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Dabur India Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 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.
Thank you, Sampat. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this conference call pertaining to the results for the quarter ended 30th September, 2020. I have here with me Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Lalit Malik, Chief Financial Officer; 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'll now request Mr. Mohit Malhotra to start the presentation. Thank you.
Thank you, again, madam. Good afternoon, ladies and gentlemen. I hope all of you and your families are staying safe and healthy during these tough times. Let me also wish you a very Happy Diwali to all of you and a great festive season ahead. Our war against COVID is not yet over, and my heart goes out to all those who have been affected by the virus. I would like to express my deepest gratitude to the frontline corona warriors, our police personnel, health care workers and sanitization workers for their selfless service towards keeping us all safe during these trying times. Moments of extraordinary challenge like these test our collective will, and I'm proud and inspired by the way the entire extended Dabur family from factories to supply chain to the frontline sales force have risen to this challenge across the globe. I would like to thank them for their hard work, commitment and invaluable contributions, which have helped us weather the COVID storm and emerge even stronger. They are our true heroes. COVID has entirely changed the business landscape around the globe, opening up newer categories and challenges while dismantling some of the established ones. As I've often said, a crisis is not to be wasted. It is, in fact, an opportunity to work harder, strengthen the business with new capabilities, beliefs and innovations to emerge stronger and even further entrench our leadership position in the marketplace. This is exactly what we did in COVID times. We have transformed ourselves as an organization becoming more agile, nimble, aggressive and fearless. We have also enhanced our risk-taking ability, encouraging our employees to become more entrepreneurial and self-driven. This crisis has propelled the company towards the journey, wherein we have accelerated the pace of innovation, retooled our distribution, increased digitization across value chain, enhanced our efficiency and productivity and brought in a complete cultural change within the company. We have launched multiple new products since the advent of COVID in spite of restrictions on supply chain and limited availability of labor and raw materials. I can say that this has been the inflection point for the company, which has brought an enduring changes in the way we operate. Our strategic business transformation exercise helped us to develop and implement growth strategies in the core business areas to successfully address the emerging challenges and deliver a robust top line growth accompanied by healthy profitability during the quarter. We saw a growth of 13.7% in consolidated revenue from operations. Our FMCG business recorded a stellar growth of 20%, backed by a volume growth of 16.8%. Operating profit increased by 16.3% and consolidated profit aftertax reported a growth of 19.5%. Riding the tailwind of immunity products and bolstered with the new innovative launches, the Healthcare portfolio recorded a growth of around 50%. This was driven by a strong growth in our power brands in Healthcare portfolio and supported by creative marketing campaigns, localized sales activation and sustained investments. The health supplement business grew by 70%, led by 2x surge in sales of Chyawanprash, a double-digit growth in Honey. OTC business reported a strong growth of 56%, on back of robust performance of Lal Tail and the NPDs like health juices, health drops and other Ayurvedic products. The Ethical business also performed well, reported a growth of 26% on back of strong demand for immunity boosting products, contextual activations, visibility drives in chemist channels and initiatives like Immunity@Doorstep. Within HPC portfolio, Oral Care recorded a industry-leading growth of 24.2%. Dabur Red paste, our flagship brand, continued its growth momentum along with the strong performance of Meswak and Babool franchise. Our market share in Toothpaste category witnessed a 90 basis point gain vis-à-vis last year. Our Lal Dant Manjan also witnessed a strong growth of 30% during the quarter. Hair Oils reported a marginal decline, primarily on account of lower sales in the enterprise business, particularly CSD business, which continues to be impacted. Ex-enterprise, the sales of Hair Oils was flattish. Our flanker brand strategy remains intact with the launch of Badam Amla and Amla Alovera. The Shampoo portfolio recorded a growth of 17.8%. Our market share in Shampoo business increased by 80 basis points, touching 6.4%. Our focus on increasing bottle salience is yielding results -- has yielded results with a strong surge seen in the quarter. Vatika Shampoo reported a good offtake on e-commerce platform as well. Home Care reported a muted performance during the quarter due to discretionary nature of this portfolio. The Air Freshers and Mosquito Repellent Creams were under some pressure. However, our market shares in both the categories saw an uptick. In Air Fresheners, Odonil recorded an increase of 60 basis points in market share. And in Mosquito Repellent Cream category, Odomos recorded an improvement of 80 basis points. The recently launched Home Hygiene portfolio on the Dabur Sanitize and Dabur Dazzl brands have registered a strong performance. Skin Care portfolio witnessed a growth of 38%, driven by strong performance of Dabur Sanitize range, which includes hand sanitizers, antiseptic liquids and soaps along with Fem hand washes portfolio, albeit the traditional portfolio of HRC bleaches declined by around 12%. With the HORECA and CSD businesses continuing to operate at lower levels, the Food business reported a decline of 3.8%. Ex-HORECA and CSD, the domestic Foods business saw a growth of 8.5%. The in-home domestic business has sharply rebound while the out-of-home portfolio has seen sequential recovery month-on-month. Our market share in J&N category saw an increase of 170 basis points, reaching to a market share of 61.5%. Our culinary portfolio under the Hommade brand recorded a growth of 12%. Domestic business for culinary ex-HORECA and CSD has shown a strong growth of 45%. The new products launched under the Foods portfolio were Real Mango Drink, Real Frappe milk shakes, foods which are also witnessing encouraging response from the market. Among the channels, e-commerce was an outperformer with a growth of more than 200%. This channel is now contributing to around 6% of sales vis-à-vis 2% last year. We were able to capture the increasing preference for online purchases among the consumers and increased our market share on e-commerce platforms across categories. International business recorded a muted growth of 5.5% during the quarter, while MENA region continues to face macroeconomic headwinds due to lower crude prices and outward movement of expats. We saw strong double-digit growth in Turkey, North America and SAARC businesses. New products were launched in Hair Care, Skin Care Hygiene categories. The business reported an increase in operating margins aided by saving initiatives across the board. We believe innovation is a cornerstone of our strategy to deliver robust growth and tap the emerging opportunities. During the quarter, we extended our portfolio with the launch of Dabur Honey Immunity range Tulsi and Ashwagandha variant, Dabur Herb'l Clove toothpaste in south, Amla Alovera Hair Oil, Dabur Badam Amla Hair Oil, low-calorie juices and Real Apple Mini.We also entered new categories with launch of Single Herbs, Dabur Vedic Suraksha tea, Ayurvedic nasal drops, along with chutneys, pickles range in the culinary portfolio. E-commerce continues to be a driver of growth, and we fortified it with the recent e-com-first brand launches of Dabur Himalayan Apple Cider Vinegar, Baby Range and Cold Pressed Mustard Oil. Going forward, we intend to drive our business by investing aggressively behind our brands, staying focused on health and hygiene, driving innovation and renovation across our portfolio, leveraging the new age channels like e-commerce, cash and carry and modern trade, besides expanding and enhancing the efficiency of our distribution network. These initiatives are coupled with cost and cash flow management to ensure stable and healthy margins. I would once again 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 the call of duty to catalyze the transformation of Dabur into a stronger, more nimble and agile enterprise. While the challenge of COVID still remains, we will strive to continue our pursuit for excellence and stay course on our strategy of strengthening and leveraging our power brands, expanding distribution footprint, digitization across the value chain in the company, cost optimization and building organizational capabilities for sustainable and profitable future growth. With this, I will now open the Q&A and invite your questions.
[Operator Instructions] The first question is from the line of Abneesh Roy for Edelweiss.
Mohit, congrats on a very good set of numbers. So my first question is on the Oral Care portfolio. So 2 questions. One, market share data, other companies are seeing is not reliable because of the lockdown. So if you could comment on that? Second, how much is the contribution of Dant Rakshak and the clove -- Dabur Clove in the percentage of sales this quarter?
Yes. To me, market share -- thank you, Abneesh, first of all. Thanks for your support. So market share data, actually, in my mind is pretty robust, and it's very indicative of the way we've actually performed. So Oral Care market shows a uptick of around 5%. And as compared to 5%, Dabur shares in Nielsen are showing a growth of almost like around 10% for us in the Nielsen data, whereas our business in terms of our secondary and primary, is showing a growth of around 24%. So in my mind, it's pretty indicative and the difference between our sales and the Nielsen remains intact. That said, there were COVID disturbances, which Nielsen also witnessed in their field work while they were collecting the data. But overall, it seems to be in line with the performance that we've shown. So that's on that. As far as Dant Rakshak and Dabur Clove are concerned, I think very miniscule performance. We guys just rolled out these brands around 2 months back. Still there is pipeline filling happening. Overall, we would have only done around INR 7-odd crores out of Dant Rakshak and very small INR 1 crores or INR 2 crores out of Clove, which is insignificant to our overall performance of Oral Care.
My second question is on the new products and very high A&P spend. So if I see sanitizer, ACV and herbal tea, these are not products in which you have a right to win because you have entered here late already established players are there. So one, will you advertise here? And second, will this go into the general trade also at some point of time?
Right. As far as sanitizer is concerned, Abneesh, we've actually tried to create a vertical of home and hygiene under the brand called Sanitize. And this will continue across our portfolio, whether it's a sanitizer, it's a hard surface cleaner or it's a home hygiene products like antiseptic liquid, soap, et cetera. This is a portfolio that we are trying to create which is all about sanitization. In my view, consumer habits are changing and consumer behavior of purchase is also changing. And these habits will ingrain as we're going forward. And the number of players in the market are very few and far between here, with Reckitt's being one of the player and 1 more -- 1, 2 more players in this category. Rest of the soap market, if you see is all about beauty space, and less about antiseptic space. To me, market is underfed in the antiseptic space. So there is a need of multiple players. As far as the right-to-win is concerned, Dabur stands for health and wellness. And I feel we have a right to win in these categories with the credibility and legacy of Dabur and the trust given on our back. So there is a complete credibility of Dabur and a right to win to get into these categories. You see our antiseptic liquids are doing fairly well and they are not just plain jane antiseptic liquids. They are herbal antiseptic liquids, which will actually carve their own niche in the antiseptic liquid category, the way we guys did it in shampoos or the way we guys have done it in Oral Care. Likewise there are examples replete which I can tell you one after the other, wherein Dabur has carved out a niche of herbal and natural in these more cosmetic or these artificial category. As far as apple cider vinegar is concerned on e-commerce, it is showing very good traction. There are a limited number of brands present. And with the Dabur's name, we have a right to win. So your point is right, we will be extending this brand to modern trade also going forward as we launch extensions and variants in apple cider vinegar.
And have you seen sales slowdown in sanitizer in terms of weekly sales number?
Yes, sanitizer sales have really gone down on. There are multiple players who entered into the market and the prices have also come down. The margins have also reduced, and everybody is getting into a market, be it a larger multinational or be the local company. There are multiple players going into the market. So therefore -- and sales -- our sales have also gone down. We had registered a total sales of around INR 80-odd crores in the first quarter. And in this quarter, we only registered around INR 12 crores sales coming from sanitizer business. So it is not a sustainable business. It will go down over a period of time. And that's what we had anticipated when we had launched. It was very contextual for the COVID times, and that's how it serves its purpose. And now the business will kind of mute, and we are pretty well prepared for that. But that said, that is only one of the products under the Dabur Sanitize brand. But now we have got a multiple portfolio out of the Sanitize brand which with the new launches will try more than cover up in terms of margins and also turnover in the sanitize portfolio.
My last question is on Chyawanprash 2x sales and strong growth in the honey. So any sense on how much growth is coming from new customers? Second, is it all in-house manufacturing? Third, edible oil companies are coming into this space. Do you see a threat long-term in terms of market share or because you have the dominant share, it will be loss for other players, if at all?
Yes. First of all, DCP. If you look at the total penetration levels of Chyawanprash, Chyawanprash is at a 2% penetration level in the country only. So the penetration levels have gone up from 2% to around 3.5%, 4% in the season, it will go up beyond this also. But that said, 4% is also very low. If you compare with the Hair Oil portfolio, you are 90% penetration, DCP is only around 2%, 3% penetration level. And if I have to compare myself with other developed countries, which is where India will move from developing to a developed, in other developed countries like the U.S. health supplements and nutraceutical penetration levels are 80% with VMS contributing 80%. In India, it's barely 10% level. So the headroom for growth is huge. So it's the onus on companies like us to bring about Chyawanprash in modern format, in palatable format, and better packaging, which can traverse the distribution. And then sky is the limit for increasing the penetration and back of Chyawanprash, we think we should be able to increase the penetration levels of nutraceuticals in the country also going forward. As far as honey is concerned, also honey penetration levels are high. So they are in the range of around 24%, 25%, and they've gone up post-COVID. And multiple players will come into the category. But if you look at other countries, honey penetrations are again in the range of around 60, 70. So we have a huge headroom to cover as far as, again, honey potential is concerned. More the number of competitors come in the more share of voice on media, the more category expands and therefore, more players will come in. So more players are welcome into the honey category while we try to protect ourself, but they are welcome. And we will try to do our best in the marketplace to fight competition.
Mohit, one small follow-up there. So in terms of penetration for Chyawanprash, what are you doing on LUPs? We have seen Horlicks and Complan come out with a much stronger, much lower pricing, smaller packs. So what are you doing there? And manufacturing capacity, if you could discuss for Chyawanprash, is it all inhouse?
Yes. I'll answer the second question first, Abneesh. Our manufacturing capacities are all in-house. It's a very sensitive product. Not everybody can make it. And if other companies claim to be making in third party, I think one has to be very sure that the proprietary formulation, which is registered or authorized or authenticated by Ministry of Ayush before you buy because Chyawanprash is a classical name and you need to follow a classical proprietary methodology of making the product, health product. Therefore say just taking it from a third-party and rolling it to market can be very risky for the health of the consumer. So that's why most of them are not nomenclaturing it as Chyawanprash. They call it chyawan amrut or they call it chyawan something, et cetera, et cetera. So it's a twist in the tale, which I think the consumer will understand very fast. As far as we are concerned, it's all in-house manufacturing, and which is very proprietary to us, and which is inspected by Ministry of Ayush, which is made as per the text. And we have augmented the capacity. Our capacity is running short. We've augmented the capacity and therefore, we are expanding our capacity. We are actually taking mega project in MP of roughly around 40 acres of land. We've also paid an advance for that, and we'll be commencing our production in a couple of months, almost 3 months time. So we are augmenting the capacity of Chyawanprash manufacturing going forward as well. Now coming to -- talking about penetration of Chyawanprash and introduction of LUPs. Yes, we understand there's a huge potential there. And we have to reduce the price points to make it accessible to the rural consumer. For that, it's early days yet, but we are working on some formats, which are amenable to LUPs and reducing the price points there. So we are working on that. It's difficult for me to let you know at the moment.
The next question is from the line of Percy Panthaki from IIFL.
Mohit and team, congrats on a very good set of numbers. My first question is on your margins and related to ad spends also in that context. You've grown your ad spends by 40% this quarter, and that has prevented the margins from expanding. So just wanted to know your view on a sort of 4 to 6 quarter basis, where do you see ad spends stabilizing? And do you think that there is any upside in your EBITDA margins from these levels?
Right. Thanks, Percy. So as far as our ad spends are concerned, I think if you compare Dabur to other companies in terms of the ad spends, we are sitting at a very low ad spend to revenue ratio at the moment. I think we have a lot of catching up for us to do. So we still sit at around 8% ad spend ratio. If I look at the best-in-class companies, would be spending still 12% on -- above the line to generate demand. So there's a catching up to do. So therefore, we'll have a leverage coming in from other line items of cost and also some Samriddhi projects, and they will be invested behind on ad spends and increasing our ad spends going forward. So for the balance of the year, we will only increase our ad spend vis-a-vis last year. That's on ad spend, and we don't want to increase our margins. We want to keep the margins where they are, and we want to invest the upside or the leverage in the business into the ad spend. That's as far as the ad spends is concerned. Now coming to the margins. We've already got upside on the operating margins. In India, the operating margins gone up by 22 basis points. And in consolidated, it's around 50 basis points. That will happen, and that's already happened. Even in first half, you've seen a margin growth. And in the balance of the year, we want to keep the margins same as what they are due last year. So overall, for the financial year, there will be an upside in the margin of the first half getting captured into the balance part of the year.
But, Mohit, how do you look at the margins on a slightly longer-term basis? Let's say, on a 3-4 year basis, do you think that your margins, which are, let's say, at 21%, 22%, they can like structurally go up to 25%, 27%? I mean, most of your categories can actually do much higher margins than that. And of course, the Foods margins are pulling that down. I understand that, but your categories are such that not too many products have direct comparables. So from that point of view, the niche product, so to say, so can the margins not be higher in a 3-to 5-year perspective?
Percy, we've embarked on a journey of innovation and launching NPDs and now trying to get into categories are much larger than where we are already existing in because the COVID taught us a lesson that we don't have to restrict ourselves to discretionary categories, which are higher margin. We also have to pivot our business to categories which are larger and which will give us the scale leverage. So therefore, we have to invest upsides into advertising. And like I told you, there's an improvement required in our advertising. So in terms of long term, 2 to 3 years horizon, we are wanting to invest in advertising and do not increase the margins to a level of 25%. It's more maintenance of margins and a little bit upside, if it happens, it happens.
Right. Sir, my second question is on the growth of the Healthcare business. Right now, that business is doing very well. Of course, there are COVID tailwinds. But once this kind of growth anniversarizes, how do we look at growth going ahead? Do we say that on the back of this 40%, 50% kind of growth, the growth in FY '22 will be sort of low single-digit or even negative in those categories because the base is just too high? Or do we say that this is a new normal base and on that base, we will now have a normal growth?
Yes. So I can't give you a very straight answer on that. I don't know as to how the business will trend. I can only tell you the trends going forward. I cannot forecast what's going to happen next year. But as I told you, when I answered to Abneesh that the penetration levels of health care are going up in the country, and we are seeing the penetration. We are seeing it happen like -- and multiple players are coming in, and therefore, the categories will expand. As the categories expand, the market leader only gets to capitalize from this kind of a tailwind, which will continue. Now in terms of absolute growth rate, whether we'll be able to sustain, answer, maybe no, because it will come off a very high base. Now if you look at Chyawanprash, in last quarter, there was a low base. And in the coming quarters, the winter quarter, now we've lapped over the high base of last year winter because summer was off-season. And off-season on a low base, we had a big growth of 2x, 3x. As we enter into the new quarter, now have come off a high base, but still I'm seeing a growth because the number of consumers are actually going up who are using Chyawanprash. So therefore, they are new customers. And when the new customers come in, that's a delta growth, which happens, although your base is higher. So therefore, the overall category and the pie increases and the market leader with 60% odd share, which is us, will only expand. So -- but exact quantification of the number, I'll not be able to do. But I feel the habits have got ingrained. Prophylactic health care has become more salient. It's got ingrained in the consumers' buying behavior. So therefore, health and hygiene is not going to disappear from the country, even in FY '22. So I will not say that it will be a low single-digit or negative sort of a growth rate in the category, and we are doing -- and it's just not the base or what the market does. It is also what you do to yourself to take the business forward. So therefore, we are cognizant of the fact that there will be a high base, and we are planning for that. And therefore, maybe more better formats will come in, more NPDs will come in. We'll get into better categories. So I have -- we have full 12 months to actually work on the same initial work to prove you wrong that it will be less than mid-single digit.
Right. Mohit, may I be permitted to ask one small sub-question on Chyawanprash.
Please, please, please.
So if you can just tell me what was the household penetration of your brand in Chyawanprash in the season last year, so that would be Q3 last year versus what is the household penetration today? Is it higher than the Q3 of last year?
Yes, definitely. It's higher by at least a percentage point, and we've seen it from first quarter to now the third quarter also as we enter into the season. It's gone up from 2 percentage to 3.5 percentage points and penetrations have gone up. And I still don't have the data as yet, but around 1 percentage point increase in penetrations have happened. But that share is still very low in the range of around 3%, 4%.
The next question is from the line of Latika Chopra from JPMorgan.
Congratulations on a strong print. My first question was on the Foods business, we saw 6% growth excluding the enterprise business. Is it right to assume that this quarter won't have the benefit of any festive-related loading, and we should see the full contribution of festive only in Q3? And on some of the new launches here, like Low Cal juice, Frappe, you have launched a Apple variant at INR 10. What kind of distribution these new launches have? And how do you think the contribution of these new products will be in the overall sales mix? And if I could just check, do you think now this business is geared to move to about double-digit-odd growth?
Right. As far as Beverage business is concerned, you're absolutely right, Latika. Beverage business ex of HORECA, ex-institutional and enterprise business is growing at 6.5%. If you look at the food business, ex-HORECA is growing at 8.5% for us and driven by culinary portfolio and culinary is Hommade. Hommade, if you see the culinary portfolio is growing at 12%. But if I exclude HORECA, culinary is growing at 45% for us. There is a tailwind on the culinary in-home consumption that we see. So that's -- so I think the Foods business is back on recovery path very strongly. In beverage business, there are 2 subsegments of beverage. One is the in-home and -- versus out-of-home. If we look at out-of-home, also, there's a sequential recovery and out-of-home which contributes around 35%, 40% of the total business is growing at 3.5%, which -- whereas the category is declining by around 34%. So that is on growth path. The in-home consumption is growing by around 12% -- 11.5% to 12%, which is significant, around 60%, 70% of our portfolio, which is a 1 liter pack. That staged a recovery of around 11% growth now, all though off-season, but then the growth is happening. And I'm sure this growth will continue going forward in the first quarter next year also when we come into the season because people are shifting from carbonated beverages to more healthy drinks and juices are considered healthy and carbonated beverage is a big market of INR 25,000 crores a year. And we're talking about only including drinks, INR 6,000 crores to INR 7,500 crores market. So there is a source of business and people are moving from that source of business here. So I have no doubt that juices will trend back to growth trajectory, today it is minus 35%, but the growth will happen. And if we gain share, we should get back to a double-digit on back of all these NPDs of getting into the drinks market and Frappe and Low Cal and restaging of brands, et cetera. So I don't think there's any doubt that we'll get into a double-digit growth rate going forward in the season next year. NPD contributions will be around 5%, 6% on the beverage business. We have a lot of potential there. In terms of Real, we are hardly scratching the surface and utilizing the equity of Real. Real has a huge market equity, and we will keep expanding that. As far as distribution is concerned, we are very small with NPD. So NPD distribution is going on. [ Feeding of patients ] are happening as yet. And as we scale the business, we'll have to embark on new distribution network. Our existing distribution Foods network is not -- E&D outlets are not doing justice to the drinks market. But as we scale up the business, we'll get on to more [ fat ] dealers and more network of the drink space. And that's where we'll be able to grow the business. As far as our separate infrastructure of distribution is concerned, we are putting in more feet-on-street and more SSMs. And today, we've got a separate distribution network in metros. And only in North India, gradually, slowly, we are expanding that also, and we'll have exclusive distribution network across India as we scale up the new businesses.
Sure. If I could check a little bit more on Toothpaste, could you state the Toothpaste growth in the quarter, I probably missed it. And what is really driving this? Is it also supported by some kind of channel inventory normalization? Is there a big difference between the primary and secondary offtake here? And also, are you happy with the traction for Dant Rakshak?
Right. As far as the Oral Care category is concerned, Oral Care categories you see is growing by around 5% and Nielsen shows our growth at around 10%. If you look at the overall category is growing at 5%, the natural base Toothpaste category is trending at around 8%. So natural Toothpaste segment, which is around 27% to 30% of the market is growing at 8%, overall market is 5%. That means the chemical base Toothpaste or calcium carbonate based toothpaste are actually doing much worse as compared to the natural segment. And the beneficiaries of this growth are Patanjali, us, Vicco and other natural players. So this natural subsegment of Oral Care is actually growing, and this is growing across different benefits segment also. Today, it's limited to anti-cavity but tomorrow, there will be more benefit subsegmentations also being carved out here in natural as the segment becomes more and more attractive. And therefore, you see, for us, all the entire portfolio of Oral Care has done well. So we've revamped Meswak, and we've revamped it. We revamped the Babool Toothpaste. And on back of Babool Ayurvedic, Babool franchise is doing well. Meswak is doing well for us. Dabur Herbal Toothpaste is limited to Kerala. We're gradually slowly expanding it beyond Kerala to south of India. Therefore, we've launched Clove Toothpaste as one of the variants there. That's doing -- that's initial early days yet, but it's a NPD. Dant Rakshak has been launched in areas where Dabur Red is not very strong, which is the north belt, where Dabur has a lot of equity because Patanjali is a player, which is very salient there and it's coming at a price point of around INR 40 per 100-gram as compared to Dabur Red, which is at INR 50. So it got a sweet spot of price point which is very attractive. I think it should gain strength there. We've got a turnover of around INR 6 crores, INR 7 crores yet, but that's small. But I think the initial feedback from the market is around 20% to 30% repeat, which is good by any standpoint. So I think we will continue to push this brand and the initial feedback is pretty positive. And we are very hopeful on Dant Rakshak. Yes. As far as -- I think I missed out primary and secondary, we have actually corrected our pipeline by almost 9 days. So -- and -- overall and including Oral Care for us. So there is no pipeline loading, which has actually happened. There is a pipeline correction happened. And 24% growth in primary is also a 25% growth in secondary. So we've actually corrected the pipeline. So secondaries are higher as compared to primary.
The next question is from the line of Prasad Deshmukh from Bank of America.
Mohit and team, congratulations on the 2Q results. So 2 questions for me. One is of the raw material exposure that you guys have. How much is linked to agriculture? And do you have any opinion on how the new reforms -- agri reforms will impact these costs?
Right. So Prasad, our results are very close to what you had estimated -- closest to what you had estimated in terms of results. So I think you predicted it very well. I don't know how you predicted it because we could also not predict it but you predicted it. And we were startled when we saw your estimates, it is very closer to us. So that aside. On raw material exposure, yes, we have 3 buckets of raw materials. The one is petroleum and crude linked and one is agri-linked and third is specialty chemical and fourth is juices portfolio. So we have around 50% almost purchases happening on herbs, spices, agriculture linked commodities, even more than that. So that is seeing significant inflation going forward. And we are contemplating judicious price increases in selective subsegments and to see how we can mitigate that inflationary trend, which we are seeing. As far as quarter 1, quarter 2 was concerned, we saw deflationary trend on back of crude and also on agriculture, but with MSPs and the government reforms coming in, and which is more linked to agri only, we are seeing inflation hitting us. CPI is already sitting at 7% plus. And even WPI is seeing a growth of around 2-odd percent. So that we are looking at how to offset it by way of price increases.
Are there any efforts in terms of getting into contract farming or bypassing the APMCs completely so that cost structure reduces permanently?
We are evaluating. We made a cross-functional team in procurement, and we are seeing that in selective raw materials, we can actually go to large-scale farmers to bypass APMCs. But at the moment, not really, because still, it's a very new act. And we have not come across suppliers with whom we can engage directly. So at the moment, we are continuing with both the APMC. But that said, we've made a core committee and they are still thinking and evaluating the major raw materials in which we can go directly there.
Got it. And the second question is on your new launches in food. These look like mostly in ready-to-eat or cooking essentials. So is it that -- could you throw some light on how you're selecting these categories? So especially something like mustard oil is not something that one could have expected otherwise. So how are you selecting these categories? And how do you plan to scale up these products in terms of distribution?
Right. So we are looking at opportunities which are existing in the Foods business, which are a high business volume, wherever we have the right to win, where competitive intensity is low and where the margins are actually higher. So there's a 3-way framework that we evaluate every category that the scale of business should be high, competitive intensity should be low, our margins should be high and we should have a right to win. So if all these 3, 4 criterias are actually met, that's when we look at the category and then we look at selective channels that do we only get into e-commerce. And if e-commerce is a cradle of innovation or cradle of where we can test market our brands. If successful, then we extend it to modern trade and then subsequently to GT. So we will do a proof-of-concept check on e-commerce. And if it does well, then we extend it. So it's almost like a test pilot that you do when we launch it on e-commerce. So you saw mustard oil is only available on e-commerce as yet. Apple cider vinegar, only available on e-commerce. Baby range only available in e-commerce, Amla Kids was only an e-commerce launch. So that's what -- now you've got a test marketing platform available to yourself. So therefore, there's no flip side of getting the stocks back from the marketplace. And Amazon and other platforms also help you co-create them, and they are very keen to stock all the innovations that you may have.
The next question is from the line of Arnab Mitra from Crédit Suisse.
Mohit, congratulations on a brilliant quarter. My first question was on the NPDs from your side. So if you could help us in terms of the top 5, 6 NPDs, which you would say, you've seen very good traction in. And where you see scalability to, let's say, a minimum threshold of INR 50 crores to INR 100 crores turnover over a few years, wherever, you've seen strong traction and you moved from e-commerce to general trade and you're seeing the rollout continuing there?
Right. So in terms of NPDs, if you ask me, our first 5, 6 will be PET bottle is a very big one. So Real entry into the drinks market with PET bottles. So I think that's doing significantly well. Second is our health drops are doing pretty well. Then third is our health juices are doing reasonably well. Then our Amla Plus juice is doing good business. Pickles and chutneys early days yet, but I think that's doing well. Apple cider vinegar, I would opine that that's got established. So that's the big ones, which I should say, are doing reasonably well. So we've not really entered into very, very big categories. While it may seem that Dabur has gone into a lot of NPD, but we've chosen our battle grounds very carefully. And wherever we've gone into bigger categories, there we've been very channel focused and gotten to. For example, our Vedic Suraksha Tea, we've gone into tea category, but that's more of khada variant of a premium tea, which is adjunct to Dabur where we have a right to win is what we've launched. It's almost like tea replacement by khada. So I think those are the big ones. And where the competitive intensity, you will see that it's low. Margins are pretty high for us. And we have a right to win here where Dabur brand lends its credibility to us.
Okay. And the second question was, when you started this quarter, at that time, I think growth in Dabur had come back to a high single-digit kind of territory. And you ended the quarter at high teens. So obviously, you've gained some momentum through the quarter, while one would have assumed possibly that with the reopening of the economy COVID, the fear kind of slightly going down. The traction in some of the categories may start tapering off. So have you not seen any tapering off in terms of the broader trends on things like Chyawanprash, which are very immunity-driven and actually, would you say that the business is continuing to grow very well because the absolute distribution profile of the category has changed quite a lot. And despite the COVID share going down, it's becoming more of a necessity in the current environment?
Yes. So sequentially, the business is definitely turned better and turned round the corner, I should say. But that said, most of our channels are doing well. So our stockist channel is doing well. Urban growth has come back. We are growing in urban by around 18-odd percent. Our rural growth which is super stockist being a barometer. All the performance is growing at around 25%. Our e-commerce business is doing well. Our institution business is still down. HORECA is still down, it is declining by around 30-odd percent, 25%, 30%, which is yet to come back. CSD is still declining. And the CSD/HORECA both contribute to 3%, 3% last year to the business contributions, which are very significant to especially our food business. Parlour channel is not doing well. Therefore, Skin Care is under issue. Modern trade is only growing by around 1.7% because of the Future Group issues. And as the Future Group issues with Reliance get sorted out, I think modern trade will also come back. Then Reliance is reconfiguring itself in the cash and carry. So cash and carry growth is also only around 10-odd percent. Had the Reliance been doing well, 50 stores, et cetera, we would have registered a growth of maybe 20% plus there also. So I think a lot of channels and a lot of categories like Home Care, Skin Care, traditional categories, Hair Oils, they are still not firing to their potential. So I think going forward, they should improve the channels and the portfolio and Healthcare business, which will come off a high base will mute a little bit. But in my view, they should balance each other going forward.
Mohit, and one last question on the international business. Any comments on how that is tracking? The non-Middle East recovered very strongly, but would there be some element of pipeline in the non-Middle East part of the recovery? And Middle East itself, do you still see the current headwinds continue into the second half?
So Middle East, in the current quarter -- in the last quarter in which we saw the results, obviously faced macroeconomic headwinds on account of crude oil prices being low. And therefore, that having a pressure on the economy and the disposable income of the people, a lot of sops have been withdrawn by the local emirates and by the local Saudis because they are the true consumers of our business plus high per capita consumers for Dabur brands which are expats actually moved out of that market, that had a issue with our Middle Eastern business. But as we go along, I think we come off a low base now. Our Middle East business should recover, and the categories are also going back as now lockdowns have been removed, and people are getting used to the new normal.So Middle East business should be back on recovery from current quarter onwards. And besides the Middle East, other businesses under pressure are the sub-Sahara business, there, which is Nigeria. And you would know the issues in Nigeria and -- but because of the COVID, I think Nigeria also gradually in storage should trend back. Barring that, all our buckets of international business are doing reasonably well. So I don't think there's a problem. SAARC is already back, Bangladesh, Nepal, Turkey, America, U.K., Europe, all the businesses are doing well. Sub-Sahara and Middle East are the only 2 pressure points, out of which Middle East should recover and sub-Sahara should also recover in due course.
[Operator Instructions] The next question is from the line of Tejash Shah from Spark Capital.
Congrats on a good sort of numbers. So last September at the Analyst Meet we had in [ Gurgaon ], you had revealed the strategy of power brand and then COVID happened. And like many other companies, we also use tactically our brand in too many health and hygiene platform. And now we are talking about changing the DNA of the company on NPD platform. Now if you can just elaborate, are the 2 strategies of power brand and then the new NPD strategy, are they mutually exclusive or part of the same broader construct?
Right. So Tejash, they are not mutually exclusive. They're actually subsumed in one. It's actually innovation is a strategy we said then and we are saying now. It's innovation across power brands only that we guys are doing like Real is our power brand. So what you see, innovation in Real, we have launched Real PET bottle. We've launched a Real Frappe. We are launching everything under Real. Hommade is a separate brand altogether, so that is separate, but innovations are happening in Real.Similarly, in Amla Aloe Vera, we've launched Amla Badam. So we are strengthening that only. In Hajmola, we've launched Hajmola Chat Cola. We are launching Hajmola [ Limcola ]. So we are strengthening the Hajmola brand. So in Honitus also, we're launching Honitus Hot Sip. And then there is a Dabur health care brand under which you have Suraksha Tea coming up and you have eventually our MFP coming up and Honey variants coming up.So the power brands in NPD, they are not mutually exclusive. The power brands will grow on back of line extensions of these brands or brand extensions of these brands. So it will be line extension, brand extension, [ SQ ] extension of these power brands. And therefore, a brand, which is INR 1,000 crores will actually become INR 2,000 crores, and we will get synergies of investments also on back of this.So in my mind, they are just not mutually exclusive. They're actually a similar strategy. But what happens is when you enter into a new category, which was opportunity presented to us in COVID -- like sanitization became very big. Sanitization could not be subsumed under our Odonil brand or Odomos brand or any other. So therefore, it's called for a creation of a new category called Dabur Sanitize, which will cut across the home hygiene and personal and home hygiene. That's why we created that brand. It's opportunity. We can't be slave to one strategy. As we say, the environment is so dynamic. So we have to keep continuously changing or tweaking our strategy. That's what we have done during these times.
Fair enough. Sir, just a follow-up on that. Dabur brand has now been linked to some point to apple cider. So how should one look at Dabur as a brand architecture? And how is this strategy different from what Patanjali attempted 3 years back and then desaturated and then their growth as well?
Yes, the Dabur stands for health basically for us. And that is the area where Dabur will get extended. Apple cider vinegar is also like a health platform, and this will only strengthen the equity of Dabur as we get into it. It is a little different than Patanjali. I don't know how to compare it with Patanjali or not to compare it with Patanjali. I don't think it's Patanjali. It's our execution excellence which actually makes us different from Patanjali. And to my mind, Patanjali also did a very good job out of [ mainstreamizing ] Ayurveda. I think their execution and their funds management somewhere led to the demise, especially the acquisition of Ruchi Soya with the cash flow problems that the company is facing and the quality issues which came as a big hurdle to their growth. Otherwise, the environment, the strategy wasn't flawed. It was okay. That's my take as a professional.
The next question is from the line of Prakash Kapadia from Anived PMS.
Congrats on a good set of numbers. I have 2 questions...
Excuse me, this is the operator. Mr. Kapadia, may I request you to use your handset, please?
Yes. Yes, I'm using it. Now am I legible?
Yes, Prakash.
Yes. Can you help me understand? So despite contribution from health supplement, if I look at gross margin, we are flat on a year-on-year basis because growth of the rural fund have remained for us at an overall company level [indiscernible] health care are much higher [indiscernible] gross margin product for us once you know the...
Prakash, we can't hear you properly. Your voice is breaking.
One second. Let me check. Now is it better?
Yes. It's better now.
Yes. What I was trying to understand is despite increased contribution from the health care portfolio and especially Chyawanprash, your gross margin have not actually seen an increase. So is it because rural contribution from other products has increased so that has some bit of offset this gross margin because I guess rural would be low LUPs and lower margin? Am I reading it correctly?
No. India gross margin has actually gone up 100 basis points, Prakash. So that's the right analysis on account of product mix. So in favor of health care, it's actually the international business wherein the gross margins are lower because Middle East business, the high-margin business did not do well. If you look at India business, gross margins have -- indeed have gone up by 100 basis points.
Right. Right. And on the health care segment, on the OTC and the Ethical side, which is largely chemist channel focused. Is there a lack of distribution from, I think, the 2 kind of outlets which we had earlier? And can you give some sense on the mix between the Ethical and the OTC portfolio in terms of value?
Right. So as far as the distribution is concerned, Prakash, we are distributed like you rightly identified that -- the distribution essentially with chemist outlets. The Ethical portfolio is distributed more in Ayurvedic chemist outlets and the OTC portfolio is more available in the allopathic chemical outlets. So Ayurvedic chemist outlets are much fewer in number as compared to allopathic chemist outlets. Ayurvedic chemist outlets will be roughly around 100,000 is where we guys go through. It has gone up drastically. And our OTC chemist outlets are in the range of around [ 275 ], which is going up from 245,000 to 275,000, and we are working on the same. So we are working on special channel programs across 4,000, 5,000 chemist outlets and trying to do visibility there to drive demand even in OTC chemist outlets.What is the second part of your question?
Some value mix between OTC and Ethical portfolio and/or direction, what was it historically? What is it now?
OTC is a little larger, and it is growing at a faster pace. And I think our presentation has the numbers. So you can check from there.
Yes. The Ethical business will be growing around 26% for us, and OTC business is growing at 56%, 55% on that business, which is almost, I think, double the size of our Ethical business. And what we do is we guys cross-pollinate products from our Ethical business as they become scalable, we bring them on to OTC and make it available in larger set of chemist outlets. And that's how we grow before it becomes available in grocery also as it becomes [ FMLG ]. So value, sale-wise -- okay, right. Okay.
The next question is from the line of Aditya Soman from Goldman Sachs.
So just quickly on any sense on how sales have been post the quarter, particularly in October as we sort of enter the festive season? And secondly, you launched several new products on this Amazon big day and on some of these other e-commerce events. How has the sort of response been for those?
Aditya, can we be a little away from the mic and speak? It's actually blaring. We are not able to understand what you're speaking.
Sure. Sure.
Can you repeat, please?
Yes. I just wanted to get a sense on October sales and also sales on some of these Amazon big day and events like that, where you've launched some of your new products?
Yes. So I think the business is -- I can't tell you the exact numbers actually, but the business is trending okay as we enter into the festive season. So it's okay because this time, Diwali is latest. So therefore, we did not stock too much in the last quarter and the stocking is happening now in this quarter because Diwali has got postponed. And Amazon big days have been really good for us and for e-commerce. And as I was mentioning in my con call address also, we've gained market shares across our different categories on e-commerce. And we are gradually slowly looking at increasing our market share, whether offline or on e-commerce portals as well. That's why we are offering a lot of NPDs for the first time e-comm as exclusively to either Amazon or to BigBasket so that we are able to get traction from them. So, so far, so good. I think October also things are only improving from what we saw in the second quarter.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
Congratulations for the excellent execution and solid volume growth. My larger question is that in case of -- when I look at last 10-quarter performance, the revenue growth and volume growth hasn't fallen in between. You gave also the explanation that there is a loading for the season which happens and the retail sales happened in the subsequent quarter. Now does that mean that is the strong growth which we have seen in quarter 2, we have more challenges on our hand for the winter portfolio also if the winter doesn't pan out? And what is your thought on the core category? You sounded a bit cautious saying that health supplement or OTC may not repeat in the similar range of growth.
Sorry, Shirish, I did not get the first part of your question. Can you please repeat again?
I'm saying in the past, you have been guiding us that there is always a different skewness and pattern in terms of revenue and volume growth. And I think last year, fourth quarter, you explained that there is the seasonality factor where the loading in the trade happens in the beginning. And subsequently, the retail sales happened in the next quarter. So is that one should read from this quarter number?
No, not really, Shirish. Now as I told you, Diwali has got shifted, got postponed. So the loading, which is to happen in the previous quarter, has not happened because of postpone of the festive season, so that we did not do that loading. We have done some loading, but the loading has been relatively much lower. Despite the loading, we have corrected the pipeline for 9 days as I told you. So we have corrected the pipeline for 9 days. So there is no loading of increasing the pipeline that the secondary sales will happen later than the primary sales. So that is not the case this time in the quarter.
Well, I understand what you're saying. My bigger question I'm wrestling in my mind, seeing that 50% growth on a Y-o-Y in 1 quarter, what has changed? If the industry dynamics has changed or the regional players like Zandu, Baidyanath, these people have not grown and that's where we have got the market share? Or is the whole market is changing? I mean you explained partially saying that the penetration level has gone up by a percentage. With 1 percentage increase, our sales has gone up by 50%. And if the penetration goes another 5%, would we grow 5x?
Absolutely. If the penetration goes up by 5%, we will definitely grow 5x or 10x for all you know so because our market shares are only 60% today in Chyawanprash. So as the penetrations go up, I think the market leader is the one who actually grows, but that's not the reason why our growth is there. Health supplement growth of Honey and Chyawanprash is only one part -- or I should say only a 10% part of the picture of the growth that you are actually witnessing. If you see the entire portfolio of Dabur, there is a growth across portfolio.So I would not say that this only has supplemented the OTC portfolio, which has grown. It is Ethical portfolio which is actually growing. It's NPD which has come in. It is -- even the Foods portfolio in domestic, as I told you, has grown by around 8.4%. Our Oral Care portfolio has grown by 24%. Our Shampoo portfolio has grown by 18%.So it's actually the GTM and the innovation and a lot of other strategic pillars that we have put in place are actually all firing and the execution engine is doing fairly well for the company. So I think -- and plus to add it up, there is a tailwind in health care, which obviously is the case, which is leading Chyawanprash and Honey growth to where they are.
You are not worried about the competition who has jumped in, in Chyawanprash and Honey?
No. No, we are very worried about it. And I think we should be very worried and not be very complacent about it, but there's little I can do for it. I think it's only a brighter side to just to look that, that they will improve the penetration levels in the market. And we will do whatever it takes in the marketplace to protect our turf. Competition is a part of the landscape, and we can't do much about it so -- except that we will keep charting our path of innovation and improving on premiumization and creating economy portfolio so that we are able to utilize our rural infrastructure that we put in place, which is an entry barrier for people to come in. And nobody can take away from Dabur's equity and legacy and heritage that we have in the consumer's mind. If an edible oil company launches a Chyawanprash, I don't know whether the consumer wants to buy oil in Honey or oil in Chyawanprash or how does it go in the consumer's mind. That is for you as consumers to choose, yes.
Well, you said it nicely. My last question on, if I may squeeze in on Oral Care. You have done -- for many quarters, you have been beating industry numbers. What is working in your experience? And now you have got 2 more ammunition, which is last year, you had Ayurvedic launch. And then now you have Dant Rakshak and you have now Clove, which is coming. So were you able to tell us what's changing in the market? I mean obviously, non-white segment is picking up faster as a natural base. But then how long do you think this trend or this cycle will last?
Yes. So I think Oral Care category, you see the natural and the herbal subsegment is the one which is growing, as I was telling you, 8% versus 5%, and that's the case. And this has become almost like 27% to 30% of the overall market, which never used to be there. So definitely, there is a tailwind as the inclination of the consumer to shift out from white and shift into herbal, natural and Ayurvedic kind of platform because they are the value-added form. And if -- do I want to use a calcium carbonate or do I want to use calcium carbonate plus clove or [ mangosteen ] which is much more effective when you do clinical trials or when the efficacy happens. Obviously, you only use value-added. And value-added is here coming at a cheaper price as compared to the calcium carbonate. So it's a cheaper, better value to the consumer, which is what is working here and working for the entire segment. So Dabur is just trying to plug the gap that we are seeing, geographical gap and also the benefit positioning gap and also the consumer gap.So that's what we will be very soon wanting to revamp our gel portfolio, which we launched as Dabur Red Gel, which didn't do very well, but we are completely revamping. Next quarter, you will see a revamp of Dabur Red Gel happening. And we've got all these products somewhere. I think either the execution or the proposition did not work, but then we will keep improving. Like I keep telling you, progression is the way to go and not perfection. We will keep progressing and keep repositioning the brand until the time they do well. Like now Lal Dant Manjan, we had written it off. There is 2 power category not growing at all. Since we started investing, we've seen LDM growth of around 30% coming on Manjan. So Manjan is back as rural is growing and Manjan is growing because rural is growing for us, and that is only enhancing the equity of rate.
In fact, you tried to partially answer my question on the LDM. The Dant Manjan business, you've purely grown because of your investments? Or is there a down-trading which is happening towards rural consumers?
So it is really not down-trading. It is a habit of the rural consumer to use the Manjan format, actually, if you ask me. If you look at the price point, if I look at the price point of Manjan is as much as the price point of the toothpaste format being different. So the price points are very similar. So actually, it could be a little more expensive than our toothpaste business.So there's no question of down-trading. It is a habit that the consumer is used to using a Manjan in rural areas and the urban consumer is used to using a toothpaste and he can upgrade. And our margins are higher in toothpaste as compared to Manjan. But that said, Manjan is a habit and it's a very effective format. So therefore, if you've seen the recent advertising of Dabur Red, we are promoting the use of powder as a sprinkler on paste or on white space. So consumers -- 50% of the population is using a white paste. We are telling them to sprinkle our Dabur Lal Manjan as a vitamin or herbal supplement on top of their core calcium carbonate toothpaste to make it more effective. So that's the new communication that we've put on place.
[Operator Instructions] The next question is from the line of Naman Jain from Hem Securities.
Congratulations on the good set numbers. I just wanted to ask you about the supply chain and the management that you guys are doing. So I just wanted to know how many new suppliers have you added in this quarter? And what is your target going ahead to reach new demographics and geographies?
So supply chain vis-à-vis COVID times actually improved now. So I think there is no disturbance happening in our supply chain. Only some localized lockdowns happened and that besides that, I think it's completely streamlined operation that we have, Naman. We have added now third-party vendors in our supply chain base in terms of vendors. They must be around 6, 7 vendors that we may have added during the course of the quarter.
Okay. And one -- just one more question. What is the -- can you tell me about the pipeline of the new products that you're going to launch in the coming quarters? I mean how many are there in the development phase?
Right. As I told you, there will be -- there's no pipeline as such. First, we have to establish the products that we've already launched. And as we go along, the percentage NPD will be in the range of around 4%, 5% for us going forward quarter-after-quarter. I can't give you the list of products or numbers that we are working on.
The next question is from the line of Harit Kapoor from Investec.
This is Harit here. So just 2 questions. One was on the Hair Oils side. If I look at the decline of 6%, if you could just give us a sense of what's happened there? Is it a down-trading impact you're seeing in the category or something else?
Right, Harit. So in Hair Oils, there are 2 subsegments for us. One is the Perfumed Hair Oils segment and the Coconut Oil segment. In Coconut Oil segment, which is growing, we've gained market share by around 10 basis points there. In the Perfumed Hair Oils segment, if you look at -- if you discount the GMP and the institutional business, then our business is almost flat in line with the category. Category of Perfumed Hair Oils declined by minus 1, but our sales is almost flat. That said, we've lost around 10 basis points in Perfumed Hair Oils segment. Our flanker brands are doing well, which Sarson Amla has grown by 10 percentage points. So they are doing better. So it is clearly illustrating that there's a down-trading happening. That's why you find a lot of economy-based companies doing better than Dabur Amla, but our flanker brands continue to surge well there. So that's it.
And the second part was on distribution. So if you could just talk about the first half, what the distribution expansion has been like?
So distribution expansion, so we are very much on course on the strategy to increasing our distribution. So we've gone up from last year of 1.2 million, we've gone up to around 1.3 million. And next year, we'll go forward to around 1.4 million outlets totally in urban and rural.In terms of number of villages, we lost a couple of villages because we could not serve them due to the COVID impact. But by end of the year, we will go to our targeted number of 60,000 villages. And for next couple of years, we'll make a plan to take up the 60% to around 80%.That said, we are now appointing village-level entrepreneurs and -- which is like village [indiscernible] is what we call them. And we are appointing them in some remote villages, where there is no threshold level of business coming in. As and when we appoint them, they will become our inventory point. And that's where we will try to do some demand generation and gather inventory. As the business scales up, we will convert them into a sub stock case. So that's what we are doing.Also, what we have done in distribution is we have split our HPC line into 2 parts, HPC 1 and HPC 2, because there are 450 SKUs that are carried by our Home & Personal Care guys who give a focus. One, we've made it a hair care-centric line and other, we've made it an oral care-centric line. That's what we are dividing. We've started our pilot project in 1 or 2 urban markets. And if successful, then we'll extend it in other urban markets also.
The next question is from the line of Vivek Maheshwari from Jefferies.
Couple of questions. One, your comment about A&P spend, you are looking at best-in-class 12% number. Is that what directionally what you want to achieve or, let's say hit over the next -- or in the medium term? I'm guessing that there is a portfolio difference also. So that 12% number may not be comparable as much. But incrementally, is it what you're kind of planning to invest at a broader portfolio level?
Yes. So that is the number that we are working towards, and we know that we are at or around 8%. So we should gradually slowly increase our advertising spending. Looking at our diversified portfolio, I think we've got too many mouths to feed and too little resources. So therefore, we have to get into a higher degree of investment for demand generation. And our products are also pre-seasonal. So I think we can do it. So we have to get the monies out from other avenues of cost line items, and that's what we are working, the possibility and all that.So therefore, going forward, in medium term, our advertising spend will definitely go up vis-à-vis last year, Vivek. I don't know by what horizon will I be able to achieve 12%, but we will at least make an attempt of investing higher amount. Lalit is right here. He is my guard rail for increasing the advertising investment. As and when he allows me, I will do it.
We'll maintain efficiency and the returns of that.
Yes. Let's go on.
[Operator Instructions] We take the question from the line of Naman Jain from Hem Securities.
I guess I just wanted to ask what is the volume growth in the multiple segments there. Can you give me the specifics about each of the segments and the volume growth?
So sorry, Naman. We don't really disclose category-wise volume.
The next question is from the line of Richard Liu from JM Financial.
Mohit, one broad question. In the context of the way higher growth that you did for Q2 versus what you sort of projected and alluded to earlier and your prognosis or what you planned for the months ahead, how would you align the 5% to 6% growth objective for the rest of the year that you had been spending in the first half?
Yes. Richard, we've not spelled out the 5% to 6% objective for the balance of the year. We not say. But that said, I can't give you any sort of guidance on the numbers going forward. The situation happens to be very volatile and continuously in flux with COVID second wave kind of hitting us. So one really doesn't know as to how it will pan out. But just to let you know, there is a recovery. And there is a recovery that we see across all channels, across all categories, especially the depressed categories like HPC and Foods are also seeing a recovery now coming back, and we are seeing growth.As far as health supplements and health is concerned, we are now coming to a quarter of winter, which is of a high base. So those exponential growth that we saw may not come in. But that said, it can get complicated by the HPC and Foods portfolio. But I will not be in a position to give you our guidance because the situation is very volatile. I would also really not know as to how business will turn out to be. But we'll target ourselves to deliver healthy growth here.
The next question is from the line of Ayaz Motiwala from Nivalis Partners.
Yes. So my question to you is on the point you alluded to on -- in general, the categories, a little bit of down-trading and the value segments of some of your businesses taking off, in particular, Hair Oils and a couple of other categories that you called out. So in terms of the contrast ratio that we've talked about in the last few years, would you be sort of tweaking your strategy to launch some of these, as you said [ tranquil ] brands or [ warrior ] brands in categories where your core is very strong but you have some customers down-trading or competition nibbling to your market share?
Right. The trend that we see is definitely down-trading across our segments. So if you look at the Foods business also, so a 1-liter pack has gone -- 200 ml has gone down to 150 ml, a INR 20 pack to a INR 10 pack. So we've launched LUP, the low unit price points or accessible price points. In toothpaste, also INR 20 has gone down to INR 10, INR 50, INR 100 has gone down to INR 10. Hair Oils also, we have a INR 10 price point. And INR 10 and INR 20, these are cash rings which are very important for us to ride our rural infrastructure. And in rural business, which is only trending up at around 46%, our [ salience ] is in rural business. It's important for us to augment capacities in these accessible price points, and that's what we have been doing. Although they'll be a little margin dilutive, but that's okay for us because it will provide us with the scale and the heft on the top line and that will leverage our other line items as we are able to scale up the business. In some larger health care categories, it is not very easy to launch LUPs because the ticket size required is big. But we are looking at improvisation of formats, which permit us to launch sachets or tablets, which are more at INR 10, INR 5 price points, yes.
And sir, just a follow-up on the same sort of down-trading and then related to modern trade. Are you getting requests from specific sort of modern trade companies to have uniquely designed or uniquely packaged sized products for them to compete in the marketplace? And how are you sort of treating this versus a possibility that they would be potentially launching white-label brands any which way as a way of doing business?
So far, we've not seen a private label threat coming in modern trade except for a couple of categories like Home Care, which are more commoditized. Rest of the places, we are not seeing threat of white label happening. That said, there's a channel called cash and carry, which is almost like a surrogate of wholesale. There, it's important for the company to launch different SKUs or different products so that it doesn't undercut regular GP. So we are trying to promote our non-KVIs there to ensure that undercutting doesn't happen there. So there is a need of developing new products for those segments of business.
The next question is from the line of Kunal Shah from Jefferies.
This is Vivek again. I just missed on the A&T bid. Basically, I just heard halfway, so you are talking about reaching 12% at some point of time?
Yes, correct. So Vivek, we want to inch up to that level, but it will not be immediate. It will be a very slow and gradual process of inching up as and when the P&L permits us. Like this time, P&L permitted us, therefore, you saw growth of around 50%. So we'll have to -- we can't erode our bottom line for increasing our A&P. So we'll have to account the right balance between the operating margin and increasing our A&P spend also.So it will be a very prudent approach in the way that we increase. Principally, we are aligned as a philosophy to increase our A&P investments behind our brand. And the entire management committee is completely onboard, but we'll have to see the situation of the business so that we don't erode profitability in the bargain.
Right. And Mohit, what will be roughly the BTL today in terms of -- as a percentage of sales?
BTL, for us, will be in the range of around 8% to 10%.
8% to 10% in BTL?
Yes.
So that will go down as ATL goes up?
No. What you see, what is visible to you, Vivek, is only ATL for you, which is around 8%. The BTL, which is there, is getting knocked off from the gross sales as for the new index.
So I understand that part. But I'm just saying that as we push up ATL, the 8% BTL looks very high to me. So does that mean that as ATL goes up, BTL starts coming down?
Yes. BTL actually is driven -- that's a philosophy and principally sounds right, but BTL is more driven by competitive intensity in the marketplace. If you've got a wholesaler and there were 2 companies and one's giving a 12% scheme and one doesn't want to give a 12%, then you lose out the wholesaler investment to the competitor. That's not what we want to do.So BTL is more tactical in nature and ATL is more long term and more brand building in nature. So they can't replace each other. Ideally, in P&L, we want to replace it, that's what every management does. But I think the forces which work for each one of them are very different. One is a demand building force and one is a supply force, so they can't actually replace each other. You know what I'm saying.
Right. Right. Sure, sure. The other question, Mohit, I have is on the sanitizer sales, which has gone down from INR 80 crores to INR 12 crores for you between first and second quarter. Is there a pullback in the industry revenues pool also, you think?
Pullback in the industry?
Revenue pool, basically.
Right. So there is a pullback so because so many players are doing it. But I think consumer habits are changing, Vivek. Consumers got used to this kind of a disease or infection now. So the use of sanitizers has actually gone down and the use of liquid soaps and soaps have actually gone up in the marketplace. So it was an initial thing to carry sanitizers, but now we don't see so much use of sanitizers, that's what. And I think there is an industry pullback also coupled with it because people have seen the margins eroding here because so many players have come in and the prices are falling.
Sure. The reason I asked about sanitizer is the drop from INR 80 crores to INR 12 crores. Does that worry you also from a health care perspective given that as customers -- or consumers become more confident, they can -- their health care may not necessarily be -- in terms of quantum, but there can be a decline in revenues given as customers become used to the New World? Does that...
We're not really -- it doesn't worry us so much because the health care penetration in India is so low and their categories have been there for so many years. It is not just Johnny-come-lately like a sanitizer came in and it will blow out. It's not like that. Chyawanprash and Honey have been there as a part of our tradition, and they will never vanish, Vivek. And therefore, we're getting into more and more better formats under the same power brand strategy so that it doesn't dissipate or have a same thing like sanitizer. I don't think so that's the case with our overall health care portfolio.
Sorry, Vivek. We need to move on.
The next question is from the line of Akshen Thakkar from Fidelity.
So just a couple of questions from my side. One was just to understand the gross margin movement this quarter maybe just in stand-alone. So you've seen 100 bps improvement, while mix has improved quite a bit. So I'm just trying to understand that. Does the 100 bps fairly reflect the mix improvement? Or was there some headwind we face this quarter which would have impacted margin?
Yes. So I think the margin improvement of 100 basis points that we saw in the gross margin for India stand-alone is primarily because of the favorable brand mix. When I say the favorable brand mix, this means that the sale of our juices were lower compared to the high profitable products like health care. So therefore, the brand mix has added to the profitability. And at the same time, there have been some deflationary impact also seen because of crude, et cetera, on the raw material cost. So that has also added. And there is a carryover of price increase that has also given us a favorable impact to some extent. And as a result of it, our margins have improved by 100 bps.
Okay. The next question was for, Mohit. Mohit, when you say that you want to increase A&P, let's say, to double digit and your construct like you maintained over the last year, 1.5 years just to maintain margin. So where does the cost savings come from? Are you looking at better gross margins in the business? Or are you looking at taking out costs?
Taking out costs. I think there's a lot of lab in the organization. There are other expenses which account for roughly around 9.6% in the overall P&L. And there are other elements, of course. Staff cost there is there. Delayering is there. S&M is there. So there are a lot of cost line items, which is where we can get the saving and can be plowed back into the -- this thing. That's why we've launched some of these projects, which is looking at end-to-end value chain of the company and trying to take out the cost elements and get the savings from there.
Okay. And the last question from my side was, you mentioned that your secondary sales in the quarter was higher than the primary sales. Any way to quantify that or maybe just help us understand how the channel inventory was in June? And how does it stand right now?
Yes. So the channel inventory, last year this time, was around 24 days. It has gone down to around 15 days. There's 9 days improvement in the channel inventory across sub dockets, dockets, wholesale, across the board inventory levels. We've consciously brought down to a level of around 15 days, which is almost the best-in-class now. And we are trying to get into CRS, which is continuous replenishment system, with keeping 12.5 days of inventory. And whatever secondary is there, that's how the projection can happen for the primary.
Okay. And these 15 days would have been something similar in June quarter as well?
No. It was substantially higher. And we have corrected the inventory from June to now by trying around 2 to 3 days. The rest, we corrected in the June quarter itself.
Ladies and gentlemen, we will now close the question queue and take the last question from the line of Krishnan Sambamoorthy from Motilal Oswal.
Yes. Congratulations on a very good performance. My question is regarding the -- that highlighted in annual report but did not elaborate significantly, which was on the project RISE and the [ clusterless ] approach. I can understand that part of this is already being shown in categories like Dant Rakshak. Can you elaborate a bit on how significant will this be as a part of your future plan?
So I think RISE is a complete change in the way we guys are operating. RISE, while it means Regional Insights and Speed of Execution, but it's also a structural change in which we operate in the organization. We are trying to empower our regional heads, which are East, West, North, South and trying to create an organization under them wherein we'll identify innovations and roll out the innovations, also looking at state level and region level P&L to increase the business in different regions.So that is what we are trying to do as a part of RISE. So it's actually pretty integral to the way we are working. And the organization is also getting structured so that we are able to empower the channel heads as more P&L heads rather than only sales heads.
Okay. But would something like Dant Rakshak also be a part of the structure?
Yes, absolutely because Dabur Red is actually very strong in South and weak in North India. In North, Patanjali is higher, so it's basically a North initiative that we rolled out with Dant Rakshak. And it's not launched in South India. It's not a national launch. It's a regional launch for us.
And there'll be many more to come on this...
Absolutely. So we are identifying products. Like for example, if you see in the product list, we've also got [indiscernible] which is being launched in South India. This is also South India. What we launched in North India is called [ Kara ]. What we launched in South India is [indiscernible] is basically a RISE initiative for us.
Okay. And just imminently, does your health care portfolio have more of a potential here? Or do you think that also you can do more work on this as a part of project RISE?
I think across the board, so we are trying to identify in sites across HPC, HC and Foods, all the 3 pillars, and also empower the organization leads there in different regions and also HPC, HC and Foods leads because we got all the 3 segments in sales also. So that's how we're trying to create. So across the board.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Gagan Ahluwalia for closing comments.
Thank you. Thank you all for your participation in this conference call. Due to [ courtesy ] of time, if we have not been able to answer all questions, we can answer them offline. Please let us know. A recording and transcript of this call will be available on our website soon.Thank you, and have a nice evening ahead.
Thank you very much.
Thank you very much. Ladies and gentlemen, on behalf of Dabur India Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.