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Dabur India Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 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. Good morning, 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 and half year ended 30 September, 2022.
Present here with me are Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Adarsh Sharma, Chief Operating Officer; Mr. Ankush Jain, Chief Financial Officer; Mr. N. Krishnan, VP of Finance; 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. Over to you, Mohit.
Thank you, ma'am. Good morning, ladies and gentlemen. A very happy Diwali and Season's Greetings to everyone. Thank you for joining us today amidst the festive season. [Technical Difficulty] environment continues to be very challenging, we are seeing unprecedented inflation across the world, in 40-year highs in US, UK and other markets.
Sorry to interrupt you, sir. This is Aman here, I'm sorry to interrupt you, So, ladies and gentlemen, we would request you all to please remain connected while we check the line for the management. Ladies and gentlemen, thank you for patiently waiting. We have the management line reconnected. Over to you, sir. Please go ahead.
Thank you, Aman. Apologies, ladies and gentlemen, for the glitch. Good morning to everyone. A very Happy Diwali and Season's Greetings to everyone. Thank you for joining us today amidst the festive season. The operating environment continues to be challenging. We are seeing unprecedented inflation across the world, with 40-year highs in US, UK and other markets. India is also reeling under pressure of inflation, which is visible in the CPI being higher than the MPC comfort level target of around 6% for the ninth month in a row. Central banks across the world are raising interest rates to curb inflation, but this is impacting consumption and also leading to currency devaluations across the world in geographies.
As a result, we are seeing GDP growth cuts across the board. In such an environment, Dabur's consolidated revenue from operations grew by 6% with a constant currency growth of 8.5%. India business grew by 7%. The 3-year CAGR for revenue of India business is at around 12%, backed by double-digit 3-years CAGR in all the 3 verticals of businesses, which is Health Care, HPC and Foods. On account of continued, unprecedented material inflation, our gross margins contracted by 300 bps plus, but this was partially offset by price increases and saving initiatives. This led to operating margin declining by around 190 bps to touch 20.1% in quarter 2 financial year '23. Consolidated profit after tax registered a decline of 2.8% to touch INR 490 crores during the quarter.
In terms of the categories, Food & Beverage business posted a stellar growth of 30%. The Beverage business was on a strong trajectory and outperformed the industry significantly with our market shares in J&N category increasing by 410 bps. This was further bolstered by strong traction in our food, drinks and milkshake portfolio, which has helped us to expand our total addressable market substantially. The Food business also performed well with a growth of 21%.
It is also my pleasure to inform you that we have signed a definitive agreement to acquire 51% shareholding of Badshah Masala Private Ltd. Badshah is one of the leading players in the Spices and Condiments category, with major presence in Gujarat, Maharashtra and Telangana. The acquisition is in line with our strategic intent to expand our Foods business to INR 500 crores in 3 years' time and to expand into adjacent categories. It also enables our entry into INR 25,000-crore branded spices and seasonings market in India. We intend to leverage our market presence in both domestic and international markets to provide a further fillip to our Foods business.
Coming to the HPC portfolio, we recorded a 6.3% growth on a high base of 17%, leading to a 3-year CAGR of 11%. Toothpaste portfolio grew by 11.2% during the quarter and our market share in toothpaste segment increased by 10 bps. Home Care reported a growth of 21%, driven by robust double-digit growth across Odonil and Sanifresh franchises. Odonil recorded an increase of 350 bps in market share in liquid air freshener category and Odomos increased its market share by 330 bps. Shampoo also recorded a 9% growth with increase in market share of 40 bps. Hair oil posted a 2% growth in the quarter, impacted by category declining by 5.7% in volume. That said, our 3-year CAGR is healthy 7% in the hair oil category. Our market share in hair oils improved by 20 bps.
The Healthcare portfolio is lapping over a 2-year base of exponential growth due to COVID onset. On the 3-year CAGR basis, Healthcare continues to be our trend of around 10% CAGR. Our market share in chyawanprash increased by 120 bps and in honey increased by 40 bps. The new entrants in honey category saw a significant shrinkage in market share by around 200 bps across both traditional trade and modern trade. Digestive category saw flat growth on a high base of 22.7%. Under OTC and Ethical business, Honitus and Shilajit reported strong growth. Among the channels, e-commerce was the standout performer with a growth of 50% and now contributes to around 9% of our revenue. Modern trade also saw double-digit growth during the quarter.
International business recorded a constant currency growth of 12% on a high base of 23% last year. Sub-Saharan Africa business grew by 18% and SAARC business clocked a double-digit growth. While Egypt and Turkey businesses reported robust double-digit growth in constant currency terms, they were impacted by severe currency devaluations leading to loss in translation in India.
Overall, in spite of weak macroeconomic environment, we continue to drive our business aggressively and have gained market shares across 95% of our portfolio. Going forward, we expect the quantum of inflation to moderate on account of high inflation in the bases. While current demand remains weak, a strong festive season, near normal monsoon, a good harvest and MSP increases should enable a recovery in rural in the near term. Urban recovery will continue to be driven by a revival of economy, softening of inflation and buoyancy in new age channels.
As for Dabur, we will continue to focus on gaining market share, growing ahead of the industry on back of strong strength of our power brand, distribution coverage, innovation, cost optimization, efficiency enhancement initiatives.
With this, I bring my address to a close and open the session to Q&A. Thank you very much.
[Operator Instructions] First question is from the line of Abneesh Roy from Nuvama Institutional Equities.
My first question is on Skin and Salon. So on a Y-o-Y basis, I understand the high base was there because of sanitizer. On a 3-year basis, 1.1% is one of the lowest growth within your own category. So is there any shift in consumer behavior towards other products, other brands? See, Nielsen market share data we know doesn't always capture the true trend.
And second related question is on sanitary napkins. Will this be more of a e-commerce play, because this is a very tough category and we already have entrenched brands also here?
So Abneesh, first thing on, Skin and Salon, we were lapping over very high bases, that's the reason why the growth of Skin and Salon is negative 5%, which is there. And it contains the sanitizer piece, like you rightly noted. And I don't think there's anything structurally which is wrong in Skin and Salon except for that discretionary product consumption, it has still not reached the pre-COVID level, so it is just taking some time. That said, we are on an agenda to taking market share from local players.
Local players are actually very strong. We've seen high price increases in the skincare to a tune of roughly around 8%, 9%, whereas some local players have not taken those price increases. So there is a little pushback coming from the consumer in terms of offtake. But I think as advertising begins in skin, I think the business should trend well. Just to tell you all the initiatives that we've taken in skincare, we've revamped our entire Gulabari portfolio. And with the onset of winter, there'll be a little bit pipelining also that we've put in place. And in winter, we should see very good growth coming on Gulabari on back of consumer promotions and new packaging revamp that we have done. Even in the Fem business, there is a big revamp which is happening.
On the sanitary napkin piece, this is essentially going to be e-commerce play. We will test the market as to how it fares before we roll it out to modern trade, like we do with most of our new products.
Related question; in last 3 years, Dabur has hugely diversified its portfolio with a lot of the products on e-commerce. So which ones are successful? And when you say e-commerce is 9% of your sales, how much is coming from the products which have been launched in the last 3 years?
Yes. So e-commerce is doing very well for us, as in the current quarter also we have grown by roughly around 50% in e-commerce. And we had some structural issues with Amazon, et cetera, changing their partner in supply chain, Cloudtail, getting shifted to multiple other partners. But I think that is all behind us. And all the different verticals of e-commerce are doing well, whether it's the marketplace or it's the grocery verticals or it is the pharmacy verticals, all of them are doing exceedingly well plus we've put in a separate infrastructure and a business head for e-commerce and we are monitoring the business. And quarter-on-quarter, our business is trending up, as you can see that it's already 9%. Around 4 years back, this seems to be around 2% to 3%.
Now, this has become a preview for all the innovations for us. So whenever we are launching new concept or a new product, we are first testing it out on e-commerce because the cost of entry is very low and not significant investments are required on e-commerce, and we use digital marketing to create demand. And also, all platform demand generation is pretty economical as compared to the mark-to-market. The products which have done really well for us in e-commerce, our BBK range has done exceedingly well for us and apple cider vinegar which has done very well. Then we have other products like -- I think most of the other products, juices and drinks have done exceedingly well for us. Our edible oils are doing well. Shilajit, new launches and variants, have done very well. The new product contribution on e-commerce is already 11% for us.
So I think most of the products which we launched on e-commerce are doing quite well. And under the REAL chia seeds and the flaxseeds, both of them are doing well. As a matter of fact, the new launch of peanut butter is now trending as a top seller on e-commerce, ahead of Pintola and other established players.
Sir, one question we grapple with is you mentioned in chyawanprash the new entrant has lost market share on e-commerce, et cetera, in modern trade. So that same question I had is -- because you are also entering late in most of these categories, initial sales is there because of either advertising or consumers just wanting to sample or the pricing, whatever. You have confidence on these scaling up over 3 years to 4 years and will we be taken to the general trade also?
Yes. So let me first address your first question. The new entrant, what I meant was not chyawanprash, it was honey. In honey, there was a quickly scale-up happen to around 5%, 6% market share levels in modern trade. But there, there has been a drastic fall in market share that we have seen of around 200 basis points, 300 basis points. And moreover, the NMR claim on back of which they had actually gained market share and so much of euphoria was created in the marketplace has all died down now. The NMR claim is also back and now they've launched new variants with the sub-branding of active and no more claiming NMR. So I am suspicious on some optimization of the formulation also would have happened by the new player. So I think it is the competency and the core competency not being there in these categories, and that's why the new entrant had come in.
As far as we are concerned, on e-commerce we launched a lot of NPDs wherever we have a right to win. So when I say we have a right to win, we have a core capability and a competency to create those products and we compete with no established and a very big organized player. We generally compete with the digital first players, and digital first players don't have the wherewithal to scale the business in the general trade or in the brick-and-mortar channels where we have our strengths and we can scale up. And we are not launching in the areas where we have that strength. We are launching it on their turf, which is digitally first. And if we do well in that digitally first space, then the chances of our success in a turf where we are strong is very positive, which is modern trade and in GT, which will come later for us. So, I don't think there is a problem for us.
That said, baby care range is being scaled up to modern trade and the other variants like apple cider vinegar are also being scaled up to modern trade. In modern trade, also we are not going to en masse modern trade. We're going to very selective modern trade chains and taking promoters to ensure that the progress of our NPD is very slow and gradual. And it is not that we give a target of doing INR 10 crore or INR 20 crore, 2% market share targets to our team, we are talking about a share of shelf and share of market in the outlets that we're putting it. So it's very micro-marketing that we guys are doing with our NPDs. So in that way, I don't think we are actually worried because it is a very channel-wise and a segmented launch that we guys are following.
Sir, my second question is on Badshah Masala. So, after 60 years, this brand is around INR 200 crore to INR 250 crore size, so which means in branded masala it's around 1% market share. So what is the expectation or scale-up here over a 3-year to 4-year time frame, given in 50 years it is around INR 200 crores? Second is of course a lot of the listed players are also having very aggressive plans here. And if you could talk about the margin profile versus your standalone margins. And when you say cash EPS neutral in first year and EPS accretive in second year, what do you mean by that?
Okay, I'll answer the first question first. So, it's a very old brand. So, I think the answer lies in your question. I think there is so much of legacy and heritage in this brand, 64-years-old brand, it's almost like Dabur which is a 135-year-old entity, which establishes a lot of trust and faith in the consumer franchise which is buying it.
To your point on market share, yes, they are around 4% to 5% market share in their core markets. They are basically present in Gujarat, Maharashtra and Telangana where they are the good number 2 player in the market with 4% to 5%. And if you look at this whole masala and the condiment market, the size of the market is very scalable and sizable, around INR 25,000 crores, as compared to categories like oral care on hair oil where we operate the INR 10,000-crore market sizes and in juices where we operate around INR 1,500-crore to INR 2,000-crore market sizes. This is a very lucrative, large market.
I think the first pivot of our winning is the market sizes where we entered should be scalable enough and there should be enough room for us to grow. And with that kind of a market size, there is room for multiple organized players to come in and gain market shares. And this market is essentially unorganized, so there's lot of room to get converted from unorganized to organized, from organized also to big branded players, so enough room for everybody to play. And this is a very, should I say, state-by-state market growth which one needs to follow. So we are starting from Maharashtra and Gujarat and then we will extend this portfolio going forward. And we feel that there is a brand equity here, which can be harnessed and can be plowed.
As far as the growth not being there in past decade or so around 4%, 5% of CAGR, I think there were issues within the family, and that's why the growth was not there. Family was little divided on the investments to be put behind the brand and there hardly was any investment put behind the brand, but the Jingle of Badshah, it still resonates very well.
As far as margins are concerned, to your second point, Abneesh, the margins are accretive. Whether it's the gross margin or operating margin, it's accretive to our Food portfolio margin and this will only add-on and improve our margins in the Food segment where we guys operate with essentially Beverage portfolio. We have a vision to extend our Beverage portfolio to a Food & Beverage portfolio and this is an attempt in that direction to become a completely Food & Beverage company rather than being only a Beverage play. We have 70% market share in the Beverage play, but we want to extend this to the Food segment.
As far as cash EPS is concerned, do you want to take up, Ankush?
Yes. Abneesh, thanks for that question. But what we mean by this is that profit after tax net of the interest opportunity cost will be accretive from the first 2 years and without taking into account the brand amortization, which will come subsequently. But cash EPS will definitely be accretive in the first 2 years, yes, and going forward.
And Mohit, on the question of the distribution scale-up, because you said only few states Badshah is present, will your plan be to first focus on these key states or you want to first take pan-India presence?
No, not really. So, we have a very focused strategy on this. So in first phase, we will focus on Gujarat, Maharashtra and Telangana and that is the key core states. In the second phase, we will focus on the adjoining adjacent states, which is Rajasthan, and subsequently we will look at scaling it up to all India where Dabur has a presence. So first, that is the geography-wise play.
As far as the distribution play is concerned, we have got the distribution to roughly around 80,000 outlets where Dabur has a much huger scale of distribution, whether it's direct or it's indirect, in both urban and rural. I think that within these states will be strengthened before we move on to the adjacent states and then subsequently to rest of India. But for rest of India, as you know, this is very specific to the palate, likings and preference-driven category. So we will have to create a back-end and create flavors which are in tune with the preferences and the taste of the consumers in other geographies also. So that scale-up will happen in due course of time.
The next question is from the line of Shirish Pardeshi from Centrum Broking.
Just 2 questions which is burning in my mind. During the COVID period, our Healthcare business has moved from almost 23%, 24% to almost 40% when I look at quarter 3 last year. Now, clearly health care tailwinds are not there and the product decline is already there. So just wanted to hear your thought that how we should look at this business the rest of the year.
Yes. So Shirish, pre-COVID the business was roughly around 30% contribution to our overall business in Healthcare, so Healthcare obviously got a growth spurt of around 70% during the 2 years of COVID, year one and year 2. Post that, there has been a rebalancing of portfolio, which was expected to happen and which is happening. One thing very heartening for us is that the penetration levels of these Healthcare categories has gone up to the pre-COVID levels. So if you look at the business, and this is the off-season that you're looking at, now in season we will be back to 30% contribution in this business. If you look at the Food business also, that went down to something like around 15% or even lesser than that, and it's back to 20% levels. Even the HPC business, which was more discretionary in nature, that went down to around 40% levels, is back to 50% level. So it's a rebalancing of portfolio mix which has happened and it's going to be back to the pre-COVID levels, so which will be 30% of Healthcare, Foods being around 20%, HPC is around 50%. And that's what we expect it to be going forward also.
The good thing is, because of the catalytic impact of COVID, now some penetration levels in these categories have kind of stabilized and they are higher than the pre-COVID levels. And during the COVID period, we've actually gained sustainable market share. If you look at chyawanprash, I think year-on-year in past 3 years, we've gained something like around more than 1,500 bps overall in the 3 years. So we've actually strengthened our market leadership in chyawanprash. We've strengthened our market leadership in the honey. In honey, pre-COVID we'd lost to Patanjali, but post-COVID we regained the entire ground and now our market share is in the range of around 50% in honey also despite newer players coming in, because the whole market opened up and there was a growth. We have not seen any slack in terms of our market share.
Then as a leader, we are growing this category as a leader and continuously launching newer formats, newer innovations, packaging revamps, et cetera, like you've seen in honey. We've extended ourselves into organic honey, we've extended ourselves into squeezy pack. Now, we are launching PET bottles. There we've gone into honey Tasties. We will be launching a Honey tea and honey for cough and cold. So there's definite multiple pivots and opportunities of growth which actually opened up post-COVID for us. And so is the case in chyawanprash; in chyawanprash also we've seen chyawanprash in powder form coming in, chyawanprash diabetic coming up, chyawanprash gur-based coming in. And so therefore, it just opened up the whole market for us.
That's really helpful, Mohit. My second question on the Beverages part. Now we have a very strong strategy and we are now expanding and representing a larger market. So if you can give me some data points that when we had only one brand which is REAL and now we have beverages, so what kind of distribution leg-up which we have seen and what leg-up will still continue next 2 years to 3 years, because I clearly see that the dairy beverages is growing upwards of 25%. So in that context, what we should estimate? I mean this is purely from the modeling purposes I'm asking this question.
I will request our business head of Foods to actually answer this question, one second.
So in Beverages, we are placing juices in nectar category and we had around 80%, 85% NDA EBITDA and 90% WD. We have been able to expand and add about 1.5 lakh outlets from the pre-COVID level. Actually, during the COVID level the distribution went down because of people staying indoors. And with the drinks portfolio coming in, what is really happening, it is giving us legs to expand REAL into rural areas, into areas that we were not there because earlier instead of nectar it was primarily an urban-centric and a town plus one-centric brand. Now with the right price point and with the right packaging, we are really expanding our distribution into rural. We have created a whole super stock network. We are going out to about 18,000 sub-stock now.
And on back of that network, even the price points of 20 which is the REAL juice and nectar price point, that is also finding a lot of headroom for distribution expansion. We are already there in about 3 lakh outlets as far as the drinks business is concerned, which we have created. We are poised to be above INR 200-crore portfolio in drinks which was launched a couple of years back. So there is a huge distribution opportunity for us. Earlier, when we were playing in the juice and nectar category, a premium category, we were limited to urban centers. And now, we are expanding into new geographies beyond North to other geographies like East, Central, West and South or be it beyond metros and class one towns to other town classes and rural markets. So, that's what the strategy is.
Yes, that's really helpful. Mohit, my last question on Badshah. In terms of channel mix, if you can help me, what is the channel mix in terms of modern trade and general trade? And second, if you can give me some broad saliency, how much Gujarat and Maharashtra market contributes to the overall sales?
Right, Shirish, I think second question first, that's the easier one. So around 80% to 90% of the business comes from Gujarat, Maharashtra and some places adjacent to Maharashtra, Andhra Pradesh and Telangana. So around 80% to 90% of the business happens from there. So, it's very focused sort of a play which is there.
In terms of channel mix, majority of the business is happening from GP, which is around 95%. E-commerce is almost zero and for Dabur e-commerce around 9%. So, I think this gives us a huge opportunity to make e-commerce at least 5% in a couple of years to come. Modern trade again is 3% for them and for us modern trade is roughly around 10%. So we will scale up 3% to 10% and stage it up. So, there'll be a lot of leverage, which will happen with the Dabur's infrastructure for Badshah.
I think after a long time we have seen a very good acquisition. So my sense is that you will turn around beyond our imagination. So, all the best to you and the team.
Right. Thank you for your kind words and wish you a very Happy Diwali and Season's Greetings. Thanks, Shirish.
The next question is from the line of Arnab Mitra from Goldman Sachs.
My first question is on the acquisition itself, that you've given some FY '23 estimates of revenue and EBITDA if you were to derive it, which shows a reasonably strong growth in FY '23 versus what that trial did in '22. So how confident are you that the '23 numbers are reasonable and not very aggressive, because you will probably not have much inputs to put in '23 itself?
And the second was on the margins. Once it comes into Dabur's hold, will the cost structure increase the presence that we a more -- you will have more overhead and you have to put advertising? And will you be able to hold this 23% kind of EBITDA margin that you have?
Right. So as far as the numbers for the current year is concerned, we are well on the way to achieve those numbers. So 6 months have already elapsed and we've already done more than around 50% of the numbers. So I don't think there is any issue in terms of achieving those numbers. And Arnab, as I told you before, that there was a little rift between the family and that's why the investments were actually stopped before the whole sell-out and this deal has actually happened and that's why the growth was muted in the past. But I think now leveraging Dabur's infrastructure, et cetera, I don't think there is any impediment in terms of growing this business to the numbers that we've taken. And we easily think that we should grow this business at a 20% plus CAGR over next 4 years to 5 years, and that is what is there as a game plan. And the whole strategy has been created around achieving those numbers, whether it's a distribution strategy or it is investments or it is a channel mix or it is a price-pack architecture or it is introducing new brands or variants or extending geographies or creating new formulation.
So all that blueprint already has been created, and I think there'll be huge synergies. I don't think we will bolt-on -- we will take Badshah's business as a standalone entity because we've only acquired a 51% stake and the promoters of the company are still there, and the promoter will be the Managing Director of the company and we will want to get a lot of learning from the promoters. So they will not be the overhead from Dabur which will be saddled onto Badshah. They will be running the company independently and with the Board doing the governance of the company. And on the Board, Dabur will have a majority stake and we will be running the company very prudently and judiciously.
I don't think there will be any overheads which will come in because Dabur is acquiring that company, but [Technical Difficulty] professional talent will be actually seated in the Board and that we will do in due course of time that we will let you know as to who will be from the Dabur side. So most probably, the finance and marketing and sales distribution will be people from the Dabur side. And the owner will also be there to help us and guide us with the entire relationships, which are existing there and also on the purchasing progress that they have 50% of the raw materials that we purchase in herbs and spices common to Badshah. So there'll be a lot of leverage in the scale benefits that we'll get in terms of procurement also.
And just one add-on question to that. This acquisition of the balance 49% stake 5 years down the line, is it a option that you have and is there a valuation that has already been decided on which that transaction will happen?
Yes, it is not an option, it's a compulsory acquisition that we will have to do with the end of 5 years and that's the part of the SPA that we will be signing. And it will be at the same multiple of revenue and EBITDA that we've acquired 51% stake, at the end of 5 years it will be on the same multiple of EBITDA and revenue.
Got it. And just last question on this was the brand amortization which I think you have briefly mentioned. Would you be amortizing the entire brand over a period of time or if you could help us understand how much of amortization comes in from this?
Yes, sure, Arnab. I think it's brand amortization will be valued and a fair value of the brand will be established at the time of acquisition. We expect this to be obviously amortized over a period of 10 years, which is in line with our accounting policy. And the share of that will be approximately INR 40 crores to INR 50 crores, which will come to our P&L, which is a non-cash item.
Understood. And one last question on margins, overall how do you see the margin pressures in 2H given your mix of commodities with current trends and maybe the pricing that you may have planned? That will be the last one from me.
Sorry, I didn't understand the margin pressure, is this...
For the overall Dabur consolidated business, how do you see it in the second half given how commodity is trending right now?
Right. So therefore, the inflation in the current quarter has been around 10% and we expect the inflation to abate a little bit to 6% levels as we are navigating a high base of last year's inflation of around -- so we expect inflation to be around 6% and the price increase benefit of 6% kicks in now. So we expect the inflation to moderate in the coming quarters. With that, sequentially, our margins should be better. But there will be some amount of margin erosion, which can't be ruled out in this quarter and also in the next quarter. Only in the next fiscal year, we will have a benefit. But sequentially, the margin will continuously become better as we go into the third quarter and the fourth quarter.
Our next question is from the line of Harit Kapoor from Investec.
Just had 2 questions. First thing was on the gross margin again. How much of this 300-bps decline that happened in the first half would you -- or 350-odd bps decline that happened in the first half in India would you attribute to the inflation impact and how much would you kind of attribute it to mix, because you've also seen Health Supplements and Healthcare category is actually declining and Foods actually grow at a faster pace?
Yes, Harit, out of 350-odd bps, near 200 bps would be purely because of inflation, rest 100 bps would be basically because of mix and balance 50 bps would be basically because of some rebalancing in consumer promotions since we had [Technical Difficulty], so broadly indeed 350 bps.
But that said, we actually mitigated this 350-bps erosion in the gross margin when it comes to operating margin. Operating margin fall is only 190 bps. So I think that has come on back of some saving initiatives that we did in the first half, roughly around INR 40 crores, and there has been obviously price increases which have happened and a lot of the leverage coming from S&M also has helped us to bridge this gap between 300 bps to 190 bps.
Great, that's very helpful. Second question is on the new product launches. So it seems like the mode of launches are going to be starting from e-commerce, then moving to select modern trade and then depending on the performance of the launches once you kind of meet your action standards, then it goes into GT. So is this typically going to do the template that you use? And it seems like you have over the last couple of years, but is this typically a template you are going to use across new launches? And if there are any exceptions, if you could kind of mention, in the last 2 years if you've got anything different, whether you started with GT or started with MT? So just wanted your sense on that.
Yes. So I think this is a good standard playbook that we've actually established for NPD and this is also helping us conserve the investment, which is going behind establishing a new product, because e-commerce is a little more economical channel wherein the investments are not huge. And if you launch it lock, stock, barrel in the GT, the investments on the mass media, especially in the Hindi satellite, are very heavy and it burns a hole in our pocket, especially with inflation being there we can't afford that to do.
So e-commerce is a great platform to fly a test balloon and it establishes. And moreover, the consumers who are shopping on e-commerce are also the ones who are early adopters and these early adopters want to try the new brand. So it's working out well. And then we roll it out in MT and then followed by GT. I don't remember any exceptions, which has actually happened. If at all there are some exceptions like in the MFD category, we've launched beta there but that's also in selective open format outlets of GT where we have actually rolled that out. Otherwise, we are following this playbook which is kind of working well for us.
One last housekeeping question, if I may. I know you mentioned 9% in e-commerce, so what could be MT now in terms of share?
Around 10% for us, yes.
Our next question is from the line of Shrenik Bachhawat from LIC Mutual Fund.
Sir, my first question is, could you share the state-wise revenue share for Badshah as of now?
Sorry, state-wise revenue share?
Revenue share divided in Maharashtra, Gujarat and Telangana.
One second, exact numbers, I'll just have to tell you. [indiscernible] mention.
Maharashtra is around 35%, Gujarat is 40% and Telangana is around 10%.
10% Telangana, okay, got it. And sir, what is the outlook on the ad spend for FY23, like how will ad spend pan-out for the second half?
See, advertising spend for us have been muted. We cut back on advertising spends by around 20% plus in the second quarter. That is because the inflationary pressures were high, some amount of optimization of advertising was required. But our overall advertising ad pro spends, which is advertising and promotion spends in the quarter has gone up by around 7%. So that is in line with our topline. So, there hasn't been any cut in the advertising and promotional. It is just moving resources from one bucket to the other. We've not advertised, but it all depends upon the channel mix where we sell. It depends upon the competitive intensity and the demand situation.
So as the demand situation improves, we will put our money into advertising. And if the demand situation is not improving and the categories continue to decline, then we have to fight for market shares and shelf shares in which the trade spends and the consumer spends become more important than the advertising spend. So the situation is pretty in flux, so it depends upon how we maneuver those spends depending upon what competitive intensity that we face, so I can't comment. But that said, overall spends are in the range of around 15% for us and will remain that much.
And on the new Indore plant, could you please share the asset turns expected on that plant and the revenue expectations in FY '25?
Sorry, I didn't quite get that really. Can you repeat the question?
From the new Indore plant, the new CapEx that we are doing for INR 326 crores, what is the asset turn expected in that plant?
The new CapEx which we are planning, INR 325 crores, we are expecting around 3 times asset turnover, so INR 900 odd crores turnover will come at the peak of it. So it should be roughly 3 times.
So around INR 900 crore revenue should be achieved by FY '26 or FY '27?
I think the peak around -- between FY '27 you can take.
And just on -- just to come back on Badshah. And as you said that the market share is around 4% to 5% for Badshah masala, so that is in Maharashtra and Gujarat, right? Telangana would be much lesser.
That's right. It's in the geographies where they're present, in Gujarat and Maharashtra.
Telangana would be around 1%, 2% or...
Yes, Telangana will be small, around 5% market share, actually 5% market share in the blended category.
Thank you. Our next question is from the line of Avi Mehta from Macquarie.
just wanted to kind of first understand, in the rural recovery, you remained optimistic. Would you say your confidence on rural recovery is higher versus there what you shared in first quarter and if yes, what could have driven that?
Yes. So I don't know if I've been very optimistic, not really. So I think what's happening is, Avi, that rural for Dabur, as you know, was for past 6 quarters always trending ahead of urban, and this is the first quarter where we've seen rural lagging behind urban whereas the category indicators, which are the early indicators that we get, that rural was lagging, but Dabur has actually quarter on, on back of a lot of infrastructure that we've put in place in terms of appointing yoddhas, 10,000 yoddhas, which is actually contributing to around INR 20 crores of our sales also and our village reach has actually gone up 100,000. So, we did not see the telltale signs of a little slowdown happening in rural while the FMCG category was all pointing at the same thing.
This quarter, we've seen our rural actually growing by only 1% and our urban business growing at around 6%. So we have seen credit pressures, liquidity pressures coming in rural business and more so, in the rural heartland of Dabur, which is more UP and Bihar. And UP and Bihar, the problem actually got exacerbated by the monsoon also being a little patchy in those areas. While all India the monsoon has been good, but in our specific areas where there is a huge reliance of rural, in Bihar and UP for us, there the monsoon has been a little patchy. And therefore, a little slowdown is what we are seeing in credit pressure, liquidity pressure, is what we are seeing in these areas.
It's very difficult for me to give you a definitive answer as to when will the rural recovery start, but I think the festive season has kind of brought in a little glimmer of hope in terms of our pipeline has -- filling for health care product has been good in rural with chyawanprash and honey kind of kicking in. In the month of September, we've actually seen some growth happening in our healthcare business here. So that is what gives us a little optimistic hope that rural might just come back around.
Sir, the second question was on the margin front. You did allude very clearly that sequentially I think the worst of the gross margin pressures are behind us because inflation eases off and price increases go through. Would it be fair to argue that second half EBITDA margin performance should also kind of mirror this in that sense?
That's right, absolutely. So we talked about EBITDA margins only. So EBITDA margin sequentially are better and they will get better in the second half. And we want to maintain our EBITDA and operating margins in the region for around 20%, 21% for the whole year, which is what -- guidance also that we have given in the past.
And sir, lastly, for Badshah, the acquisition, I understood the revenue synergies. You were kind of alluding to some in synergies at the back end, but would you argue that a higher chunk of synergies is something that would be revenue driven and margin is something that would not be the case. I mean, I guess that was the read-through, but I just wanted to kind of understand it better from your perspective. Was that understanding correct?
Yes. So the synergies are actually immense in the business. So first is obviously the distribution muscle of Dabur, especially in the rural, that is huge for us. And whether it's a core market of Badshah or a non-core market of Badshah, I think rural village reach of Dabur is far better and in rural you sell small low unit price point packs and they won't have that. So we are putting up CapEx is in increasing capacity for them also. That's one area of the states in which we can expand. Then the non-core urban markets where they are not present and Dabur is present, that is a second lever of synergy that we will get. Then the third leg of synergies, alternative channels like modern trade and e-commerce, where they are not present and we people are present in.
The fourth synergy is actually overheads because in a smaller business the overheads are higher as compared to Dabur, which will leverage its existing infrastructure. And on marginal cost basis, we can just tag on this business to our business. That's the fourth. The fifth is the procurement efficiency which we buy on scale, and our systems processes enable us to get better deals as compared to the verbal negotiations which happens in their case. Seventh is automation in the factories, which today their manual operations we'll automate and therefore reduce manpower there.
So that is another level of synergy. And then obviously, the manning and the organization structure can also be leveraged. But this will be reinvested back in advertising spend that they have been cutting back on and therefore creating margin. So whatever synergies we get, it's not that we will plow it back into the business and advertising because I think demand has to be created and this category is a high decibel advertising category where we need to invest money in creating the demand.
Thank you. Our next question is from the line of Kunal Vora from BNP Paribas.
First question on Badshah. What's the reason for buying only 51% and not 100% to start with? And you said, you expect strong growth in revenue as well as profitability. So you will have to share some benefits of that with the promoters for the remaining 49%? And also the promoter will continue to remain the MD. So will you be able to drive all the changes you want to implement with promoter still being a vendor?
Yes, first thing, Kunal, I think that's a good question. So obviously, these deals happen over a period of time and we have been in discussions and in talks with them for over 5 years now, and the deal has got consummated after a span of 5 years. So, there have been deliberations and discussions, which have been happening with the promoters over a period of time in which we've established that chemistry connect also. So I don't think they being the Managing Director on the Board will hamper, actually to help us because we are getting into this new category. It is an alien category for us. We've not done the business like this.
And we need to get that understanding on-board. And with the promoters being there, I think they will only hand-hold us because there are so very new ventures that we will have to understand in this category. And there is a stickiness in the relationship which is there as far as distribution and the channels is concerned. So, that stickiness of relationship also has to be harnessed. And with Dabur's progress in negotiations, so that will come very handy, plus creation of products involve a lot of understanding of the taste and preferences of the core markets. And the promoters are Gujarati, they understand the taste palate so well of the Gujarati consumer.
So therefore, extending the products, creating new variants, looking at the market, so we can provide analysis and they can provide real sense of the taste of the local consumers, so a lot of learning has to come from them. And that's why, a, in a sense the promoters would not sell out a company if we were to acquire 100%. They would not agree to that, that's one. Number two, a lot of learning has to come from the promoters, and they will hand hold us plus it will take us that much of time to understand the company. So if a part of that benefit will go to the promoters over a period of 5 years we are okay with that. So that's the way the deals happened which are more win-win relationships rather than one way deal.
And just to add to that, team is going to manage the business along with the Managing Director and most of the members of that could be nominated by Dabur. So we expect that all the changes and synergies that we want to capture, we will not have any issue with taking them on.
Understood, that's very clear. My second and last question, I just wanted to understand, how does the reduced advertisement spend impact the strength of the brands, like we've seen this happening across the board, all companies have lowered ad spend, like besides the gross margin pressure is there anything structurally we just changed, let's say, television, digital dynamic because of which the ad spends have been lowered? And how does it impact the business in the longer term, like reduced advertisement spend?
Sorry, Kunal, there was a lot of noise in the conversation, we couldn't here you. Could you repeat.
Yes. So what I wanted to understand was the reduced advertisement spend, how does it impact the brands in the longer term? I mean, I understand that in the short-term it is gross margin pressure, which is resulting in the...
So the question is the reduced A&P spend, how does it impact demand in the long term. While for Dabur, so this specifically for Dabur. Though in the short term, the team, we understand that there are pressures and therefore A&P has been reduced.
Right. Kunal, sorry, I couldn't understand that question, there was disturbance. But as far as we are concerned, the asset test of a brand's growth is market share gain in volume and value, and more so in volume, and that's what we are trending. So as you know, 95% of the portfolio we guys are gaining market share, whether you gain market share through advertising, pull creation or through pushing the product and the consumer actually uses it, that is the asset test. And we've been gaining market share and strengthening our position in the marketplace. So as the situation warrants, the investment moves into that particular sphere depending upon how the demand is, competitive intensity is. So that's the way things are. So I don't think this is going to hamper the brand health. But that said, we are completely for investing behind our power brands and new products that we guys are launching. And as the situation becomes a little better, we will be back into investing behind this brand, the way we were used to doing it, and actually increasing our investments behind the brand. So that philosophy is absolutely with us.
Earlier, you were looking to raise expense to much higher levels, like you wanted to go beyond 10%. Today we are at like 5.5%. So where does it settle? Would it settle somewhere in between? Do you want to go back to double-digit ad spends or.
The intent is to go back to double-digit ad spend as the situation demands, but at the moment because of the inflationary pressures being so high, I think temporarily we've actually got some efficiencies coming into optimization of advertising, which has actually happened, but that would not be a long-term strategy. Long term is always to cut back on trade and consumer spending and put the money back into advertising.
Understood. And just one last question, like on Middle East and Namaste where you've seen declines in sales and on constant currency basis. What's happening there and how do these markets look like for the coming quarters?
Right. Again, inflation is the main culprit. There has been huge inflation, like in India we've seen a 10% inflation, in Middle East we have seen an inflation of around 30% and 30% inflation is coming in because this entire portfolio is our HPC portfolio which is Personal Care portfolio, and which is very crude denominated in terms of the raw material prices. In addition to that, we've seen dollar actually strengthening. So because of the inflation, we had to take price increases to an extent of around 20% there. And because of the 20% price increase, we've seen a little backlash coming from the marketplace. And inventories also -- reluctance of the distributors to pick-up the high price tag, I think it's a momentary issue, which should get resolved. So it is because of that, most of the categories, while they're growing in terms of value, but volume-wise, we are actually declining there. But I think it's a momentary thing which is happening, both in the US, and also in our Dubai MENA markets.
[Operator Instructions] The next question is from the line of Mihir Shah from Nomura.
So firstly, I wanted to just pick a little bit more, get some more thoughts on the overall demand environment. I mean narrative for most companies has been that demand is expected to improve going forward. But the recent demand improvement that you've seen in urban, and you did highlight rural demand that you are witnessing for yourself. So the recent urban demand can largely be a festive-linked uptick that is there and can easily fizzle away. Any data or trends that you are witnessing that can give you some insights on how rural demand and urban demand is expected to shape up going forward from here?
Yes. See, the demand environment is actually pretty lukewarm as far as our data tells us. If I look at the syndicated data, we've seen a growth in the market, which is roughly around 10.9%, it has come down to around 8.1%. And the volumes have actually gone down by around 2.2%, which is in the range of around 0.9% in the last quarter. So the volumes are going down, the growth that you're seeing in the syndicated data is all coming on back of the price increases. And because of inflation, price increases, the interest rates are going up. So therefore, all efforts being made by the government not to revive the demand but to destruct demand to reduce the inflation.
So therefore, the telltale signs are to destruct the demand and therefore, so that the inflation actually comes down, and that's the pressure that people we are facing. And we are not seeing this actually going down. So the only report for companies like us is to consolidate our position and maintain margins as much as we can, and gain market shares and get to a trajectory of growth through gaining market shares and consolidating your position. That is what Dabur is doing. As far as the urban and rural is concerned, we've seen rural decline at around -- from a category perspective, decline by around 4.5% to 5% and urban is just there, which is actually flat, which is also flat on back of the emerging channels like e-commerce and modern trade doing well and they are all opening up after a huge backlog of COVID. But festive season has brought in some glimmer of hope for us and we hope that will last and this will sustain.
And I hear your comments on ad spends that you mentioned and the promotion, but only on gross margins again, you did mention that you are expecting raw material inflation to ease to about 6% and you've already taken 6% pricing. So does that really mean that from next quarter onwards on a YoY basis you will not have material pressure on gross margins? I mean is that understanding correct?
No, not really. We did sequentially, so it's actually quarter 2 has been relatively better than quarter one and quarter 3 will be better than the quarter 2. But if you look at year-on-year, there'll be inflation of around 6% though. But if there is a price increase of 6%, that's not good enough to offset the inflation of 6%. You need to take a price increase of roughly around 10% or 11% to offset inflation of 6% material prices because you operate at a gross margin levels of around 45%, 50%. So that's how it is. So there will be some pressure on the margins for year-on-year, but sequentially there will be operating margin improvement definitely.
So what we can say is the contraction in margins will come down significantly, from currency 50-odd level it will -- the contraction will come down significantly in gross margins on a YoY basis. At least 50% or so, yes.
Our next question is from the line of Tejash Shah from Spark Capital.
My first question pertains to rural demand. And if we see among FMCG players for last almost 8, 12 quarters, there is no consensus on rural demand and that has been missing for quite some time. Overall, it looks more reflective and led by resistant for each company. But by and large, it has been tepid for long. And when we see this in relation to discretionary categories, they have been talking about a lot of premiumization and rural penetration-led growth. So, how should we actually try to marry those 2 trends where discretionary categories are coming with reasonably better commentary on rural demand than FMCG players? And are we seeing any such divergent trends within our basket in favor of discretionary portfolio in rural?
Yes. So I don't know, there is no right explanation, I don't know what you're saying. But as far as we are concerned, the way we see it, that rural demand has been tepid and we have been seeing down-trading which is actually happening in the rural areas. And our LUPs are doing well and the inflation impact in the rural areas has been more as compared to in the urban areas, so really cutting back of the pack sizes also, which has happened in the rural areas, and those products are doing well for us. So we see INR 10 price points and INR 20 price point actually doing well. INR 1, INR 2 price points are also doing well. Our shampoo sachets are performing better than the shampoo bottles. As far as the premium products doing well in rural, we have not seen that happen at Dabur. But critical explanation could be a KCF recovery which they say, but we have not seen that pan out in the rural areas, especially for us. That is more evident I think in urban but not in rural.
Second, on broader capital allocation that we are seeing FMCG players across. Is there a disproportionate thrust on putting money organically and inorganically, both on Food side of the portfolio? Many HPC guys are actually now acquiring assets on that site, including what we have done now. So, does it mean that HPC as a basket is not as attractive on an organic route except some D2C initiatives. And broadly, we are seeing a lot of opportunities on the Food side or how should we read, or there is nothing to read on this?
No, I think very good point actually made. The way I see it, in a inflationary environment like this, when companies are all taking price increases, there are some categories which are more elastic and some categories are inelastic. The Food market and the staple market in India, because it's so unbranded in nature, that is very in-elastic in nature. So no matter how much of inflationary pressures are there, and the market passes on that inflationary pressure to the consumers, this is an inelastic demand. So the demand will always be there, whether it's edible oil or it is food. And that's why the Food category is growing at a fast pace, and the decline -- and what happens is in the discretionary category, we see the pressure being too much and people cutting back on discretionary in an inflationary environment and that's why the discretionary products don't do so well.
And India is a large unbranded market, so lot of inorganic play will happen in India and we will see a lot of consolidation from unorganized to organized, which will happen in India. That's why you see a lot of deals happening in Food. That said, I think the personal care market is also very low penetrated in this country. And if you look at examples of Southeast Asia or examples of Middle East, I think the penetration levels of personal care are low and there is so much of catching-up to be done in personal care.
But I think the times are not great. These are in inflationary times. These times are not great too for us or for any D2C player to scale-up a premium product or a personal care product. But I think on a long-term basis, personal care should also see a lot of deals which will happen in addition to Foods and in addition to Healthcare which is becoming salient, and which are the 3 buckets that we have our businesses. So it's not that we are shifting our resources into Foods. We want our foods to be around 20% thereabout and also put thrust on our HPC portfolio and the Healthcare portfolio, which is a window to Dabur's equity in the long-term.
Our next question is from the line of Sheela Rathi from Morgan Stanley.
My first question was with respect to -- you're talking about 95% market share gains across the category and I think this is a very strong delivery. Just wanted to understand is there any category where we are seeing larger competitive intensity, both from large players as well as the D2C side?
Yes, that's right. So there are couple of categories we are -- so that's 5% is where we are facing competitive intensity. So for example, hair oils is somewhere that we are facing a huge competitive intensity and that comes from one of the larger players and at a lower price point. So as you know, Dabur Amla is the high price player and we compete with competitor who is at half our price and therefore we have a flanker brand strategy. We need to strengthen or invest money in our co-brand and protect it by creating boats with our flanker brands.
So that is a strategy, which is intact and that is to hedge the competition that we're facing from almost like a market leader in the hair oils category. Barring that, I don't think we have any competitor wherein we are really worried. In the Healthcare portfolio, we had a competitor make an entry, but I think it got washed away and we've only strengthened our position. So barring hair oils, I don't think anything else worries us, except in our skincare portfolio we are facing some pressure from local small players, which are very regional players which are undercutting us, like in [indiscernible] we face some competition from very local players which are Punjab-based or UP-based, et cetera, but that is something that we can easily counter reasonably well as we have deeper pockets as compared to them and one can maneuver.
As far as D2C is concerned, not really, I don't think we are facing any pressure on D2C. As a matter of fact, any category in D2C where we are entering, we are seeing our market share gains are instantaneous in D2C because consumers see that trust and legacy and that imagery, especially in the Healthcare category and in the HPC category much better with Dabur as compared to a smaller D2C player.
My second question was with respect to the Food & Beverages category expansion, especially on the distribution side. So where do we see the distribution backlog being in the next 3 years? And just as a part to it is, you talked about the playbook on the online side or the e-commerce side which is working out very well. Do you think on the F&R portfolio you think the same strategy will work out or if you would need to be more aggressive on the JV side or the MT side?
Yes. So I just talked about some sort of distribution expansion strategy that we did with our Beverage portfolio, especially after getting into the drinks portfolio. So just to give you a flavor of the next 3 years if that's what you are talking about. So we have started this journey from North and East, next season we will be expanding basically in Central, West and South part of India. So that's how it will play out in the next 3 years.
So we are slowly and steadily building up our renewal network and creating our own rural footprint rather than writing on the CCD or the FMCG footprint. Earlier we used to write on the FMCG footprint, but now, with substantial business coming in, we are creating our own footprint because the kind of outlets that we cater to, the kind of routes that we cater to, the kind of beverage outlets that we cater to are very different from FMCG outlets and we are also appointing people who have an experience of Beverage category in terms of distribution, and that is giving us a lot of synergies and that is really helping us scale the distribution very, very fast. So that's how in the next 3 years it will pan out. We will reach out to newer town classes, rural markets, newer outlets because the E&D kind of outlets are very, very important, so that's to answer your first part of the question.
As far as the second part of the question is concerned, because of the weight value ratio, the beverage portfolio is not so conducive for e-commerce, that's what we say. But what has happened really is quick commerce, which has now become very, very important for us, that has really helped portfolio rating. As quick commerce goes up, it will really help the beverage and the strategic portfolio and that is what we are seeing. Our earlier quick commerce used to contribute about 15% of the revenues for beverages. As far as last year is concerned, now it has gone up to 30%, 32%. So quick commerce is really helping us and I think that's the way forward for Beverage in the coming years.
Yes. But that said, I think in the GP also distribution becomes significantly important to [ Mayank's ] point and therefore, we are putting up a separate infrastructure in place in GP also for ramping up our drinks business, which is already exiting at INR 200 crores. And in 3-years' time, we want to build it to a INR 500 crore portfolio in drinks, yes.
The next question is from the line of Ajay Thakur from Anand Rathi.
So, I had one question, first question was more on the [indiscernible] led advertisement that we are witnessing from Dabur side. So any thought process change over there or are we looking at -- so for instance, we have already seen even 3 brand investments by the likes of Amitabh Bachchan, Deepika Padukone, which we have brought in. So why -- as in what is the thought process change that we are trying to see over here? And would that be kind of catering to or trying to solve certain problems with the endorsement or is it going to be addressing more of the market share or some other kind of thought process over there? So that's the first question.
Right. So Ajay, Dabur has always been working on a template or a playbook of celebrity advertising and this has been working well for us and it helps us to gain market share. But yes, this is also towards solving specific problems for us, like in Red toothpaste we are very salient in the south of the country. And in South, our market shares are much higher as compared to North of the country. In North, Patanjali is a strong player and Baba's foothold is much higher as compared to Dabur's foothold in UP, MP, Bihar, which is in the Hindi heartland. And in the Hindi Heartland to fight that kind of followership that Patanjali has, we needed a bigger name and that's why we signed up with Amitabh Bachchan to gain share in the North belt for us. And we've made some 2, 3 creators, and all the creators talk about taking share from a white or plain toothpaste, and that's what. And even in Dabur Amla, we signed up with Deepika Padukone, but Amla has always been taking the top-notch celebrities. So from Kareena Kapoor we've moved on to now Deepika Padukone, and that's also towards increasing our market shares, yes.
The next question is from the line of Vishal Punmiya from Nirmal Bang Institutional Equities.
So first question is basically a clarification on the price increase. So we had around 6% price increase for the quarter. Any additional price hike that we took in 2Q FY '23 or it is just the flow through of the previous price hikes?
This is actually a combination of both. So, these would be a flow-through as well. And so our estimate is 2-third is flow-through and one-third would be the fresh price increases.
So what is the weighted average price increase that we took in 2Q FY23?
Weighted average price increase is 6% including the preferred flow-through.
Okay. No, so additional price hike during this quarter would be around 2%, 3%?
Yes, around 2%, one-third of that, which will now come with full effect in subsequent quarters as well.
And secondly, on Badshah, so based on the revenue mix that you have given, I'm assuming that 15% is exports. So if you can basically break up the 3-year CAGR for the domestic business and exports business, and any overlap of regions in exports for Dabur international business and Badshah business?
Yes, so exports has been very marginal or miniscule for the Badshah business, roughly around 5%, 6% of their business. But I think exports holds a huge potential, especially in the areas where there is Indian expat population, which is essentially in Americas and in the UK. And we feel there is a huge opportunity and Dabur has got a massive infrastructure of distribution there, which can be leveraged for the Badshah business there. And we feel in due course of time this 5% of turnover will definitely go up to roughly around 10% in a shorter period of time just by leveraging our distribution because the huge expat population already holding, and expat population that too from the region, which is Maharashtra and Gujarat, Gujarat being more so in Middle East and the Americas.
The next question is from the line of [ Aditya Agarwal ] from Deloitte.
I wanted to ask you, on your Beverages portfolio, let's say -- we have seen that the dairy beverages portfolio has been growing good in the current year. So what's your outlook and performance for the current year on the same?
Sorry, Aditya, we didn't get your question. Hello. Aditya, could you please repeat?
Aditya, can you please repeat the question?
I think that in the current year we have seen that the dairy beverage portfolio has been going good for the industry, and how on the same line as REAL brand performing and what's our outlook going forward for the same?
Right. So, we are very optimistic and hopeful on the entire beverage portfolio because our strategy is to build this for scale-up the REAL brand. And earlier we were only present in the juices and the nectar category. Now we've expanded the total addressable market from roughly around INR 1,700, crores, INR 1,800 crores to moving out to around INR 8,000 crores, INR 9,000 crores and into the drinks space. And if you look at the J&N category, Juices & Nectars, where our market share is in the range of around 65%, 67% as compared to the drinks category where our market share is pretty miniscule, less than 10%.
So therefore, the total addressable market has actually gone up for us and we see the 10% market share only scaling up in due course of time. And therefore, that 90% headroom of market share is still there with us. That's what we alluded to before in terms of infrastructure expansion and distribution reach, advertising, new SKUs being added, new variants being added and now, we are also proposing to enter the fizz market, which is the carbonated fruit beverage market. And we should be starting our production in the coming season in Jammu to harness that particular category.
As I was just saying that in the current quarter on a standalone basis we have seen for the food and beverage businesses, the PBIT margin has gone up to some 16.6% from its original 13.5% to 14%. So are we envisaging to keep this at the same level or are we going to go back to the 14% level.
No. Margins will keep increasing as the benefits of scale, keep coming in. So I think as we scale up the business we'll be leveraging our S&M costs, and even if the investment is there the indirect costs will be leverage and also the fixed assets will be leveraged and while it's CapEx heavy and we are putting up investments, but I think the margins, the bidding margin level will keep going up as we scale up the business.
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. Thank you everyone for your participation in the conference call. The webcast and transcript will be available on our website soon. Thanks and have a nice day.
Thank you very much, ladies and gentlemen, on behalf of Dabur India Limited, that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.