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Dabur India Ltd
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Ladies and gentlemen, good day and welcome to the Q1 Results Investors 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, ma'am.
Thank you, Aman. 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 30, June 2023. Present here with me are, Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Ankush Jain, Chief Financial Officer; Mr. Rahul Awasthi, Global Head of Operations; and Mr. Ashok Jain, EVP, Finance and Company Secretary.We will start with an overview of the company's performance by Mr. Mohit Malhotra, followed by a Q&A session. I now hand over to you, Mohit. Thank you.
Thank you, Gagan madam. Good afternoon, everybody. Thank you for joining us today for the results call of quarter 1 financial year '24. During quarter 1 financial year '24, most of the economies witnessed a moderation in inflation. In India too, inflation showed signs of easing as witnessed in both CPI and WPI data. With this moderation in inflation, there has been an uptick in volumes in both urban and rural markets, indicating promising signs of recovery in demand. In such an environment, I'm pleased to share with you that quarter 1 financial year '24 has been a quarter of strong growth across all geographies.Dabur's consolidated revenue for the quarter crossed INR 3,000 crore mark to close at INR 3,130 crores and registered constant currency growth of 13.3% and INR growth of 11%. India business grew by 8%, backed by robust double-digit growth of our Healthcare and HPC portfolio. The Beverage portfolio got impacted by unseasonal rains in the North and West India. The 4-year CAGR for the India business is 10% with near double-digit CAGR in Healthcare and HPC and strong double-digit growth in F&B business. International business registered a growth of 20.6% in constant currency terms.Talking about the categories, HPC portfolio recorded a 11% growth during the quarter. Our Oral Care portfolio grew by 13% in the quarter, leading to strong double-digit 4-year CAGR. Dabur Red gained 50 basis points of market share in the category, consolidating our position as the #2 player in the Oral Care segment, with every second household being a Dabur Oral Care household. Hair Oils recorded a 10% growth and posted a strong gain in market share of 200 basis points to reach its highest ever level of 17.4%. Shampoos recorded a 9% growth in the quarter with 4-year CAGR at a robust 13%, leading to market share gain. Home Care registered a 15% growth with all the brands witnessing strong performance. Odonil, which is #1 player in the air fresheners category, continue to witness gain in market share. In mosquito repellent category, we saw an uptick of 340 bps in market share.Healthcare portfolio recorded a 10.5% growth, posting a 4-year CAGR of 10%. We saw market share gains across health supplement portfolio. Digestive category saw a growth of 15% off the back of robust performance of Hajmola franchise. OTC portfolio grew by 24% during the quarter, driven by double-digit growth in Lal Tail and Honitus. Ethicals registered a 7% growth in the quarter.We have recently established a therapeutic division, which includes a team of 400 product specialists for advocacy and sales of our Healthcare portfolio to allopathic doctors. This division is targeting an incremental business of around INR 150 crores during the year, with the portfolio of Baby Care, Branded Ethical, Pure Herb and Derma products. With this division, we are targeting to reach 70,000 allopathic doctors in addition to the current coverage of 70,000 ayurvedic practitioners. This should enable the company to bring Ayurveda into mainstream allopathic healthcare and accelerate growth of our Healthcare [ category ].Beverage business saw muted growth during the quarter on account of unseasonal rains which particularly impacted North and West India. The food business under the Hommade brand performed exceedingly well with growth of 35%. This has been further bolstered by Badshah acquisition, which saw 23% growth in the quarter. We remain on track to exit the year with a run rate of INR 500 crores from our foods plus Badshah business.We continue to drive our distribution expansion initiatives. Our direct reach stands at 1.4 million outlets and we should increase it to 1.5 million by the end of the fiscal year. Village coverage is at strong 1 lakh-plus villages, being ably supported by more than 13,000 [indiscernible]. [indiscernible], which is an efficiency marker of distribution, continues to see improvement and has seen an increase of close to 10% in the quarter.Now coming to the international business. With moderation of inflation and distribution changes, the international business has seen a strong recovery and registered a 20.6% constant currency growth. This was driven by robust growth across our regions, with Middle East North Africa growing by 10%; Egypt growing at 45%; Turkey business growing at 52%; and Sub-Sahara business growing by 13%. Our focus on innovation and customer-centric strategies has enabled us to gain market shares across most geographies and countries.A litigation has been filed against one of our subsidiaries Namaste LLC in USA, along with other companies manufacturing hair relaxer products like L'Oreal, Godrej, Soft Sheen/Carson, Avlon, Revlon, et cetera, where it has been alleged that usage of such hair relaxer products leads to harmful effects. Namaste disputes the same and stand with the safety of its product. Namaste, along with other defendants, have formed a defense consortium and appointed lawyers to take adequate steps to defend this lawsuit. The case has been filed on the basis of an inconclusive study. Namaste, along with other defendants, maintain there is no legal merit to the suit. The portfolio in question is less than 1% of our consolidated revenue and we have a product liability insurance in place. The matter is subjudice.Coming to the quarter's profitability. Our consolidated gross margin expanded by 75 bps as material inflation reduced from high single digits to low single digits. During the quarter, we have increased our A&P investments by around 30%. We believe these media investments are essential to drive long term sustainable growth and maintain our market leadership. This quarter, we recorded a market share gain in 90% of our portfolio.Our operating profit saw a growth of 11.2%. PAT for the quarter touched INR 464 crores, growing by 5.4% over previous year. This includes amortization related to Badshah acquisition. Excluding this amortization impact, the PAT growth was 8% on a like-to-like basis.Overall, the improving demand scenario augurs well for the business as we will continue to drive profitable growth across our business verticals, backed by investments in our distribution network, brands, manufacturing, digital and organizational capabilities.With this, I conclude my address and open the floor for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Abneesh Roy from Nuvama Institutional Equities.
My first question is, of course, in Q4, your numbers were weak and now you have seen good recovery on Y-o-Y basis and even on 4-year basis. So want to understand on this recovery bit, is it because of the inventory levels changing from Q4 to Q1 in any meaningful manner? Second is, of course, 30% increase in the advertising also. So is it across categories? Because it seems slightly higher than what some of your other peers are doing. On an absolute basis, the 30% increase and when seen from a gross margin to EBITDA margin kind of a translation, it is much higher than the gross margin expansion versus the other companies. So could you elaborate this recovery bit? Is that sustainable for the coming quarters also across categories?
Abneesh, I think the recovery is seen in the market per se, it is not just Dabur recovery, if you've seen that rural business across the board actually has recovered and there's a volume uptick, which has been seen in the rural business. So rural for the category itself, or should I say, for FMCG market, has actually grown by 4%. We are growing ahead in rural at around 8% and urban growth for us is around 10%. So across all businesses, we have seen the recovery happen as the rural recovers and Dabur is more salient in rural. So backed by rural, we are seeing a recovery happening in our DP business. In MT, we had some issues in modern trade with Reliance, which we sorted out and modern trade is again back on a limb and growing at around 18% for us.E-commerce, some tiering issues in the business that is again going to be back on track and e-commerce should, by the end of year, should be around 9% of our overall sales. So broadly, I'm confident on the recovery of the business, but for Beverages, which was impacted by the seasonal -- unseasonal rains which happened, and that dampened the Beverage portfolio. But our food portfolio grew by around 34%. So it's a secular kind of a growth that we've seen across the portfolio and not much pertaining to any inventory levels in the market per se.As far as the second part of the question is advertising, advertising, we've cut back last year, advertising, because of the inflation issues and we wanted to maintain the margin. And that's why there was advertising cut because huge inflation was there. Now inflation has kind of abated in our portfolio. India overall inflation was almost around 0.5%. International business still witness some sort of inflation. But we had alluded to earlier also that we will be investing money back into advertising for surging demand, and that's what we've done. And that's why 30% growth in advertising is what we are seeing and that was done. And we also invested some money back from consumer promotion and trade promotions back into advertising. So the gross margin improvements are being invested into advertising and some is growing down into EBITDA also, operating profit.
Sure. My second question is on the health portfolio with this leadership team from Himalaya, such as senior person. You have also shared the higher targets for FY '24 with higher feet on street, et cetera. My question here is, why now -- how easy is it to target allopathic for ayurvedic, because both are very different? If it was so easy, why did you not try it earlier? And any other learnings because Himalaya being unlisted, we don't know much, but it's very well run in the health and ayurvedic segment. You're also very large. Any other learnings are there, apart from what you're doing in terms of feet on street and targeting allopathy? Any other changes needed in your own portfolio?
So couple of changes in the Healthcare, one is the leadership change that you know, Philipe has come in and he's the one who's driving the Healthcare vertical for us. So I think 1 major change is advocacy and advocacy not to -- also, we are doing it to ayurvedic, but also we started allopathic also because we see the that allopathic doctors are the mainstream practitioners in the country and without a portfolio, getting a yes or a tick from allopathic, you really can't drive Healthcare in a country like India. So therefore, we are going to be doing a positive advocacy with allopathic doctors and also driving sales through them, INR 150 crores of incremental sales, and we've put around 500 people, feet on street, totally going to both allopathic and ayurvedic doctors. So this business should be incremental.And moreover, if you remember my previous speeches also, I talked about Baby Care, we are not taking mainstream and keeping it restricted to e-commerce, in the time we establish a GPM for Baby Care. So with this advocacy team coming in and going to gynecologists and pediatricians also, Baby Care will come into mainstream. Baby Care, which exited at around INR 20 crores last year, should see a INR 50 crore business in the current year and Baby Care will be driven very hard through this vertical, along with Branded Ethicals and also some pharma-led products. So overall, we should continue on a growth trajectory of 10% CAGR on Healthcare going forward with Philipe's coming in.Apart from setting up an advocacy vertical and selling products through this advocacy vertical in allopathic channel, which is not a very big challenge, it's not very difficult, because Philipe has done it in the past. We are doing it except that training, et cetera, has to go on a little bit slow burn. But I think the end of the year, we should see turnover growth coming from this vertical. The second vector of growth in Healthcare will be investing money on power brands, which we'll continue to do, backing up Lal Tail, Honitus, Pudin Hara, all these brands and Chyawanprash and Honey, et cetera, that will go on the way the strategy was. The third vector is new product introductions to increasing the addressable market in Healthcare. That will go on as it is.
Sure. My last question is on the M&A strategy, which Dabur has. So clearly, when I see Marico, HUL, ITC, et cetera, they have been quite more aggressive on the D2C front in terms of acquisition last 2, 3 years in the food and Personal Care portfolio. Dabur obviously, has done Badshah acquisition. So wanted to understand D2C acquisition, what is your thought process? And second, in terms of Badshah, what is the interplay between Badshah and Hommade? Hommade has done well. But are there any synergy benefits which you are working on between both the portfolio in terms of either distribution team or in terms of brand architecture, et cetera, because now both are fairly adjacent to each other for the customer?
Absolutely. So Abneesh, what we are doing, we've got money sitting in our balance sheet for acquisition purposes. We're continuously scouting on targets for D2C also. Now -- and if we come across a company which is synergistic to us in the Healthcare play or the Personal Care play or the skin care ayurvedic play, we will evaluate them. And if it is financially worthwhile, we will acquire the company. The last thing we want to do is acquire a dilutive brand that further take down our EBITDA margin. That's why proper due diligence has to happen before we actually acquire a brand, but money is there in the balance sheet to acquire a D2C brand also, which will be a premium player for strengthening our urban business. That's one.The second part of your question on Badshah and Hommade is concerned, both Hommade and Badshah are doing well. Badshah has grown by 23%, also impacted by a lot of inflation of spices. Hommade brand is growing at around 33%, 34%. Hommade is restricted to the Northern side of the country where Dabur is very strong and Badshah is today restricted to Western side. We are cross-pollinating the portfolio from Badshah to Hommade, Hommade to Badshah definitely. In terms of distribution, we are leveraging the Badshah distribution in the West for Hommade and we are leveraging the Dabur distribution for Badshah in the North. Still, we have not started. Going forward, in the next quarter, we will start pollinating Badshah to our distributors in the Western region to start with -- Western and Southern region to start with before we move to North.This is what the playbook was in the beginning, and we are sticking to our strategy, what we have planned out to be. But both of them are running at a rate of INR 500 crores going forward next year. Next year, we'll be looking at a food portfolio, totally INR 500 crores. So we'll be exiting at around INR 450 crores and next year, I think the target will be INR 500 crores for our foods portfolio.
The next question is from the line of Avi Mehta from Macquarie.
I wanted to kind of just understand the Oral Care positioning a little better. Do you see the need to extend beyond the naturals positioning to ensure that the growth divergence versus the industry sustains at the earlier highs? And if yes, what steps are you taking for the same?
Avi, not really, we want to stick to our core and our core capability as far as Oral Care is concerned. I think naturals is our core, and we will stick to the naturals portfolio, and we will not differ from the naturals portfolio. If you look at the current numbers, which has come from Kantar, we see penetration on natural category has moved up from 30% to 31%, 200 basis points of improvement is there in the growth as far as the natural category is concerned. Within the natural overall, we've been successful in taking business from the non-natural to the natural. The category has grown in volume by around 2.5%. We have grown by around 9% as compared to our #1 competitor who's grown by 7%. We have taken share from them, and we are consistently taking share, 50 basis point gain has happened in Dabur Red. Even Lal Dant Manjan on back of rural recovery has also done very well. Dabur Herbal Toothpaste had some [ seeding ] problems in terms of stock-out. But that also we are correcting going forward. But in South of India, it's doing well.We've launched our Dabur Bae Fresh Gel, which you can say is a kind of a non-natural/natural gel entry, which is targeting youngsters and teenagers and the positioning is more on fresh breath which is really not on health, but it is an extension of our Red franchise into a gel. We've launched it. We've roped in Kartik Aaryan as a celebrity for that. We've already got a turnover of around INR 4 crores to INR 5 crores. We launched it at the end of June. And I think for the full year, we'll be targeting a number of around INR 15 crores to INR 16 crores coming out of our Bae Fresh Gel. Our earlier gel franchise has also grown by more than around 25% in the last quarter. So gel was an area where which was absent in our portfolio, which we have kind of plugged now.
Okay. Okay. And just a follow-up. In your opinion, this 31% naturals share in Oral Care, where do you see it trending probably 2 years or 3 years ahead?
Avi, I don't know 2 years, 3 years, but definitely little long-ish term, I think 5 to 6 years, I think the whole category -- 50% should become natural. And Dabur will consistently keep taking share from the market leader.
Got it. Got it. Perfect. And the second bit was essentially on -- sorry.
Because the price points are similar, there is no difference between a price point. This is basically a value-added toothpaste. Like you have a value-added hair oil, this is a value-added toothpaste, calcium carbonate base, and we are giving more added ingredients and promising benefits like cavity protection, like sensitivity, et cetera, but more through natural means rather than through cosmetic and chemical means.
Very clear. The second bit was essentially on the margin. Now, given the first quarter performance where we've seen input costs kind of moderating, demand strength kind of reflecting in this margin performance, would you want to revisit your guidance for FY '24 of 19% to 19.5%? Or how would you kind of -- if you could share your comments on that, please?
So as far as inflation is concerned, we are witnessing the inflation moderating across our categories, but the mix of inflation is also changing towards food. We've seen food basket inflation around 11%, while it's moderated in HPC and HP in Healthcare, but food basket, we've seen inflation, with spices inflation being around [ 9% ], concentrate -- food concentrate also, we've seen inflation. Now the monsoon is going to hit. I don't know how inflation will pan out in the immediate term. But consistently, overall, on the hydrocarbon [ linkage ], the biggest basket of raw material and packaging material, there we have seen deflation. And that deflation should continue for next quarters to come. and there will be a margin upside. We have seen the 75 basis points of improvement in our gross margin, which we've invested into media, that we'll continue to do. If the gross margin upside is higher, then that will flow into our operating margin, but we keep our guidance of the same similar band in the time we cover up our media investments to the tune of around 8% to 9% of the overall business should be media for us. Till the time, money will keep going into media because we feel, long-term, we have to invest in media and not really look at a very short-term approach of giving it to margins and less to media and starving the brands.
No. Got it. Okay. Just the last bit -- sorry, just the last bit was on this recent news that came in about the Honey, if there's anything that you would like to comment on that, which is coming -- the last bit, if you don't mind. That's all for me.
Yes. So I know that these news keep coming in and we keep giving statements and one more statement I will give. We stand by the purity of Dabur Honey. Our every single batch of Dabur Honey is dispatched from a factory and it complies with all FSSAI parameters, which is the regulatory body in India. We export to almost -- many countries and everywhere we follow the regulations of the regulatory body there. Most of the factories where we produce our honey, they are all U.S. FDA-certified facilities and no question of any impurity. I think it's our foremost duty and Dabur brand stands for quality and trust in the consumer's mind. And we don't want to breach that. That's our foremost priority to do. So no question of anything. So every batch is tested as it exits the factory and that batch is tested for all around 65 parameters of FSSAI and also beyond that, which includes HMF also, which has been questioned. Recently, Dabur Honey has been granted an [ ECMA ] special certification, post inspections and proper due diligence by authorities.This study which has actually happened is evidently a couple of hours before our quarterly business results announcement. This is definitely motivated to malign the image of the market leader. Last time also, when this controversy happened with CSE report, we emerged much stronger. We gained around 500 basis points of market share since then. And I'm sure even after this controversy, we'll emerge out to be much more stronger. And as a business, we do not pay any heed to such studies, which keeps happening. And these are some tactics by some companies to malign our image and take share through ulterior motives, but we do not want to pay any heed to that and continue with our business as usual.
No, perfect. Perfect. The 500 bps -- I mean the market share gain which you saw last time is a very clear kind of indication of that.
The next question is from the line of Arnab Mitra from Goldman Sachs.
My first question was on the gross margin. So while your consolidated gross margin has moved up, what I was noticing is the India gross margin has been kind of flattish for the last few quarters, while we have seen input cost deflation and a lot of the other companies have seen strong expansion. Is this something that is going to come in with a lag? Or are there certain pockets where the inflation is very high for you, which is why the India GM is not moving up that much sequentially?
So India -- Arnab, India gross margins have also improved by 80 bps in the quarter year-on-year. So -- and therefore, the benefits of deflation in Healthcare and HPC businesses are flowing on into business. So that's true. So it's actually improving.
Yes. So 80 basis points is the improvement, but Arnab, maybe you are reflecting on other companies maybe have shown a 190 and we are actually 80. One of the issue here is in food, we have inflation of around 11%, hitting us in fruit concentrates and fruit as a segment is very salient in our summer months, which is our first quarter. So 25% of our business is coming from summer-centric fruit portfolio where we have seen inflation. As we move into quarter 2 and quarter 3, HPC and HP portfolio will become even more salient. And therefore, gross margin upside will be even better in those 2 quarters, to your point, also. So -- and in HPC portfolio, where raw material is essentially SLES and hydrocarbon link -- LLP link, there, we have not seen very high deflation yet because of the strategic inventories that we will be carrying. As we exhaust the inventory and we move into the regular purchases, we will see gross margin upsides happening there also. So definitely, sequentially, there has been a gross margin improvement quarter-on-quarter, and we will continue to see that for the next 2 to 3 quarters, yes.
Okay. Understood. My second question is on Beverages. So clearly, this quarter, there was an impact from the summer season. Just wanted to get a sense on how you see the full year now because you do have a very high base for 2Q also, I think with the timing with the festive season. How do you see the full year growth for Beverages overall? And anything on the new initiatives on Beverages, especially fruit drinks in terms of how you want to scale it up this year?
Yes. So Beverage is muted on account of season and we could not help in the season. If you see most of the beverage companies as per the [indiscernible] data, which was released, they're all down by around 25%. As compared to way down by 25%, Dabur Beverage portfolio is only down by -- it's almost flat. We have declined by around 1.6% in Beverages, whereas in terms of transactions, we've actually grown by around 4% to 5% in terms of transactions. Transaction is number of [indiscernible] that you are selling in the market on back of the drinks that we guys introduced. So that has just been introduced. So overall Beverages will be muted through the quarter because main season was damper, but I don't know how the season will pan out to be next year going forward. But I think it will be muted for the full year in Beverages, which will be, in a way, a positive as far as our margins are concerned in the current year because the salience of Beverages, if it's low, then the margins become positive for us.
Okay. Understood. And my last question was on international business. You had those distribution issues. I wanted to know, does this quarter fully reflect that the issues are behind and you -- or there is some restocking that you would expect going ahead as the distribution changes will be kind of kick-in into those markets?
Yes. International business, we've done the changes in distribution last year, and therefore, that got reflected in the first quarter. In first quarter, we lost some sales on account of change of distributor. Next quarter should be a full-blown quarter with the distribution changes getting ironed out. For the full year, we can guide for a good double-digit growth in international business. Constant currency, obviously, we have grown by 20%, and we'll continue to grow like that in constant currency in international business, but currency depreciation impacts us. But even in Indian currency, we will have a double-digit growth as far as international business is concerned, the full year.
The next question is from the line of Percy from IIFL.
Just some comments from you on the Hair Oil segment. It's grown at 10% this quarter and your other large competitor basically has seen flat kind of a number. So just wanted to understand what has led to this difference in performance?
Yes. So Percy, we guys have grown by around 200 basis points, we have a highest market share of 17.4%, we've registered in Hair Oil. So I think our Amla portfolio, which is following a strategy of the core brand strengthening and anchor brand, I think all our brands have done well, including Amla core. I think execution in the market has been absolutely great by the team, and we've been getting share in segment after segment. So pack price architecture and MSL, which [indiscernible] is actually reaping results in the marketplace for us and shelf-share is going up, distributions are going up. All in, I think execution has been great. So -- and our strategy is actually working for us, which took us time because in the INR 10, INR 20, we were losing shares to our competitor, but I think that we've come back and kind of anchored it well.
Got it. Got it. Secondly, on margin, just continuing from Arnab's question, how do you see it playing out? You said basically, you had some higher-priced inventory. Now that will get run through. Do you think that you will sort of end the year at the higher end of your guidance of 19% to 20%?
So I never gave a guidance of 19% to 20%. So -- but yes, higher end of the guidance, yes, so definitely. So I think it will take us another year. I don't know how the inflation pans out to be, Percy, it all depends upon inflation, but we've already taken price increases in last year to manage inflation. And all the follow-through impact of the price increases should happen in the current year. If inflation is really benign, and it leads to deflation, which is not the case right now, it's 0.5% inflation still, if inflation becomes deflation, yes, we could positively surprise you at the end of the year, but I can't give you that kind of a guidance at the moment. We should remain in the band that we talked about earlier.
Sure. Sure.
And Percy, also, in India -- while in India, we will see some bit of deflation, but also in international markets, the currency devaluations are still playing a role. So it's very difficult to say at this point of time, will we cross 20% or not. But yes, we would definitely improve versus last year. That is the intent, but whatever is the upside in gross margins, we will want to plough it back to the media spend and generate demand for the future.
The next question is from the line of Shirish Pardeshi from Centrum.
Just to start with, I think we have seen a base effect now playing out in the Healthcare. So would you be help -- help us to give some thoughts, how we should look at quarter 2, quarter 3 onwards, because I would assume now inventory also would have been depleted very sharply?
Shirish, as far as inventory is concerned, I don't know inventory is depleted or not, but I can tell you a couple of examples that we were carrying a lot of inventory in e-commerce for Healthcare and that inventory is getting depleted, as we speak. And Chyawanprash growth is still not back on track and Chyawanprash CAGR continues to be 11%, but still Chyawanprash is not growing as we would expect. Although it's a lower base for Chyawanprash, non-season for Chyawanprash, but still the decline in Chyawanprash is to a tune of around 9% or so.But this is not the season. In the season, we expect Chyawanprash to actually grow. It's not a depleted inventory. That's the point I'm trying to illustrate. It's a normal course, par for the course of inventory in Healthcare. But that said, Healthcare should trend at a double-digit growth, a high-single to a double-digit growth is what we should see in Healthcare going forward. All verticals of Healthcare should have a price increase element that we have taken last year and backed by mid-single volume growth, and we should see a double-digit growth in Healthcare going forward.With Baby Care actually leading the pack and Honey has been doing well, I don't know, but for the recent controversy, it -- I don't think it should impact the business much, but Honey continues to do very well for us. In the season, Glucose was impacted because it is the summer-centric portfolio. Next season, going forward, when we do the loading in quarter 4 for quarter 1, I think that should be better. So Healthcare should give us a high-single to a low double-digit growth for the full year.
And just to add maybe, you know, yes, you are right, the abnormal basis have evened out. Business will now grow on a normal trajectory.
That's what I was expecting. Okay. My second question is on the Hair Oil. From the -- from the presentation, I can make out that we have launched Dabur Cool King. I think that's gone into the market. So can you share some initial feedback, how this product has done well, which are the markets you are seeing the pickup or any color on that?
While we launched it in the month of May, actually fag end of the May, it seem 2 months of implementation in the marketplace, May and June, the initial response of the product has been very positive. The advertising that we released has been received very well with the consumers and we've gained 15% relative market share to market competitor, our market lead player in whichever towns and markets that we have launched. We have launched it in UP, we've launched it in North and we've launched it in Bihar. These are the parts which are most impacted by the summers and that's where the Cooling Oil grows.It's a INR 1,000 crore category and dominated by a single monopoly player. We made multiple attempts in the past, all not very successful. Again, we tried to enter because we are trying to plug all the gaps of Hair Oils. Initial feedback is very positive, but Shirish, we'll have to come back again next year and make a full-hearted, because the summer was muted this time. So, but that said, the product response and the repeat purchase is in the range of around 25% to 30%, which is very encouraging.
The reason why I'm asking this question because similarly, even Marico and Bajaj Consumer has also made inroads in the Cooling segment. So I was saying, is the growth rates are so impressive that -- that's why everybody is trying to get into the footing?
Not really. I think it's a plugging of gap of the portfolio and each competitor --- I don't know, I can't tell about themselves. As far as we are concerned, we see this as a definite gap in our portfolio. So we want to plug the gap wherever we have a right to win, and we have a proposition which is very unique, which has been introduced with the chill tube in it. First time, there's a tube in a bottle, which has got camphor crystals in it, which provides cooling and perpetual cooling. No other player in the market has got this kind of a proposition. So on back of this proposition and Dabur having a right to win in the Hair Oil market, we feel we have good chances of success here and that's why we are kind of pushing it. And this is in line with our Dabur Amla, big strong brands and plugging the gaps in all the portfolios. So that's what we're trying to do.
Okay. My next question is on the NPD funnel. I think last 15 months, we have tried various products, starting from the Baby Care range, we have gone some dry fruits, we have gone into the mustard oil, edible oil and then now when we look back, what is the thing which is working or what is -- looks promising? And maybe if you can guide over next 1 year, what is your NPD funnel? I mean, not the product, but what is your target in terms of contribution to sales?
See, we've always maintained that our innovation as a percentage to overall business should be in the range of around 3% to 4% and that's what happened in the current quarter also. Our total NPD to total revenue is around 3% of the business across all verticals, and that's what we want to maintain. So -- but for emerging channels, the e-commerce where the NPD to the business revenues in the range of around 10% or so because that's a incubating funnel for us. And as we keep incubating and doing proof-of-concept checks, once it's successful, then we roll it out to MT and e-commerce. That's our playbook. That's been established very well. In terms of successes, Baby Care is a definite success. In Healthcare -- I'll now talk about Healthcare to you. Baby Care is definite success.We hit a turnover of -- exit of around INR 20 crore. Now we are making it mainstream. This year target is around INR 50 crores what we are doing. Cool King, we've already introduced. We have done INR 6 crore of revenue number. It's a seasonal brand. So next will follow. Bae Fresh Gel, we've already launched in the marketplace, the entry into our gel category. Odomos brand will increase the addressable market and we are launching Odomos LVP going forward. And the edible oil portfolio, the entire edible oil, mustard oil, sesame oil and heart oil that we have got, that will stay on e-commerce for us, and it's doing very well. It's actually we are constraining supplies of the edible oil portfolio in the marketplace deliberately because it's a contingency portfolio kept for us in case of any trying time.So that's --- there, our Coconut Water continues to do well. Real Fizz as you know has done very well. INR 200 crores of drinks franchise we have already created. Our Dabur Ghee, as we speak, is INR 10 crore in exit. It's again, we can open floodgates but we're deliberately keeping it restricted. Hajmola extensions of LimCola, Chatcola and Fantola being launched, are doing very well and they are contributing to around 10% of the overall Hajmola business. Hajmola has grown by around 15% and 10% of the turnover is coming from innovations over there.Our Tea, our entry into chai was the attempt that we did. And I think this year, we've taken a turnover around INR 10 crores to INR 11 crores coming from our Ayurvedic Tea. Our Health Juices has grown by around 20% in the current year. So overall, around 3% to 4% of our business should continue to come from our innovations, which are future pillars of growth going forward in the future for us. And it's in line with our increasing our addressable market under the guardrails of our power brands, which will keep strengthening, which are the core of the business contributing to around 70%, 80%.
That's helpful, Mohit. So just one follow-up here. Though it is heartening to know that you have a very strong NPD funnel, but how do you manage this complexity, running these all businesses right from supply chain to manufacturing to the front end and at the distributor level?
Yes. So I think it's not very complex, because I told you, it's done within the guardrails of the power brand architecture. Now to tell you a guardrail of power brand, I'll illustrate to you with an example. Hajmola is a brand, which has got 3 variants. I'm introducing 2 more variants. It runs on the same line, it runs on the same bottle, only the color of the cap is different and the laminate is different, and the same supply chain handles it, same distribution handles it -- same distributor handling it. So I think it doesn't cost us much. The new variants bring in more vibrancy and a better incremental business.Similarly, Real brand, the Real brand is now available in a PET bottle. Earlier, only a Tetra Pack was going. Now a PET bottle is also made available. Earlier, 5 variants were going, now 7 variants are going. The batches become multiple but that complexity we are geared to manage. And it is --- and we have learned it through our international business also where the population is lesser and the rounds are smaller and changes in the line can frequently happen with efficiency and economies. So that we have learned over a period of time. So I don't think there is too much of complexity. As far as the Hair Oil is concerned, again, similar bottle, similar in the economies, which are there, it gives more news to the salesman to sell and better throughput at the outlet is being promised. So I don't think there's too much of complexity being added here. Rahul, you want to add something? We happened to have a privilege of having Rahul along with us. Maybe if he wants to add something.
So for -- Shirish, for many innovations, we adopt the principle of open innovation, wherein we are not only deploying our own capability, but we are taking help of a lot of third-party manufacturing is already available, which are having the same kind of format already being produced. So many of these innovations are not creating complexity in our manufacturing setup and they are very fast to do and that is the reason why we are able to roll out innovation in such a faster way.
I got that, Rahul. That's really helpful. But just wanted to check at the front end, when your distribution is common length. So in that, how the distributor is doing justice selling all these products, unless it is channel-specific?
Yes. So, Shirish, channel-wise, as far as --- I'll give you a little bit more granular answer. So, e-commerce is a common channel. They are open to innovation. So there is no pressure there. So is the case in modern trade. We furnish them directly. Distributor interface in 80% of our modern trade is not there. Now coming to GT, which is 70% of the business, complexity arises there. There we are planning to increase our feet on street. A, we are appointing more number of sub-stockists and more number of Yoddhas that you know. As far as --- and in GT, we have 3 separate verticals, Healthcare distributor, HPC distributor and Foods distributor separate and with a common distributor, we are trying to segregate lines also. And depending upon the threshold of turnover, we're separating HPC into HPC 1 and HPC 2 also, and adding more feet on street in sales and marketing costs to ensure that delivery and execution happens of the NPDs that we introduced.
The next question is from the line of Prakash Kapadia from Anived Portfolio Managers.
Two questions from my end. What could be the current sales mix of OTC and Ethicals? And you obviously talked about new initiatives in the Ethical piece. And going forward, as we are trying to scale both, could you give us some sense on margins? Are margins similar or higher between OTC and Ethicals? And secondly, on the Beverage business, what happens when there is unseasonal rains or delayed summer? Does growth happen in the balance of the year or on a exit full year basis? Is it fair to say growth remains muted or flattish or festive season can drive growth for Beverages?
Right. So first part of your question, OTC and Ethical, almost 50%, 50% of the total turnover that we have, and margin profiles are also pretty similar because most of the Ethical portfolio is the one, once it crosses the threshold level of turnover moves to OTC for us. So there is no margin profile difference between OTC and Ethical and it's almost 50%, 50% of our portfolio. Like Hajmola, where it was the classical or Ethical product, it was used to be called, [indiscernible], and then we [ nomenclatured ] it as Hajmola and we are calling it OTC now. So that is how we change it. So, Ethical and OTC is a different lifecycle stage.In the previous cycle of the lifecycle, it is called Ethical, then it becomes a Branded Ethical, then it becomes a OTC for us. So that's the lifecycle stage depending upon the turnover. Yes, like our Stresscom is Branded Ethical, which is called a Stresscom, but the active ingredient over there is Ashwagandha. So when it is Ethical, it is called Ashwagandha, when it moves to Branded Ethical, it's called Stresscom. When it reaches a INR 5 crore turnover, it becomes an OTC for us. That is how we look at the lifecycle stage management or our Ethical to Branded Ethical to OTC to FMHG business also.So that's the way our Healthcare, it's again a playbook, very well established in Dabur over years, and we stick to that. And the margins are pretty similar, which are accretive to the overall margins of the company, both from a gross margin perspective and from a net margin perspective. And the requirement of advertising is so much more lower, with establishing this advocacy vertical, we will be able to now do more advocacy and reduce more advertising, which is where we have more attrition of the consumer. Again, we have to advertise, again, lapsing happen, but the doctor remains the same, along the lifecycle of the product, and therefore -- that's why pharma margins are much higher as compared to OTC or FMHG margins for you.Second part of your question is Beverages. Now the season has impacted Beverages on account of summers being lower and 30% of the consumption of Beverages are out-of-home for us. Out-of-home consumption, when the rains are there, people don't move out, and people don't move out, the eating and drinking outlets don't have that kind of throughput and they are not able to sell, that's why the portfolio gets impacted. If rains are not there and the marriage season is great, which is what we think it should be or Diwali season is great, if the rain don't play a damper or spoilsport, then I think that season should not get impacted by Beverages. But because the season is so heavy and it contributes to around 30%, 40% of the total consumption for the whole year, a little impact for the full year business definitely happens.
The next question is from the line of Latika Chopra from JPMorgan.
Mohit, my first question was on your expectations on volume growth progression for the rest of the year. We start lapping even a lower base as we come into the next few quarters. And depending on the rural recovery comments that I've heard, do you anticipate volume growth tend to -- gradually move to -- to maybe even high single-digit volume growth I think for the rest of the year?
Yes, Latika, absolutely, I think rightly said. So if you look at now -- giving a little better answer for you to understand it. If you look at the volume growth across our verticals, our volume growth in Beverage has been very muted because Beverage season wasn't in favor. So volume growth was negative, which dragged the overall volume growth of the company down. If you look at the Healthcare volume growth, our Healthcare volume growth, while there was a 6%, 7% of price increase impact, the overall business has grown by 12%. There is a 6%, 7% of volume growth in our Healthcare business. In HPC business, where the price increase wasn't very high, our volume growth has been in the range of around 7%, 8%. And going forward, this should be the volume growth going forward. So mid-single to high-single volume growth going forward, and a Beverage portfolio, a little bit negative, but definitely mid-single volume growth should be there in the business.So, ex Foods, this time, the volume growth is 6% for us in the first quarter. And yes, and we will have to do. And with the rural recovery happening, as we see, the rural has grown by 4%, we've grown by 8%. Volume growth in rural this time for the category is around 7.5%. On back of all this, we should see a definite volume uptick happening in the business, and we are always monitoring our volume market shares. So for us to grow ahead of the category, the volume growth should be ahead of mid-single also for us to gain market shares across 90% of the portfolio that we have.
Sure. My second question was on Beverages. Sorry to check on this again. But your earlier comments during the call presented that for full year for Beverages, do you expect a muted full year? I understand the first quarter was sluggish, which is about 30% to 40% of the business. But for the remaining quarters, are you okay if you build in some growth or are you seeing any other challenges here on a high base or anything like that?
See, we have taken a target of around 8% -- 8% to 9% growth on a high base of 40% of last year. So we are looking at that target for us. The season now played havoc for us, but the targeted growth is definitely that. And we see the month of July, 22 days out of total 30 days in July was impacted because of rain. So this is an extraordinary event that we are seeing, which wasn't planned earlier. So I can't tell you guidance going forward for Beverages because it is so much season-driven for us. So that is what -- but we had targeted a target of around 8%. And we want to inch up to that particular target and all the incentives of the entire team, sales force and back-end is linked to that particular target, Latika.
Yes. And the last one was just to get a sense of what was the Toothpaste revenue and volume growth for the quarter? And also some comments on your CapEx plan for FY '24, FY '25?
Yes. So easier question first. The total CapEx is in the range of around INR 400 crores, INR 450 crores for the current year, and that's why in the current quarter, we have done INR 160 crore of CapEx. So full year, we should be doing around INR 400 crores, INR 450 crores of CapEx. Now the second part of your question in terms of Oral Care. Oral Care, the volume growth of the category is 2.5%. We've done a volume growth of roughly around 8% in Oral Care with Dabur Red as a flagship gaining 50 basis points market share.The category of Natural, which is 30% -- was 30%, now has become 31%. We've launched gel also in the market. So, I think we should definitely have a double-digit growth as far as Oral Care driven by volume growth for us for the full year in Oral Care. I think we are doing well in Oral Care. I don't see a reason why we should not perform well here. The business is on track and doing well for us. And another point I just want to add, I missed out. Last year, we had issues with Reliance because one of the SKUs that we had introduced in Reliance was undercutting into the GT market, which we cut back supplies, but now that also, relationship has been formed and the business is back on track as far as modern trade is also concerned with Reliance. So that also works in our favor...
This is for Toothpaste, right? That SKU...
Yes. Toothpaste. I'm talking -- I'm talking about Toothpaste. And like you know, we are already a #2 Toothpaste company in the country today and we [ implicated ] the #2 player and we become the #2 player even in Toothpaste now -- in the last quarter.
So, Mohit, if my understanding is right, this issue was there in Q4, right? So does it mean that Q1 was a bit of that issue -- resolution with Reliance. And do you think this 8% volume growth kind of moderates a bit in coming quarters?
Sorry, Latika, I didn't quite get your question.
So I'm just trying to understand if this issue with Reliance resolved in Q1? And do you think this 8% volume growth kind of moderates a bit in the coming quarters?
No, no, it's the other way around. It was an issue in the last quarter. We have --- in the previous fiscal year, we have corrected that problem in the quarter 1. And going forward, the business should trend well, even in Reliance I'm saying, because last year, while in GT, we kept gaining share, but in Reliance is a modern trade and single account, we lost some market share. So that relationship on Oral Care category manager is back on track and we should start gaining shares back in Oral Care is what I'm saying.
The next question is from the line of Sheela Rathi from Morgan Stanley.
Mohit, my first question was with respect to the rural recovery. You seem to be sounding much more confident on rural recovery. But we are getting very mixed signals from most other management on rural side. So what has changed for us? And how --- and you talked about the big single-digit growth at the aggregate level on the volume side. But what is it that has specifically changed for us on the rural side and any specific markets which you would like to talk about?
Firstly, the way rural was, I'm looking at the market indicators in FMCG volume, rural used to be minus 5% in quarter 4 of '22. From minus 5% volume, it became to minus 2%, then to minus 3%, minus 3%, then plus 0.3% and now plus 4%. So definitely, these are trends of almost a recovery that one is actually seeing even one plots a graph and the rains have been near normal. And if you read the news article, et cetera, you find that rabi harvest was impacted by monsoon but kharif sowing has been great.I think this harvest would only happen in the winter season to come and there'll be more money in the hands of the consumers. And wage rate in MGNREGA has also been taken up to around 10%. MSP rates have also gone up. This will increase the money in the hands of the rural consumer. And while the category is growing at 4%, we have grown by 8% in rural. So that is telling us that money is back in rural and moreover, price increases have come down now. And as we move into next quarter, there the price increases will go down and volume growth will actually start. When the inflation was high, price increases were high. It was inching on the rural consumer and therefore, the propensity to spend was actually impacted. But going forward, I think things will only move back, plus election year is coming.So government will also invest more money in rural, especially, in the Hindi Heartland and business will be back. So one of --- some of the anecdotal examples is North. North is very high salient for us, which got impacted by monsoon heavily and the FMCG market was down there, but we have seen where we are very salient in UP, MP, Bihar and Northern Belt also, we've seen our business growing by around 6%, 7% in the GT also, despite our Beverages not firing. So which was sub-stockist network has kind of yielded results for us in the North. And that is telling me -- giving me confidence that rural should be doing well for us going forward. And I don't see a reason why rural should not, because if you look at around, if I look at quarter 4 of financial year '21, rural was always the one which was leading the growth and urban was following. Now both urban and rural are kind of growing well.So I think rural, we should keep inching up and the gap between urban and rural should keep narrowing and rural should fire. So -- but how monsoon and the climate change is impacting the world, I don't know how things will be, but I just hope that rural fires and that augurs well for us. We are highly salient in rural with 45% to 50% of our business coming out of rural.
And any early signs of up-trading, because last year, we were seeing lot of down-trading. So in any categories where we have seen a switch?
Not really. We've not seen any signs of up-trading. But that said, the price increase impact has kind of moderated now. So now it's even keel. The shock of price increase is now in the base, and that is a kind of an up-trade. So consumer has gotten used to it, and now they are buying products. So up-trading in the sense that a 8 ml sachet has become a 6 ml sachet and that's now in the base. So that is kind of up-trade in a sense that you may take it like that. A lot of bridge packs, which have been launched in the market that already got structured or penciled in the bases now. So that is a par for the course going forward. Yes.
Just one more question, and I'm not sure whether there will be an answer here. But from a portfolio perspective, what would be the share of brands, which would be, say, less than INR 50 crores for us? You talked about baby products, where we are very excited about is at INR 20 crores. But do we have a number here, that is what percentage of our portfolio would be less than INR 50 crores, overall portfolio?
I think we have the number but we can get back to you.
We can get back to you with the exact details.
I will get back to you, but I think broadly to tell you, 75% of the portfolio is power brand portfolio, and none of our power brand is below INR 50 crores. So all are in the range, with the exception of Pudin Hara, which is in the range of around INR 60 crores, INR 70 crores, rest all are above INR 100 crores portfolio. So 75%. So rest is 25% of the portfolio, out of which, there will be many of them, which are more than INR 100 crores, but not a power of --- not a part of power brand architecture. So definitely, it will be below around INR 20 crores. If you ask me number of brands, so number of brands will be more than 20, because Dabur has so many brands. But in terms of percentage turnover coming from less than INR 100 crores -- INR 50 crores brand should be around 10%, 15%.
Understood.
I hope I have not confused you more.
No, this is very clear.
The next question is from the line of Vishal Punmiya from YES Securities.
Yes. Just wanted to understand our OTC growth a little better. So we have a impact in our base quarter because of the COVID related portfolio, but when I look at the CAGR performance, it looks like the OTC portfolio has picked up quite well and is reporting a strong growth even on a CAGR basis. So what is helping this growth in the OTC portfolio? And also if you could help with the OTC revenue decline in the base quarter? That's all from my side.
Yes. So I think OTC has got sub parts to it. The first part is digestive part of the portfolio, which is Hajmola as our lead brand there. That has grown by around 15% and that is growing on back of a lot of innovation that we've done in Hajmola. As I told you, Chatcola, LimCola and now Fantola coming in, I think they should be the ones which will be driving the growth.Our Pudin Hara portfolio has been a little muted in OTC because of the season. Pudin Hara is more summer-centric portfolio, that got impacted. That's not done well. Our Lal Tail, which is a Baby Care brand, that has done exceedingly well growing by around 15% to 16%, and that is doing well on back of market share gains, that we've gained market shares in the market from Johnson & Johnson, which is a market lead player. The fourth power brand is Honitus, which is cough and cold. That on a higher base has still grown on by 30-odd percent and it is continuously taking share from other competitors like Benadryl and Torex, et cetera. Then -- and the 4-year CAGR is around 22% for our Honitus. So it's year-on-year, we are taking share from the market lead player and growing because the size of the market is very big, and we still in terms of market share was up 10% in Honitus brand. So there is a huge headroom for growth here. The fifth brand is Shilajit. Shilajit has grown --- is growing at 20% 4-year CAGR for us. That is a men's wellness. That as a category is actually growing very well.
Even Dabur Health Juices for that matter.
And what was the decline in the base quarter for OTC?
No, no. There was no decline in the base quarter. It's coming on a high base. In the base quarter, the growth was in the range of -- Ankush.
Just check...
We will -- we can just check.
The OTC and Ethicals together grew about 15%.
No, it might be because of COVID.
We can come back to you, Vishal. We don't have the data readily available, but one come back to you on the base number.
Sure. Sure. No issues.
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Ms. Gagan Ahluwalia for closing comments. Thank you, and over to you, ma'am.
Thank you, Aman. Thank you for everyone for your participation in this conference call. The webcast, audio recording and transcript of this call will be available on our website. Thank you. And have a nice evening ahead.
Thank you very much. Ladies and gentlemen, on behalf of Dabur India Limited, that concludes today's call. Thank you all for joining us. And you may now disconnect your lines. Thank you.