.

In COVID situation, you saw a depression of around 22% in the ad spend. That is because structurally the media changed. We stopped spending in outdoor. We stopped spending in press. We focused all our resources on electronic media, that too outside of GEC into Doordarshan because that’s where the eyeballs were. That’s where the GRPs were. And that came at a much lower cost. While we spend low minus 22%, our GRPs went up by 70 percentage points while spending 1/5. So that’s how.

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Operator [114]

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The next question is from the line of Shirish Pardeshi from Centrum.

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Shirish Pardeshi, Centrum Broking Limited, Research Division – Senior Analyst [115]

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Mohit, my personal compliment to you for good execution and banking on the opportunity. I have 1 question, I mean, that is related to distribution. Could you give some color how this GT and modern trade has performed in the month of July? And what level of recovery we are seeing in these 2 channels? And related question is that what is the CSD doing in this quarter? Or maybe you can give how July has performed in CSD?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [116]

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Yes. So what happened is GT has actually recovered quite a bit. GT, which declined by around 13% is back on the recovery path now. Modern trade is far away from recovery. Modern trade declined by around minus 28% and still we see modern trade not recovering. So there is a pressure in modern trade. CSD continues to be down. It declined by around minus 50% and even in the month of July, we do not see too much of recovery, but recovery is expected going forward as the government releases fund for the CSD and they will be able to buy and also pay their debt going forward. But modern trade is a concern, which is still at minus 25 [operational] level because of Big Bazaar, which is a big boy and even DMart not doing as well to the way they were in pre COVID levels. But GT definitely has recovered.

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Operator [117]

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The next question is from the line of Prasad Deshmukh from Bank of America.

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Prasad G. Deshmukh, BofA Merrill Lynch, Research Division – Equity Research Analyst [118]

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So Mohit, we hear about these clinical trials for ayurvedic products across multiple universities by Ministry of AYUSH. So this is like to check the immunity boosting properties against COVID. Would you have an idea as to what is the status of these trials? And what part of Dabur’s portfolio would benefit from these if there is a favorable outcome?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [119]

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Yes. So we’ve already put our products into the clinical trials, Prasad, but the results are still awaited. And I think part of the study is over and the part of the study is yet to come. We’ve not even got the initial findings, so it will be incorrect for me to comment at this point in time. But Chyawanprash, Ashwagandha, Tulsi Drops, Ayush Kwath, all that are a part of the ministry trials and also trials are initiated by Dabur. So there are trials happening at all ends, but the result is not yet out.

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Operator [120]

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The next question is from the line of Kalpesh Jain from AMBIT Securities.

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Unidentified Analyst, [121]

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Mohit, congratulations on a good set of numbers for Q1. Mohit, you mentioned somewhere when one of the participants asked you about June growth, you said that June growth had bounced back to 7% positive territory. So now that a significant portion of July has also expired, what is the kind of a growth traction we are seeing in the month of July?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [122]

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Sorry, you’re talking about the recovery, [Kalpesh,] in the month of July?

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Unidentified Analyst, [123]

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Right. So I just wanted to have a broad sense on the indicative growth numbers for July?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [124]

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So July, our growth is roughly around 5% to 6% odd secondary levels of growth is what we are looking at. But that said, our modern trade is still under pressure and so is cash and carry, institutional and HoReCa channels have still not opened up. That’s why it’s in the range of low to mid-single digit kind of growth rates that we are seeing.

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Unidentified Analyst, [125]

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So it’s not significantly different from June?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [126]

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Not significantly different from June, yes.

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Unidentified Analyst, [127]

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And 1 more question. So on your market share. So as far as your Hair Care category is concerned, we had Marico posting its quarterly numbers a couple of days back, they said that their decline was about 12% in the Parachute portfolio and value-added portfolios have declined by 30%. So have you seen some sort of a market share gains as far as your Hair Care portfolio is concerned or it’s been flattish?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [128]

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No. See, we exist in 2 parts of the portfolio, Coconut Oil portfolio and value-added portfolio. In Coconut Oil, we’ve gained 20% market share.

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Gagan Ahluwalia, Dabur India Limited – Senior General Manager of Corporate Affairs [129]

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20 basis points.

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [130]

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20 basis points, sorry, sorry. 20 basis point market share. And in value added, we’ve gained 40 basis points market share in both. So our declines are lesser than the category declines in both Coconut Oil and also value added.

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Operator [131]

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The next question is from the line of Aditya Soman from Goldman Sachs.

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Aditya Soman, Goldman Sachs Group, Inc., Research Division – Equity Analyst [132]

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Mohit, so my question is on new product launches. So you indicated that sort of INR 90 crores of your revenue came from sanitizer. And how much was the contribution (inaudible) other new products in, say, health care?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [133]

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Yes. Health care products NPD would be roughly around INR 50-odd crores broadly. INR 50 crores is what the NPD — Yes, around INR 50-odd crores, Aditya.

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Operator [134]

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The next question is from the line of Rohit Dokania from IDFC Securities.

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Rohit Dokania, IDFC Securities Limited, Research Division – SVP of Research [135]

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Thanks, Mohit, for giving us an idea of the sort of international business from a medium term perspective. Could you also talk about any recovery that could have happened at least in the month of July across the global market?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [136]

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Yes. So even global markets have seen a recovery. It is a recovery to an extent of around 1.8%, which happened in the month of June, around 2% odd. And we are seeing release of lockdowns happening and unlocking of markets happening there also. So we are seeing significant recovery, barring Nepal where the business is still down by around minus 17-odd percent. Rest of the places we are seeing recovery in, again, low to mid-single digits even in international business.

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Operator [137]

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The next question is from the line of Shirish Pardeshi from Centrum.

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Shirish Pardeshi, Centrum Broking Limited, Research Division – Senior Analyst [138]

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Mohit, quick question. We have seen 2 new players come in to Honey segment. What is it that;s exciting? Or if you can give me some color on what’s happening in Honey in terms of competition?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [139]

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Shirish, in Honey what has happened is we’ve actually surged our market share numbers. Prior to COVID, our market shares were in the range of around 30-odd percent levels (inaudible) data that we have in consumer panels, we see our market share surged to 50 percentage point level, where we’ve grown by around 60%. I think Honey penetration, the country has gone up. A lot of smaller players have vanished during the COVID because of supply constraints of honey, and they could not purchase. So we’ve been able to gain market share from those players. But there are some organized players like Lion and Hitkari, which still remain in the market, and there are a couple of multinationals who’ve also entered the Honey market. So I think we are staying on course to defending our market share and gaining our market share and increasing the penetration of Honey in the country and that’s why you’ve seen we launching value-added honeys in terms of Tulsi and Ashwagandha at one end. And also for e-commerce, we’re launching exclusive offerings like Himalayan Honey and Organic Honey. That’s also being launched as we speak, I think, next month or month after you’ll see those launches also. And we will keep also making honey in accessible price points as we go forward.

So we are growing the market irrespective of what the competition is. If the competition comes in, they will grow the market at a faster pace. The penetrations of honey in the country are still very low. So the more the amount of advertising in honey, the more the market will grow, and we will be the beneficiaries there. So we’ll be conscious that we don’t lose share, and we have to gain share from a unorganized and at the top end, keep innovating so that we keep growing the category as a leader too.

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Operator [140]

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The next question is from the line of Rahul Ranade from Goldman Sachs.

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Rahul Ranade, Goldman Sachs Group, Inc., Research Division – Research Analyst [141]

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I just wanted to understand out of this health care NPD that we said for INR 50 crores, how much of it would be mainstreaming out of the ethicals portfolio where we already had products versus how much is completely new products? And second question is, is it fair to assume that whatever we are mainstreaming from the ethicals, it should have a higher success rate since the efficacy of these products is kind of proven?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [142]

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So it will be, I think, broadly around INR 12-odd crores will be a part of the ethical portfolio mainstreaming and around INR 38 crores will be new NPDs, et cetera, like Ayush Kwath and Kadha for example, we were the first movers in the market and this was the advisory given by the government. And we quickly churned out a formulation and we rolled it out as per the Ministry of AYUSH guidelines. That was completely new to us. Tulsi and Haldi Drops, while we had it in other format, but this was — drops as a format wasn’t available. So that came in. So that’s around INR 7 crores, INR 8 crores. It’s completely new, which wasn’t there. But a lot of other products have come in.

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Operator [143]

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The next question is from the line of Sakshi Mehra from (inaudible)

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Unidentified Analyst, [144]

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(technical difficulty)

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Operator [145]

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(Operator Instructions)

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Unidentified Analyst, [146]

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We have recently increased our market stake in Eveready business. Sir, can you please throw some light on it? So are we planning to acquire it or just keep it as an investment?

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Unidentified Company Representative, [147]

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See, I think this Eveready business is by the promoters in their individual capacity. So therefore, as Dabur India Limited, we have no linkage or any role to play in that. So that is purely their personal investments. So we cannot comment anything further on that.

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Operator [148]

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The next question is from the line of Suvarna Joshi from Axis Securities.

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Suvarna Joshi, Axis Securities Limited, Research Division – Senior Manager of Research [149]

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Congrats for a good set of numbers in these tough times. Sir, you mentioned about rural market growing by 1%, while urban declining 13%. And now we’ve been seeing that the number of COVID cases have been growing in the hinterland. So what is your assessment going forward in terms of the impact on the business that this will have? Or do you see that rural market will still remain resilient despite the rising number of COVID cases? That was one. And the second bit was, is this growth also driven by the distribution expansion strategy that we have kind of given a year or 2 because we think that rural is likely to kind of contribute healthily to the growth going forward?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [150]

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Yes. So I think rural continues to grow for us, and we don’t see any sort of downside in rural even in the month of July. So we’ve not — we also hear news flashes saying that community spread is happening in rural India. At the moment, we are not yet impacted, except for the flood situation in Bihar and some few lockdowns have impacted us in some sporadic districts and cities in Bihar and Madhya Pradesh and also Northeast, et cetera. But we see rural trending well. And the difference between rural and urban is quite a bit. As I was telling you that Nielsen is talking about a growth of 12.5% in rural as compared to 1.5% negative in urban, so there’s a huge gap. I think rural recovery is much faster.

And I was telling you as the population is spread out in rural areas. So therefore, the COVID cases will not spread out in the rural as much as they’ve done in urban. So I remain very hopeful as far as the rural is concerned. Plus, the rural traction will also happen because of population reverse flow, which has happened in rural, because of that also the demand surge has happened. And to add it up, government is also adding around INR 1.5 lakh crore package is what PM Modi announced for rural. There’s additional 40,000 in MGNREGA. Support prices of crops have gone up. Monsoon has been great. The crop — initial crop has been fantastic. So I think all those tailwinds are going in favor of rural areas.

And tractor sales are also gone up in quarter 1, which is a great barometer of the rural performance. So everything is going in the favor of rural. That said, we’ve also expanded our rural infrastructure. In terms of number of villages, we were — we’ve completed around 52,600-odd villages, and we are committed to going up to around 60,000-odd villages in 2 years’ time. So in this year or 1.5 years. So I think — depending upon the COVID situation and our accessibility.

And also, we are looking at now village level entrepreneurs to be sown in, in the rural so that we are able to really spread out deep into the hinterland. As you know, there are 6 lakh villages in India, and we are only talking about 60,000 villages here. So there’s a huge headroom for growth as rural is becoming more accessible with roads and the infrastructure going up. So I remain very hopeful as far as rural is concerned. Plus, we’ve also launched LUPs, which is low unit price points, which only help the rural infrastructure that we build — for us to build the business there. So I hope I’ve been able to answer your questions, Ms. Joshi.

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Operator [151]

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The next question is from the line of Ankit Babel from Subhkam Ventures.

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Ankit Babel, [152]

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Sir, I have 1 question. You people are doing a wonderful job. I mean, launching so many new products, bringing in so much of efficiencies in your operations, savings of around INR 100 crores to INR 150 crores each year. And plus, you have a tailwind of the trend of shift from unorganized to organized, and you are gaining market share also. Now all these happening, is it fair to assume that barring any economic shocks, going forward, Dabur is ready for a mixed kind of a growth with margins in the range 23%, 24% because of all the savings and improving efficiencies. Maybe in next 2, 3 years point of time?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [153]

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Ankit, your voice is not very clear. Can you repeat? I understood the first part, but the second part, I’m not able to hear clearly.

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Ankit Babel, [154]

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Sir, my second part was that with all these positive things happening into the company, is it fair to assume that barring any economic shock, Dabur is ready for a mid- to high teens kind of a growth with the margins in the range of 23% to 24% going forward in the next 3 years?

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Mohit Malhotra, Dabur India Limited – CEO & Whole Time Director [155]

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I can’t give you a guidance, Ankit, here, as to are we ready or not, but we are doing all the right things in our mind, which should change the trajectory of the company and take it to the next level. And that’s what I can say. As far as the immediate term is concerned, we’re looking at something like around low to mid-single-digit to compensate for the COVID impact with all these initiatives what will happen for the full year. So that’s the best guidance that I can provide you. But I think that’s for you to expect what the growth will be. So we are doing all the right things, whether it’s systems, processes or IT interface or technology, you’re launching innovations, and the team is stretching and trying to make all the products, which are available in getting to mainstream categories and larger categories also as we speak going forward so that we are able to take the business to the next level to benchmark to the best-in-class in the industry and try to bridge the gap in terms of revenues in long term.

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Operator [156]

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Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments.

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Gagan Ahluwalia, Dabur India Limited – Senior General Manager of Corporate Affairs [157]

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Thank you. Thank you for participating in this conference call. Webcast recording of this call and transcript will be available on our website. Thank you, and have a very nice evening ahead.

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Operator [158]

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Thank you very much. Ladies and gentlemen, on behalf of Dabur India Limited that concludes this conference. Thank you for joining us, and you may now disconnect your lines.