Dabur India Ltd
NSE:DABUR

Watchlist Manager
Dabur India Ltd Logo
Dabur India Ltd
NSE:DABUR
Watchlist
Price: 509.5 INR 1.38% Market Closed
Market Cap: 903B INR
Have any thoughts about
Dabur India Ltd?
Write Note

Earnings Call Transcript

Earnings Call Transcript
2019-Q3

from 0
Operator

Ladies and gentlemen, good day, and welcome to the Q3 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.

G
Gagan Ahluwalia
Senior General Manager of Corporate Affairs

Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India limited, I welcome you to this conference call pertaining to the results for the quarter 9 months ended 31st December 2018. I have here with me Mr. Sunil Duggal, CEO Dabur India Limited; Mr. Mohit Malhotra, CEO India business and the CEO designate for Dabur India; Mr. Lalit Malik, Chief Financial Officer; Mr. Ashok Jain, EVP Finance and Company Secretary; and Mr. Ankush Jain, head, financial planning and analysis.We will start with an address by Mr. Duggal, followed by a Q&A session. I now hand over to Mr. Duggal. Thank you.

S
Sunil Duggal
CEO & Whole Time Director

Thank you, Gagan, and good afternoon, ladies and gentlemen. Welcome to Dabur India Limited conference call pertaining to results for the quarter and 9 months ending 31st December 2018. The domestic FMCG business recorded growth of 15.2%, on the back of volume growth of 12.4%. In the base quarter, we grew volumes and revenues by 13% and 17.7%, respectively. Both was driven by double-digit -- order book double-digit growth across all the 3 verticals, led by investment in brand building and distribution expansion. Consolidated revenues from operations grew at 11.8% in quarter 3. HPC verticals boasted growth of 15.3%, led by a strong performance in Hair and Skin Care. Hair Oil business was stronger at 23.6%, volume market share in hairs moved up by 50 basis points vis-a-vis the same quarter last year. Shampoo posted a robust performance, growing by 25.2%. This was despite high growth of 56.1% in the base quarter.Skin Care listed growth of 19.3%, driven by double-digit growth in Gulabari and good performance of the bleach portfolio. Oral Care category grew by 10%, with 11% growth from Toothpaste. Web franchise continued to perform well, driven by increase in penetration, aggressive marketing and visibility initiatives. The movement of EBIT performance due to high competitive intensity at economy price points. Despite that, our market share in business category continued to see an uptick.Home Care grew by 8.9% this quarter, backed by strong performance of Sanifresh. Odonil and Odomos recorded subdued performance because of low institution orders in the base. Healthcare vertical performed very well with growth of 15.9% while supplements grew by 13.8%, led by double-digit growth in both Chyawanprash and Honey. Digestives recorded growth of 22.5%, driven by a continued strong performance of the Hajmola tablets and Pudin Hara. New variants, focusing -- focus marketing initiatives and distribution expansion contributed to guiding this growth. Strong winter season also helped in generating good demand for the winter-centric products. OTC category grew by 17.7% because of good growth in Lal Tail, Honitus, and Shilajit. Ethicals business picked up pace and delivered growth of 17.4%. Foods recorded growth of 11.1%, which was slightly lower than other verticals, primarily [indiscernible] and cold weather. Profitability in Foods continue to see improvements because of network optimization and lower input costs. Media spend, tactical consumer promotions, modern creative focus, e-commerce and new products continue to drive the business. Driven by these initiatives, our market share in the J&N category increased to 56%, and increase of over 300 basis points over the same quarter last year.International business reported growth of 2.4% during the quarter. Egypt market declined by 10% in constant currency [ dated ] because of hyperinflation and [indiscernible] issues. SAARC grew by 11% in the back of strong growth in Pakistan and Bangladesh. Hobi had a strong quarter, growing by 31% in constant currency terms. [indiscernible] currency denomination [indiscernible] into INR. GCC markets reported a soft performance due to consumption pressure and sharp decline in categories. [indiscernible] business listed double-digit growth in [indiscernible] and North America but was brought down by EU and the Middle East.Operationally -- operating margins in [ investment ] business declined by around 250 basis points because of increased [indiscernible] a growth in [indiscernible] inflation and adverse currency movements. Standalone operating profit increased by 18% and operating margin increased by 60 basis points [ to reach to 22% ]. While media spend this quarter was lower, the overall marketing spend, including promotional expenses, of 20% in consolidated and 9% in standalone. Consolidated operating profits posted growth of 10.4% while the operating margin steady at 20.3%. Tax increased by 17.6% in standalone and 10.2% in consolidated.Today also happens to be the day when the interim purchase has been announced. The impact of today's [indiscernible] of consumption felt in India. The package announced for supplementing [ summer term ] increased in [indiscernible] to INR 60,000 crores. [indiscernible] went to other such [ majors ] which showed the increase of [indiscernible] in the hands of the consumer and [indiscernible] increased consumption of [indiscernible] in the next few years. Looking at the longer term trends, 172 million lower in many [ flat ] households in India which earn an income of less than INR 10,000 per month. I'd like to see steady growth in their income over the next many years. This, in my view, is a strong lever for driving sustained FMCG growth going forward.As you would know, the discussion planning which we had embarked upon a couple of years ago has now concluded with Mohit succeeding me as the next CEO of Dabur with effect from 1st April. The entire succession process has been in progress for over 3 years and has been meticulously planned. It has involved extensive internal preparation and external intervention to ensure a seamless transition. Mohit has an outstanding position and has done a commendable jobs in all his assignments and the 25 years that he has spent in Dabur. I'm happy that he's been taking good jobs which has been raised for the last many years, and I assure you that he is extremely capable of handling this. We wish him all the best in his new assignment. Lastly, on a personal note, I wish to thank the investor community for their unwavering support for the last 17 years, which has enabled our market cap to increase from INR 1,500 crores in 2002 to over INR 80,000 crores to date, a 50 fold increase. I've always enjoyed our interactions over 61 consecutive quarterly conference calls and innumerable meetings in India and all over the world. This has been both energizing and enriching and has been immeasurably fun with introductions. I look forward to remaining in touch.With this, I now open the Q&A and invite your questions. Thank you.

Operator

[Operator Instructions] The first question is from the line of Sameer Gupta from India Infoline.

P
Percy Panthaki
Vice President

Sir, this is Percy here. In domestic, quite heartening to see price growth coming back. I think, this quarter, your price growth is nearly 3%. I'm just taking the difference between volume and value, and that is much higher -- yes, 2.8%, which is much higher with what we've seen in the previous couple of quarters. So despite this higher price growth, we are seeing compression in gross margin. In the standalone business, we've seen about 130 bps, in [ consol ], 230 bps. So just wanted to understand why both for standalone and for [ consol ], if you could -- or rather standalone and international, if you could reply separately. What are the drivers? I mean, in spite of consumer promotions, your price increase has accelerated, so then it has to be inflationary pressures only? Is my understanding correct?

S
Sunil Duggal
CEO & Whole Time Director

To some extent, yes, because we did buy into slightly higher price raw material in the first and second quarters, increasing dramatically in the third, but then we were too consuming the earlier purchase pickup materials. I do see the gross margins not coming back to the earlier levels perhaps as quickly as the fourth quarter. So there's nothing structural in the domestic business now that we know right now there's a huge level of promotion, even though consumer promotion has gone up significantly but not that large. In international, it's a little bit more structure because of higher consumer entry promotions. We've been keeping up that whole number significantly because of the headwinds which consumption had in those parts. And there, you see lower gross margins emerging, both on this account as well as in account of the currency devaluation. [ Now we will see ] growth. And hopefully, with currency stabilizing, we should be able to do that and also for consumption revitalizes, then again the margin should come back. So I'm really optimistic about the domestic margin profile. I think, it should emerge quite strong over the next few quarters. International, we have to still wait and watch due to the extent of externalities.

P
Percy Panthaki
Vice President

Right, sir. And just wanted to understand what's happening on the volume growth. Sometime in this quarter, you hit the ball completely out of the park. Q2 was around 8% volume growth. This time, we've accelerated to beyond 12%, which is our best in several, several quarters. So just wanted to understand the drivers behind the same. Do you think there is any change in the macro which is driving this? Or is it mainly some company-specific measure? And if it's the latter, do you think this kind of volume growth is sustainable going ahead?

S
Sunil Duggal
CEO & Whole Time Director

I don't think you should look at volume growth in a quarter in isolation. There is a big impact of this. And like even last quarter, when we did the [indiscernible] people said that this was well below our expectations. At earliest, you should moderate expectations in line with this and we have a high base in quarter 3. Comparatively soft -- with the shift in seasons in quarter 2, and a little bit softer in quarter 3. So if you normalize these 2 numbers, you get to around, what, 10%, 11%, at the [indiscernible] and that's what I've been maintaining, that we are in this kind of trajectory as of now. And going forward, we don't know, it could accelerate, could decelerate, could remain pretty much the same. But I think with the measures which we already saw this morning and also perhaps going forward, we'll see more of them. The consumption does seem to be pretty difficult towards to have a robust volume growth. So again, normalize it. This year, we will bringing double digits as I said, but it will be bumpy and -- lumpy, sorry, and one has to live with the fact.

P
Percy Panthaki
Vice President

Right. And do you think this double-digit can continue into FY '20 as well, because you have significantly high base in some of the quarter in FY '19?

S
Sunil Duggal
CEO & Whole Time Director

Yes. It's definitely fueled by significant increases in disposable income because on a normal basis we have in '18, 19, getting to double-digit is not a walk in the park. So we have to have some tailwinds behind us. So there has to be improvement in the whole consumption space, disposable income, has to inch up -- not just inch up, but go up significantly. And then, I think, double digits will be visible. In the event of that not happening, then it's going to be perhaps again back to the high single-digit trajectory. I don't see it coming down significantly below that, but this is the base case of the bill case scenario, base case is that we continue that 8% to 10% growth. In bill cases, we've given to double-digits on the back of stimulus and disposable income increases, and we don't know whether to slice at this point in time.

P
Percy Panthaki
Vice President

Right, sir. And finally, if I can just ask sort of your comments on some particular categories. Firstly, Hair Oils growth has been very, very strong at around 24%, 25%. So what exactly is happening there? Are there any pipeline issues or anything? Or is this sort of representative of the end consumer demand you've seen this quarter? That's one. And secondly, on juices, it has been weak. What is the reason for that? And thirdly, on Toothpaste, is it mainly just Babool led problems? Or are you seeing a slowdown even in Red?

S
Sunil Duggal
CEO & Whole Time Director

Red continues accelerating. It's -- of course, this 20% growth will not continue forever. But while we are there, we are quite happy to live with it. But to the earlier part, it's something which has surprised us positively. A 20% growth in Hair Oils has never been easy. And we've been doing it now for the last couple of quarters. [indiscernible] It's really on the back of market share gains rather than any huge consumption improvement the way I look at it. I mean, it's a little bit of both, but the market share gains, even maybe only 50 basis points optically, I think, that led to a pretty significant improvement in our overall growth, and this is both in our Hair Oils as well as in the coconut space as well as the oil price, perfumes, Hair Oils. It's everything. All the Hair Oil brands on fire. Almond Hair Oil, for example, has done extraordinarily well. And we have the work over the last few years in terms of building the solution infrastructure, expanding the brand franchise beyond only Hair Oils and Vatika are now being [ exuberant ]. Almond is INR 100 crore plus brand. Almond is doing extremely well and more Jasmine, we did again great sales last few quarters. So [ Almond ] is now INR 100 crore plus brand, so all these are marketing..

P
Percy Panthaki
Vice President

Right, sir. And foods?

S
Sunil Duggal
CEO & Whole Time Director

Food is a little bit soft, yes. It does underperform to some extent. The reason is 2. I think the main one is a very cold winter in the north, which is around 2/3 of our consumption in the northern zone. And that leads to some depression in consumption. And also, a couple of that is the massively increased competitive intensity. People just throwing money in terms of trade promotion, et cetera, et cetera. And it's a combination of both. There's nothing wrong with the franchise because the market share has grown tremendously. It's just that the consumption of beverages in particular in north India has slowed down considerably in the third quarter. And let's see now how fourth quarter pans out, if it continues to remain very severe or not. So we may not see the kind of growth even in the fourth quarter unless March turns out to be very hot. But there's nothing structurally wrong. The franchise is extremely strong. Distribution supply chain, absolutely no issues. And now, the new product also beginning to kick in. The [indiscernible] range, for example. That's why I do expect the next year to be decent one for Foods.

Operator

The next question is from the line of Abneesh Roy from Edelweiss.

A
Abneesh Roy
Senior Vice President

My first question is on the very high promotional intensity in the beverages and the Toothpaste business. So how has the profit polled for the industry? Will it not be down significantly versus, say, 2 years back in both these segments?

S
Sunil Duggal
CEO & Whole Time Director

Unfortunately, the COGS are pretty much on our side, so whether it's beverages or whether it's Oral Care or even Hair Care, et cetera, HPC has benefited a lot from these material cost tailwinds. We look at the margin profile is at a pretty decent level. If I'm not mistaken, the Foods margins have actually gone up intensively. So no assurance on the margins, but yes, I think, we have further up the whole -- it's [ 1/6 ] in Foods. It's pretty significant. But keep in mind that this has been evaluating in Food measure which we probably will start doing now. So the margins may trend down, but not significantly. So we will not see any growth of margin, let's say, in the first quarter in Foods. And we might see some degree, but it will be for a noble cause of protecting market share and try to increase the phase volumes.

A
Abneesh Roy
Senior Vice President

And what about Toothpaste? Because HLL has become very aggressive on pricing and Patanjali is very aggressive on the wholesale promotion. So are these 2 things big worries on longer term perspective or more of a technical?

S
Sunil Duggal
CEO & Whole Time Director

I think, that was impacting Babool and not Red. And we have to now make sure that the Babool franchise is reinvented and reenergized, and get growth from there, because actually, the only drag here. But yes, the consumption has been tight, [indiscernible] is going to grow all over last, but I think the focus is largely intact, and we do have some very clear plans in terms of revitalization and reinvigoration of Babool, of which you will see perhaps this quarter itself. And I think that will be significant in improving the fortunes. Now Babool is in now negative territory. It goes into even a breakeven or slightly positive. It will be a bit uplift for the OTC portfolio as a whole. And I'm pretty sure we'll be able to do that.

A
Abneesh Roy
Senior Vice President

So where is the Babool customer going? Because during quarter, Babool has been seeing very challenging numbers. Your overall growth is still decent, 11% and 2%, still decent numbers. So is some flaws of Babool happening to Red also?

S
Sunil Duggal
CEO & Whole Time Director

Well, a little bit of that happens, but perhaps now, the INR 10 franchise and the INR 10 universe expanding to beyond Babool and [indiscernible], which were the only 2 encumbrance. There's been of choice available for the INR 10 consumer. You can buy HFC, you can buy active salt, you can buy Patanjali. So that -- obviously, that has -- the gels are now significantly at INR 10, almost embedded at INR 10, 2% Max Fresh. So there's a big choice beforehand. And therefore, some of them do -- or at least experiment with other brands, and we just have to make sure that our stickiness really improves because we do believe that this INR 10 price points are going to stay here for a while.

A
Abneesh Roy
Senior Vice President

Could you talk about your smaller hair oil brands? Almond 100 ml, plus the 50 ml promotion on top of that? And Sarso will add 17 brand to INR 600 crores. So the INR 90 crores also been aggressive? Also an impact on that. And then Almond, what is the market share gain?

S
Sunil Duggal
CEO & Whole Time Director

It's a competitive platform product format as well, so that doesn't bother us. But in Hair Oils, we have matching competition by -- rupee for rupee in terms of promotions, and that's why the whole promotions in the state of increased quite a bit in the domestic business. So the gains in market shares are there and we are holding on to our margins because the current price was friendly, which is the main input cost. And that's the reason why we're able to do well in Hair Oils and not have our margins also eroded there.

L
Lalit Malik
Chief Financial Officer

[indiscernible] is not very -- I mean, we see the [ silicone ], brands, the percentage of that doesn't create an impact that leads to on-site.

S
Sunil Duggal
CEO & Whole Time Director

It would be great. Almond is around 40% or so. If you choose promotion, I think that's something which we are [indiscernible] because we have to build a brand at to a certain scale. And to do that, that promotion is picking. Because you never discount the market leader, unlike other perfume Hair Oils brands which are competitors will get a shop discount to us. We apparently are the market leader. So if you want to gain franchise at fixed cost, we may have to be a little bit more aggressive than -- in promotion. But having said that, I think the incumbent is also very aggressive on promotion. It's not that we are the only one that's doing that.

A
Abneesh Roy
Senior Vice President

The next question is the EBITDA margins for the domestic business is fine, but you manage that today, from the cut. Now Patanjali first 9 months is down sharply in most categories significantly. Is there is a reason or you have cut down on ad spend because there is a gross margin pressure? Or you want to phase it out? Which is the real reason? Is it structurally the industry lower on ad spend because Patanjali has cut down significantly?

S
Sunil Duggal
CEO & Whole Time Director

Well, the Hair line is visible to everybody. And then the [indiscernible] domestic business is up by around 3%. So I think the [indiscernible] only is 2.8%.

A
Ankush Jain
Head of Financial Planning and Analysis

Yes, definitely, the media part is up by around 3%. The A&P, and is also the P, is up by around 9%, right? So it's not that we are cutting back very dramatically in terms of, a, yes, there is moderation expense there because we are building much less than what the top line is generating. So the key part is, going ahead, and this is largely to counter the deceptive areas in beverages, in Hair Oils, et cetera, et cetera. We have no recourse because that's the only weapon which we have. So while we don't like the idea of having A&P reductions but it's still something which is not bad number unless you go by many other companies have seen sharp decreases their A&P, which we haven't reported to. And going forward, the intent is to build up the a part, and hopefully, we'll be able to do it for headwinds, [ POEs ] and if the consumption improves.

A
Abneesh Roy
Senior Vice President

Sir, at the start of the year, you identified that, every year, you'll take smaller brands to the bigger level. So this year, first 9 months, what has been the performance these brands you had put more effort?

S
Sunil Duggal
CEO & Whole Time Director

I think, I would do a stand out performance and we've done also well in [indiscernible], moderately well in Lal Tail. So I think it's overall a very positive reaction to our higher level cost investment, especially for Patanjali and [indiscernible] has done extremely well. We're also after all promotion and advertising expenditure obviously has done substantially very well so far. So I think the deed was in place. We did have issues with regards to leadership and the health it's getting, that's been plus now. We have a great set of people. And now, once we have that, then we are willing to sign the check in terms of advertising and promotion. So it's going exactly according to plan. We'll up the whole ante in this space for maybe add a couple of new brands in the next financial year. And our plan remains completely unchanged. We will start some issues in demonetization and GST happened, it impacted the states quite a bit. But now, I think we're back on track.

A
Abneesh Roy
Senior Vice President

And sir, last question. Your honey also had grown very strongly at 19% -- almost 20%. Now I see the premium of Dabur Honey on Patanjali coming back significantly again. And then we have a new competition from [indiscernible], which is selling 35% cheaper than Patanjali at INR 99 in the e-commerce at least for 500 gram. So one is, how are you able to manage book growth in spite of now premium coming back? And any risk from a medium, longer-term perspective?

S
Sunil Duggal
CEO & Whole Time Director

See we always enjoy a 30%, 40% premium over our lower priced competitors, and we were able to sustain and grow market share despite that. The only disruptive force which come into play will down there which came on the back of certain assurances and promises. But the consumer now is back to very happy to pay us the 30%, 40% premium. I don't think any others company coming in will be able to disrupt us, disrupt this premium which we enjoy. So we are taking down promotions a little bit gradually, and again, the whole idea is not to have huge dealings with our competitors, but the 30%, 40% premium is something I think is a structural, works with the brand and something which we should not discard. But at the same time, we have to ensure the highest possible quality of honey and that's something which we have never compromised on.

Operator

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

P
Prakash Kapadia
Principal Officer

And congrats on a wonderful journey, Sunil. Always been a pleasure to interact with you and hear your views about the industry and the way you've grown Dabur. Real congrats for that.

S
Sunil Duggal
CEO & Whole Time Director

Thank you very much.

P
Prakash Kapadia
Principal Officer

I had 2 questions. If I look at the current domestic mix of 72%, 73%, on a medium-term basis, do we expect this mix on international and domestic to be around this level? And in domestic, of the 3 broader categories, which would be the fastest growing? And what are the focus areas in the medium-term for us?

S
Sunil Duggal
CEO & Whole Time Director

I think we are now -- at this quarter, we were at 25% international, 75% domestic. It seems to have kind of leveled off at this point. But at least, for the next 2, 3 quarters, I do expect the domestic business to be -- to go higher than international, maybe not significantly so, but definitely because we still haven't lapped the whole currency issues, which began in the second quarter of next year -- of last year. So once the rebalancing happens, I think the ratio will stabilize at around 75-25. And in terms of the best-performing categories, I do expect, next year, the OTC part will be the best performing. It may not be the largest category, which we have, but I think it certainly should perform above most of others.

P
Prakash Kapadia
Principal Officer

Most from the others? Okay. And the entire new product pipeline will help us there? Or is it just the -- all the products will...

S
Sunil Duggal
CEO & Whole Time Director

Yes. No, no, no. In that sense, we see a significantly higher number of new products. I think it's now over. That's the issue, that is the substantive issue, then we've kind of rebalanced from that. We rebuilt the revenue line. We rebuilt the margins. Now we would like to invest in different amounts of new products, and you've seen a little bit of that happening. But you'll see far more happening next year. So it would be a big driver of growth, perhaps, even if it costs some profitability. But that's a good trade-off if the new products succeed.

Operator

Next question is from the line of Vivek Maheshwari from CLSA.

V
Vivek Maheshwari
Research Analyst

My first question is on the rural market share. What is the trend that you have seen in the quarter gone by? Obviously, lots can change after the budget and what government is intending to do. But what has been the experience of the previous quarter?

S
Sunil Duggal
CEO & Whole Time Director

Even if you take -- there is a focus and delta between rural and urban. Having said that, if you add that model trade to urban, then the delta kind of reduces to 1% or thereabouts. But this has not factored a certain amount of consumption, which origins -- its origin in urban but actually going to rural. It is hard to factor. So I would estimate, almost impossibility, the absolutely correct number, but rural outgrowing urban by around 2%. Now going forward, I think that would continue, perhaps even expand, because the rural stimulus is likely to be higher than urban. We've seen a little bit of sample of that this morning when you are having the whole pension schemes and as well as the [indiscernible], INR 6,000, which will definitely improve rural conversion. Although it's likely to be 30, but we do feel the whole growth will come significantly from rural.

V
Vivek Maheshwari
Research Analyst

Okay, okay. Second, on the promotion-based, I am not very clear. So is your revenue growth in domestic, is it just under 15%? And if your volume growth is 12.5%, that -- the delta is 2.5 percentage points of pricing. But if I -- since your promotion -- sorry?

S
Sunil Duggal
CEO & Whole Time Director

Pricing and mix. Let me just walk you through the begin -- but yes, please pardon me. Finish the question.

V
Vivek Maheshwari
Research Analyst

Sure. So pricing and mix. My only question is, if the promotion intensity was higher, does that mean the pricing growth was higher than 2.5% then?

S
Sunil Duggal
CEO & Whole Time Director

No, I think the price mostly is around 2.7%. The mix impact is around 0.1%. So overall, what you see in the gap between volume and value is around 2.8%. But I think, on the promotional side, what you don't see is the consumer and trade promotions, which is reduced from the sale to [indiscernible] revenue, which is what again we're sort of suggesting that those [ ASCs ] reflects 2.8% growth. Effectively, if you add [indiscernible], it is around 9% growth. So these are just 2 factors that you get to see when you add up [indiscernible].

V
Vivek Maheshwari
Research Analyst

I understand that part. So which means that revenue growth is deflated to the extent of promotion, which means the pricing impact is deflated for -- does that mean the -- so let's say -- let's put it this way, 2.4% -- or 2.67% pricing on a like-for-like basis, adjusting for promotion, how much that would be at, let's say, an RFP level?

S
Sunil Duggal
CEO & Whole Time Director

I think, at the RFP level, I think what you will see is will be within the rate around 3.5% to 3.6%.

V
Vivek Maheshwari
Research Analyst

So as you reverse the promotion intensity, that is what is going to benefit you in terms of both the growth and the launch, obviously, at -- to margin?

S
Sunil Duggal
CEO & Whole Time Director

Yes, that's correct. And we think we also have to see how do we rebalance the total A&P. So if we reduce GT, maybe you reinvested more into media, but that is the [indiscernible]. I think you know us fairly well. So I don't see that being -- because our A&P is up [indiscernible], it's actually a little bit below than what we would like to have. And even with [ monthly ] payments, they're wanting for more money. So we'll be happy to give it to them if the promotion intensity is reduced or if inflation tailwind accelerates.

V
Vivek Maheshwari
Research Analyst

Sure. And lastly, on International Business, Mr. Duggal. What is your medium-term aspiration from this business, I mean, in terms of growth? Because it has been fairly bumpy, again, not just for you, but for your peers as well. But how do you think about the International Business as a basket?

S
Sunil Duggal
CEO & Whole Time Director

I think the medium- to long term is -- the prospects are very good. We are very enthusiastic about the long-term prospects. Volatility, there's always volatility. And I think in 3, 4 years, this business was driving growth in a very significant manner, then it fell off significantly. We are getting our momentum back, and take another quarter or 2, so I can't see things happening in this quarter and next quarter because we rebalance currency devaluations. But I think, from the second half of next year, perhaps, as early as second quarter of next year, we should see good growth coming back. This is with a disclaimer that currency should remain reasonably stable, and the economic situation should not go completely downhill, which some people do state it will happen in the [ Gulf ]. These 2 evils will happen. I think the businesses are very well poised. We have seen sustained leadership. The teams are intact. Many of our constant currency growth in the 2 market sectors is all -- are excellent, [indiscernible] Bangladesh. So I'm not -- call what is about the long-term prospects of this business. Yes, there will be turbulence, and we have to live with that.

Operator

Mr. Anand Shah, you may proceed with your question.

A
Anand Kumar Shah
Senior Vice President of Consumer

Just a quick question from me. In terms of your International Business for Namaste, you highlighted that Sub-Saharan Africa and the U.S. has done very well, but there are some issues in the EU and also other parts of the world. So what are -- where is the problem, actually? If it's Sub-Saharan Africa and U.S. are okay, then where is the issue?

S
Sunil Duggal
CEO & Whole Time Director

Yes. I think you're right that there is the impact on smaller part of the business, but why is it being such a drag? The reason is that we practically did no sales in the third quarter in EU because of some issues with regard to pricing, the distributors -- the distribution business, the important price and we kind of draw the line that we will not do the price. So the strategy is not happening there. Now I think that's an necessary is.sue, which we have to face, that we cannot be compromising on our pricing. And if we are firm on that, we may have some short-term losses, but long term, we'll gain. We did exactly that on Africa when we do the line again on pricing and -- this [ fourth ] quarter but for roughly a couple of quarters. But the business did rebalance very strongly. And we also do the same in North America. So you have to take the bitter medicine. And this is the last sort of area where it's been attributed. And so the pricing is largely connected in North America and [indiscernible], which are the 2 big consumption segments. And you're seeing good growth happening, double-digit growth happening from there. I think EU will correct, maybe not this quarter, but next. It does take a couple of quarters for somebody to blink, and we certainly don't intend to be the first one to do it.

A
Anand Kumar Shah
Senior Vice President of Consumer

Got it. That's clear. And the only other problem really in the entire pie is GCC. A little bit currency issues out there but more of a macro problem in that region. So how do you see that also correcting itself over the course of the next 2 quarters or so?

S
Sunil Duggal
CEO & Whole Time Director

Perhaps it'll take 2 quarters, this one and the next. Now having said that, the GCC itself, our secondary growth are very good. They are at high single digits, which is not a bad situation, considering that the overall category growth are declining. So our market share's improving. Our business on the ground is doing fine. We are concentrating a lot of shampoos and toothpastes where we have comparatively low shares. But so the upside are almost unlimited. And I think we have our strategies right in terms of focusing on the core, which is Hair and Oral Care and, perhaps, disengaging a little bit from the Skin Care business. So I don't see long-term issues. But then, having said that, as the economic downside continues to accelerate, and I'm no expert on how to bring that out, then the problem will continue. But otherwise, we do see light at the end of the tunnel maybe from the second quarter of next fiscal. And the rebalancing could be quite sharp. The growth in business could be quite dramatic. But there has to be macro, which don't go against us.

A
Anand Kumar Shah
Senior Vice President of Consumer

Okay, got that. And the second question...

S
Sunil Duggal
CEO & Whole Time Director

Just to complete that. Now there is example that had a massive devaluation in August last year. And now the currency is steady, actually strengthening a little bit. Average trajectory is maintained, then 30 million is in orders, one of our big growth drivers because we are growing the business around 30%, 35%, all of which we should remove in translation. But if the translation were not there, then that itself will provide us with a big impetus. Lastly, I think we've continued to now deliver basically high growth once the EU issues have been sorted out. And FARC and many other geographies remain very constant, I think a big concern is GCC and how will the [ indiscernible ] behave. There's no other issue, which we are facing there.

A
Anand Kumar Shah
Senior Vice President of Consumer

Right. So where would I extrapolate just the margins to your acquired businesses were operating this last year with margins, which were, like, in the mid- to high single digits? So does it mean that there could be order in the, say, next 2 years, there could be a 500 to 800 basis points delta even on the margin strength for the acquired businesses?

S
Sunil Duggal
CEO & Whole Time Director

If the currency remains stable, then yes, we would see that kind of increase. And if the top line in Namaste, which is a high-margin business, continues its trajectory, we would see that kind of growth happening, 50 to 100 bps improvement in the result. But there has to be these tailwinds behind us.

A
Anand Kumar Shah
Senior Vice President of Consumer

Okay, got it. And finally, coming on to the NPD pipeline that you spoke about accelerating next year. Would this entail getting products from your international portfolio into India? Will that be a timely focus or completely [indiscernible]?

A
Ankush Jain
Head of Financial Planning and Analysis

No, no, that will be comparatively -- that will be interesting but comparatively small part. We intend to feed many of these products with e-com. And also, we have to now see how the e-com will have on our numbers and we expect to pick up another. But broadly, the products will be incubated through e-com, and if they life, then they will go to go modern retail and then to the general retail, if at all. So these are very different ways we can do this. These products are highly premium and are affordable only by the upper crust of society. So it's not something, which we can do on a large scale. But in terms of rising, and when these products begin to show some traction, then we can accelerate the portfolio by the distribution.

A
Anand Kumar Shah
Senior Vice President of Consumer

Could you give us one example of what the NPD pipeline for your mass market portfolio could look like for next year? I mean, you spoke about toothpaste brand or toothpaste product being launched some time. Would that be one such example of what you intend to do next year?

S
Sunil Duggal
CEO & Whole Time Director

It's one such example of that. And broaden the whole ethnic flavor range of beverages; perhaps get into other beverage segments, which were not present in and that's been under discussion. But the innovation will continue everywhere, whether it's in Home Care or whether it's in Hair Care, et cetera. They will be everywhere. And some of that order will go-to market, we'll choose the best ones and the rest will be pushed in. And then we'll also have to see what kind of resourcing do we have. Now if the inflation continues to be benign and the categories trend up, then there will be enough money on the table to fund many of these initiatives. Otherwise, we may be constrained to do comparatively fewer, but certainly more than what you've seen in the last 2, 3 years.

A
Anand Kumar Shah
Senior Vice President of Consumer

Okay, and last question. At the start of the year, you had said focused on market share, and hence, the margins could be flat on a y-o-y basis for fiscal '19. And that's probably where you're able to end at. So any views going into fiscal '20? It would give you the expansion now that you have kind of rebalanced the whole thing?

S
Sunil Duggal
CEO & Whole Time Director

Yes. I think there will be some leverage. As I mentioned earlier, that most of the lines in our P&L, you will see deleverage in the current footprint, whether it was IOH or whether it was S&M, et cetera, et cetera, because of big investments. Now this would be in the base. So I think that the leverage will begin next year and right from the first quarter of next year, in many touch of these operating areas. And I see a fairly benign outlook on costs. So now the key figures would be always flowing to the bottom line, some of which we saw come in A&P. And I don't have the answer to that. But our desired route would be, as Lalit just said, is to take some money out of the promotion and put them into advertising and have the aggregate spend at current levels. But that may not be possible if the competitive intensity remains today what we've seen in the last few quarters.

Operator

Next question is from the line of Mehul Desai from IDFC Securities.

M
Mehul Desai
Research Analyst

This is [ Harit Shah ] from IDFC. Just 2 questions. Firstly, on the International Business. So I just wanted to get a sense of how large is the GCC portion for you now in the overall mix on the international side?

L
Lalit Malik
Chief Financial Officer

Around 30%.

S
Sunil Duggal
CEO & Whole Time Director

30% international is GCC?

L
Lalit Malik
Chief Financial Officer

Yes. 30% to 35%.

U
Unknown Analyst

Would you assume that the margin in this business would be slightly ahead of overall international margins?

S
Sunil Duggal
CEO & Whole Time Director

Significantly ahead.

U
Unknown Analyst

Significantly ahead? Okay. And second question, sir, was on the Hair Oils piece. So obviously, this quarter, there's been a very strong growth in Hair Oils, and you've mentioned that it's been across the board. I guess, could you just give a sense of where this growth is coming from and where the share gains have been from, really? Just give a little bit more light on that.

A
Ankush Jain
Head of Financial Planning and Analysis

All right. The share gain essentially has been back of [indiscernible] due to the volume trend. The performers have gained share. The [indiscernible] has gained share because, at this point, I think Almond Hair Oil has done very well. And [ the overall ] for Hair Oils is also back on a growth path now, as you see. So volume market share is up -- gone up by 80 bps if you compare it on a y-o-y basis.

U
Unknown Analyst

Okay, all right. The third question is, really, on the staff costs. If you could just give us a sense of how much more accelerated in FY '20 would be the costs on account of soap impact. And how much has -- would it have been this year?

S
Sunil Duggal
CEO & Whole Time Director

I think as far as that and some parts is concerned, next year, it will be in line or maybe slightly lower. But it will maintain. So there won't be any further increase that will happen compared to this year. So this year has been the year of -- the first year of [indiscernible]. Therefore, there is costs in -- on account of the current market price. And therefore, we've seen the increased costs in the – slight cost there and the percentage of growth that we have seen. But going forward, if we utilize because, basically, it will remain the same, but at the same time, it will be either comparable or maybe slightly more in terms of monetization.

U
Unknown Analyst

So that will happen from Q1 of next year itself?

A
Ankush Jain
Head of Financial Planning and Analysis

That's right.

S
Sunil Duggal
CEO & Whole Time Director

Yes, Q1, you will see some leverage emanating out of these [indiscernible] expenses which include the soaps.

Operator

Next question is from the line of Amit Purohit from CIMB.

A
Amit Purohit
Analyst

Sir, from the growth, again, I just want to understand. This quarter, growth, you indicated, driven by distribution and new launches. And how much was the rise strategy also playing out? Or -- and the benefits of that, would we see in the ensuing quarters?

A
Ankush Jain
Head of Financial Planning and Analysis

Right. So right now, I think we started the journey way back in the first quarter as well. One thing we've done is an analytical piece on rise to how much we’ve stated has been contributing to the business, what is the level of profitability, et cetera. We developed small test market of rise in the Northeast. And I think, in the last call also, I talked about it. So the growth in the Northeast market is at a rate of around 34%. We put up new subset in place. So we done the test pilot very very successfully. As we speak next year, going forward, we'll be now standing right to other states also. So therefore, the law of innovation that the [ indiscernible ] talked about will be taking [ generally ] from the rise initiative also going forward. Yes.

A
Amit Purohit
Analyst

Any specific categories that you think you can call out or it will be just because it will be region-specifics, so then, hence, it's difficult to call out any?

A
Ankush Jain
Head of Financial Planning and Analysis

No. Across the board, so right through Gulf state across geographies, then it's portfolio-agnostic, so across portfolio of HPC space or [ extreme ] space or toothpaste. So there will be innovations pertaining to rights. So when it -- like juices, there will be new flavors to be introduced. There could be very unique, specific flavors that we may introduce going forward for Hair Oil, and the coconut oil market or the perfumed oil market. So it's very region-specific but across portfolios.

Operator

[Operator Instructions] Next question is from the line of Arnab Mitra from Credit Suisse.

A
Arnab Mitra
Research Analyst

First question is on Hair Oils, where you've seen, which has probably driven the highest growth this quarter. Now, a few years back, you had taken a view that, possibly, this is not a growth category, so you would not want to invest in it. But since last year, you've put in some investments, tactical measures. Now as we go into the next 2, 3 years, do we see you kind of seeing this as a growth category, actually putting in fair share of investments, advertising, new products? Or is it just very difficult to sustain even a mid-teens kind of growth in this category?

S
Sunil Duggal
CEO & Whole Time Director

Let's put it this way, that if we see opportunities for market share gains, because I don't see this category growing, initially insignificant base. But if it's a large category that the potential for -- from growth through market share gains is immense, and if we have the right levers in place and if we're able to find the right levers, then, definitely, we'll invest because it is a high margin and, like I said, category where we have huge upside in terms of market share growth. So we'll take it as it comes. It won't really be the most focused category for us, those belong to the more next-gen categories in consumer healthcare, et cetera, et cetera, but there are huge opportunities in Hair Oils, which we would seek to exploit.

A
Arnab Mitra
Research Analyst

Sure. And just related to this market share gain in volume in terms of Amla. Is this the first time in a few years that, actually, market share has ticked up in volume terms? And any specific actions that you've taken to kind of have this happen?

S
Sunil Duggal
CEO & Whole Time Director

Well, we did see sharp deceleration in Amla market shares around 2 to 3 years ago. Since then, there's been largely holding with the -- and the decline, if any, has been marginal. So yes, for the last 2 years or so, we've seen a flattish kind of market share, which are now trending up. And the biggest trend down, like I said, 2, 3 years ago. So we still have a lot of catching up to do. And I think we won't just look at Amla in isolation. We look at the Amla family of oils, which includes Sarso and Brahmi. And with that, I think, the climb rate can really take up shares very significantly. Now how much of that growth will come from Amla and how much from the [ coconut ] oils? Pretty hard to say. But we do intend to play these oils as a single, unified approach to stay competitive.

A
Arnab Mitra
Research Analyst

Sure. And the last question was on Shampoos. So last 4, 5 quarters, you've seen very high growth, the relaunch of Vatika also. So as you lap up now those relaunch quarters, do you get a sense that this brand is now kind of on a strong growth trajectory like you had with Red a few years back? Or -- and is this growth reflecting in market shares in the shampoo category?

S
Sunil Duggal
CEO & Whole Time Director

Well, it's begun to reflect market shares, even though not significantly. But having said that, we are a comparatively small player for shampoo. So there is no limits to how much we can grow here because even if we go from 5 or 4 areas, where we currently need 6 or 7, exactly, it needs more than doubling of revenues. So I would not say that the base should worry us too much, [indiscernible] the volume share. So the base should not be something, which we obsess about. What is the potential? And the potential here is, perhaps, more than any other categories, which category. So like in Hair Oils, we play the market share game here and not get too concerned that we are sitting on a high base because that growth that's very material. It's very material in categories where we have honey or [indiscernible] or some others, but not here.

Operator

As there are no further questions, I now hand the conference over to Ms. Gagan Ahluwalia for closing remarks. Over to you, ma'am.

G
Gagan Ahluwalia
Senior General Manager of Corporate Affairs

Thank you. And I thank all of you for your participation in this conference call. This call and transcript will be available on our website. In case you have any further questions, we'll happy to assist. Have a nice evening, everyone.

Operator

Thank you very much, members of management. Ladies and gentlemen, on behalf of Dabur India Limited, that concludes today's conference call. Thank you all for joining us, and you may now disconnect your lines.