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Dabur India Ltd
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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, ma'am.
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 results for the quarter and 9 months ended 31st December 2020.Present here with me are Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited; Mr. Lalit Malik, Chief Financial Officer; Mr. Ashok Jain, EVP, Finance and Company Secretary; and Mr. Ankush Jain, Vice President, Financial Planning and Analysis.I would like to inform you that after more than 8 years of long and fruitful association with the company, Mr. Lalit Malik has decided to pursue his career interest outside of Dabur. Mr. Ankush Jain will be taking over as Chief Financial Officer with effect from 1st of April 2021.We will now start the conference with an overview of the company's performance by Mr. Mohit Malhotra, followed by a Q&A session. I'll now request Mohit to start the presentation. Thank you, and over to you.
Thank you, Gagan madam. Good afternoon, ladies and gentlemen. I hope all of you and your families are staying safe and healthy. Let me also wish you all a very happy New Year and a great year ahead.While the war against COVID continues, the starting of the vaccination program in India and many other countries overseas augurs very well for the whole world. I would like to express my deepest gratitude to the R&D personnel and thousands of scientists across the world who have worked at extraordinary pace to provide this vaccine to the world.I would like to express my gratitude to the entire Dabur family from factories, to supply chain and to the frontline sales force who have gone beyond the call of their duty and thank them for their hard work, commitment and invaluable contributions, which have helped us weather the storm and emerge stronger. They are our true heroes.I also want to place on record my appreciation for Mr. Lalit Malik as the Chief Financial Officer of Dabur India Limited and thank him for more than 8 years of long and fruitful association with Dabur. I also take this opportunity to welcome Mr. Ankush Jain who is taking over as the CFO with effect from 1st of April 2021.Ankush has more than 23 years of experience in finance and accounts with companies like PwC, GSK and Carlsberg. I welcome him onboard again.The strategic business transformation exercise that I've talked about before continues to drive the growth strategies in the core business areas to successfully address the emerging challenges of COVID and deliver a robust top line growth accompanied by healthy profitable -- profitability during the quarter.We saw a growth of 16% in the consolidated revenue from operations. Our domestic FMCG business recorded a stellar growth of 19.5%, backed by one of the highest volume growth of 18.1%. Operating profit increased by 16.5% and consolidated profit after tax reported a growth of 23.7%.Healthcare portfolio has recorded a growth of 28.1% in quarter 3, driven by strong momentum in our power brands in the Healthcare portfolio and supported by creative marketing campaigns, localized sales activations and sustained investments.Health Supplements portfolio grew by 35%, led by a robust double-digit growth in Chyawanprash and Honey. OTC business posted a strong growth of 34% on back of robust performance of Honitus and Lal Tail, which was further bolstered by the NPDs of health drops, health juices and other Ayurvedic products.The Ethical business also performed very well, registering a 23% growth on back of strong demand for immunity boosting products, contextual activation, visibility drives and chemist channels and initiatives like Immunity@Doorstep.Within HPC, our Home & Personal Care, Oral Care portfolio recorded a massive growth of 28%. Dabur Red, our key brand, continued its strong growth momentum. Meswak and Babool franchise also recorded a double-digit growth. Our market share in Toothpaste category witnessed 120 basis points gain vis-à-vis last year. Dabur Lal Dant Manjan also witnessed a very strong growth of 20% during the quarter. Newly launched Dabur Dant Rakshak received a very good initial response from the consumers.Hair Oil portfolio saw a good recovery with a growth of 12%. We witnessed double-digit growth in both Perfumed Oils and Coconut Oil portfolio. Our flanker brand strategy remains intact with recently launched Badam Amla, Amla Aloe Vera, which have seen great traction. We also saw an increase of 20 basis points in our market share in the Hair Oil category.The Shampoo portfolio recorded a growth of 27.1%. Our market share in Shampoos continues to see an uptick and increase in market share of 50 basis points to touch 6.5%. Our focus on increasing the bottle saliency is yielding results with a strong surge seen in the quarter. Now the bottle saliency is almost 15% of the business. Vatika shampoo reported a strong offtake on e-commerce platforms as well.Home Care reported a muted performance during the quarter due to discretionary nature of the portfolio. The air fresheners and mosquito repellent cream category continues to be under pressure, reporting a high single-digit decline after syndicated data. However, our market shares in both these categories saw an uptick. In air freshness, Odonil registered an increase of 214 basis points in market share, and in mosquito repellent creams, Odomos recorded an improvement of 250 basis points.Skin Care portfolio witnessed a growth of 9%, driven by strong growth in Fem Handwash portfolio. Gulabari and Fem are seeing sequential improvement as mobility and social activity is going up.Even though HoReCa and CSD businesses continued to operate at a lower than pre-COVID levels, the Foods business reported a growth of 4.7%. Ex HoReCa and CSD, the Food business registered a growth of 16%. In-home consumption has rebounded, while the out-of-home portfolio has shown sequential improvement month-on-month.Our market share in JNSD category saw an increase of 20 bps. Culinary business under the Hommade brand recorded a growth of 16%. Excluding HoReCa business, the growth in culinary was 42%.The new products launched under the Foods portfolio like Real Mango drink, Hommade chutneys and pickles range and Amla RTD juice continue to see good traction in the marketplace.Among the channels, e-commerce was an outperformer with growth of 150%. This channel now contributes to around 6% of our business. We were able to capture the increasing preference for online purchases among consumers and increase our market share on e-commerce platform. We have also launched e-commerce-first innovations like Baby Care portfolio, Apples Cider Vinegar and Cold Pressed Mustard Oil, which are receiving a good response.We continued to drive innovation during the quarter, expanded our Honey portfolio with introduction of e-commerce-first Himalayan Forest Honey and Organic Honey. We expanded our OTC and Ethical portfolio and added Dabur Red Pulling Oil, a traditional ayurvedic mouthwash to the Oral Care category. A range of contemporary ingredient-based hair oils have also been introduced under the Vatika brand on e-commerce.The new products launched in the last 3 quarters are performing well and have contributed to around 4% to 5% of our revenue. Innovation will continue to be a strong driver of growth for the company, and we intend to continue to convert consumer insights into innovative and relevant products for the current times.International Business recorded a growth of 14.1% in CC terms during the quarter. MENA region saw a turnaround and posted a double-digit CC growth. We saw strong double-digit growth in Turkey, SAARC and SSA business.The business also rewarded an increase in operating margins aided by cost-saving initiatives. Going forward, we intend to continue to invest strongly behind our brand, distribution infrastructure, digitization and automation, building a robust manufacturing backbone and supply chain. Our focus will remain on capturing growth opportunities in our portfolio, increasing our market shares and drive strong profitable growth in our business.I now open the Q&A and invite your questions. Thank you very much.
[Operator Instructions] The first question is from the line of Vivek Maheshwari from Jefferies.
Great performance. A couple of things. First, on the -- Oral Care side. I mean if you look at your numbers as well as your competition numbers, suddenly, we are seeing a double-digit growth in the category. All 3 of you have reported a double digit in the domestic market. So can you just elaborate on what's happening in that given where the penetration levels are? In your case, of course, there is market share gain, but from an overall market perspective, can you just share your thoughts?
Right, Vivek. So what's happening in the category in Oral Care, I'm quoting now the syndicated numbers to you. The category of Oral Care has actually grown in value terms by 9% and volume terms by 3%. So there is a price increase driven value growth in the category, that's what we've seen.The Herbal and Natural category, which almost is 30% now, is growing at the rate of 14% in the category. And we have gained 120 basis points at the cost of the competition and where the market shares are going down and our market shares are going up. On all the 3 brands, be it Red Toothpaste or Meswak or Babool, we've actually gained market share sequentially quarter-wise and year-on-year as well.
Sure. Sure. And in the last few quarters, we have seen a very high focus on new launches. So can you share your thoughts on products that you think have done extremely well and products which have not met your expectations?
Yes. First of all, I'll talk about the products which have not done too well in past 6, 8 months. I think there is a -- there was COVID contextual new product launches that we guys did, which was our sanitizers and hard surface cleaners and some home and hygiene products. So they have not done very well, and the momentum has got lost, like sanitizer business in which in the last -- in the first quarter, we would have done a business of more than around INR 50 crores, INR 60 crores, that's almost down to around INR 2 crores to INR 3 crores.So sanitizer business plateaued off. Players have entered. Profitability has gone down. Competitive intensity has gone up. And there's a surplus capacity and the category has become completely commoditized. So there, it's not done well, and related categories around sanitizers have also not moved well.Now I'll move to the brands which are more strategic that we guys did. First of all, I'll touch up on the Healthcare. In Healthcare, we guys rolled out our juices range, which is the new health care juices, wherein we add the aloe vera juice, Giloy juice, Ashwagandha juice, et cetera. They are getting very good traction in the marketplace.We also launched a portfolio health drops, like Tulsi Drops. They are doing exceedingly well. We rolled out our pure herbs range, which is, again, doing very well in the marketplace.In the HPC portfolio, in Hair Oils, we launched a premium variant and we launched flanker brands. Whether it's Amla Aloe Vera or it's Badam Amla, both of them are actually doing well.In Oral Care, we rolled out Dant Rakshak in non-salient red markets, which is North, against a very big opportunity which was existing. That is showing significant traction in the marketplace. And also in South, we rolled out Dabur herbal toothpaste as we did a test marketing there.So both these initiatives in Oral Care are doing well. And in addition to that, in the current quarter, we rolled out Red Pulling Oil essentially on e-commerce. So Oral Care initiatives also doing exceedingly well.Then I'll come to the e-commerce initiatives. We launched Cold Pressed Mustard Oil in e-commerce that's doing very well; Apple Cider Vinegar, it's doing reasonably well. We launched a range of baby care products there, that's doing well. So most of our e-commerce initiatives are doing well except barring the Odomos rackets that we launched on e-commerce, that's not doing very well. And we are correcting that at the back end here. The entire -- so e-commerce range that we guys rolled out, now we've rolled out a range of hair oils and shampoos, that's also doing very well for us.The Ethical portfolio that we rolled out in our Ethical division, which is more prescription in nature, all of them are doing reasonably well as we speak.So that's the report card on NPDs. And NPD contribution to the business is now around 4% to 5%. YTD, it's around 6%.
That was very detailed explanation, Mohit. And if I can ask just 1 more question. Can you just talk about the input cost trends and your views on gross margins as we go forward?
Yes. So raw materials are firming up. Raw material prices are firming up and all our basket of -- so whether it's agri basket or it's a petroleum-linked basket or it's a packaging material or paper, we are seeing firming up of prices happening everywhere. So we are left with no choice but to pass on this kind of an inflation to the consumer because we'll not be able to absorb all this. So you will see calibrated price increases which will happen across our portfolio.And plus some cost efficiencies, which have been driven from all other line items, and we've already launched Samriddhi project. So under the Samriddhi project, you'll see some cost saving happening, plus reduction of consumer promotions which will also help us to manage our operating margin. We don't want to dilute our operating margin. So we will try to balance and manage our operating margins by price increases, cost optimization and also some consumer promotional reduction or if need be some advertising judicious spends.
The next question is from the line of Arnab Mitra from Crédit Suisse.
Again, congratulations on the second consecutive strong quarter. My first question was on Chyawanprash and Honey, where we all know that the fear of COVID is now kind of going down, it probably went down even in the DQ. So from your vantage point, any trends that you are seeing there?Do you see the consumption level slipping sequentially in October, November, December, January months, or are you seeing some permanent gains in market share, which are not going away despite the fear of the pandemic kind of going away? You could kind of comment on both Chyawanprash and Honey separately if the trends are a bit different.
Right. So Arnab, the exponential growth that we've seen in the season, as you know, Chyawanprash and Honey, the season is winter, and we are out of the winter season. So during the season and preseason loading, we did not see any sort of a moderation coming in. As a matter of fact, sequentially, we've seen the improvement in the quantum of sales that was happening month-on-month. And that's why you see this great set of numbers. But the exponential growth that we've seen may moderate going forward, but I feel the growth will continue on back of the innovation, brand building, investments that we are putting in, in brand extensions that people will be launching.So now coming to market share numbers. In Chyawanprash, we've increased our market share by 120 basis points and 60% plus market share in the Chyawanprash. And the penetration levels of Chyawanprash in the country have also gone up to beyond around 6%. And Chyawanprash has got a proven efficacy as an immunity booster. And in line with that, we guys did some sort of a clinical trial, and the clinical trial results are out. I can't give you very granular details about the clinical trial. It's already with Ministry of AYUSH. And post ratification by Ministry of AYUSH, those findings will be out.And we've seen a significant impact of Chyawanprash as an immunity booster in contraction of COVID and recovery of COVID and the quality of life index. And this entire study has been done in more than around 600 -- more than 600 respondents as per WHO standards. So that result is out. So I think on back of that, Chyawanprash as a category should take up a big boost, and it's also been advisory by the government.So I think overall, the pie of Chyawanprash as a category should increase. That said, exponential growth will definitely moderate. And we are doing all what it takes to ensure that we are able to go on a path of growth even on Chyawanprash on back of innovations that we guys are thinking of launching.Now coming to Honey. Honey also, the exponential growth may not continue, it will moderate. And as the instances of COVID go down, we see the pie contracting in Honey. Honey penetrations are 24%, 25% in the country. And this pie will contract as we go forward because people will not have as many medicines as they used to have during the COVID times and honey is used if you were to increase efficacy in these medicines and prescribed by the vaidyas.So that insurance will go down. That said, we are launching huge innovations, and the category is also becoming significantly competitive. And on back of competition, increasing share of voice, the -- as the share of voice increases, more and more consumers might just get in, and we will be working on the path to increase our market share.As we speak, we've increased market share by 700 basis points in Honey, whether it's e-commerce or modern trade or general trade, across channels. So we have not seen any sort of contraction in these quarters, and we would want to maintain, if not that exponential growth, but at least the growth should get maintained.
Thank you for the very detailed reply, Mohit. The second question was on the -- some of the new launches, which you did, which is specifically some edible oil, which is the Cold Pressed Mustard Oil and also ghee which you read in the media.So just wanted to understand because the total category sizes here are very large. [Technical Difficulty] we are a very small niche player in e-commerce and these kind of segments, but in the medium term, do you actually want to get a sizable turnover? Because in this category, even small shares can get large revenue contribution. So just wanted to share your thought process on that.
No. So we are a health care player, Arnab. As you know, we don't want to become an edible oil player, which plays in the mainstream of these categories. We want to play in the value-added segment of these markets. As you know, the market segments are very large. Even the value-added segment is pretty large.So at the moment, we'll restrict ourselves to e-commerce. We will see how the traction on e-commerce is, which I told you is very good. And then gradually and slowly percolate these into modern trade. We are in no hurry to get a INR 100 crore or INR 200 crore out of these categories because it could be margin dilutive also if we end doing that. So we'll be having a very calibrated approach and a watchful approach to extend this to mainstream.
The next question is from the line of Abneesh Roy from Edelweiss.
Congrats on extremely good set of numbers. My first question is e-commerce versus modern trade for you. So e-commerce share has gone up, but now with modern trade also seeing good growth coming back and people going to malls also significantly. How do you see the market share or percentage share of your revenue between this in the near term? Do you see e-commerce coming down or structurally, e-commerce will keep going up and in some years, maybe e-commerce will become bigger than modern trade?
Yes. So Abneesh, thank you. So we see e-commerce structurally becoming bigger as a channel where the consumers are inclined to do their purchases as contactless sort of a purchase behavior, a behavior which is skewed more towards urban consumers and also the millennial consumers. And this habit is actually percolating from a very top end urban to urban and gradually slowly will go on to semi-urban also. So structurally, we'll see e-commerce as a business will only grow.E-commerce will also -- I would not say, eat into it, but e-commerce will also have a positive rub off effect on modern trade because modern trade also has e-commerce portals, like Reliance will also have reliance.com, Jiomart has come in. So the modern trade change will also gradually slowly pivot towards the purchase on e-commerce. So we are trying to be a first mover there and capture that also. And B2B e-commerce is also catching up.So that also, all ends of e-commerce, if you ask me, will only structurally become bigger and larger and will eat into the GT shares as we speak. And modern trade coming back into normalcy now after 2 quarters of contraction, we'll see even modern trade gaining share. So overall, e-commerce and modern trade and cash-and-carry will become much and much larger.And we, as an organization, will be trying to be the first ones to launch brands which are exclusively meant for all these 3 channels. We are trying to create an organizational structure which is geared towards these channels and we'll also increase our share of shelf and all the parameters will get strengthened in all these 3 channels for us.
Next question is on toothpaste. So this 120 bps improvement in market share, is it primarily against Patanjali or even against the top 2?And second, you gave us the data that now Chyawanprash penetration is 6%. So my question was in terms of frequency of toothpaste consumption now versus, say, 2 years or 3 years back, is there a significant improvement because of focus on hygiene because of the corona because growth rates is improving for everyone, and let us forget the Nielsen number. Does the listed company number does show that there's a significant pickup in the volume growth ex on the price growth also?
Right. So Abneesh, first of all, in terms of the market shares, the 120 bps, which is what we've gained, Patanjali is also gained. So as I alluded to earlier in Vivek's question, that the herbal category has seen a 2x growth as compared to the non-herbal category. So if the entire category grew by around 7% in value, there was a 14% growth, which is coming out of the herbal category. And the beneficiaries of herbal category growth rate are Patanjali and Dabur and a couple of small players here. So I think the market share gain is coming at the cost of the other players and not in addition to the other players.The category penetrations are already 90% odd. So I don't think COVID has really acted as -- to increase the frequency of rushing of the Oral Care category, I would not think so. So I think it's at the cost of the market leader that we would have gained market share here. And Patanjali and other herbal players penetration would have gone up as compared to the lead players.
Next question is on Honey. So in the past, you have seen premium honey in India hasn't seen much of success by other players. You launched Himalaya Forest Honey and Organic Honey. So what is the thought process? Is it more to get some niche audience here in the e-commerce or maybe even modern trade?Second, the edible oil company which has come here, it has a target of INR 100 crore for next year in honey. So what would be your thoughts? Will it be just expansion of category because of new players, especially given the recent controversy, recent issue, which happened, wherein that company was well placed from a German machine testing? So if you could tell us how do you see that and the next year's INR 100 crore impact on the category?
See, as far as we are concerned, we are market leaders in honey. And I told you that we've notched up around 700 basis points in honey. We will be working on a trajectory to increase our market share and strengthening our position in the marketplace. And as a part of strengthening the position in the marketplace, a, strengthening the existing brand plus launching premiumized variants.Therefore, Organic Honey, Forest Honey and Ashwagandha Honey and Tulsi Honey that we rolled out in GT also. That's all attempt to pivot our honey towards value-added segments and not just be dependent on a commodity market, which is what honey is, and keep talking about purity.So we are trying to value-add our honey and are moving into different verticals, which are more value-added of honey, and we'll be focused on gaining market share. If some other player comes in, it's actually a welcome thing for the industry and for us because he will only increase the pie as the share of voice actually goes up.As far as some German test is concerned, we are here to abide by the law of the land, which is the FSSAI standards, which have been laid up. If somebody comes and talks about in Nigeria, there is some testing and are launching that in India, so I don't think people will sway towards that or something made in USA or Australia or -- it has to be because Indian honey is collected from the Indian beekeepers. And Indian beekeepers collect the honey from 20,000 varieties of flowers which are grown in India and not grown in Germany. And the flora of German land, of the different monsoon and fertilizers and soil is completely different to what is in India.So FSSAI, in the clarification given to the CSC report, very clearly said that FSSAI has the most stringent standards in the whole world, and NMR is nowhere standard in anywhere in the world. Even in Germany, that is not a standard because there is no robust database. So this machine relies on what the database is and the testing done in accordance to the database. It's a print of the database, which it checks the sample again. So if the database is not Indian, it will not test against India.So therefore, one would not like to comment too much upon what the competitor is doing, but be focused on one's own journey of strengthening our own stain honey and also launching value-added things and increasing the penetration of honey as a market leader.And for us, Patanjali happened in the past also. And if a new player comes and takes away 1 or 2 percentage points, it's okay, as long as honey category is expanding. And as a market leader, we will be beneficiaries of that tailwind which will come to expand the category.
And what is the category size now based on the exit run rate?
We are almost around 40% market share. So I think it'll be around INR 1,500-odd crores.
Mohit, last question. So beverages when I see Cola companies, they are seeing very good growth in the past 2 quarters also. You have seen very tough last 2 years. Some growth has come back. So is the price value equation now good enough because I see, again, very high discounting in the industry in the fruit juices coming back?Second, how is the INR 10 price point done? And are you now confident that without the base effect also growth can come back? Base is very favorable, so growth will come back. But are the structural issues behind?
Right. So I think I would say the structural issues are already behind. If I dissect the business, the way the business has actually performed, while the growth is 4.7%, if I take out the HoReCa business and the institutional business, the business has actually grown by around 6% for us.Now 6% to 8% is what the beverage growth has been. And -- but Colas coming back, I think it's momentary. It is a health care sort of a trend which is getting established. So Colas will always become a source of business for the juice category and the drinks category. And I think the drinks category only pick up our INR 10 price point that we rolled out in Koolerz and Apple Mini have done exceedingly well in the market. And our foray into the bottle, our pet bottle has also been received very well in the marketplace.So our movement into the drinks category, I think, is very positive and should be positive for the coming quarter, which is going to be the season quarter for us in Real. I am very optimistic on back of all the NPDs and innovations that we people are doing in beverages that our business would turn around. And structurally, this business should only improve going forward. And like you rightly alluded to is that the base is going to be favorable here.
The next question is from the line of Tejash Shah from Spark Capital.
Congrats on good set of numbers. Mohit, the traditional understanding on premiumization was that GT as a channel is less experimental and hence, modern trade was right channel to launch premium products, as the format allows consumers to sample premium products. But now we are seeing, for the last 1 year, that even international players like us are launching premium products on online platform alone. So is there any insight that online consumer has become much more experimental with premium products online and they are okay with, without trials or touch and feel, premiumizing on that platform?
Tejash, I think premiumization has always been the game on e-commerce. E-commerce itself was very small. So as e-commerce is picking up, we are seeing more and more players and that is becoming more visible to us. But I think e-commerce was always a cradle for launching premium products.If you see a lot of companies who could not afford to launch products in GT because go-to-market itself is very expensive for a smaller player, they always chose e-commerce as a cradle of launching their brand. So we've got repeat examples in Personal Care, in garments, et cetera, where they're e-commerce exclusive brands and not present in modern trade or in GT also.So now what's happened is the mainstream companies have also started choosing e-commerce as a cradle for new product launches. And as and when they do well, they will roll it out in modern trade and GT. They have wherewithal to launch it in GT, for example, Dabur could have launched Real in GT or other products in GT, but the cost of failure is quite hard in GT as compared to in e-commerce, where you can target very sharply to the millennial consumer, you can sell products on a limited platform and there is no question of taking the sales back.So all around, it's all positive to launch products in e-commerce and continuously keep improving. So as I keep telling that progression is the way to go than perfection, and you can quickly test the products on e-commerce. Rather than doing test marketing and spending 1 full year in doing test marketing, it's better to keep improving your mixes when you launch in e-commerce.
Hello?
Hello, yes, Tejash.
Yes. Is the cost of creating customer awareness also lower on that platform?
Much lower, much lower as compared to general trade because you are able to very sharply target the e-commerce consumer on platform and on social.
Sure. Mohit, we also announced today subsidiary for export initiatives. So if you can share some detail, is it a fresh initiative or it will be just recalibrating our business -- existing business there?
Sure. So what we have seen is that there is an opportunity for us to have exports from India. This is in addition to the international companies having business outside India. So in order to promote the exports, we are setting up a separate subsidiary, which is 100% subsidiary of Dabur India Limited, which will manufacture the products in India and export to the markets like U.S., et cetera. So that is going to be the focus, which we will do it in a separate subsidiary. For that reason, we are forming a legal entity.
And just to add to Lalit's point, with COVID happening, health care demand in the overseas markets have really gone up and to provide a focus, the subsidiary is being formed.
Right. And with China having an issue, this could be an opportunity for India to improve our exports.
Sure. So this will be white label or this will be under our brand only?
It could be white label and also our brand, both.
Okay. And lastly, we were running at a target of some 1.4 million direct reach by the end of the year. So where are we on that number?
Right. So we are pretty much on track as far as our direct reach numbers are concerned, Tejash. So we were 1.2 million. As we speak, we are already 3. By end of the year, we should reach up to around 1.4 million, our direct reach in the GT business.
The next question is from the line of Aditya Soman from Goldman Sachs.
And congrats on great numbers. Firstly on Oral Care. So in the past 2 quarters, we've seen this sort of step-up in overall revenue. So I think revenues for 7 quarters before then were around INR 250 crores, INR 270 crores. Now that's jumped to about INR 330 crores. Can you explain in a little more detail what this step jump has been?
Yes. So Aditya, Oral Care, right, I think Oral Care is one of the categories which is not so much impacted by COVID for us. So I think pre-COVID to now, not much of difference has been made except that the other 2 brands also, which is Meswak, Babool, LDM, all the 3 have also started firing in addition to the Red Toothpaste. Red is obviously our flagship brand, is doing very well. And our overall market share has gone up by 120 basis points.So I think -- and also regionally, we have put up RISE as its whole structural change, which is regional insights capturing. So we are making regional creatives for everything and focusing on regional GTM and regional manpower is being created.So I think all that is now coming to pay us rich dividends that we have shown in. And that's why you see this growth happening in Oral Care on all the brands. So be it Babool or Meswak or Lal Dant Manjan and Red Toothpaste.And we've also launched 2 more brands, which is Dant Rakshak and Clove and we'll continue on the trajectory of launching more innovations, which are already in a pipeline for us. And our Red Pulling Oil has also got rolled out in the marketplace.
Understand. And in this step up, right, I mean, to INR 330 crores, let's say, from about INR 260 crores, what would be the contribution of Red versus the other brand?
So red contribution, I think, should be more around 70% of the total portfolio and 30% would be others. Red has grown by 30% for us and other portfolio has grown by around 20%, 25%, overall growth being around 28% for us.
That's fair. And second question on Digestives. I mean for most of the other businesses, we've seen that step up in Health Supplements or Oral Care. But Digestives has sort of been steady around that INR 95 crores to INR 100 crores. So what do you think would be the next steps to take that to the next level?
Right. So I think very good question. I think our Digestives portfolio has been flat in this year. Essentially, single brand Hajmola. Hajmola is very salient, and last full year Hajmola, pre-COVID, had really grown. But post COVID, what has happened, with out-of-home consumption going down, the impulse purchase SKU of Hajmola which is sachet, which has gone -- declined by around 15% for us because it was basically consumed by kids, and kids have stopped going to school and schools are shut. And therefore, that portfolio has got impacted.But the other part of the portfolio, which is bottle, which is only contributing to around 25% of the portfolio, it's grown by 15%. So in-home consumption of Hajmola is growing at 15%, out-of-home, which is the majority consumption, is what is declining by around 15%.But going forward, we have great plans in Hajmola and Hajmola was one of the contenders of being a power brand in the company, but for this COVID situation. I think -- so we are launching multiple other SKUs in Hajmola. We rolled out Chatcola last year. Now we are coming out with multiple very interesting other SKUs. And Hajmola has the potential of getting extended into a lot of other impulse purchase categories in namkeens and others.So we are still working on a strategy. As we speak, we are working on a budget, and we will be working on plans to extend Hajmola into larger categories as we speak. Like there's a lot of cottage industry, which is prevailing in India, whether it's Ram Ladoos or Imli Ladoos, et cetera, which is in line with what Hajmola brand core is all about. So there's huge potential here in Hajmola, and we are cognizant and we are working towards that.
Got it. And just on Hajmola, I mean have you seen any sequential improvement in the out-of-home, let's say, from October to December?
Yes, we have. So it was minus 50%, but I think sequential recovery now is minus 15%. I think it's a matter of time, in the first quarter, we think it should revise as the schools open. Schools are still shut, but I think if schools open in the month of February or March, Hajmola sachet should revive on the back of school opening.
The next question is from the line of Shirish Pardeshi from Centrum.
My heartiest congratulations to you and entire time. We will definitely miss Mr. Lalit going forward. I have a few questions.
So will we.
I would definitely miss more. So I think most of the questions have been asked and my friends have taken a lead asking so many questions on Oral Care, and let me not trouble you more.I just wanted to understand structural fundamental changes happening in Oral Care. Is that -- I mean some time back, we were saying that white is moving to non-white and Naturals, which is a color toothpaste phenomena, which is happening. And that has been prevailing and that's a very sticky thing.I just wanted to understand and dissect your growth, 28% is a superb growth. But is it that we have got a benefit of new product pipeline filling and somewhere we are now trying to use operation RISE to fill in the rural consumers and wholesale channel?
No. I think this is more structural than just pipeline filling. While pipeline filling happened, that could be in extent to around 4%, 5% at best. As I told you, NPT ratio in Oral Care will only be in the range of around 4% to 5% for us, not beyond that. Rest of the growth has been contributed by the intrinsic strength of the brands and the structural trend in the category, which is a movement from whites to the value-added segment. Because unlike other places, here, the value-added segment, which is a non-white segment, is a little cheaper or the same price as the white segment.So there is no reason for why consumer will stick to white. There will be all the reason if the share of voice is there, if a compelling reason is there, consumer will definitely switch out from white to a more value-added segment. That's why you find market leader also trying to flank itself on to more value-added offering and, therefore, the share of voice, even by the market leader and by others, is only increasing towards the value-added segment.So I think there is a strong tailwind and enduring tail bit towards the non-white and this pies keep increasing. And as I alluded to in one of the meetings, it's a matter of time before it will become 50% also and -- the non-white segment. And the other players for whom the non-white is the lead spearhead will be the ones who will be beneficiaries of this gain.
Okay. Because I've seen -- having worked out in the SAARC countries, I've seen this benefit of non-white. But anyway, it's now panning out to India in your favor. My next question is...
And just to add here, Shirish, that we see the same trend panning in Middle East. Middle East also, we are the leaders in the herbal space. And there also we find -- and the non-herbal space is the market lead. We find our Oral Care business doing exceedingly well. And also, this is the same thing has happened in Nigeria. And country after country, we are witnessing our Oral Care herbal play catching up.
Exactly. That's what my past experience. But anyway, you are confirming that market is shifting. That's a good news for us.My second question is on the Healthcare, now forms almost 44% of our business. And -- I mean congratulations to you from doubling that business over the last 2, 3 years. But I tend to believe Healthcare as a higher gross margin profile, but it's not reflecting to -- in our margin setup. Is that -- can expect maybe another 2, 3 quarters, margin trajectory will improve?
No, Shirish, I don't think so the margin trajectory will improve because we are embarking on a huge inflation which is staring at us. And it's in the range of around 5% to 6%, and we have no other option but to pass on that inflation to the consumer. And if this passed on, then there will be a pressure on that volume gain, volume pressure coming in.While the Healthcare portfolio is margin accretive to the overall portfolio, there's been a huge inflation in the herbs and spices whether it's amla or it's honey or it is other spices that go into Chyawanprash. As the demand has picked up, the cost of the raw materials have also picked up for us. And raw material is a very significant contribution to the Healthcare cost of production for us.But that said, the Healthcare business will keep trending up for us, and we hope so. And by virtue of this, the margins will keep increasing from a gross margin perspective, but we are also embarking on so many innovations in health care. And to back up those innovations, we are investing a lot of money.So advertising expenses have also gone up by around 38%. Actually, in media, it's gone up around 40% plus for us. So we've invested ahead of the curve in seeding the new brand, and on back of which, the margins are only stable there. We don't see the expansion slow down from gross margin to the operating margin because advertising expenses are eating that margin upside.
Do you think Healthcare business over the next 3 years would settle 50%?
I think it's very difficult to say as we established a base of very high exponential growth. And as we go around next year, this exponential growth will definitely moderate. And -- but the intent is to take it up to that level definitely.
But this was also a high season quarter when winter-centric products have a higher contribution historically as well. So probably it will settle looking over in the full year context.
Okay. Just last question, Mohit, from my side. Since the time you have come in, you have harped on performance improvement, progressive growth, new product launches, and you have actually undone the previous time. Do you think this focus on strategy is secondary but growth is important? Is that the strategy you want to follow next 2, 3 years? Or you will also focus on the profitability and delivering margins or bottom line?
See, there is a balance between the 2 things. So I would say the margins and the top line growth are to be balanced with each other. And that's the arts and the science of managing the business. So I think that's what we are trying to do, to balance both margins and also top line.So whenever the commodity prices are a little benign, we are investing that upside on the brand building. And when there will be a pressure, we will try to cut back like in the first quarter. You saw that we cut back on advertising expenses and, therefore, we managed our margins or at least managed to curtail the losses, which happened in some segments of the business.But we are embarking on the strategy that we had created in the beginning of our vision period, which is all about power brands, which is all about localization and e-commerce, modern trade, being fast on creating independent autonomous verticals, decentralization of authority and introducing span of control and working on cost optimization.All those legs of strategy are still working well for us. And we have not done any course correction in the way the strategy is being run in the company. I think this is -- the results are actually the output of the strategy that we seeded in the beginning of our vision period.
So the reason why I'm asking, if you can give me some understanding on the ad spend, how much we should build in for this year, next year and the following year? I mean broad number.
Our [ ad pro ratio to media ] ratio at the moment is roughly around 10% of that we are spending on the business. But our wish would be to go up to around 11.5% to 12%. That's where Unilever is, that's a best-in-class, it's what we want to benchmark. But difficult against the tightrope walk as you go on. So if the inflationary pressures are there, then we can't do that much. But if the prices are benign and gross margins go up, then you can afford to take up that growth. So that's the balance that we have to account as we go along.
Sure. And YTD, [ ad pro ] number is around 9%. So will probably stay around that. It will stay a little higher than that.Can we go on. Shirish, sorry, there's a long line, so we will...
[Operator Instructions] The next question is from the line of Krishnan Sambamoorthy from Motilal Oswal.
Congrats on a great set of numbers. Mohit, in your first interaction with investors and analysts about 1.5 years ago, as well as in the annual report, you had highlighted that for Dabur to grow, targeting and reaching millennials is an important pillar. In terms of cultural changes, in terms of personnel changes, in terms of product changes as well as channels, you indicated e-commerce is an important factor here. What has been the initiative so far? And how satisfied are you with the success since then?
Right. I think, first of all, satisfaction index is very low for me, but we have been trending in the right direction. So e-commerce, we've been able to create a vertical completely and give complete autonomy to them to run. That's why you saw e-commerce percentage steadily has gone up from 1%, 1.5% around 2, 3 -- 2 years back. And now -- then it became 3% and now it's 6%. And month-on-month, e-commerce as a percentage is going up.We have created all hero images. We've staged up our brands on e-commerce. Now we are available, we created our Dabur separate e-com channel. We have still a lot of room to cover on our websites or social media. Digital investments have also gone up from a paltry around 5% to now 20% as we people speak.Premiumization across our categories is happening. In Hair Oils, you've just seen some premiumization happening now. And wherein we launched e-commerce-first Hair Oils, we've launched e-commerce-first Shampoos. We are still not launched e-commerce-first toothpaste. So they will all become future growth drivers for us.So across category, Healthcare, a lot of work has to happen still on e-commerce and also on the Foods category. So we are lagging behind in terms of where -- what we would aspire and where we are right now.But absolutely, I don't think there is any way out but to connect with the millennials. And we have to connect with the millennials because they are the ones who are going to be the flag bearers of future Dabur. And that's the way we'll be able to bring Ayurveda Ghar Ghar, that we take Ghar Ghar Ayurveda as our vision.So we'll only have to start with that youngsters. And if they are able to relate with Ayurveda, we will be able to take Ayurveda mainstream, and that's the vision of the company. So we are working towards it, but not to our best of wish.
Can I also squeeze in a question on the cost savings target that you had initially highlighted, INR 80 crores to INR 100 crores for the year. How much is it -- how much is sustainable and targets going forward?
Yes. So on cost savings, we already identified projects which are worth what you're saying around INR 150-odd crores. And annualized this year, we should be getting roughly around INR 50 crores out of this project, and rest we'll accrue in next year going forward.And Samriddhi project is going on very well, and we are continuously monitoring the project update here, and it's running across cost optimization in our formulations, to our packaging cost, to our freight cost, to variable cost, fixed cost across the board in the organization and also overheads and span of control.So that project is underway. And to do project management, we are working with a consultant on the same so that we are able to monitor it from an external third party.
The next question is from the line of Prasad Deshmukh from Bank of America.
Congratulations on a good quarter. So 1 question...
Prasad, can you be a bit loud, please?
Yes. So 1 question on this export subsidiary. Just wanted to understand, is this specifically for Ayurvedic products? Or is it like overall health care? And could you give a sense of the size of this opportunity?
See, it is not just restricted to Ayurvedic, it is going to be across all categories. And right now, as we just mentioned that considering the China disadvantage, we see there is a big opportunity to that. So we are drawing up our strategy, but we do want to have focused efforts put on that to improve the exports. So therefore, we are going to look at the opportunity there.So it's difficult to say what size that we are looking at, but we certainly are looking at a good opportunity going forward. And we are in the pipeline with some of the good contacts -- contracts to be achieved, and we will see as we progress.But yes, I think, to answer your question, it is across all categories, not just for Ayurvedic.
Okay, sir. Just a follow-up there then. Given the clinical trial data is now available, as you said, for many Ayurvedic products now, does this open up a possibility of registering these products abroad, like, say, medicines or all these are -- or is this all going to be an OTC kind of a business?
At the moment, Prasad, all these products are actually OTC because despite the clinical data available, there is a huge regulatory barrier for us to register the Ayurvedic brand. Because clinical data is on the efficacy of the product, how it's performing, but registration of the Ayurvedic products in overseas market requires understanding of the raw material which goes and the efficacy of those individual raw materials, which is a very tall task. So at the moment, we are exporting them as food supplements and as OTC products, and not as prescription.
The next question is from the line of Alok Shah from AMBIT Capital.
Congratulations on a stellar performance yet again. My question was essentially on the supply chain and the distribution. Considering a slew of new launches that Dabur has done over the last 6 to 8 months, are we trying to make some strategic changes to the existing supply chain? Or you think that the current supply chain and distribution that is there, and this is largely towards the GT and modern trade, they are pretty open to accepting all the new launches and it is working seamlessly?
Right. So Alok, supply chain infrastructure is very well geared to handle this. As a matter of fact, we are consolidating a lot of warehouses. And on account of consolidation of warehouses, we are getting a lot of saving is what we're doing. We used to have around 36-odd warehouses. Now we are operating with around 29 -- 25 warehouses. So we have rationalized a lot of warehouses post GST implementation, that's working well.As far as distribution is concerned, yes, you're right. The bandwidth is limited of the stock with salesmen to sell so many NPDs that we have rolled out. So therefore, what we've done is, in some markets, we've tried line split. So we have 3 lines working at the moment. One is the HPC, HC and Foods line. In some markets, we've split the HPC line into 2 parts. One is Oral Care driven and the other is Hair Oil driven. And we are testing out the market with that so that additional burden is not there.And to improve the efficacy of the last mile, we are also digitally enabling them with a lot of new software which will be available on their handheld terminals, which will be of aid for them to sell newer number of categories, newer number of SKUs and optimize their sales cost in terms of the time spend that they're spending there. So I think there's a little tweak which is actually happening in our GT model also.
Got it. Got it. And just add to that, would there be a cross-pollination opportunity significantly for you to push the new products into the channels which were earlier only towards the health care focused and vice versa?
Absolutely, yes. Because reach of our Ethical portfolio is really limited in terms of chemist outlet, we only reach out to around 70,000 chemist outlets as compared to our OTC reach, which is 2,75,000. So cross-pollination helps. And during COVID times, we have actually done cross-pollination.So the Healthcare products, as we wanted to extend, a lot of Foods teams are selling Healthcare because Food wasn't selling. And Personal Care team also sold a lot of sanitizers, et cetera. So there is a cross-pollination opportunity. And we leveraged that opportunity also during COVID. That said, but the 3 main lines will remain and some cross-pollination will happen across the board.
The next question is from the line of Latika Chopra from JPMorgan.
Mohit, sorry, I got dropped off. So I'm not sure if this was asked already. The question -- the first question is on the overseas business. How confident are you on sustainable recovery for this piece? And any thoughts on further scope of margin improvement for overseas?And the second bit was a bit of clarification on this export subsidiary. Would this entail the food products, ready to eat, ready to cook honey, ghee? Just asking more from a PLI perspective, if you could share some thoughts, and any CapEx of that you have in mind for this?
Right. So -- yes, Latika, we saw you and then you were dropped off, and we wondered that all your questions have got answered. But thank you for coming in.And the first question on International Business. So I think all the markets with the exception of 1 or 2 markets in International Business have kind of turned around after the COVID impact in quarter 1 and also in quarter 2. So most of the markets are doing well.Overall, constant currency growth that you've seen is around 14%. First, I'll talk about SAARC. Nepal business and Bangladesh business are trending well, and I think this growth is sustainable. They've grown by 13% and around 17%, respectively, for Nepal and Bangladesh.And the Dubai-based MENA region is also doing well now post the COVID impact. And we think for multiple quarters now, we enter the [indiscernible] so that business should also do well. Our U.S. business and Sub-Sahara business is trending well, and so is the Egypt business doing well. Turkey business in constant currency has grown by 33%. But because of the Lira depreciating, we didn't realize much. But intrinsically, the business is doing pretty well.So I think even on the margin front, there will be a potential of operating leverage in International Business on top of the -- on back of MENA business coming around. So I think, overall, we are in a good space as far as International Business is concerned.On the export piece, the subsidiary is essentially to provide some focus on the exports and nothing beyond that. So it's a minor structural change that we're doing in the company because of so many units we operate, almost 12 units, and export and private label for us has really grown. So we are just trying to provide more focus by having a separate sort of unit operating for exports here.
Any CapEx, Mohit, you have in mind for this?
Yes. I think we are evaluating the possibilities because currently, we do have production capacity available. But going forward, we will be requiring the additional capacity expansion. At that point in time, we will look for CapEx also.
Yes. And just to add to Lalit's point, and CapEx will be more in domestic business also that we'll be investing in, but which will be not unduly high, that will be in line with the CapEx of this year. We may look at expanding, augmenting our Healthcare capacities, which are kind of running short and we'll need more civil space. So we might look at additional plants coming in, in Central India. But I think the plants will get tangibly close in the budgeting when the exercise is on for that.
So this will be in FY '22, is it? The CapEx for new plants?
Yes. Yes. So -- yes.
Next question is from the line of Stuti Johri from Trivantage Capital.
I just had a quick question on -- so in December, I remember reading some reports about like honey being adulterated and things like that. I know you released a statement about that, but I was just wondering if that had any impact on your honey sales?
So Stuti, we've not seen any impact tangibly come in on this thing. For sometime, we were #1 selling honey on e-commerce. We lost -- vacated that position from #1 to #2, but we are again back to the #1 slot. And we've gained around 700 basis points of market share in honey across the board across channels. So we've not seen a very significant impact happening on honey, so -- yes.
The next question is from the line of Varun Singh from IDBI Capital.
Sir, just wanted to understand in terms of new launches...
Varun, you're not clearly audible, Varun. Can you please use the handset?
Am I audible now?
Yes.
So just wanted to understand on new launches. Sir, what is your thought process in terms of how do we select the categories for doing new launches? So if you can share some thought on that, Mohit.
Right. So we have a proper new product development model that we select. So category selection happens on the size of the category. The size of the category has to be big enough. The capability should be there in the organization to give a good product in that category, and we should have a right to win in terms of proposition to cut clutter in the category, and there should be an opportunity that we see in the category. So only then do we get into the category.So categories are decided based on different platforms. There could be opportunities in e-commerce or modern trade, in GT, in rural, et cetera, and we've embarked upon RISE, regional insights. So we capture the insights from the different regions and then map out the sizes of those categories and attractiveness in terms of our right to win and market share gain and profitability, et cetera, before deciding on.
And how are the new launches tracking, Mohit, for example, mustard oil we launched and we launched even our child care, et cetera, products? So any commentary on that?
Yes. So they are e-commerce-first brand launches, Varun, and they've got a very good traction in the marketplace on e-commerce. So we still not rolled them out into GT or to modern trade. So they are being restricted to e-commerce. On e-commerce, we've got great reviews from the consumers and the business is also trending well there.
The next question is from the line of [ Kunal Vaidya ] from Dalal & Broacha.
Sir, I just had a question in terms of your channel inventory, and specifically, in terms of your Hair Care portfolio, just wanted to understand what led to this top line growth in terms of the volume on a year-on-year basis?
Right. First of all, channel inventory. I think the business is becoming more and more hygienic, if I may say. So the channel inventory is now -- it was sitting at 21 days. From 21 days, our inventories are down to around 13 days. And both in power brands and other brands, we've seen inventories getting corrected and which has released the cash in the hands of the distributor and, therefore, they are able to buy more and make more money. So I think the whole business is becoming more hygienic.In terms of Healthcare, all the 3 pillars are doing well for us. Be it Perfumed Oils, Coconut Oils or Shampoos, all the 3 are doing well, and we've gained market share in all the 3. In Hair Care, and overall, we've gained 12% in our Hair Oil portfolio and Shampoo business has gone up by around 28%, and driven by a lot of sales in bottles on back of e-commerce and modern trade shoring up.
Sir, then how much of this you would consider as exponential growth in case of Hair Care?
I don't think this is exponential growth. This is actually the recovery, which has actually happened. Earlier, this is more discretionary part of the portfolio which is impacted by COVID. As the COVID instances go down and consumer demand is now also moving towards discretionary, this portfolio is coming back to its pre-COVID levels, actually ahead of the pre-COVID levels. But there's nothing exponential here, if you ask me. It's a pretty structured growth that we are seeing here in Hair Oils and Shampoos.
The next question is from the line of Rahul Maheshwari from AMBIT AMC.
Hello, am I audible? Hello?
Yes, Rahul.
Yes, you're audible, sir.
Yes. First of all, congrats, Mohit and team, for going strong quarter-on-quarter.My first question is on -- as you mentioned that you're diversifying your portfolio in new categories, can you give some highlights where is the categories where you are not deploying the capital or you're getting -- discontinuing that categories or the product segment? And what are the new learnings that you've got in those categories or product segments?
So the new categories that we are entering in, so I think good question, Rahul, because once COVID came in our life, and we got into thinking again that are we in the right kind of categories. And therefore, that is the time when we said that we need to get into categories that can sustain or endure our existence during a black swan event like a COVID if it ever hits us again. So that was rethink which happened in the company.And therefore, we decided to get into a more stable state categories like we've gone into baby care, we've gone into edible oil. We're getting into better skin care. And a lot of Healthcare also categories came in. So that was a rethink. And that's why we have launched these categories in -- also we went into sanitizer, which was more of an opportunistic play.At that time only, we knew it was tactical and opportunistic to capitalize on the COVID situation, and that's for to survival at that time, and we did around INR 80-odd crores during the time of COVID.And so the learning is that the sanitizer category in hard surface cleaner and more contextual categories are -- will be rationalized, and we will cutting out -- we'll be cutting out the sale of the SKUs that are not making profit or which are not selling as far as sanitizing and home and hygiene categories are concerned.Healthcare, Personal Care and Foods are more strategic in nature. And with an adjunct to our power brand architecture, they will be retained and they'll be sustained over a period of time and brand investments will be spent on that, and we will shore up those and scale up those categories.
But my basic question was, you are doing good of adding the capacity. But any specific products where you are not deploying the capital or you're trying to discontinue that category? It can happen that out of 10, 2 products don't go well?
So only thing comes to our mind is sanitizers, we may get out of, and not that we deployed some of the investment brand sanitizer, it was too opportunistic, it's nothing else. That we are structurally getting out of and getting into something. We are not discontinuing anything else.
Okay. And my second question was just on -- as you've created 1 subsidiary for export-oriented where you would be producing in domestic and you would be exporting. So how you will be taking care of the currency tailwind? I mean in case if the same export goes to MENA or Latin America and the way the currency is behaving, or it's too early to comment?
I think, generally, all our exports are in U.S. dollars. So therefore -- and specifically, we are targeting U.S. mainly and, of course, other countries in Europe, but -- so therefore, I think all our exports are going to be in U.S. dollars. And plus, we also ensure that we get the advance so that we do not have any exposure or based on LC. So that's the process we'll continue to follow. So we don't see any risk on currency because dollars is generally paid higher when we compare with rupee. And we also take our hedging as our regular policy. So therefore, we don't see any risk on currency on this exports.
Just sorry for asking just 1 question, Mohit, to you. Looking from the last 3 quarters, Dabur is ahead in the industry in terms of the growth in volume. What is your sense on sustainability of these kind of growth?And it's very tough to answer, but a sense in terms of your gaining the market share, penetration is gaining, new products is hitting. Do you think that the growth, which you had earlier estimated or guided, it would be more higher or you want to revise the growth rates?
Right. Normally very difficult for me to exactly give you a guidance on the numbers. And it may not be right because the situation is still pretty volatile. There are some categories, there are some channels and geographies, which are really not firing to their full potential. So difficult for me to give you an exact number, but our attempt, again, will be to gain market share, increase penetration across the categories and improve the efficiency in the business and also do cost optimization to take care of the margins. And our attempt will be to continue with the momentum that we have built in the business of this kind of a growth.
The next question is from the line of Abhijeet Kundu from Antique Stockbroking.
Congrats on a very strong set of numbers. My first question was, to your perspective, which are the categories where you see -- which will be the key drivers? I mean health supplements has done really well. How much of that Q3 is scalable going ahead? Hair Oils -- Hair Care as a whole has been 1 category, which has been lagging. But if you scale it up and the way it has done in the current quarter, the next 2 years -- 2 to 3 years [ growth, and really scale it up ] because Foods is one [ getting you there ] -- a lot of potential is there. So from your perspective, which would be the category...
Sorry, Abhijeet, your audio is echoing a lot.
Yes. So from your perspective, which would be the category that would really drive growth during the next 2 to 3 years? It's sort of a follow-up from the previous question.
Right. So Abhijeet, I think all the categories are strategic growth pillars for us. While health supplements did very well in the current year due to the COVID issue and that the peak growth momentum may be moderating a little bit in health supplement. But strategically, I think for next 2 to 3 years, Healthcare should drive the business.In short term, which is maybe 6 months to a year, the categories which got impacted by COVID, which is more Hair Oils and Foods and Shampoo business. They all will come back and help us in the growth for the next year and will offset the little depression that we may see in the growth rates of health supplements or Healthcare happening in the current year.So overall, long term, I think it will be more Healthcare, which will drive our business, and we will also focus more on Healthcare because that's the core of the company, along with HPC and Foods also, because we're doing innovation across the board, but more Healthcare. In short term, it will be more HPC for us and Foods.
Okay. And in Healthcare, specifically in OTC and Ethicals, are we doing any -- are we taking any special initiatives to tap chemist and to really drive growth because a lot of those health juices also require some amount of push from chemist channel because Ayurveda doctors are very less in numbers to give you [indiscernible] So any special initiatives or any special thoughts over there?
Yes. So Abhijeet, yes, definitely chemist channel and engagement -- special customer engagement with chemist channel is one of the drivers in the GTM strategy for us, a, expansion of chemist channels. We, at the moment, reach out to around 2,40,000. We want to go up to 2,70,000 chemists, and this is just for the current year. And then we will go up to further expansion as we embark on the next vision.So chemist is definitely our focus. We are trying to redo our planograms in the chemist outlet and chemist engagement programs are also, as we speak, happening and focusing on pharma wholesale also. So that is happening as we keep launching innovations in health supplements like rightly noted by you to increase our efforts.So as far Ethical business is concerned, our doctor connect is going up. Our Ayurvedic chemist counters will go up and our feet-on-street with our product specialists and Ayurvedic sales promoters are also going up in number as we speak.So the vaidyas are not small in number. They are 5 lakh in number, as we speak, and we are only connecting to around 100,000 vaidyas today. So there is a huge headroom to cover. And so in the case of Ayurvedic pharmacies and also allopathic doctors. Today, we are not covering allopathic doctors. And allopathic doctors are also now very inclined to prescribe Ayurvedic adjunct medicines to allopathic.
The next question is from the line of Abneesh Roy from Edelweiss.
Yes, sir, just 1 small question. So your ad spend has been an outlier past 2 quarters. I understand such a strong funnel of new products. Now with pandemic-related consumption also stabilizing and your new products also seeing good growth, when do you see the growth in ad spend normalizing to the growth in the sales? Currently, it's 2x of the sales growth.
Right. I think from the current quarter onwards, Abneesh, I think -- in a short answer, your question is current quarter itself. Because -- but we will monitor the situation. In case we get a good sales upside, then extra margin will be deployed back into advertising, but it's a balancing approach that one has to do. And -- but our higher investment in advertising has actually paid up very well for us during these past 6 months.
But, Mohit, bulk of it is going towards new products?
No, not necessarily, Abneesh. It is not because a lot of NPDs that we launched are contextual, and there was an intrinsic demand which is there in the environment for the NPDs, and they got pulled up.For example, whether it's a Tulsi Drop or the Haldi Drop or health juices or it is Giloy or Ashwagandha or Immunity Kit, et cetera, it automatically got pulled up and we didn't have to spend too much of money.The majority ad spends have been on power brands and their adjunct NPDs that we would have rolled out. So it's not too much on the NPDs. So it's been on the core brands, and this has only helped to strengthen the core brands.Like Chyawanprash saw a lot of investments on the back of Akshay Kumar creative that we guys launched. Honey saw a lot of ad spend on back of the controversy, which actually happened. We spent a lot of money on Real also with the Real drinks coming in. So -- and culinary range also saw a fair bit of spend on back of the Hommade brand.That's why the power brand architecture is working very well because most of the NPDs that we are rolling out are falling under the power brands. And new product advertising only has a positive ramp up on your key brand, and we are able to scale up that business faster.
And last question, sir, on manufacturing capability because of COVID, are you also now doing much more automation within your factories to get productivity gains over medium, long term? And to address any such COVID crisis, say, in the future if it happens, can you address it far better than the first few weeks?Second is because of such a strong volume growth, do you need increased capacity? So any numbers you can share on CapEx next 2, 3 years?
Right. I think to answer the second question first, we've augmented capacity across our subsegment, be it Oral Care, Chyawanprash, Honey and Hair Oils. So we've already put in CapEx. We put CapEx to augment capacity of more than 250,000 cases have been added actually in our manufacturing.We are also spending a fair bit of money on improving our productivity under the Project Samriddhi. So we've got 12 factories in all. So we are trying to look at productivity improvement across our factories as we speak. The process is yet going to start in the next month's time, and we are test piloting it in one of our units in Baddi, which is our largest unit, and then we'll progressively do it in -- across our units.We're also robotizing a lot of manual operating jobs, and we've been able to robotize a lot of those activities which are manual and releasing labor out there. As far as COVID kind of issue happens, we put in safety protocols already in all our factories, and we are strictly monitoring and adhering all those protocols as we speak.
The next question is from the line of Amit Purohit from InCred Capital.
Congratulations on a good set of numbers. So 2 things. One, on Chyawanprash, just wanted to know, we've been seeing increase in penetration levels. Is it also to do with the growth rates coming largely from smaller players as we see market share improvement? Or is it driven by consumers, which we're actually shifting to a branded -- trusted brand versus Hommade Chyawanprash? Or is it just the rising awareness? What would you ascribe it to?
Chyawanprash is always around. Actually, the way we see our market share in Chyawanprash has gone up by 120 basis points. And this increase in market share is coming from smaller players shifting to Dabur Chyawanprash. That said, a lot of smaller players [indiscernible] because Chyawanprash category has actually become very attractive for people to enter, and so they have entered.So the regional players who entered into the Chyawanprash category and they are helping to expand the pie. So as the pie gets expanded, people shift in from local players to more national players like Dabur Chyawanprash. So therefore, there's a penetration expansion and also there is a market share increase, wherein we are taking share from smaller players to ourselves.So as the category keeps expanding with more players coming in, we will only be the beneficiaries, as a market leader, to get the market share gains from them to us.
And just 1 small thing, what would be the size of the category now, sir?
Chyawanprash category will be in the range of around INR 1,000-odd crores.
Okay. And sir, 1 more question I wanted to add on is on the modern trade thing. So now modern trade coming back and we've been slightly under-indexed in modern trade is what my understanding is versus the leader in the Oral Care space.You think that this could have some effect, while I understand the natural portfolio continues to be so strong, but do you think there could be some deceleration in growth rates because of this as the modern trade comes back?
Sorry, I didn't quite understand. You're saying the modern trade coming back, will it have an impact on the Oral Care business?
Yes. What I'm trying to say is that the leader, I mean, was over-indexed -- is over-indexed in the modern trade, and we've been under-indexed in modern trade, some channel kind of shift happened, and probably we were not impacted much because modern trade for us is anyway not so significant in the Oral Care space. And now that the modern trade is coming back, the leader will also getting aggressive and try to grow ahead of the market. In that context, you think or -- or do you feel that e-commerce is strong enough for us to actually handle it and Naturals is also strong enough for us?
No. Amit, I think that's a great opportunity, actually, the way I see, because we were not very strong in modern trade. Generally, what happens is your market share in modern trade are higher than your GT market share. And invariably, if you see for the multinationals because you can buy space in modern trade and that's what is your strength.It's very easy to garner share of shelf in modern trade and share of shelf gives you market share. So I think it's an opportunity for us to at least have our market shares being represented in our share of in shelf in modern trade. So we are actually ramping up our operational excellence in modern trade to see that our shelf shares are in line with our market share.So we will want to grow at a higher clip in modern trade as compared to in GT. And to garner market share in modern trade is much easier as compared to in the GT business because GT is more demand driven and modern trade is more execution driven, and which generates demand because it's a point of sale and there is a consumer moment of truth, which happens with the product and he can buy you. So that's actually an opportunity for Dabur, as I see it.
The next question is from the line of Avi Mehta from Macquarie.
I just had 1 question. I wanted to just understand your thought process on how do you look at managing the portfolio complexity that this aggressive new launch thought process brings in? In particular, what are your thresholds post which you considered that the new launch needs to be [indiscernible] or cut?
Sorry, Avi, I did not catch the last part of your question. I hear saying how do you manage complexity, then what did you ask?
Your thresholds on when you look to cut SKUs, product variants?
Right. So okay. So we are continuously looking at rationalization of tail SKUs which are not making any profits or don't contribute to the top line. So that exercise is continuously happening as a part of our efficiency driving exercise. And every month, we view SKUs which are not delivering business or they are not delivering to profitability, and we rationalize those SKUs.That said, yes, complexity is there. And because of the complexity, we've done the line split as the sales end. And as far as marketing and production is concerned, we've been able to manage this diverse portfolio complexity, and it's a part of the game for us, where as far as the front end is concerned, we are doing a line split and test marketing the line split going forward.
And -- sorry, when you said the split -- sorry, the scanning of banks that's based on profitability or growth?
Both, both.
The next question is from the line of Manoj Shah from [indiscernible] Investments.
My question is that with the current trend that people are shifting from allopathic medicine to the...
Mr. Shah, you are not audible clearly.
Hello?
Yes. Please go ahead.
Yes, with the current trend that people are shifting from allopathic medicines to the Ayurvedic. And with the current pandemic, I just wanted to know, would you like to refocus yourself on the medicines which Dabur used to manufacture earlier, like Asavas, Vatis and so on kind of it? Do you think this is a good time or opportune time for Dabur to put more trust on those segments?
Right, Manoj. So rightly identified, I think the entire Ayurvedic system of medicine has actually got a tailwind right now with Ministry of AYUSH also putting focus and giving government advisories to use a lot of prophylactic Ayurvedic medications and the shift is definitely happening from allopathic to Ayurvedic. So we are trying to leverage on this tailwind going forward. And we are -- that's why we are expanding our classical portfolio.If you see in the current quarter also, we've rolled out amla churan, Ashwagandha churan and Madhu Rakshak Vati for fighting typhoid fever. So we have a huge gap between us and local players in different regions who are owning Ayurveda. So we are trying to plug the gap because -- so that when the vaidya prescribes the Ayurvedic portfolio for a patient, he has that entire packet of products available within the Dabur.So we are trying to plug the gap irrespective of what revenue and the profit that we guys are making because we want to be one-stop shop for all the entire portfolio of Ayurveda to our vaidya. So we are working very hard to create a pipeline and launch products so that we are truly a full-scale Ayurvedic organization. So that's what we're working towards. And that's been one of the growth drivers for our classical business.Now the classical business has got multiple subcategories, like you mentioned. There are gold products in it. There is Clove in it. There are Asavas in it. There are Tailas in it. There's multiple subcategories here.
Yes, because -- and how big is the current portfolio of this?
How big? We do a business of roughly about INR 250 crores here. And the market is as big as INR 1,000 crores plus. So we are not even 25% market share here.
And do you have any plans to like push up? Because the problem with this is you require vaidyas who will promote or write these prescriptions, okay? So...
Manoj, can you be a little louder?
[Technical Difficulty] something of that sort so that there are more availability of vaidyas within the cities, metros, so that people, if they are looking for an alternative medicine, so they can visit those kind of. So anything we are working on trying to enhance our -- make availability of vaidyas kind of?
Sorry, Manoj, I could not understand. If you could be a little louder.
Ayurvedic vaidyas, doctors.
Yes. How you can make the -- see, whole thing is vaidyas have to available and they have to write the prescription to buy our products, okay? So first step is to have the vaidyas availability. So what steps you are taking to promote that kind of?
Right. So a very good question, Manoj. I must complement you for this question. So what we are trying is, Dabur being the largest Ayurvedic company, we are trying to create a platform. The platform is still in the testing phase. So we are trying to create a platform digitally wherein we are able to connect the vaidyas to the patients so that Dabur becomes a one-stop shop where patients can come in and they can seek consultation from the vaidyas. And that portal is still being tested out. And it's in the beta phase. And once we are finalizing it, then we will roll it out.So we are very conscious that -- so along with this, we are also expanding our reach to the existing vaidyas by having more product specialists and who will reach out the more feet-on-street. And like you rightly said that now Ayurveda is becoming more and more mainstream, so we're trying to reach out to allopathic doctors also where the reach is much higher so that they can supplement their medication along with the Ayurvedic products.So that's what is happening. And also making our medicines available in regular chemist outlets by creating planograms in the regular chemist outlet besides just Ayurvedic chemist counters.
The next question is from the line of Sunita Sachdev from UBS Securities.
Nice long conference call with a lot of insights. But 1 question. Any outlook to what do you think of the packaged juice business now that we are close to seeing everything open up, mobility increasing? Any insights that you could share with us on what is the direction now in the packaged juice business?
Right. Sunita, the packaged juice business during the COVID time declined by around minus 50%. From the decline of minus 50%, it's gone up, not in black yet. So it's still minus 5%. If I look at the business in the month of December, we see a 2% growth happening in the packaged juice business. Our market shares have gone up by 20 basis points.I think by the time we come into the season, which is in the month of March, I think there will be a growth trajectory which will start here, and we should be beneficiaries of that. And we're also entering a low base of COVID, so that should augur well for our Food business and juice business.
Yes. But any kind of tentative kind of growth levels that you would like to kind of highlight? I mean would it be going back to the same sort of levels that we've seen? Or you think because of the new launches and your new initiatives, we could look for slightly higher growth in the segment?
Yes, I think the growth should be pretty robust. I can't give you an exact number because I also don't know the number, but we've launched a few of NPDs, like we've gone into the drinks market. So we're scratching the surface, not even significant market share players here. We've launched INR 10 price points and a lot of variants in our premium juices also. So business should trend in double digit.
Ladies and gentlemen, that will be the last question for today. I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments. Thank you, and over to you, ma'am.
Thank you, Aravind. Thank you for your participation in this conference call. The transcript of this call will be available on our website. Thank you again, and have a nice evening ahead.
Thank you very much.
Thank you very much. Ladies and gentlemen, on behalf of Dabur India Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.