Dabur India Ltd

NSE:DABUR

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. Isha Lamba, Head Investor Relations and M&A. Thank you, and over to you, Ms. Lamba.

Good evening, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to the earnings conference call pertaining to the results of Q3 FY '25. Present here with me are Mr. Mohit Malhotra, Chief Executive Officer; Mr. Ankush Jain, Chief Financial Officer; Mrs. Gagan Ahluwalia, VP, Corporate Affairs; and Mr. N. Krishnan, General Manager, Finance.

We will start with an overview of the company's performance by Mr. Mohit Malhotra, and this will be followed by a Q&A session. I'll now hand over to Mr. Malhotra.

Thank you, Isha. Good evening, ladies and gentlemen. We welcome you to Dabur India Limited's conference call pertaining to the results for the quarter ended December 31, '24. .

The quarter presented a challenging operating environment marked by unfavorable weather conditions and a slowdown in consumption, India experienced delayed and contracted winter with October and November being the warmest in many years. While urban demand showed signs of moderation, the rural market remains resilient. The rural has outperformed urban for the fourth consecutive quarter. Organized trade channels such as e-commerce, recommerce and modern rates continued to deliver robust growth for us.

Consolidated revenue per Dabur grew by 3.1% in INR terms and 5.6% in constant currency terms. India business, including Badshah, grew by 1.7%, underpinned by volume growth of around 1.5%. The International Business recorded strong growth of 18.9% in constant currency terms. Within the domestic business, HBC portfolio performed well with 5.7% growth. Oral Care portfolio recorded a growth of 9.1% driven by strong franchise and [indiscernible]. The Toothpaste portfolio has received a good response in the market, recording a 50% year-on-year growth in this quarter. Dabur Oral Care is now the #2 brand in the modern trade pan-India.

The Hair Oils portfolio grew by 3.1% year-on-year. Within hair oils, both coconut and perfumed oil grew ahead of the category, gaining market share of 125 and 236 bps, respectively, taking our overall Hair Oils share to around 18%, the highest ever. We remain focused on premiumization and portfolio expansion in the segment. Home Care grew by 5% year-on-year. Odonil grew in double digits in volume terms with aerosols and gel pockets performing well. In the air freshener category, we gained market share of 101 basis points. Odonil saw the #1 brand in the liquid subsegment of the category with market share of -- market share gain of 650 bps. Odomos portfolio was under pressure due to cyclones in South India and delayed winters but performed better than the category and gained 574 bps market share.

Sanifresh in Home Care continued its strong performance, achieving double-digit growth during the quarter. Skin Care portfolio recorded a growth of 5.6%, driven by strong performance in the Gulabari franchise, which recorded 9% growth. This was led by robust demand for our flagship product, Gulabari Rose Water, with new formats such as body washes, body lotions, creams contributing more than 20% of the Gulabari portfolio. Our Health Care portfolio was flat, impacted by delayed and contracted winter. Health supplements comprising of Chyawanprash reported soft performance because of unfavorable weather conditions. However, in Chyawanprash we have grown ahead of the category and gained market share of 140 bps. [ Honey ] continues its leadership position with 54% exit market share.

Digestives grew by 4%, driven by Hajmola portfolio. extensions and variant of Hajmola contribute to more than 15% to Hajmola franchise. Within OTC and [indiscernible] recorded a high double-digit growth. The food business demonstrated strong performance with the [ calorie ] and Badshah domestic portfolio growing at 20% to 15%, respectively. [indiscernible] category was impacted in the quarter due to muted festive season demand and price-driven cooperative intensity. However, we performed better than the category and gained market share by 320 bps. The active range of 100% uses in coconut water posted high single-digit volume growth. We are undertaking several initiatives in our beverage portfolio to bring Real back to the growth path in the upcoming season. Emerging channels like e-commerce and modern trade posted a robust double-digit growth and now accounts for more than 20% of the India business.

Coming to our International Business. We recorded a strong growth of 18.9% in constant currency terms. This was on back of double-digit growth in Middle East, North Africa, Egypt, U.K., U.S. and Bangladesh. We witnessed currency devaluations across emerging markets like Egypt, Nigeria, Bangladesh and they were impacted -- and this impacted the [indiscernible]. Talking about profitability, we faced inflationary pressure this quarter and took judicious price increases in our portfolio. Operating profit increased by 2.1% and PAT grew by 1.8% year-on-year. In light of the volatile geopolitical landscape and uncertain macroeconomic indicators, we have revised our strategic vision from 4 years to 3 years. We have partnered with leading consistency [indiscernible] company to refine and align our strategy for the next 3 years in line with the evolving dynamics.

This exercise has already begun and we plan to conclude the same by end of the fiscal year. This will enable us to capture opportunities and navigate the future with sharper and more focused vision. We expect sequential improvement in demand over the next few months on the back of increase of infrastructure investments, [indiscernible] and government initiatives to spur growth in the upcoming budget. We are committed to driving profitable growth through strategic investments in brands, innovation and operating efficiency aimed at delivering sustainable value and strengthening our leadership in the FMCG sector.

With this, I'll conclude my address and open the floor to any Q&A. Thank you.

[Operator Instructions] We have the first question from the line of Mihir P. Shah from Nomura.

Congrats on a decent volume growth. Sir, if I can ask on health supplements. Post the high sales during COVID, the segment seems to have stagnated over the past few years in absolute sales. I understand there is some impact this quarter due to delayed winter, but is there anything else that you can share which is ailing this category? And also, any update on the Ayurvedic doctor initiative and the expansion around the new categories that was planned in Health Care overall?

Yes. So Mihir, what happens in Health Care, I think the answer is -- can be divided into 4 subparts. We have 4 subparts of the business. The first part of the business is the Ethical portfolio, which I call the backbone of the whole business. That is doing well for us. This time, we faced a lot of [ inflation ] because of [ gold ] prices actually moving up because of that, whilst there was a price increase, the volume growth was [indiscernible]. But otherwise, that business grew at a high single digit for us, the Ethical and the branded Ethical business and also supported by [indiscernible]. That is the moving okay. We continue on the trajectory of [indiscernible], and that is one piece of the business, which is roughly around INR 500-odd crores for that.

Then the second part of the business is OTC business. Within the OTC business, most of our star brands are doing exceedingly well. Let's take an example of cough and cold, Honitus. Honitus this quarter actually grew by 12%. Then we have health juices, which grew by around 44% broadly. Then there is baby care. There is a new range of baby care and there is an old Lal Tail of baby care. The new range of baby care, which [indiscernible], which is going to be exiting at around INR 50 crores this year has seen a growth of around 25%, 26%, which is also very healthy.

Lal Tail, which is a seasonal product due to winter got impacted. And that sale was really muted because of some [ self-inflicted ] issues, I think there was a disturbance. [indiscernible] have given us consumer offer on a Lal Tail, which got ramped in the marketplace, because of which there was disturbances. But I think coming forward in the quarter, I think that gets completely [indiscernible] out and will be back on the growth path. As far as Lal Tail is concerned, market share in the baby care segment remain flat and we've not lost any market share that we feel there's a lot of headroom to take shares from LLP driven market lead, where we can take a lot share. And the upcoming season, we'll be launching another variant, which will take care of the issues which are faced in [indiscernible].

Our [indiscernible] during the summer, I think we'll continue to do well and season for that. And our women care business, which is about [indiscernible], that has grown by around 8% in this quarter. Our business is also a women-centric business, that's also doing well with about 5% growth. That gives you a flavor on the OTC bucket. This OTC bucket is in the range of, turnover-wise, around INR 800 crores to INR 900 crores business. So I've covered INR 800 crores to INR 500 crores, around INR 1,200 crores.

Now then comes the health supplement business for us, in which the key brands are Chyawanprash, Honey and [indiscernible]. In [indiscernible], we have some issues which we face in the marketplace on the [ virtualization ]. That was completely behind us now and it's back on market share gains. An exit market share is running at 54% market, highest ever. So all the competitive intensity of competition, et cetera, all that is already behind us. And I think the brand is on exist-wise sales growth is perfectly on track.

Now comes to Chyawanprash. That is the only brand -- the turnover of Chyawanprash is around INR 500 crores for us. In this INR 500 crores portfolio, which is so valued in COVID, because COVID, we had little headwinds because [indiscernible] really went up in the country. To settle that problem, which is a big problem for us, as we see, so we are trying to come out with modern format of Chyawanprash, like plates, liquid, the powder Chyawanprash, capsule Chyawanprash, a whole format extensions. That is underway and that is doing well. Then we came out with target group expansion. So Chyawanprash for women in terms of [indiscernible], having iron efficiency; Chyawanprash for pediatric population, which is [indiscernible], That's also doing well. Total variants of Chyawanprash is now -- and Chyawanprash [indiscernible], these all variants contribute to around 20% of the overall Chyawanprash portfolio, which is high-margin and high-growth as compared to a mainstay Chyawanprash.

So unfortunately, the weather conditions marred the season. Otherwise, market share-wise, we are right there. The market declined by around 6% and Chyawanprash decline was around 3%, thereby we gained share because there is a decline. So I think it's a matter of time. Also, we are trying to position Chyawanprash as all weather product. So we're coming out with a monsoon campaign. We come out with memory-enhancing campaign for Chyawanprash. So all those actions are on way. We will also validate all these efforts with [indiscernible] when they're working with us on category-wise growth and make all efforts to bring back Chyawanprash back on track. So that's on the Health Care portfolio, how we are trying to handle our Health Care piece. All the new initiatives in Health Care are doing very well, whether it is the a initiative or it is health uses that I talked about or its food supplements that we introduced. So all the new initiatives there are 2.5% of the Health Care are doing well for us. This is about the Health Care business.

Sorry the long answer, but I think it was..

No, no. Thank you for the detailed answer. That was very helpful, actually. Secondly, if I can check on the Oral Care category. There seems to be a divergent trend across players with one growing in low single digits, other in mid, while Dabur has grown in high single digits. Is this very division trend due to various exposure or different exposure across subcategories? Or is there something else that one should read into?

So Oral Care practically itself is doing very well, if I ask you. So there different vectors of growth in all Oral Care category. The category is doing well. And our [ double ] rate is doing well on back of a lot of tailwind coming from the Health Care category 30% has improved to around almost 31.9% or 32% now. The other category has grown by 7% as compared to the growth of 5% in overall oral care non herbal category. There are gaps in our portfolio which we are in [indiscernible]. Last year, we [ planned ] the gap of gel, which is doing well for us, as I alluded to. It should be around INR 44 crores to INR 50 crores brand exit this year. So that's growing by around 50% for our portfolio.

Then another gap in terms of sensitive and bleeding gums and whitening area. We are in the position of [indiscernible] that, and hopefully, the next season we shall flag that. We've gained market share because we've grown ahead of the category in the new systems, and we've gained roughly around 5 to 6 basis points market share. And most of the country now, we are the #2 player. And we feel there's a huge headroom which is available in terms of us taking share from the market leader who's still in [ 40s ] in terms of market share. So therefore, a huge potential. Even in modern trade, where the competitor is very strong with its premium variants, there also, we have become a #2 brand now in modern trade, so which is very encouraging for us.

So besides Dabur Red, which is the flagship brand, [indiscernible] is also doing well. We're talking about complementary usage of Dabur Red with toothpaste to give power to the white true [indiscernible] . That campaign is doing excellent for us. Meswak, which is a premium variant in the toothpaste category, is also growing by around 15%. We have engaged with the celebrity ,[indiscernible]. On back of that celebrity, we've got base actions after [indiscernible] and Meswak also. We've got some work to be done on [indiscernible]. We have not been able to take up the performance of [indiscernible] and the is declined in this quarter.

one good news I want to share with you guys is Dabur Red toothpaste is the first Ayurveda toothpaste to have been accreted in by IDA, which is Indian Dental Association, which only used to have graded fluoride-based toothpaste. It's the first time they've given that accreditation take a non-fluoride based toothpaste. SO now we can get into dentist endorsements also. And as we continue with efforts of [indiscernible], this will also get leveraged, and we will reach out to more number of dentists and try to spread this across.

So I think overall, Oral Care, we are in a good space. So you will see in the next coming fiscal year, we have the process of revamping the entire face of Dabur Red also. The packaging revamp is going to happen to make it more modernized and make it more modern trade centric for us. So Dabur herbal toothpaste, which was a new entrant we introduced last year has also grown by around very high double digits. So that was a gap in the marketplace. The ingredient-based toothpaste also is doing well for us.

So overall, we are very exited with the Oral Care category. In terms of manning also, we've done some changes in our manpower in the Oral Care category. And we've given it to our best performer and we've been increasing our share of voice also, which has been lower compared to our market share. So that also will be heightened going forward in next year. So extremely excited about the overall Oral Care opportunity. Thank you.

Got it. A subpart to that question is, will this category or any other categories see any one-off benefits in the coming quarter due to [indiscernible] or anything?

In [indiscernible], are very exciting part of you staircase, which we show dialogue with social media, which we are planning there is something on [indiscernible] now that we're introducing. Before anybody goes to the [indiscernible] will not be possible. But we put on some restating a bar. So we put up around 10 to 15 stores counter basically, wherein we are expecting toothpaste from water taps and we're giving the toothbrushes. The consumer will take toothbrushes, take the toothpaste from the tap, expense it, do the dance now before it goes for the remaining [indiscernible]. So those kind of activations what we are trying to do.

So that's actively -- if you go and if you see these pictures of that. So a lot of activation in [indiscernible] and all, that we decide that in [indiscernible] we are doing LED screens, around 38 of them. We have branded all barricades, goods. We had 13 billboards. We are planning all changing -- changing rooms have been branded by Dabur and these [indiscernible] stations. So all that is happening. So rural India, which is value-changing for Dabur, we will continue rural activation there.

[Operator Instructions] The next question comes from the line of Abneesh Roy from Nuvama.

My first question is on the McKinsey. So if you could tell us if this is across categories, across brands or some specific categories have been given? Second is your payout to McKinsey, will it be linked to targets being achieved?

Third is in some of your issues, for example, last 2 years, many quarters, you have faced a lot of challenges. Some are still going to continue. For example, Tampa Cola will continue to remain a challenge for the entire food entire beverage industry, and now they'll ramp up. So that issue continues to remain. And Chyawanprash, you did discuss that post COVID, there is a challenge. So how does McKinsey help you meet these challenges in which you may or may not be able to do much because those are either competition or they are basically category-like? If you could discuss this entire thing.

Right. So is what we do in Dabur is we have a 4-year vision plan. And as we speak, we are in seventh vision cycle of all the vision exercises. Earlier, we [indiscernible] cycle. So we feel that in volatile and heavy-headwind macroeconomic environment and FMCG is not doing so well in the sector, I think we require a validation of our strategies through external consultant. That's why we're trying to [indiscernible] external consultant onboard like McKinsey, and we have are changing our vision period for 4 years to 3 years so that we are able to [indiscernible] fine-tune, align and quickly recalibrate our strategies for year become the longest period and therefore, we have translated to 3 years and also in line with the best practice in the industry, which is also around 3 years that we've done.

So we've tied up with McKinsey at the moment for the vision exercise to do all the numbers, do all the category reviews and validate all our strategies, which we've been following and which includes Chyawanprash, which will include beverages, et cetera, We will specially double down on the beverage and the [indiscernible] because that is where [indiscernible] on the business. So there will be focus on that, along with refining numbers and the milestones for next 3 years. And this region exercise dovetails into the next year budgeting cycle also for us. At the moment, we've not linked them to our target achievements, but that is something that we'll contemplate after this exercise is over. So then we continued approach first and go [indiscernible] way having a big picture view of the business.and defining the vision exercise for the next 3 years. And from the vision exercise that we have a lot of offshoots that will emerge in terms of category pain points in the business [indiscernible] because beverage or this the thing and then we will get into long-term specific arrangement with them, if at all. That we will review once they -- we've already begun the exercise. So this is supposed to be ending by end of fiscal year. At that time, we will see whether to extend or not to extend or do specific projects as [indiscernible].

Sir, my second and last question is on two specific categories. So in toothpaste, you have done well. In fruit juice, you've seen a big dip in terms of sales. In these two segments, if you could discuss in FY '26, from a pricing perspective, do we expect some pricing growth in each of these segments? Because clearly, in toothpaste, market leader is delaying price hike, is happy to sacrifice growth in EBITDA margins and operate at a slightly lower band. And that does mean that pricing growth in toothpaste in the near term, medium term looks difficult. Its category leader is not taking. And the trade incentive, the trade intensity is also high in toothpaste.

And similarly, in the fruit juice business, clearly, Campa Cola is operating at a very high trade margin and INR 10 pricing is also there. So there, if you could discuss, would you need to increase the trade spend here to match up with Campa Cola? Because they are operating at a much, much higher level. In spite of, say, INR 10 pricing parity, their trade incentives are much higher. So would you need to match up? And how do you see FY '26 in terms of pricing and trade incentive for the fruit juice business?

I get you. So overall, I think the inflation is picking up with the [ country ]. Last full year, the inflation of 3%, we passed on the entire inflation to the consumer. Because the inflation was too high, we have to keep place in consumer inputs to buffer it up. And I think going forward, the inflation is inching up. Across the markets, our business, we expect a 5% increment to [indiscernible]. So whether it's [indiscernible], Oral Care, so inflation really does include concentrate also that we are purchasing. Because in new currency will appreciate [indiscernible] concentrates will also become expensive for us. So a, price increases will happen in fruit base also and in juices also. But we have to take very calculated price increases, observing the operative intensity in the marketplace so as not to become uncompetitive in the market.

As far as Oral Care is concerned, there is still a headroom of taking a price increase growth in Oral Care, especially in the venue of premium Oral Care, where there's a huge delta which is available between what the market leader is having and between what we are having. So there's a huge delta margin available. So I don't think -- in Oral Care, taking price increase will never be an issue for us by growing volumes. So there'll be a part volume and part price increase in Oral Care that we [indiscernible] for us to and is there in Oral Care. And also, we are coming out with premium variants. So in terms of mix, that premiumization should take care of the inflation which might [indiscernible], and we expect the best growth to come in from Oral Care only going forward next year.

As far as juice portfolio is concerned, yes, there are headwinds in juices, which is basically fine-tuned to reduce the relative price differential between the colas and us. What we are doing is we already planned it for the next season. We are planning to give consumer value to -- now again, the beverage business is not very simple. It has to be divided into, again, 3, 4 parts for us. First is active juices, active with a pure 100% juice. There is no problem in terms of business growth. We are having a 10% growth of the business. But this business contributes to around 10% of the overall beverage portfolio. So there, we have resilience of taking price increases, and we will continue to take price increases. And we'll be introducing a health based juice also here, which will have -- have the ability to take the price increase here.

The second part of the portfolio drinks. Drinks has done well on back of distribution expansion. We have very small players in market distribution expansion that are taking inflationary price increases, whatever warrants the increase. And on macro distribution, we'll be growing that portfolio also. As far as coconut water is concerned [indiscernible] there also, and we've invested in the [indiscernible] line and coming out in a PET bottle besides tetra pak will give us huge growth in the leverage.

Now the big part is the nectar business. Nectar business, there is a pressure in terms of RPS. So there, we are proposing or we've already designed to do consumer offer to reduce the prices from INR 130 to INR 100, but that will happen by way of consumer offer, not our existing prices. Also, we are coming out with a range which will be a relatively economical range with the related pricing [indiscernible] of around 2 colas, and that will also hit the marketplace in the season very soon. So that is our game plan for the juice business and to fight the cola, et cetera.

One last follow-up and I'll end there. So essentially, on toothpaste, you said you expect that to be fastest growth. Now rural is recovering for every company and every category. For toothpaste, for you, how much is rural? if rural does well, is that a benefit for you? And second, the market leader is doing all these AI programs, wherein they're connecting customers to the dentist. Would you also need to look at this? Or it doesn't really matter too much?

See, as far as rural is concerned, rural contribution to us in Oral Care is in line with the overall company contribution, will be around in the range of 45% to 50% for us also will come from rural for the overall Oral Care franchise, that is. As far as AI intervention in the business is concerned, it's a great thing for us to do. And if there's a best practice in the industry, we will absolutely follow the best partners, the way we've [indiscernible] now on Oral Care. So we will do that. But I don't think we make any material difference to the business volume of AI-based connectivity to the dentist. I told you that we've just got an endorsement of IDA. I think that introduction and doctor endorsement for us will go a long way in building our overall Oral Care business, yes. .

The next question is from the line of Percy Panthaki from IIFL Securities.

Again, a question on beverages. So just wanted to understand why we are getting affected so much by the cola wars. I mean, our product is very, very different in terms of its proposition, taste, composition, et cetera. And in fact, if I look at the second largest player in this business, which is a listed company. And they report -- in fact, despite having an exact like-for-like product versus Campa, they are not getting affected much. So why is this happening?

Yes. So firstly, couple of issues, I'm not attributing the exact performance on the price index or the cola or a couple of more reasons. I think the first reason is the season. Last summer did not favor us. In the peak of summer, there are seasonal rain. And because of seasonal rain and we're doing a little bit of season loading, I think that impacted. And both the festive season has also not been very conducive to, I think, all the categories, and because of urban contraction. The third is it's a very urban-centric consumption of juices, and urban India has been reeling under pressure and the growth rates are actually [indiscernible]. That is the reason. First is season, second is urban not performing.

And third is this then RPI getting worse. We used to operate in a related price index of around 2. If [ Coke ] 1 liter is INR 50, we guys are INR 113 per liter. So that RPI has actually gone worse from 2 to around 2.7. So that is impacting. And in the out-of-home consumption, which is good around 30%, 40% of the business, it's more impulse. So anything which is cold, whether it's produce or a refreshment drink, that gets taken. And there's been a skew of new brands also which has actually made an entry, whether energy drinks or these cola. So that has impacted the business. So I think it's, again, a three-pronged act that we are doing.

First is communication revamp. We are wanting to educate the consumers that cola, which are nothing but sugar-flavored waters are not great, and they are not same products. They are compared to juices, which active, especially we doesn't have any added sugar content in it, only a natural sugar content, that's one. Second is offering value for money to the consumer by reducing the price of INR 130 to around INR 100, introducing a new range thereof, and also offering other extra margin to the distributor. So that distributor ROI improves when they have distributed a beverage, where the case value was lower as compared to our HBC case value. So all these three efforts are ongoing for us to capture the season better. So those are the [ ways ] to revise the beverage business for us.

Got it, got it. So just a question since you mentioned out-of-home is a major component. Would it be right to assume that your 200 to 300 ml packs are like 30% to 40% of your total beverage sales?

Yes, broadly around 40% of the total business will be tetra pak, 200 ml, which is out-of-home consumption. And to your point, that is the most impacted. 1 liter, not as much, in the home. It's out of home which is most impacted.

Understood, understood. And within -- so you have, of course, the 100% juice, which is not impacted. But you have the nectar and you have the fruit drinks. So between the nectar and the fruit drinks, which is the more impacted one?

It is the nectar which is the most impacted. Fruit drinks are not impacted Fruit drinks are giving me double-digit growth. Even my coconut water is giving me double-digit growth. Active is giving me double-digit growth. It's only the nectar time portfolio, wherein our market leader with 70% market shares, where I'm getting most impacted. And that is a 200 ml pack in metro cities, which is where the major impact is coming to us.

As far as the market leader is concerned, we're talking about the second largest player. In the category of nectar, J&N, which we call the juices and nectar category, the category has declined by around 16% and our decline is around 8% to 9% in the [indiscernible]. We have gained market rates of around 320 basis points due to the nectar category. All other players, the players that you named it and like-to-like product like ours has declined by 400 bps there, and they have declined. So we have consolidated our position as the 80%, 90% of the portfolio is colas. So therefore, they are not impacted, plus they're not impacted because of the geographic growth that they're getting, which is more inorganic and not really organic. If my guess is right, you would do better.

Understood, understood. Also wanted to understand on the rest of the consumer care -- or rather the consumer portfolio, if I leave the foods and beverages aside. There also, the growth has been a little lackluster. So what is really needed for the growth to improve? Is it just consumer sentiment? Or is it something else that can be influenced at your end even if the consumer sentiment remains poor?

So I think we have to bifurcate the portfolio. I just talked about the Health Care business. Health Care business was impacted by only the winter being contracted and Chyawanprash only suffering. Rest of the business verticals, we are completely on track and we feel that growth will come in. Our CAGR for about 5 years in this business is around 7 to 10 -- 6% to 7%. So I don't think the issue there, except for this time winter was really short and delayed winter. So this is [indiscernible] impacted. Also we are having plans of making Chyawanprash all season, et cetera. Rest of the broad categories we are really not concerned.

If you look at HBC, HBC has grown by 5.7% and category after category, whether they are hair oil or shampoo or oral care, skin care, everywhere we've gained market share. And we gained market share by a mile. In Oral Care, we gained market. In Hair Oils, for example, overall Hair Oils we gained 150 basis points. In coconut oil, we've gained 120 basis points. In perfumed oil, we gained 236 basis points. Home Care, we've gained 110 basis points in all subcategories. And air fresheners, we are now the #1 brand in the country, 600 basis points, where we've gained in just the new entry for us. There also, we've grown by 88% in that new format.

So I think [indiscernible], Gulabari has done very well for. Bleaches, we've gained market share by around 55 basis points. So I think everywhere, we are doing well. So I don't think there's any problem as far as home and personal care concerned. And Health Care, this quarter is impacted by the season. I think that should get connected. Beverages, I talked about to you .

So then would it be fair for us to assume that -- I mean, if no one-off events, then Q4 at overall company level, or at least excluding beverages, your growth should be in the region of about 6% to 7% if basically the Health Care is the only thing pulling it down. and that was seasonal. And if, let's say, that normalizes in Q4, do you see any other moving part where something which did well in 3Q could sort of come down in 4Q because of any specific reason that you can foresee as of now?

I don't think so there's any specific issue that I want to highlight or anything that customer might not really. I think overall, you're right, the growth will be in line with that. So we expect a mid-single kind of growth coming up, et cetera, Inflation is picking up now. So I think that's a little concern. And -- but I think that inflation should be mitigated by pricing due to the cost-saving initiatives that we are embarking on. So we expect mid-single, if not high growth to come in. And there will be a sequential improvement. Definitely, the business will be much better than quarter 3 for what we have done. .

The next question is from the line of Avi Mehta from Macquarie. .

Mohit, I just wanted to kind of pick up from the last participant. You did allude to a pickup in the sales growth trajectory. That's appreciated. But would it also be fair that the margin profile also should logically be relatively buoyant and the flattish expectation that we were hoping to achieve in second half is something that we're still going for?

Yes. So [indiscernible] inflation is actually picking up. We had inflation of 3% in YTD, and we mitigated through price increases, et cetera. And going forward, the inflation will be in the range of around 5%. So inflation mitigation should happen by way of price increases as far the [ attempt ] of the business will be. And we should be in a position to maintain margins going forward. Whatever margin that we have, we'll maintain our margins. And next year going forward, margins should only improve from year by way of price increases and cost saving. That identification is ongoing process as we are making the budgets and working with McKinsey how to improve our operating margin going forward next year. .

And Mohit, just the last bit. As you -- which is the next part on when you look at FY '26, you have historically been able to achieve a 20% to 21% margin levels. What are -- given that you are focusing on providing value, reducing RPIs and beverages, is the -- what are the potential offsetting factors that could help us achieve that in FY '26? Or is that being something that you would target more beyond that? How should I look at the margin profile for the business from a more medium-term perspective?

Yes. So I think [indiscernible] will be to go [indiscernible]. That's what we were aiming at. I think the levers to achieve that would be changing the mix of the product portfolio that we sell. So I think selling of premium mix is we want to target, and that's how we incentivize the team moving forward. Oral Care is one initiative in the mix that we tried to double down on and invest the money to gain market share, and therefore, volume [indiscernible] on oral care, which is quite profitable for us. Besides Hair Oils, other areas which are more or margin-accretive, Health Care is what we will target. So mix is one definite area is what we look at. .

The second space will be premiumization across different categories, wherein we would want to innovate. Like I was telling you in Hair Care, we always focused on stabilizing our [indiscernible] because the competitor has taken away with all the market share from us. And I think it's taken us from 4, 5, 6 years to consolidate all that. And now we've got an all-time high market share of around 18%. Now we'll embark on premiumization as far as this is concerned. And so premiumization, mix and some cost-saving initiatives is what we will take in [indiscernible] that third initiative and price increases, wherever we have a price increase,

I think these 4 levers to help us inch up our gross margins from the current year. And what happened in the current year, we've also taken a correction of INR 200 crores in quarter 2, as you are aware of. So on a percentage, gross margin went down because of that, that deleverage happened from [indiscernible]. Hopefully, that will not happen in the next year and margins will be inch up because of that also.

Okay. Perfect. And also in terms...

[Technical Difficulty]

Sorry to interrupt, Avi, but you are not clear right now.

Sir, I just wanted to just understand [ Namaste ]. I'm sorry, I thought that was also a headwind. And if you could quantify how much that would be. That's all from my side.

Yes. I think I got you. So Namaste, as rightly said, last year, we spent roughly around INR 100 crores on the litigation costs in Namaste given to advocate authorities. As we speak, we've changed our agency in Namaste, and therefore the cost has ran down by 25 percentage points, so INR 100 crores to INR 75 crores in the current year. Going forward also, and there is some bids which we bought back from insurance agencies. So then we are definitely leverage on [indiscernible] International Business, and we expect the profitability to be better.

So in International Business, one lever is obviously legal costs going down for us, which is overlap. The second will be that other denominated currencies are doing better for us. Namaste business is doing better. Middle East, North Africa, all the big currencies are performing well, and we expect them to perform well. And depreciating currencies will also overlap the currency depreciation next year. So as we speak, we have INR 81 crores of translation loss, which I think will go down going forward. So that would be another lever which will add to our International Business profitability.

The next question is from the line of [ Disha Giria ] from Ashika Institutional Desk.

I just wanted to understand that in your presentation that you have mentioned that the rural has outperformed urban by 140 basis points. But you mentioned in your opening commentaries as well as over the discussions that the urban has kind of slowed down. So if you could give some number to be able to better understand the rural and urban bifurcation. Because in hindsight, the rural outperformance looks like the gap might have increased because of the urban slowdown as well.

Yes. Let me give you more detail on the data -- syndicated data. Syndicated data overall, FMCG market is growing at a rate of around 7%. That's what they indicate, in which rural is trending at 10% and urban is at around 5%. It's almost a difference. So urban as directed by 40% going forward, used to be curtailed and now is in the range of around [ 5-odd ], And rural has actually doubled in terms of what the Nielsen [indiscernible] was, which was the range of 5 and now become 10. The difference between urban and rural in terms of retail itself is at 490 bps. So that's the retail -- what retail stocks, and Dabur growing ahead of the category for urban/rural.

If Nielsen is talking about 7% FMCGs, Dabur is trending up, and that's why the gain in market share is happening at across our categories for us. So that's as well as the retail [ audit ] is concerned. So there's a trend in the market that the retail is moving ahead of urban -- sorry, rural is moving ahead of urban by around 490 bps. The same thing is getting reflected in our business also, but has been with a lower, 140 bps. So the overall India business has grown by 1.7%. Urban business has grown by 0.6% and rural business has grown by 2%. So the difference between the 2 is 140 bps. And that's why the rural performance is better than urban.

Going forward, we think this will inch up going -- as the rural [indiscernible] picks up. So it will only go up from here. And this is happening on back of real base growth, which is higher in rural India. This is growing real base growth. In rural it's moving up by 5% as well as urban is coming down by minus 7%. So there's more money today in the hands of the consumers in rural as compared to urban. But this thing might change because food inflation is very high at around 8%. So if rural also starts prioritizing food as compared to [indiscernible], this thing could change. But the situation is very dynamic in the marketplace, and we need to watch that out.

The next question comes from the line of Harit Kapoor from Investec.

Just on the advertising spend, I just wanted to get your sense on how do you see that trend moving? Because you have mentioned in the past that, that's something that you want to ramp up year-over-year to get in line with the double-digit levels at some point. Last 2 quarters, you've seen it come off. This quarter, the India is a stand-alone piece looks like a sharper decline. Y-o-Y. So is it that in the current context of the market below the line is a higher share for you right now? If you could just kind of break that up and give an outlook on how you're thinking about it.

Yes, absolutely, Harit. I think, again, I'd say [indiscernible], of course, in different times, different strategies. One strategy doesn't become the same through the year. So I think as the consumption story is not great at the time, I think there's a pressure on the category growth rates. At this time, the pie is not expanding. I think it's futile effort to spend so much money on advertising. It's important to consolidate our position when the pie remains the same. The growth is hard to get. That's what one is trying to do. We are trying to prioritize more BPL spend to increase our market share and to get more [indiscernible] and getting more consumers. When the market growth happens, that's when we double down from advertising and doing. So advertising has come down.

Our overall advertising and promotion expenditure increased by around 10%, but advertising expenditure has gone down. That said, that is still more than 7% of the overall consumer care business that we have in India, which I think is optimal level given our diversified portfolio with too many pockets of spend. But the endeavor is always whenever luxury is available in terms of margins at that time, you want to invest money behind advertising to grow your brand. But when luxury of spend is not there, then you have to have a balanced approach between margin and -- because top line is not coming your way, it's now growing by mid-single digit, top line is growing by low single digits. So you have to conserve money to maintain our margins. So that is the mindset that one has. So that's how we're calibrating. So...

You have to also see our India business, some of the businesses like smaller businesses like [indiscernible], et cetera, they don't have increase in spend. So if I were to -- or even some of the [indiscernible]. If I were to gross it up, then it could be around 7.5% to 8%, which is -- which currently is affected around 6 or 6.7 odd [indiscernible] 10 percentage points. .

There are also pockets of businesses which don't have advertising for us. For example, [ advocating ] marketing doesn't have advertising point. Export doesn't have advertising. [indiscernible] business doesn't have advertising, so is our commodity businesses. So if you apportion advertising on your core consumer business which has advertising, that is in the range of around 70%. But that said, I think we have to prioritize advertising spend. There's no shying away from that fact.

Got it, got it. And the second question was on pricing. So you have mentioned a few times on the inflation in [indiscernible]. When do we see this start to kind of go into the market? Could there be a little bit of lag effect because market competitive intensity is high in some of the categories? So because this -- if you look at quarter 3, the difference between volume growth and revenue growth is 50 basis points. So I just wanted to get your sense when do we start to see incremental pricing kind of going into the market from here on? .

[indiscernible] in incremental pricing but there's some drop or there's a time lag effect. But our procurement strategy is also to take a long position. So when we anticipate inflationary trends, and that helps us hedge level of inflation, and then we can plan our pricing accordingly. So while you see over the last 5, 6 quarters our trend has been that, by and large, pricing has been in sync with the inflation and [indiscernible] very clearly that at least either at a Health Care level or in HBC level or beverages level, we're trying to compensate. Even one of the subcategories has some time lag, then the other category helps mitigate that. Then is, by and large, our endeavors, the procurement strategy, combined with market intelligence and taking those category price increases.

the next question is from the line of Tejash Shah from Avendus Spark Institutional Equities. .

Just on the consultant part. So over the past 5 to 6 years, especially after COVID, we have seen FMCG companies have repeatedly turned to consultants for growth solutions. Yet we have seen no sustained or standout success. So what drives the reliance on this external validation despite no, I would say, big success or results that we have seen from that approach?

So I think you were answering your question only. So I think -- because what happens is, despite our strategy, best [ return ], hard work, if the results do not reflect our ambition and aspiration, then you start sometimes questioning your strategy. Are you on the right path or not? That is where you require to do that introspection, you require some validation from an outside expert. And these consultants or rare experience of working in many FMCG companies and got best glass practices exposure, which we may not have. Because we've got 1 company, 2 company exposure, et cetera. So while what we think is right for the business is what we do, sometimes this validation really helps. And it's a global benchmark. We don't operate only in India. We operate in America, Europe across continents. So sometimes, some practice overseas markets can be very relevant for the India market.

And every market has a different level of maturity. What happens in China when it comes to India are very slow. What's happening in U.S. comes to India, [indiscernible] growth in overseas market, and there's a lot of formulas for International Business have been very successful in India. From my point of view, like winning in many Indias, it is basically an international concept that we saw working very well in India. Because the smaller countries with populations of 1 crores or 2 crores [indiscernible] state, which are 20 crores, et cetera. So there, those things work. So these best-in-class benchmark helps, and that's why you do a dipstick with the consultant and not really ask them to run the business. You ask them to validate your strategy once in 3, 4 years. And that at least gives you the confidence that yes, you are right, the validation work.

And sometimes, it was stakeholders also. So one is for ourselves that we do the strategy. Sometimes, the stakeholders also get a bit of validation that the management who is making the strategy is a maker and not a checker. Checker is somebody else. So there's a making and checking validation actually happens from the stakeholders who are looking at the company management to deliver the results also. So it's outside external management or also internal validation is where the consultants really help.

Sure. So is it more of a process validation? Or is it more of a like solving the growth problem and delivering our numbers there?

No. It is not process. Process is already entrenched and processes don't change, except if there's some growth that is happening in a process. It's more strategy, it's more strategy and -- which they validate and execution. Because the market is so dynamic. So you have to either make your strategy across a dynamically environment which is perpetually in flux. So as the flux happens, you have to keep tailor-making your strategy. And these guys come and help you to customize your strategy through the environment which is changing. Beverages are fantastic. Suddenly, there's a cola happening and the reliance is disrupted. So our validation of our beverage strategy by McKinsey [indiscernible] where exposures, worked on food, with coke, FX and everybody globally will only help us to find new of the strategy. .

Okay. Second, for the last 2, 3 years, we are seeing that FMCG companies including us also are reverting towards science and efficacy-based innovations to tap urban consumers. Our ID recognition of toothpaste is also kind of validation of that. So last time, you spoke about in detail that how we are also going in a direction where the focus will be on efficacy and science-based launches. So any update on that? And any, let's say, clinical trial -- or clinically tested products that you would have launched? .

I'll give you an example of [ Chyawanprash ]. I didn't give you many examples, but I only talked about Chyawanprash that we guys have rolled out, having 10 variants that have come in Chyawanprash. We have commissioned clinical trials, which is promising 30% RDA of iron, which is required by a woman, 30%. If you have 2 pills of Chyawanprash everyday, 30% of the RDA is fulfilled by Chyawanprash. So that's the clinical trial that we've done. We've done another clinical trial for [indiscernible] and Honey sales. [indiscernible] 15 mls, including in [indiscernible] also it starts acting in 30 seconds once you are able to consume it. We have very recently rolled out to reinforce sign only for e-commerce, only exclusively for Amazon, which is all back in which you've got the collagen powders and you got pills of multivitamins for women, multivitamin for men, collagen powder and [ gummies ]. So these range of 4 products we rolled out. It's called [indiscernible]. I think the samples will be handed out to you soon, but it's available on Amazon. So that's all backed by scientific claims, and scientific claims are all not analytical, but more clinical.

Okay. So this is [indiscernible] wellbeing nutrition kind of portfolio that we are developing.

Not as [indiscernible] as that. We just got 4 SKUs. We are doing a proof-of-concept check on e-commerce and we'll scale it up a little bit later. Yes.

The next question is from the line of Aditya Soman from CLSA.

Just one question for me. So this work with McKinsey, did it involve any sort of strategic decisions on any category or sector or it's more of sort of a tactical review on how -- to as you mentioned before, where you're talking the review period and just thinking of strategy?

So I think the strategy exercise on the long-term is 3-year vision is being planned. So they will debate and questions all businesses which are nonperforming or even performing, which have got a right to win for Dabur. Anything which doesn't have a right to win, they will be questioning and there'll be a [ debate ] happening between management and then to retain or to size down or to reduce investments or what to do. So it'll be very strategic exercise that we do. It's not a very practical exercise at all. For tactical exercise, we had done a similar exercise in McKinsey on RGM, which is revenue growth management of Oral Care and Health Care. That is done and dusted, which was around 6 months back. .

But now this is more of a strategic exercise and questioning various businesses, prioritizing ROI and investments in different buckets of the business, what we should double down, what we should not focus on. Since COVID, we've done a lot of initiatives. Like you remember, we've done sanitizers, we [indiscernible] it off. We did home care maintenance, we [indiscernible] it off. But there are a lot of portfolios which we had launched at the time which are still there in the business. So [ drops ] has fallen off, then -- but health juices is doing well, which is growing by 44% has become a very big bucket. So they will question. And from a right to win standpoint, is it a sizable category? Is it a profitable category? Is it where we have a capability as a corporate entity to exist? So they have multiple models that are different prongs on which they evaluate the business.

Maybe just to add on, there will be -- while it's a tactical strategic exercise. But what might happen is that at the end of the advice, some offshoots will come out, which will probably be some of them maybe [indiscernible].

Understood. Very clear. Just to -- maybe just to -- so is there -- is the outcome of is that, let's say, one of the categories is not -- does not fit in with the overall strategy, then you would even go up to the extent that if it doesn't work out, then we'll get rid of a category? Or even that can be an outcome, however, whatever the problem you see on that?

Absolutely. So M&A could be an outcome of it of a strategic category where Dabur is not present. There could be divestment. There could be non investment. So all those kind of decisions will still happen, and this will be at the top level. .

The next question is from the line of Latika Chopra from JPMorgan.

First one was domestic [indiscernible] growth in the quarter was 1.2%. Just wanted to check this does not carry any impact of any kind of channel restructuring, inventory that we done previous quarter? Are there any likening effects which are expressed in this number? And just trying to also check with you, in an earlier question, you talked about mid-single-digit growth in the coming quarter. Were you referring to volume growth expectations? Were you referring to value growth? Considering, I think, most of the companies are very cautious around urban consumption. Rural has been improving [indiscernible] But it seems the pace of improvement [indiscernible] probably not as much as a [indiscernible] company. So in that context, presuming the [indiscernible] where they are..

Latika, we can't hear you clearly.

Is it better now? I'll come back separately later. .

It's clear now.

Yes. You can try again.

Can you hear me now?

Yes, we can hear you now.

Okay. So my first question was on the domestic volume growth of 1.2%, did it have any negative impact or follow-on impact of the channel correction that we did in the prior quarter? Or this was the underlying drop of volume growth that you saw in the market?

Yes. This was -- there was no one-off impact of any stock coming back, et cetera. No. That wasn't the case in this. This is the growth that we've seen in the marketplace, yes. So that's one. There was some element of honey stock, which we cleaned up. I think there's a minor return sale was there. Barring that, I think nothing consequential. The pipelines have been maintained. We reduced the pipeline to 21, and 21 in the pipeline now also. So that is not the case at all.

And the second but was on your volume growth expectations going ahead. As. Assuming mean macro remains where it is because most companies are sounding cautious in urban, there is a rural recovery which is there. But do you think this is our go-to mid-single-digit volume levels or what you were earlier alluding was mid-single-digit value level?

So we were using the mid-single-digit value level. It will be a part price and part volume because what happened in the current quarter also, while we had taken a price increase of 3% also, that got nullified by giving extra scheme trade which not netted from gross. And therefore, net remained where it was. So while the price increase was there, but that did not accrue in terms of the net sales because of netting out of the consumer promotion which we had to give because the consumer demand was low and you have to fight the competitive intensity in the marketplace.

So I'll give you an example. In Home Care, we're just analyzing, my volume growth of Home Care comes out to be around 15%, 15%. And my value growth of Home Care comes out to be around 2% -- so 5%, sorry, I would say 5%. So between 5% and 15%, there's a 10% delta which got consumed in fighting competitive density with the market leader. So when the pie is not growing, I think, if the pie and competitive density moves up, except for Oral Care and Hair Oils also, we saw the same thing. Hair Oils, the [indiscernible] grew by around 6% for us and what we realized is only around 3% kind of growth rate in Hair Oils also. So therefore, going forward, I think I'm alluding to around a value growth of around mid-single, looking at where the market is.

Understood. No, this is clear. And the last one was probably I missed hearing your -- if you give any guidance on margins [indiscernible] the question, but I couldn't hear you clearly. If you could just clarify how are you thinking about margins, margins for the consolidated business in FY '26. Any range that you would like to share?

Before I get to quarter -- in the full year next year, at least for quarter 4, our intent is that a mid-single-digit top line growth, we try to maintain our margins for quarter 4. For next year, we are staying in the course of making our annual [indiscernible]. However, having said that, we see a bit of inflation. We'll try to mitigate those, intend again to maintain it, but we will take appropriate price increases, cost saving initiatives, some leverage will also come. So intent is to maintain or slightly improve. And in case of a significant improvement, then we'll also try to reinvest it back into [indiscernible].

Thank you. We have no further questions, ladies and gentlemen. I would now like to hand the conference over to Ms. Isha Lamba for closing comments. Over to you, ma'am.

Thank you, everyone, for joining today's call. Thank you, and have a very good evening.

Thank you. On behalf of Dabur India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.