DABUR - Dabur India Ltd. Share Price

Outlook by Management:
Dabur's management anticipates a sequential improvement in demand over the coming months, driven by increased infrastructure investments, favorable agricultural conditions, and government initiatives to stimulate growth. They expect urban demand to recover gradually, while rural markets are projected to remain resilient, continuing their outperformance over urban for the fifth consecutive quarter. Inflationary pressures (estimated at ~5%) will be managed through calibrated price increases, cost-saving initiatives, and premiumization. Margins are targeted to reach 20-21% in the medium term via product mix optimization, operational efficiencies, and strategic investments in high-margin segments. The Company is refining its 3-year strategic vision with McKinsey to align with evolving market dynamics, focusing on agility and capturing emerging opportunities.

Key Highlights:

1. Segment Performance:

   • Oral Care: Grew 9.1% YoY, driven by Red toothpaste (+9%) and Meswak (+16%). Gels portfolio surged 50% YoY. Dabur is now #2 in modern trade.
   • Hair Oil: Gained 125 bps in coconut oil and 236 bps in perfumed oils, reaching an 18% overall category share.
   • Home Care: Grew 5% with Odonil (double-digit volume growth) and Sanifresh (double-digit growth).
   • Healthcare: Flat due to delayed winters. Chyawanprash gained 140 bps share; Honey retained 54% market leadership.
   • Foods: Culinary (+30%) and Badshah (+15%) grew robustly, while beverages faced pricing pressure.

2. International Business: Delivered 18.9% CC growth (MEA, Egypt, UK, US). Currency devaluation in emerging markets impacted translated growth.

3. Challenges: Beverage segment (nectars) under pressure from competitive pricing (Campa Cola); addressing via price corrections, new formats, and value offers.

4. Strategic Initiatives:

   • Premiumization in Hair Care, Oral Care, and Skincare (Gulabari rose 9% with new formats).
   • Focus on e-commerce/MT (20% of India sales; double-digit growth).
   • Innovations: Modern Chyawanprash formats (tablets, liquids), health juices (+44%), and Siens (science-backed wellness range).

5. Cost & Margins: Legal costs (Namaste) reduced by 25%; gross margins to improve via pricing, mix, and procurement strategies.

Question 1:
"What seems to be ailing the Health Supplements category post-COVID, and what updates can you share on the Ayurvedic doctor advocacy initiative and Healthcare expansion?"

Answer:
Health Supplements faced challenges due to delayed winters and market saturation post-COVID. Chyawanprash (-3% vs. category's -6%) gained 140 bps share, while Honey maintained 54% leadership. Innovations like modern formats (tablets, liquids) and targeted variants (Khajurprash for women, Kesarprash for geriatric care) aim to revive growth. OTC products like Honitus (+12%) and Health Juices (+44%) performed well. Ayurvedic advocacy continues, with Ethical products growing high-single digits.

Question 2:
"Why is there divergent growth in Oral Care across players, and will Maha Kumbh activations benefit categories?"

Answer:
Dabur's Oral Care grew 9.1%, driven by Red (+9%) and Meswak (+16%), supported by herbal trends and IDA accreditation. Gels grew 50% YoY. Rural outperformance and premiumization (modern trade #2) drove share gains. Maha Kumbh activations (e.g., DantSnan campaigns) aim to boost rural visibility but are not expected to create one-offs.

Question 3:
"How will McKinsey's involvement address challenges like Campa Cola and Chyawanprash, and what's the pricing outlook for Oral Care/beverages?"

Answer:
McKinsey is refining Dabur's 3-year strategy, focusing on underperforming categories (e.g., beverages) and validating growth plans. Beverages face RPI pressures; price cuts (INR 130→100 via promotions) and new SKUs aim to counter Cola competition. Oral Care will balance premiumization and calibrated price hikes despite inflation.

Question 4:
"Why is Dabur disproportionately affected by Cola competition, and how are beverages segmented?"

Answer:
Nectar (-8% vs. category's -16%) faced urban slowdown, unseasonal rains, and RPI issues (2.7x Colas). Activ Juices (+10%) and Coconut Water grew, but 200ml packs (40% of portfolio) lagged. Plans include value pricing, health-focused variants, and PET packaging.

Question 5:
"Can FY26 margins reach 20-21% despite beverage challenges?"

Answer:
Margins will focus on mix improvement (premium Oral Care, Healthcare), cost savings, and price hikes. Legal costs (Namaste) reduced 25% YoY. International markets (18.9% CC growth) and currency stabilization will aid profitability.

Question 6:
"Why has rural outperformed urban, and what's the growth gap?"

Answer:
Rural grew 2% vs. urban's 0.6% (140 bps gap), driven by real wage growth (rural +5% vs. urban -7%). FMCG rural growth (10%) outpaced urban (5%) per Nielsen. Rural saliency (~45-50% of sales) is expected to strengthen.

Question 7:
"Why are ad spends declining, and how will pricing offset inflation?"

Answer:
Ad spends shifted to BTL (e.g., sampling, trials) due to muted consumption. Pricing (3% YTD) and procurement hedging will counter 5% inflation. Mix optimization (premiumization) and cost savings prioritized.

Question 8:
"How does Dabur justify consultant reliance despite mixed industry outcomes?"

Answer:
McKinsey validates strategies, benchmarks globally, and addresses category-specific challenges (e.g., beverages). Outcomes may include portfolio rationalization, M&A, or divestments.

Question 9:
"Are science-backed innovations (e.g., IDA accreditation) accelerating?"

Answer:
Science-led launches include Khajurprash (iron claims), Honitus (15-minute efficacy), and Siens (e-commerce collagen/multivitamins). IDA accreditation enables dentist endorsements for Dabur Red.

Question 10:
"Was Q3 volume growth impacted by prior channel corrections?"

Answer:
No material channel correction impact. Volume growth (1.2%) reflected market demand. Beverage pressures and Honey stock normalization were minor factors.