management discussion and analysis - dabur.com€¦ · quality products for personal care and....

The year 2009-10 saw the globaleconomy emerging from the worst-everfinancial crisis since the GreatDepression. India’s growing importancein the world economy is now wellestablished and the country has earnedthe distinction of being the secondlargest emerging market economy, thefifth largest global economy in terms ofpurchasing power parity and the secondfastest growing economy in the world.While India may not have been in thethroes of acute recession, the globalfinancial meltdown did slow down thenation's growth story for a few months.However, the economy bounced backquickly, demonstrating its inherentresilience and strength.

The year also witnessed a delayed andbelow normal monsoon followed bydrought like conditions in several partsof the country. While the Indianeconomy waded through these troubledwaters and posted a remarkablerecovery, a big worry – in the form

daily grooming. Today, the consumersare seeking to buy recognized brandsand good quality products to meet theirneeds and aspirations. This shift onceagain ensured that growth in rural salesof FMCG products far exceeded theincrease in urban sales.

The Gross Domestic Product (GDP),which recorded high growth of about 8-9% from fiscal 2004-05 to 2007-08,had slowed down to 6.7% in 2008-09but recovered again in 2009-10 growingat 7.4% (as per CSO Revised Estimates).The recovery in GDP growth for 2009-10is broadbased with six out of eightsectors/sub-sectors showing a growth rateof 6.5 per cent or higher (Source: CSO).

The economy has witnessed a demandrevival as indicated by a 10.4%expansion in industrial productionduring 2009-10 as against 2.8% during2008-09. In addition, bank creditexpanded by 17% in 2009-2010 ascompared to the year ago period.

16 | Annual Report 2009-10

MANAGEMENTDISCUSSION AND ANALYSIS

In an intensely competitive environment, DaburIndia Ltd. continued to drive Industry-bestvolume-led growth and posted one of its bestperformances, growing the Revenues by 20.6%and Net Profit by 28.1%

of spiraling food Inflation - started totrouble the country and the industry,especially in the second half of the year.These high food prices, together with thegradual hardening of other input costs,threatened to force consumers to tightentheir purse-strings, particularly in theresurgent rural India.

In spite of all these challenges,consumer demand remained robustfuelling growth in consumer productsparticularly in the rural areas. This washelped by government initiatives such asthe rural job guarantee schemes,infrastructure development projects,debt waiver schemes and the spike inagri-commodity prices which hascontinued to boost agricultural incomesin recent years. As a result, aspirationlevels in rural India continued to growand this growing aspiration is nowbacked by more purchasing power. Goneare the days when the rural consumerwas content with using unbranded, lowquality products for personal care and

Dabur India Limited | 17

It is the percentage growth in NetProfit between 2001 and 2010. Itis the strength of a corporatebrand that has not only survivedthe u ps and downs of theeconomy, but more importantlygone on to report strong growthyear after year.

Source : CSO Estimates

The Fast Moving Consumer Goods(FMCG) sector was benefited by thisresurgence in the economy and theprevailing benign input cost environmentin the first half of the year. Lowermaterial costs and increasing grossmargins led to hefty increase in spendson advertising and promotions by most

CHART A : Growth in GDP in the IndianEconomy


one of its best performances, growingthe Revenues by 20.6% and Net Profitby 28.1%. The highlights of theCompany’s performance in 2009-10 ona consolidated basis are:

� Consolidated Sales increased to Rs 3,416.7 crore in 2009-10 from Rs 2,834.1 crore in 2008-09,registering a growth of 20.6%

� Earnings before interest,depreciation, taxes and amortization(EBIDTA) increased to Rs 669.5crore in 2009-10 from Rs 517.3crore in 2008-09, registering agrowth of 29.4%

� Consolidated profits after tax (PAT) went up to Rs 501.3 crore in 2009-10 from Rs 391.2 crore,increasing by 28.1%

� Earnings per share (EPS) went up toRs 5.8 in 2009-10 from Rs 4.5 in2008-09

FMCG players in an attempt to increasetheir share of voice. As a result thesector witnessed heightened competitiveactivity with most FMCG players vyingfor improving volumes and market share.This also kept pricing power in checkwith reluctance on part of the majorplayers to affect any significant pricehikes. Therefore the growth was largelyvolume driven and oriented towardsmass market. Organized retail, whichhad been impacted by the slowdown in2008-09, showed signs of revival withgrowth coming back in same store salesand announcement of expansion plansby some of the leading chains, althoughin a calibrated way. Overall the FMCGsector saw increased activity during theyear fueled by improved margins andrevival in consumer demand.

In this intensely competitiveenvironment, Dabur continued to drivestrong volume-led growth and posted

The GDP, whichrecorded highgrowth of about8-9% from2004-05 to2007-08, hadslowed down to6.7% in 2008-09 butrecovered againin 2009-10,growing at 7.4%

Note: The Balsara acquisition in 2005-06 added 10% to revenues in that year and Fem Care Pharma Ltd whichhas been acquired in 2009-10 has added 3.5% to the revenues during 2009-10.

Chart B : Consolidated Sales growth during last 10 years(In Rs crore)


� Return on Net worth of the companyincreased to 53.5% in 2009-10from 47.7% in 2008-09

The year 2009-10 recorded one of thehighest revenue growths in Dabur (SeeChart B) in the last decade.

Sales during 2009-10 were significantlyvolume-driven, with volumes accountingfor around three fourths of the revenuegrowth. The input cost pressures weremanaged effectively and the company didnot take any significant price increasesduring the year. Growth rates acrossquarters have been consistent and reflectyour company’s sound business strategiesand strong execution capabilities.

On the operational front, the companyachieved a significant improvement inEBIDTA margins which increased from18.3% in 2008-09 to 19.6% during

existing brands as well as new product initiatives. Aggressive marketinginitiatives led to good volume led growthand market share gains in key categorieslike toothpastes, shampoos and healthsupplements.

During 2009-10 Dabur completed theacquisition of Fem Care Pharma Ltd.(“Fem” or “Fem Care”). The acquisitionhas added about 3.5% to the toplineduring 2009-10. The Company believesthis acquisition will open new vistas ofgrowth in the fast-growing skin carecategory and will accrue significant costand revenue synergies. We have putFem’s core brands – fairness bleaches,hair removing creams and liquid soaps– firmly on the growth track. Significantinvestments have been made behindthe brands, which would take them onto a strong growth trajectory in days tocome. The operations of Fem CarePharma Limited have been integratedwith Dabur through a fairly quick andseamless integration of manpower,sales and distribution network, supplychain, IT processes, manufacturingoperations and logistics. In fact, thecompany has shown good growth inrevenues, margins and profits post theclosing of the deal which was effectedon 25th June, 2009.

The Fem Care legal entity has sincebeen merged with Dabur and the mergertakes effect retrospectively from 1stApril 2009. The High Court order to thiseffect was passed on 2nd June 2010.

During the year, the company test-Note: Office of Economic Advisor, Govt of India

2009-10. This was a result ofcomprehensive planning, forecastingand hedging strategy for procurement ofraw and packing materials which wasalso aided by lower input costs duringfirst half of the year. During the secondhalf, although there was a sharp increasein agri-linked commodity prices andcrude oil-linked input costs, thecompany managed to mitigate theimpact of this increase in costs throughproactive procurement and buyingstrategies. Chart C on WPI movementduring the year highlights the inflationlevels experienced during the year.

Part of the margin improvement wasinvested during the year on higheradvertising and promotionalexpenditure, which increased from12.1% to 14.4% of sales. This wasutilized to invest behind our brands todrive strong growth in the portfolio of

Chart C : Movement of WPI during 2009-10


hair oil & Dabur Amla Flower Magic hairoil to expand its presence in the lighthair oils category.

While things have certainly looked up,there are many challenges along the waywhich make it critical for us tocontinuously review and evaluate ourstrategies to compete well and capturethe opportunities in this dynamic andfast growing industry. Growth rates inreal GDP and per capita income shouldsustain at the levels seen in the recentpast in order to support robust demandfor consumer staples. Also, rising foodinflation continues to be a major threatwith regards to spending and may act asa dampener to the consumption story.

launched a host of new brands andproducts, including Dabur Uveda rangeof Ayurvedic skin care products. Packedwith herbal extracts derived from a blendof authentic Ayurvedic ingredients thatare documented in Ayurvedic scripturesof Bhavprakash Nighantu and provenactives, the Uveda range is wellresearched and proven to enhance skintone and texture. The other major launchof the year was the Réal Burrst range offruit-based beverages. Available in 4variants, this non-carbonated light fruitbeverage range offers the benefits ofrefreshment and thirst quenchingqualities to the consumers. Thecompany also introduced two new lighthair oil brands – Vatika Enriched Almond

Dabur continuesto move forwardon the double-digit growth trackwith sustainedvolume growthacross all productlines. 2009-10has shown one ofthe best volumegrowths for thecompany inalmost a decade


India Ltd ended the year with a robustsales growth of 20.6% with all itsestablished strategic business units(SBUs) reporting strong performance.

� Consumer Care Division (CCD), thelargest SBU of the companyencapsulating the domesticconsumer products business, todayaccounts for 68.1% of theCompany’s consolidated revenues.Even on this large base, Revenuesfor the business increased by 14.6%during the 2009-10 financial year

� International Business Division (IBD)has emerged as the second-largestSBU for Dabur, accounting for

But the economic growth drivers too are immense, in the form of a fairly young population, growing pool of skilledmanpower, rising savings andinvestment rates, a vibrant servicessector and potentially large source ofdomestic demand. These together holdout the promise of stable and sustainedfuture growth for India and for yourCompany.

Though the economy has been on a path to recovery, conditions still remain challenging. In spite of this,Dabur continued to drive its key strategicinitiatives and invest aggressively behind its brands and businesses during 2009-10.

It is the number of new brands, products and variantslaunched by Dabur in 2009-10. The new launches -which include Uveda range of Ayurvedic skin careproducts and Réal Burrst range of fruit beverages -further strengthened Dabur's presence in existingcategories besides opening up newer avenues of growth

Strategic Business UnitsDabur India Ltd continues to moveforward on the double-digit growth trackwith sustained volume growth across allproduct lines. The year 2009-10, infact, has shown one of the highestvolume growths for the company inalmost a decade and what’s moreencouraging is the fact that this growthhas come at a time when the industryhas been struggling with severaldownsides like poor monsoons, droughtin several parts of the country, risinginput costs and one of the highestinstances of food inflation.

The challenges notwithstanding, Dabur


17.6% of Dabur’s consolidatedrevenues. The division ended theyear with a revenue growth of26.3%, driven largely byintroduction of new products andexpansion into newer geographies

� Consumer Health Division (CHD),which leverages Dabur’s corecompetence in Ayurveda and offersa range of Ayurveda-based Over-The-Counter (OTC) products, brandedethical and classical products,reported a growth of 15.0% and nowaccounts for 8.0% of the totalconsolidated turnover

Consumer Care Division (CCD)Dabur India Ltd continued to focus onexpanding its product offerings toconsumers by way of new productlaunches and expansion of existingproducts with the rollout of newervariants, thereby continuing to addressthe growing and ever-changing needs ofits consumers across both urban andrural India. The year also saw Daburintroduce a variety of low-priced SKUsto increase affordability for its productsand deepen its rural penetration througha host of sales and consumer initiatives.

Rural India, in fact, continues to be thebig growth driver with demand from thehinterland outpacing demand from theurban markets in key categories liketoothpastes & shampoos. The severedrought in several parts of the countryand the lower than expected monsoonsfailed to dampen consumer demand inRural India. The poor monsoon anddrought came after four consecutive

It is the revenue increase inpercentage terms during 2009-10 of Consumer CareDivision, the largest SBU ofthe company, which todayaccounts for 68.1% of totalconsolidated revenues


years of bountiful harvest, which had putthe rural economy on a strong wicketwith a sizeable increase in rural incomeand consumption. Also, the governmentrural job guarantee schemes coupledwith the spike in commodity prices inthe recent years continue to add on tothe rural wealth, in turn giving a bigpush to the standards of living in thehinterland. The result is there foreveryone to see. Aspiration levels in ruralIndia have gone up, fuelling demand forbranded, packaged products.

Dabur India Ltd, with its variousinitiatives, was well poised to takeadvantage of this growing consumptionin Rural India, which in turn helpedDabur’s Consumer Care Division (CCD)achieve robust growth. CCD ended2009-10 with 14.6% growth increasingits revenue to Rs 2,326.5 crore.

With a share of 46.7%, Health Carecontinues to be the largest contributor toCCD’s sales during 2009-10. Health carehas also been identified as an importantgrowth engine for the future and Dabur isdrawing up a blueprint and lining up ahost of new initiatives for the category.

Health Supplements: Growing healthconcerns in India on the back of thewidespread outbreak of flu and virusesacross the country and a flurry ofconsumer-connect initiatives with itsvarious brands, helped the HealthSupplements category end the year withover 20% growth in sales.

Dabur Chyawanprash, the flagship brandin this category, reported strong doubledigit growth in sales during the year.This growth has come in spite of aprolonged summer, which is traditionallyseen as a lean sales period for theproduct. The brand was repositioned thisyear on the immunity plank, a move thatensured good consumer connect in viewof the recent outbreak of flu and virusesacross India. Dabur Chyawanprashseized the opportunity and undertook amega awareness building campaignacross India, underlining the need tostrengthen the body’s immune system tofight these new-age flus & viruses.Christened Immune India, this

Rural India continues to be the big growthdriver with demand from the hinterlandoutpacing demand from the urban marketsin key categories like toothpastes &shampoos

Dabur’s CCD business is divided intofour key portfolios of Healthcare,Personal Care, Home Care and Foods.These cater to a number of consumerproducts segments like Hair Care, Skin Care, Oral Care, HealthSupplements, Digestives, Home Careand Foods. Chart D gives the relativeshare of each category.

Health Care

2009-10 was one of the best-ever yearsfor the Health Care vertical within DaburIndia Ltd. With good growth across itsthree key product categories of HealthSupplements, Oral Care and Digestives,Health Care became the first verticalwithin Dabur to cross the Rs 1,000-Crore turnover mark this fiscal.

Another big achievement for this verticalwas the entry of Dabur Glucose, Dabur’sflagship energy drink brand, in the haloedlist of Dabur’s Billion Rupee Brands. TheHealth Care portfolio has the largestpresence in this list with as many as 7brands – Dabur Chyawanprash, DaburHoney, Hajmola, Dabur Red Toothpaste,Dabur Lal Dant Manjan, Babool andDabur Glucose. Dabur Red Toothpaste, infact, even has the distinction of beingamong the select few brands in FMCGhistory to achieve the Rs 100-croreturnover within 6 years of its launch.

Chart D : Category wise break up of CCDrevenues


campaign brought together Ayurvedicdoctors & experts from across thecountry, along with the DaburChyawanprash Brand Ambassador, todrive home the message ofstrengthening immunity throughAyurvedic products, particularly DaburChyawanprash.

This campaign was taken forward withthe launch of a new advertisingcommercial – featuring brandambassador Mahendra Singh Dhoni –that underlined the need to buildimmunity and remain fit. A mega school-level awareness drive was also rolled outacross nine states – Delhi-NCR, UttarPradesh, Bihar, Jharkhand, Punjab,Maharashtra, West Bengal, MadhyaPradesh and Rajasthan. Under thisinitiative, the brand reached out to over7.5 lakh students across 820 schools toeducate children about the need forbuilding immunity in order to stayhealthy and strong.

Under this programme, doctorsand health experts reached outto various schools andconducted workshops onimmunity building. Theseworkshops were designedwith easy-to-comprehendpictorial presentations tomake them interesting forthe children. The successof this Immune India

campaign can be gauged by the fact thatit bagged the Gold Award under the BestSchool Contact program of the yearcategory at the WOW Event &Experiential Marketing Awards 2010.

Riding on these initiatives, DaburChyawanprash – already the marketleader by a huge margin – saw its shareof the Chyawanprash market increasefrom 61.9% to 62.7% during the year.

The year also saw Dabur introduce a new2 kg value pack of Dabur Chyawanprash,priced at Rs 360. The Chyawanprashvariants – Chyawan Junior and ChyawanPrakash – performed well as consumeracceptance increased for the twoproducts. The malted food drink variant Dabur Chyawan Junior, which is

now in its second year,continues to do well withconsumer sales improvingsubstantially.

Dabur Honey, the largest selling brandof honey in the country, was re-launchedduring the year with a new logo. Theproduct was also made available in a Rs 10 pack, which has been hugelysuccessful and has added newconsumers to the brand. Our marketintelligence revealed that consumershad a distinct need to use Honey forfeeding it to children and for religioususages. This new SKU helped usaddress this need.

The brand continued its steadyperformance on the back of its highnutrition proposition and ended the yearwith healthy double-digit growth. TheCompany also launched the secondedition of its Honey-based Recipe Book,titled Big Bee’s Health Secrets, whichwas launched by Amitabh Bachchan, thebrand ambassador for Dabur Honey.Dabur continued to leverage and takeforward the brand message of “healthier


alternative to sugar” to increase thefranchise for Dabur Honey.

Dabur Glucose was the other strongperformer of the health supplementsportfolio, ending the fiscal with veryimpressive growth. Riding on a consumerconnect initiative with its new brandambassador Zaheer Khan and aided byextended summers, Dabur Glucosewitnessed a huge upsurge in demand.Dabur Glucose rolled out a nationwidebowling talent hunt – Dabur Glucose-DAce Of Pace - to discover the hidden pacebowling sensations in small town India.The contest saw over 68,000 kids fromacross the country participating, with theeight finalists even attending a bowlingclinic with Zaheer Khan.

Introduction of Dabur Glucose in sachetsand improved performance of its twovariants – Orange and Lemon – continuedto drive growth for the brand and helped

it gain market share. Dabur Glucose hasnow been re-launched in 2010 with newpackaging and communication.

Oral Care: The category witnessed doubledigit growth during 2009-10 withDabur’s toothpaste brands continuing tobe among the fastest growing oral carebrands in the country.

Babool, Dabur’s toothpaste brand in thevalue segment, recorded strong growthduring the year riding on its valueproposition and herbal equity. Baboolalso marked its entry into the gelcategory with the launch of Babool MintFresh Gel, which has been positioned asa good value proposition in this category.The launch has been successful withBabool Mint Fresh Gel cornering adecent share of the gel segment withinjust three months of its launch.

Meswak, reported good performance on

It is the Revenue in billion rupee earned by DaburChyawanprash, the flagship health supplement brand inDabur’s portfolio. The year also saw Dabur Chyawanprash- a market leader in the category - further increase itsmarket share through a sharp focus on its immunity building proposition

Health care hasbeen identified asan importantgrowth engine forthe future. Daburhas drawn up anew strategy andis lining up a hostof new initiativesfor the category


the strength of a host of new initiativesto enter newer markets such as South India.

Red Toothpaste sustained its highgrowth momentum during the year. The company focused on acceleratinggrowth with new communication andlocal activations for the brand which wasalso re-launched in a new contemporarypack. Dabur’s toothpaste portfoliooutperformed the category growth whichenabled the company to gain marketshare in the toothpaste category.

The toothpowder market continued to beon a slower wicket as the growingaffluence in rural India has resulted inan overall consumer shift fromtoothpowders to toothpastes. As a resultthe toothpowder category is more or lessstagnant. However, the Company’scontinued efforts to target conversion ofnon-dentrifice using consumers totoothpowder usage through villagecontact programmes in Uttar Pradeshand Bihar paid off with Dabur Lal DantManjan maintaining its share of thetoothpowder category.

Digestives and Confectionary: TheDigestives category reported healthydouble-digit growth during the yearunder review. Hajmola tablets joined theRs 1 billion club while Hajmola candiesgrew at a good pace. Hajmola continuesto be the most preferred digestive tablet in the country with as many as 2.5 crore tablets being consumed dailyacross India.

The company continued to drive forwardHajmola’s post-meal connect with thelaunch of a ‘Kahan Maara Chatkara’ – aradio-driven initiative that sought toidentify the best street food joints acrossthe country and boost sales throughassociation with these food retail outlets.Through this, Hajmola reached out toover 2.5 crore listeners and identifiedclose to 700 food joints across thecountry. The company also introduced anew 50-paise sachet containing twoHajmola tablets, targeted mainly atinstitutional customers.

Its new variants – Nimbu and Pudina –continued to add excitement around thebrand and drive sales. Hajmola Pudina,

launched last year, has met withencouraging response in the market. Theyear also saw Dabur extend the Hajmolatablet portfolio with the introduction of anew variant – Hajmola Kachha Aam.Hajmola variants, in fact, now contributeto 7% of brand sales.

Hajmola Candy, on the other hand,undertook a mega school activationprogramme across 1,750 schools in 24cities, reaching out to 11.5 lakhstudents. Another key initiative was theintroduction of mega jar of 1,000 candiesthat enabled Hajmola Candy to make itsway forcefully back on retail shelves.

Personal Care

The Personal care category, whichaccounts for 33.9% of CCD sales, offersa portfolio of Ayurvedic and naturalproducts for hair care and skin care. Akey growth driver for the company, thepersonal care category performed wellduring the 2009-10 fiscal, with bulk ofthe growth being driven by volumes – aconsiderable achievement given thetough economic environment. The

It is the percentage growth of Dabur’s Toothpastebrands in 2009-10 making it among the fastestgrowing toothpaste companies in India


2009-10. While hair oils grew by about10%, Dabur’s shampoo portfolioreported an increase of over 20%.

Dabur Amla continued its strongperformance in the hair oil market drivenlargely by continued consumer & trade plans and strong rural activationsin various states. What was mostencouraging was the fact that even as volume growths in the overallhair oil category slipped to single digits in the later part of the year,Dabur’s hair oil brands continued to grow ahead of the category. And thiscame at a time when competitiveintensity in the market touched a newhigh with rival brands resorting to megaprice cuts and higher trade promotions.Dabur Amla continued to withstandcompetition and has truly establisheditself as the largest perfumed hair oilbrand in the country with a consumerbase of over 35 million users.

The year saw Dabur unveil a new,modern & contemporary look for DaburAmla Hair Oil, which is also Dabur’soldest and largest brand. The newidentity modernized this over 60-year-old brand, making it more contemporaryand relevant, in consonance with today’slifestyle. In order to further deepen thebrand’s penetration in rural pockets,Dabur India Ltd also announced thelaunch of special low-priced packs ofDabur Amla Hair Oil – a Re 1 sachet & aRs 10 pack (25ml) – making this beautybrand more affordable. Dabur Amla HairOil has, in fact, been voted byconsumers as the most preferred hair oilbrand with the highest top-of-the-mindrecall (Source: 4Ps-ICMR Survey).

Your Company also announced theexpansion of its consumer initiative – arural beauty pageant christened DaburAmla ‘Banke Dikhao Rani’, whichrecognises and rewards young girls for

portfolio expanded during the year withthe acquisition of Fem Care Pharma, aleading player in skin care and beautyproducts market. Fem, which has aleadership position in the fairnessbleach category and a strong marketposition in hair removal and liquid soapcategory, gave Dabur an entry into thehigh-growth mainstream skin care andfairness market with an establishedbrand name FEM.

A stream of new launches, entry intonew categories like mainstream skincare and continued trade & consumerconnect initiatives ensured steadygrowth for the portfolio. The growingshift in consumer preference towardsnatural personal care products alsohelped drive demand.

Hair Care: The hair care category -comprising hair oils and shampoos -recorded impressive sales g rowth during

It is the number in million ofHajmola tablets that areconsumed daily in India. It is

the story of a brand that has been touchingmillions of Indians daily thereby emerging asthe most-preferred post-meal digestive in thecountry and becoming a billion rupee product


their beauty and talent. The contest was held across 52districts in three states – Uttar Pradesh, Madhya Pradesh& Bihar – covering 2,000 villages.

Vatika Hair Oil continued to establish its superiority overplain coconut oil and ended the year with a goodperformance. Anmol coconut oil registered double digitgrowth by increasing penetration of the brand on the basisof its value proposition and aggressive trade supportinitiatives. This growth, in fact, comes at a time when thecoconut oil category is showing signs of a slowdown.

The year also marked Dabur’s entry into the light hair oilmarket with the launch of two new products – Dabur AmlaFlower Magic hair oil and Vatika Enriched Almond hair oil.Both the products – which were rolled out nationallyduring the course of the year – have been well accepted byconsumers and have carved a distinct identity forthemselves in a cluttered market. Light hair oil marketrepresents an exciting growth opportunity with the categorysize estimated at over Rs 600 crore. With consumersincreasingly embracing light styling hair oils, Dabur – withthese two products – is well poised to take advantage ofthis shift in consumer preference.

Dabur’s shampoo portfolio, driven by its niche natural andherbal positioning, continued to be a strong player in thishighly competitive market. Vatika was among the fastestselling shampoo brands in the country, reporting another

power-packed performance. All Vatika variantscontinued to perform well and the company expandedthe portfolio with the launch of a new variant –Vatika Black Shine with Sun Protection.

Dabur's maiden foray into health shampoomarket with Dabur Total Protect

Ayurvedic shampoo was wellreceived and the Company

plans to focus its effortson pushing this product

in key health shampoomarkets like West

Bengal.

It is thenumber inmillion ofconsumersusing DaburAmla Hair Oil.It is a reflection ofthe support enjoyedby this near 70-year-old beauty hair oilbrand, which hascontinuouslyinnovated andrevamped itselfto remaincontemporary forconsumers acrossgenerations


Uveda, the skincare expert fromAyurveda, personifies attributes likeexpert, effective, enduring, dynamic,stylish, mature and Indian. Dabur hasalso roped in cine star Vidya Balan asthe face of Dabur Uveda. The DaburUveda range comprises completefairness cream, 2-in-1 Moisturizer,Moisturizing face wash and ClarifyingFace wash. This also marks Dabur'sentry into the fairness cream market.The range, test-launched in Delhi-NCRand six cities in Maharashtra, has metwith encouraging response. Theproducts and the packaging have beenappreciated by consumers and we willcontinue to improve the mix and thenlook at a national rollout sometimeduring the next fiscal.

The third pillar of Dabur’s Skin Carestrategy is Fem, which was acquiredduring the year. With increased mediaspends, signing of a new brandambassador in Preity Zinta andintroduction of new products like Femherbal Bleach and Fem Hair RemovingSolution, the portfolio registered arobust growth of more than 20% in the9 months of it being part of Dabur.

All the products under the Fem personalcare portfolio – bleaches, hair removingcream and liquid soaps – performedwell. The efforts made by Dabur to revitalize the brands and its focused approach saw the Fem portfolioget back on the growth trajectory.

The second quarter of the fiscal beganwith Fem’s association with theblockbuster television reality show‘Rakhi Ka Swayamvar’. This also markedthe introduction of media intervention inFem’s bleach portfolio after a gap of 12months. This, coupled with the

successful launch of Fem Herbal Bleachand re-launch of the hair removingcream in a new avatar with cream andnourishing lotion, local consumeractivations in Punjab and Maharashtraby way of beauty pageants, improvedretail presence and higher engagementwith the beauty parlour communityhelped the core business of bleachesand hair removing creams register strongdouble-digit growth during the year.

Post-acquisition, the personal careportfolio of Fem has been integrated withCCD’s skin care portfolio. The financialsof Fem are not reflected yet in CCD. Femwill be included under CCD in the nextfiscal.

Home Care

The smallest part of the CCD business,Dabur’s Home Care portfolio comprisesthree categories: Air Fresheners,Mosquito Repellants and SurfaceCleaners. Dabur has a well craftedstrategy in place to develop the evolvingand under penetrated Home Carebusiness in India in a phased manner.During the 2009-10 fiscal, Dabur’shome care sales increased marginally,with the second half of the year reportinggood growth.

Sanifresh, the toilet cleaner brand,continued its powerful performance andrecorded good growth during the year tobecome the second largest brand in thismarket. The focus on winning consumervalue equation through selectiveadvertising, improved product andproviding better value to the consumerboosted the brand’s sales.

In the personal application mosquitorepellent category, Odomos performedwell despite a reduced mosquito menace

Skin care: The skin care category sawimpressive growth of more than 30%.Skin care has, in fact, been identified asone of the growth drivers for Dabur. Thecompany has approached the Skin Caremarket with a three-pronged strategy,with Gulabari (offering a range ofmainstream skin care products offeringthe benefits of Rose), Dabur Uveda (arange of mass prestige Ayurvedic skincare products) and the recently-acquiredFem (a portfolio of instant fairnessbleaches and depilatory products) as thethree pillars.

The Gulabari franchise continued to bethe star performer in this categoryposting strong growth and increasing itspenetration. The recently launchedproducts of Gulabari skin care range –which include a moisturing cream, lotionand face freshener spray – showed goodmomentum with the Gulabarimoisturizing cream doubling its turnoverduring the year. The company willcontinue to look at further brandextensions under Gulabari and is in theprocess of developing newer Rose-basedproducts under this franchise.

The growth of Gulabari brand was led byincreased media spends, consumeractivations like college-level beautycontests and enhanced retail & tradevisibility. Dabur Gulabari has beenhosting beauty contests in UttarPradesh, Hyderabad and North East, andthese initiatives have helped boost sales.The new Gulabari face freshener sprayalso continues to do well and has nowleveraged the distribution strength ofFEM sales to drive volumes further.

The year also saw the launch of Dabur’snew premium Ayurvedic skin care rangeunder the brand Dabur Uveda. Dabur


due to prolonged summers during theyear. Odomos opened new marketsduring the year, particularly in SouthIndia and Maharashtra, which havehelped growth. The brand wasaggressively promoted in the post-monsoon mosquito season with focus onefficacy and safety of the product, whichhas been certified by the Indian MedicalAssociation (IMA).

Following the success of Dabur’s OdomosNaturals in key markets like Tamil Naduand Maharashtra, the brand is beingscaled up nationally. Odomos Naturals isIndia’s first range of personal applicationmosquito repellents packed with thenatural goodness of Aloe Vera andCitronella. The range was aggressivelymarketed in various markets like Delhi,Uttar Pradesh, Mumbai, Bengaluru and

Kolkata. The mosquito repellent portfoliois now being expanded with the launch ofOdomos oils, a value-for-money producttargeted at rural consumers. The brandportfolio was extended with the launch ofOdomos spray.

In the air fresheners category, thecompany provides a range of productsunder the Odonil brand. The brand hasbeen facing increased competition fromother players and private labels, andended the year with flat growth. OdonilBlocks have been re-launched with newand attractive easy-to-use packaging,and in improved fragrances of OrchidDew, Mystic Rose, Lavender Meadowsand Jasmine Mist. A new TV commercialwas launched highlighting the use ofthis product for improving the homeambience and as a result the mood of

the family. The company is introducinga Pluggy version of Odonil in addition toa Rs 10 SKU.

The hard surface cleaning products,Odopic dish cleaner and Dazzl witnessedflat growth due to intense competitionand emergence of in store private labelproducts in the category.

Foods

The foods business, which nowcontributes 14.2% to the CCD sales,registered a sales growth of about 20%during 2009-10. The growth was drivenby both the range of fruit juices andculinary portfolio. The Company, whichprimarily operates in the packaged fruitjuices & nectars market with Réal andRéal Activ, marked its entry into theburgeoning fruit drinks segment with the


launch of Réal Burrst. A light andrefreshing fruit beverage, Real Burrst isavailable in 4 exciting flavours - MixedFruit, Crispy Apple, Orange Bytez andMango Mania. Real Burrst promises anexperience that delivers refreshmentthrough lightness of fresh fruits, andcomes in an attractive Tetrapak. Therange was test launched in modern tradeoutlets and is gradually being expandedto general trade as well.

All our fruit beverage brands addressspecific consumer needs. For instance,our range of 100% juices with no addedsugar - under the Réal Activ brand - is afitness brand targeted towards youngadults, while the Réal fruit juice rangemeets the nutritional needs ofconsumers, particularly kids. Réal Juiceprovides more than 60% of a day’s

requirement of Vitamin C, containsminerals like Iron and Calcium & thattoo with no added colouror artificialflavor & no added preservatives. RéalBurrst, our fruit drink range, addressesthe refreshment needs of consumers.So, the three brands Réal Activ, Réaland Réal Burrst have been positioned onthe fitness, daily nutrition andrefreshment platforms respectively.

The Réal & Réal Activ franchisemaintained the growth momentumduring the year and also increased theircombined share of the packaged fruit juice market in India. This growthwas aided by the launch of 3 newvariants (Réal Apple Nectar, Réal PeachNectar & Réal Blackcurrant Nectar), abrand new ad campaign establishingRéal’s superiority over competition

and introduction of special occasiongifts packs that generated huge trials.The Réal Activ brand continued to focus on the ‘No added Sugar’campaign with aggressive branding andactivation activities.

Réal, the flagship fruit juice brand fromthe house of Dabur, also joined handswith Disney Consumer Products underwhich Réal used the image of Disney’smost beloved character Mickey Mouse toadorn the Réal juices and nectars packs.Through this tie-up, Réal juices aim tocommunicate the message of“Nutritional power of Fruit juices” to the kids and families. The newpackaging is available in 200 ml SKU,with 8 Réal variants - Orange, Mango,Pineapple, Mixed Fruit, Grape, Guava,Litchi and Apple.

It is the growth in percentage terms in 2009-10 of thefoods business, which now contributes 14.2% to the CCDsales, driven by both the range of fruit juices and culinaryportfolio. The Company, which primarily operates in thepackaged fruit juices & nectars market with Réal and RéalActiv, marked its entry into the burgeoning fruit drinkssegment with the launch of Réal Burrst


Réal also undertook a mega consumerconnect initiative, ‘Réal Apollo NationalSchool Health Programme’, - inassociation with Apollo Life, a part ofApollo Hospitals. The programme‘Healthy Kids - A Better Tomorrow’sought to educate & counsel schoolchildren on rules for maintaining goodhealth. The programme was rolled outacross Delhi-NCR, Mumbai, Bangalore,Hyderabad, Chennai and Kolkata, andreached out to 1.8 lakh children in nearly300 schools. Under this initiative, apanel of experts from the Apollo Life willcounsel the students on 'Rules to GoodHealth' and conduct sessions on goodnutrition, regular exercise, stressmanagement and good lifestyle habits.An interactive AV, featuring Disney’spopular character Mickey Mouse, wouldalso seek to educate the kids on balanceddiet and healthy eating habits. Theparticipating schools in this programmehave got a cluster health analysis of theirstudents and ultimately feature in anationwide survey to identify 'TheHealthiest School of the City'.

Réal Activ took forward its associationwith health with the participation in DelhiHalf Marathon. The brand has also signedon film star and fitness icon BipashaBasu to further popularize the brandamongst health conscious individuals.

The year saw mega initiatives being

introduced for the culinary range ofproducts under the Hommade brand,which helped this portfolio achieveimpressive growth of more than 30%.The entire Hommade portfolio wasrelaunched in an all-new packaging,revamping the entire category with an aimto spur growth for its range of culinaryproducts. The product categories extendacross interesting paste combinations tosuit the tastes of Indian consumers withvariants available in garlic, ginger, ginger-garlic and tamarind pastes respectively.The range also includes tomato puree,coconut milk and Lemoneez.

The new look complies with premium,international standards of packagingbreaking the clutter with a better shelfpresence and increased product shelf lifeof ginger, garlic & ginger-garlic pastefrom 9 months to 12 months. Theproduct benefits, usage & instructions areclearly communicated on the new packs.Besides, special TVCs were also createdfor the first-time for the Hommade rangeand aired specially in South India.

International BusinessDivision (IBD)Dabur’s International Business Division(IBD) caters to the health & personalcare needs of customers across differentinternational markets spanning MiddleEast, North & West Africa, EU and US

through its brands Dabur and Vatika.Over the years, this business hassuccessfully transformed itself from asmall operation focused on the Indiandiaspora to a multi-locationtransnational business with a presenceacross 60 countries and catering to theever-changing needs and aspirations ofthe local populace in these markets.

The business continued to be the fastestgrowth engine for Dabur, ending the year with a 26.3% growth during the2009-10 financial year. The division'sperformance too was supported by strongvolume-driven growth and calibratedprice increases that were undertaken tooffset the impact of rising input costs.IBD now accounts for 17.6% of Dabur'stotal consolidated Revenue. Thedivision's growth during the year wasdriven primarily by Egypt, GCC, Nigeria,North Africa, Levant, and neighbouringcountries. Expansion into new marketsfurther contributed to this growth, as thecompany seeded several new geographieslike Cambodia, Philippines, Belarus,Gambia and Bolivia. This robust growth,in fact, comes at a time when the externalconditions remained extremely tough withrecessionary trends, currencydepreciations, demand contraction andthe Dubai meltdown was threatening tohurt businesses.

Hair Creams, Toothpastes, Hair Oils andConditioners were the key categoriesthat accelerated the division's growth.While the company is operating in theinternational markets with brandarchitecture similar to its Indiaoperation, the products sold under thesebrands are completely different and have

The Hommade portfolio was relaunched in an all-new packaging, revamping the entirecategory with an aim to spur growth for itsrange of culinary products


been tailored to suit the specific needs ofconsumers in these markets.

The Focus Markets of GCC, Egypt & Pakistandelivered strong growth with healthy profitmargin. Despite being a mature market, GCC hasnotched up yet another strong performancegrowing by 42% during the year.

Dabur Egypt saw yet another year of spectacularperformance, reporting a 30% top line growth in2009-10. Dabur Egypt is now the second largestcontributor to the IBD business after SaudiArabia.

The Potential Markets reported an impressiveperformance with a 49% growth in 2009-10.Performance in these markets has been drivenprimarily by the North African and Levantmarkets, which have grown by 61% and 57%respectively. The North Africa, Levant & EastAfrica potential markets have since beenupgraded to Focus Markets status with the hiringof local resources and higher investments inlocal-level marketing and promotions.

African Consumer Care, Nigeria has grown by17% during the year with both its key brands -Dabur Herbal Toothpaste and Dabur HerbalFresh Gel - showing strong growth to achievesignificant market share in a very competitiveoral care segment. Asian Consumer Care,Pakistan reported a revenue growth of 26%during the year with Dabur Amla and Hajmolaemerging as two strong brands in the country.Dabur UK Ltd closed the year at a 23% growthin turnover with introduction of more productsand improved distribution.

The company reported impressive growth in itskey brands across markets. Dabur Amlafranchise achieved impressive growth and DaburAmla Hair Oil is now the biggest brand in the hair

It is the compounded annualgrowth in Revenue generated byDabur’s international businessdivision over the last six years. This has been one of the fastestgrowing divisions within Daburwith an array of products tailoredto suit the ever-changing needsand aspirations of local consumersin the overseas markets


oil category in Saudi Arabia. The Amlafranchise has been extended to the HairCream Category with the launch ofDabur Amla Hair Cream.

The Vatika franchise has also shownrobust growth with Vatika Hair Oil rangeincreasing its penetration and emergingas the fastest growing hair oil brand inthe category. Vatika Hair Cream defiedtough market conditions and achievedhigh growth and market share gains inhair creams category.

Dabur's toothpaste brand Miswakperformed well in North Africa becomingthe fastest growing toothpaste brand inMorocco and Algeria. Dabur HerbalToothpaste also established itself asNigeria’s No. 1 toothpaste in the herbalsegment and achieved good growth in acategory that saw overall growth rates slipinto the negative territory during the year.

New product development andInnovation remained key to Dabur'sgrowth strategy in the overseas markets.

During the year, the company launchedAmla Hair Cream, which has sincebecome the fastest growing brand in theHair Cream segment. Vatika DermoVivaSoap was also successfully launched ina tough MNC-dominated category andthe brand achieved good sales in thefirst year of launch.

The year saw the re-launch of VatikaShampoo range in a new packaging with5 shampoo variants and 2 conditionervariants. The launch was a big successwith the brand doubling sales over theprevious year. The company alsointroduced a new variant in VatikaHamam Zaith – Hair Fall Control.

During the year, the newly acquired Femrange was also added to Dabur’soverseas portfolio. The Fem brand wasstrengthened in the overseas marketsthrough ATL and BTL inputs, whichenabled the brand gain a foothold inthese highly competitive markets.

The Sales & Distribution network has

been augmented by appointing newdistributors in CIS, Mozambique, Guineaand Rwanda. Besides, local resourceshave been deployed in key markets ofYemen, Syria, Kuwait, Malaysia andTanzania to strengthen the S&D structure.

With these initiatives, Dabur is now wellon track to become one of the biggestFMCG companies in North Africa and theMiddle East region with a strong growthprofile both in revenues and profits.

Consumer Health Division(CHD)The Consumer Health Division (CHD),offering a range of healthcare productsbased on the age-old principles ofAyurveda, continues to be a focus andhigh-growth area for Dabur. Thecompany has formulated a blueprint to further drive growth in this categorywith the launch of a variety of new OTC(over-the-counter) healthcare products.The CHD portfolio, comprising both OTCproducts and classical range, registered


a growth of 15% during the fiscal withsales going up to Rs 273.7 crore.

This portfolio has been enhanced withthe transfer of a few brands from CCDportfolio such as Pudin Hara, JanamGhunti, Hingoli, Sat Isabgol & GripeWater which have been transferred toCHD for sharper focus. The move haspaid off and these brands have posted arobust growth during the year.

A new campaign for Pudin Hara with thetheme ‘Jaante Ho Par Lete Kyo Nahin’was rolled out which boosted the brand’srevenues. The company is now in theprocess of expanding the Pudin Harafranchise with the introduction of Pudin Hara Lemon Fizz in the firstquarter of 2010-11.

In the OTC portfolio, Dabur revampedthe women’s health tonic brandDashmularishta. The new pack, whichnow has brand ambassador Juhi Chawlaon the front label, gave this age-oldproduct a new, younger and more

contemporary look. This, coupled with asharper communication strategy aroundrejuvenation and innovative consumeractivation, helped the brand register aclose to 20% growth during the year.Honitus, the division’s flagship cough &cold brand, also reported a goodperformance supported by the launch ofthe new testimonial campaign. Launchof new variants helped the HonitusLozenges range report a strong doubledigit growth.

The year marked the repackaging ofseveral key products and the launch oftelevision promotion for two key brands –Dabur Badam Tail and the rejuvenatorbrand Dabur Shilajit Gold – whichresulted on both these brands posting agood performance. A new campaign wasdeveloped for Hingoli, marking thebrand’s re-entry into television screensafter a gap of seven years.

With the relaunch of the Classicalsportfolio in a new, contemporary avatarand focused healthcare promotion

activities through Dabur AyurvedicCentres, Health Camps and Vaid(Ayurvedic doctors) Meets, the division’sethical business growth accelerated and the business reported double digit growth.

Sales & DistributionDabur India has a highly developed sales and distribution network with apresence in even the smallest of markets.Dabur's distribution network covers over 2.8 million retail outlets, with a high penetration in both urban and rural areas.

Dabur’s product portfolio is very diverseand the growth strategy envisagesstrengthening positions acrosscategories. Continued focus ondeepening penetration, improvingproduct availability and capabilitybuilding in Sales & Distribution toleverage category and channelopportunities were among the severalnew initiatives undertaken during

It is the percentage growth in 2009-10of the CHD portfolio, which comprisesboth OTC products and classical range


2009-10 to support the growth vision.The S&D focus centered around thefollowing areas:

Sales category focus: During the year,Dabur revamped its sales structure to getsharper focus on three distinct categories- Home & Personal Care, Healthcare andFoods - to drive share gains in anincreasingly competitive market. The newapproach was implemented in largeurban markets where operationalcomplexities were significantly higher.

Category focus with specialized fieldforce and Stockist sales teams for Home& Personal care and for Healthcarecategories was implemented in the top90 markets in the country, whichcontribute to about 40% of the CCDbusiness. These categories so far hadcommon sales force to service traditionaltrade in most markets. The focus on keychannels and the need for enhanceddirect company field force contact was

enabled by augmenting field resourcesbut the costs were contained throughimproved productivity and optimization.

While frontline field force and stockistsalesmen were organized by the threecategories in these large markets, the business was managed in anintegrated manner at the manageriallevels. The stockist network was alsoretained as common to derive benefits ofoptimized scale. This enabledappropriate frontline category focuswithout sacrificing the benefits ofoptimized costs and process harmony. Asales inventory management strategywas also developed to improve stockistservice levels to support this initiative.

Fem integration: The newly-acquiredbusiness of Fem was integratedsuccessfully into the CCD Sales &Distribution network during the year.The business strengthened Dabur’sskincare presence with leadershippositions in bleaches and provided theopportunity to access new channels likeBeauty Parlours and Salons. Theparlour network plays a crucial role ingrowing consumer franchise forcategories like bleaches and beautyproducts, and the footprint wasincreased from 18,000 to over 25,000parlours during the year.

While front-end for Fem in traditionaltrade was kept separate in top towns forcontinued focus on Cosmetic & Chemistchannels, Modern Trade and smalltowns were integrated with CCD toleverage distribution synergies. Thestrength of the Fem network in Cosmeticstores was leveraged by ramping up fewof the CCD cosmetic products throughthe network.

Fem Modern Trade business benefitedimmensely from the integration with itssalience increasing significantly duringthe year. The year also witnessedharmonizing of all sales processes ofFem with Dabur, enhancing efficiencies.Fem business is now on a strong footingto continue the growth momentum intothe next year.

Modern Retail: The year 2009-10 sawthe Modern Trade environmentstabilizing with key players reconfiguringtheir networks and optimizing scale upplans. A comprehensive strategy wasdeveloped to sustain growths in thisscenario, focused on share gains in keycategories. Investments in building aneffective servicing & activation system toaddress complexities of multiple formatsand supply chain configurations werethe critical elements of the approach.The strategy helped Dabur sustaingrowths & make significant market sharegains across key categories like HairOils, Shampoos, Toothpastes and Foods.Modern Trade now accounts for about8% of the CCD business.

Rural Focus: Dabur rolled out specialrural focused sales initiatives across 8key states – UP, Punjab, MP,Chhattisgarh, Bihar, West Bengal,Maharashtra and Gujarat, contributing toalmost 70% of the national ruralpotential. Brands with strong ruralfranchise were focused to sustainmomentum in this scenario.

Low unit price packs and price pointofferings were brought into focus tocapitalize on the share gainopportunities. Rural distribution reachwas also stepped up aggressively in 71high potential districts in these states

Rural distributionreach was steppedup aggressively in71 high potentialdistricts in 8 keystates, ensuringproductpenetration tovillages with lowerpopulation strata


penetrating to villages with lowerpopulation strata. Market contactfrequencies were significantly increasedin these districts and market coverageimproved significantly. The rural tradeopportunity was also leveraged through‘Dabur Apnaao, Lakshmi Laao’programme for the Sub-Stockist networkin focus states.

Direct engagement through non-traditional media like Haat activities etcenabled Dabur to provide ruralconsumers an opportunity to experienceDabur products. Fairs and festivals like‘Kumbh Mela’ were also effectively usedto improve brand communication acrosskey rural markets.

Information Technology: During the year,Dabur significantly strengthened itscapacity to process real-time marketinformation. The footprint of thesoftware ‘Drishti’ for stockists coversalmost 70% of business and is helpingus improve field efficiencies. The Drishticonsole provides dashboard of fieldefficiencies to the sales teams to directtheir actions.

Customer service capabilities wereenhanced with the development of aPortal for stockists to log in and viewdetails of their transactions. Investmentswere also made in IT systems during theyear to enhance the technical capabilityin Sales forecasting in order to improvesupply chain efficiencies.

Retail Business - newuDabur India Ltd’s retail businessoperated under the brand name ‘newu’saw a calibrated expansion phase withcorrections being implemented in the

format and business model. It was a yearof consolidation for the business, whichunderwent rationalization and closure ofsome non-performing stores besidesrelocation and rapid introduction of newoutlets at vantage locations resulting ina jump in sales and halving of lossesduring the fiscal.

This business - operated under thewholly owned subsidiary H&B Stores Ltd- is managed by a team of retail expertswho have experience in beauty / lifestyleretail and realty intricacies. The team isfocusing on giving the stores a distinctidentity with a select range of beautymerchandise that is exclusive anduniquely positioned in stores.Introduction of exclusive internationalbeauty brands would be another USPwith the newu stores going forward: thecompany plans to build a pool of 8-10such international brands exclusive tothe newu cache. During the past year,the company has introduced twointernational beauty brands in India –SEN from Turkey and Beauty Formulas(UK) - through newu.

The year under review also markednewu’s entry into two new markets –Punjab and Rajasthan – as part of astrategy to consolidate and expand

operations in North India. This will enablethe business to build a cluster aroundNCR and North India which will be morecost effective and efficient from alogistics viewpoint. The profile of newustores has also undergone a revamp andthe outlets would now be positioned as alifestyle beauty store, offering a one-stopsolution for all beauty needs. Thecompany today has 13 operational stores,with plans to take the count to around 40 stores by the end of 2010-11.

The company was among the first torealize that retail rentals would findrigorous correction in the near future;and had been selective in signingproperties at high rentals. This hasplayed an instrumental part in ourcalibrated expansion. Rentals at the fewstores booked at high rates have alsobeen re-negotiated favourably. Some ofthe new stores are being leased onrevenue sharing basis instead of fixedrentals which has improved the viabilityof the business model.

OperationsDabur's products touch the lives ofmillions of consumers every day. Buildingon a legacy of quality and experience forover 125 years, brand Dabur today evokes

The sales structure has been reorganised toget sharper focus on three distinct categories -Home & Personal Care, Healthcare and Foods- to drive share gains in an increasinglycompetitive market. The new approach hasbeen implemented in large urban markets


trust. To reciprocate this trust and toensure competitive advantage in themarket, the company believes incontinually striving for a higher and betterlevel of quality not just in its productsand packs, but also in its operations,without losing sight of its commitmenttowards the environment and the society.A strong back-end support inProcurement, Manufacturing, Research &Development and Human Resourcemanagement have been key to Dabur'ssturdy performance through the year. Alarge number of initiatives were rolled outby the company to improve productivitythrough effective application oftechnology and advancement inmanufacturing processes besidesadoption of lower cost energy options.

Procurement

It was a year of strong margin expansionfor Dabur India Ltd as well as wide fluctuations in inflationary

pressures. Controlling costs in aninflationary scenario was one of thebiggest challenges faced by yourCompany during the year under review.The Company effectively tackled thischallenge on the strength of its strategicfuturistic planning and use of intelligentbuying mechanisms like calibratedhedging and e-sourcing.

Effective use of short and medium-termplanning with regular forecasts by ateam of strategic planners helped Dabureffectively keep its costs under strictcontrol and restrict price hikes to aminimum despite high inflation onseveral commodities.

Manufacturing

Dabur India Ltd has 19 state-of-the-artmanufacturing facilities spread across

the globe, which includestwo greenfield plants setup during the 2009-10

fiscal and two units that came into theDabur fold following the acquisition ofFem Care Pharma. Of these, 12production facilities are located in Indiawith key manufacturing locations beingBaddi (Himachal Pradesh) andPantnagar (Uttaranchal) besides sevenfactories located at Sahibabad (UttarPradesh), Jammu, Silvassa, Alwar,Katni, Narendrapur, Pithampur andNasik. The Foods business is serviced bymanufacturing facilities at Newai(Rajasthan) and Siliguri (West Bengal).Outside India, Dabur has manufacturingfacilities in Dubai, Sharjah, Ras-al-Khaimah, Egypt, Nigeria, Nepal andBangladesh.

Domestic: Dabur India Ltd expanded itsproduction volumes during the year at itsexisting manufacturing locations byimproving productivity at the variousunits. The company increased its effortsto improve productivity at all its


manufacturing locations by deployingvarious cost reduction and energy saving initiatives, resulting in a sharpdrop in its manufacturing costs tolowest-ever levels.

In line with the market trends, themanufacturing department alsosuccessfully took up the challenge ofintroducing a bevy of low unit packs(LUPs) for a variety of productsstraddling Oral Care, Hair Care andHealth Supplements. Manufacturingcapabilities were enhanced at thefacilities to service this burgeoningdemand for low priced units.

The energy conservation and greeninitiative, which was introduced in the2008-09 financial year, continued thisyear with the implementation ofalternative fuel technologies for steamgeneration at several of its units, both inIndia and in overseas locations. A new

manufacturing technology for extractionof medicinal actives from herbs wasrolled out at various locations during theyear, generating efficiency in energy costsand providing cleaner & safermanufacturing procedure at the units.These green initiatives have been detailedin the Sustainability Report presentedelsewhere in this annual report.

As part of the manufacturing strategydrawn up in the previous fiscal, Daburhas set up a Greenfield plant in Baddiand Phase-I of this facility wascommissioned in March 2010. In thefirst phase, this unit will produce hairoils, skin care products and someAyurvedic products. The second phaseinvestment would be undertaken in the2010-11 fiscal for adding capacities formore product lines. In addition, anexpansion was undertaken at thecompany’s existing Pantnagar facility toenhance the capacity for toothpastes

and shampoos, which wascommissioned in March 2010. Boththese units use principles of greenmanufacturing and have been designedusing energy-efficient material andmanufacturing technologies to ensurethat operating costs are dramaticallyreduced. These units have, in fact, beendesigned to be eco-friendly with zerodischarge of affluent.

The projects for setting up new units tomanufacture Lal Dant Manjan andHajmola in Baddi and Jammurespectively are in advanced stages ofcompletion, and would be commissionedin the 2010-11 financial year.

The skin care units of Fem Care Pharmalocated at Baddi and Nasik, acquired aspart of the acquisition, were successfullyaligned to the manufacturing systems ofDabur and higher productivity achievedat both these locations, leading to cost

It is the size of Dabur’s healthcareportfolio in Rupees Crores, coveringcategories like Health Supplements,Oral Care and Digestives. It boasts of

brands like Dabur Chyawanprash, Honey, Hajmola, Babool andDabur Red Toothpaste, which have together helped the healthcare portfolio become the first business unit within Dabur to cross the Rs 1000 crore mark


reduction and improved service levels.Even export volumes of Fem from theNasik unit were increased significantly.During the year, the excess capacityavailable at Fem’s Baddi unit wasdeployed to manufacture Dabur Gulabarirange of skin care products to service theseasonal peak demand.

Overseas: Dabur’s overseas productioncapacity has also been enhanced to keeppace with the growth in demand. Thecold storage capacity in Nepal wasdoubled to service the surge in demandfor its fruit juices.

Egypt continues to be an importantdestination for the company with stronggrowth coming from this market. Themanufacturing facilities in Egypt havebeen expanded and enhanced to meetthe future growth requirements. A secondHair Oil plant was commissioned in Egyptalong with capacity enhancement in Hair

Cream & Toothpasteleading to doublingof production capacity. During the year, Dabur took possession of a newindustrial plot in Egypt for constructionof a new Greenfield facility. The companyalso doubled toothpaste manufacturingcapacity at its other Africanmanufacturing facility located in Nigeria.

Dabur’s Ras-al-Khaimah (RAK) unit sawvolumes increase by 20% and operatingcosts reduce dramatically throughimproved productivity across variouscategories. New manufacturing lineswere also installed for Shampoo andHair Cream, increasing the capacity ofthe RAK unit. The unit, in fact, saw thehighest volumes during the year with thecompany rolling out a number of newSKUs from the plant. Power cost at theunit also came down substantially postreceipt of the electrical connection, thusreducing the usage of gensets.

Warehouse Management System wasimplemented in Ras-al-Khaimah andJebel Ali for the first time across anyDabur facility globally. The system helpsin better traceability and ensures First-In-First-Out for raw materials andfinished goods. Besides, the RAK plantwas accredited with ISO 22716Certification (GMP).

R&D and Innovation

Dabur maintains its edge overcompetition with its herbal and naturalheritage. In a business where change inconsumer needs and preferences are theonly constant, Dabur has leveraged thepower of research and development tocreate new products and categorieswhile remaining true to its heritage.

The past 12 months have seen Daburupdate and upgrade its portfolio in linewith changing consumer demands and

The company increased its efforts to improveproductivity at all its manufacturinglocations by deploying various cost reductionand energy saving initiatives, resulting in asharp drop in its manufacturing costs tolowest-ever levels


aspirations. In terms of product andpackaging innovations, the Companysuccessfully developed new variants inHajmola, a new range of Ayurvedic skincare products and fruit-based beverages,new variants in shampoo, a range of lighthair oils and a new gel toothpastebesides new packaging for Dabur Redtoothpaste, Odonil and a host of newOTC products.

The company has always been in linewith consumer trends. As a company,Dabur is highly connected to its

consumer and develops products thatmeet their needs and requirements. Ahigh degree of consumer insight goesinto development of each product.

Dabur India has a well equipped in-house research wing - Dabur Research &Development Centre (DRDC) - thatfollows a ‘brush-to-brand’ approach. Wehave our in-house nursery, which growsseveral rare herbs that go into variousproducts. This in-depth knowledge aboutnature and natural ingredients is one ofour big strengths in the market. DRDC

also undertakes detailed tests onindividual ingredients and products toensure that the final product meetscustomer needs and aspirations.

The company continues to benefit fromthe strong foundation and long traditionof Research & Development whichdifferentiates us from many others. Whilea lot of companies today offer Ayurvedicand herbal products, Dabur enjoys theconsumer’s trust because of its herbalheritage. With a portfolio of Ayurvedicand natural products, nature and herbsare key to Dabur’s existence and so, thecompany is investing substantially insustainable development of bio-resources. With a lot of medicinal plantshave been declared as endangered,Dabur has now started cultivating theseherbs to meet its product developmentrequirements. The company is in theprocess of establishing a megagreenhouse in Uttaranchal where saplings

As a company, Dabur is highly connected toits consumer and develops products thatmeet their needs and requirements. A highdegree of consumer insight goes intodevelopment of each product


of these rare herbs would be grown. Thisgreenhouse – to be set up over 10 acresof land – would operate on the same linesof the existing greenhouse at Banepa inNepal. The saplings grown at thegreenhouse would be provided to localfarmers under a community developmentprogramme and the harvested plantswould be bought by Dabur at prevailingmarket prices. This system of contractcultivation would assure the communityof a sustained source of income whileproviding Dabur with a resource base forcrucial raw materials.

Application of latest scientific tools toprove the efficacy of Ayurvedicformulations, products and medicineshas been another major endeavour withDRDC. This has helped the companyidentify hitherto unknown mechanism ofaction of Ayurvedic medicines. Keepingpace with the development in science,bio-marker based studies were alsoconducted to validate the efficacy ofAyurvedic products like MahanarayaniTail, Dabur Chyawanprash and DaburChyawan Junior.

This has helped make a 5,000-year-oldscience contemporary to suit the needsand aspirations of today's modern and

urban consumers. The age-old beliefsare now being increasingly endorsed byscience, helping reaffirm consumerbelief in Ayurvedic products. Dabur isnow also partnering with governmentbodies to develop standards forAyurvedic classical products, besidesworking together with IndianPharmacopeia to develop standards formedicinal plants.

Human Resources

Dabur is committed to create an openand transparent organization that isfocused on people and their capability,and fostering an environment thatenables them to deliver superiorperformance. Even during the tryingtimes that the industry was goingthrough, Dabur remained committed to its employees, continually investing in the development of its humanresources through a series of employee-friendly measures aimed at talentacquisition, development, motivationand retention.

People always have been, and shallcontinue to be, central to Dabur's growthstory. The company's commitment canbe gauged by the fact that Daburabsorbed all the employees of the

acquired entity - Fem Care Pharma Ltd.The Fem business was, in fact,seamlessly integrated to leverageorganizational synergies.

The Company also made significantinvestments for training in the areas of marketing excellence, customerservice and building higher skill sets.During the year, the companyintroduced an audio-visual basedtraining programme for the Fem salesforce. This programme - christenedSPORT - looked at addressing the specific needs of selling Femproducts to beauty and cosmeticoutlets. All the field staff under theFem network were put through thisprogramme that also adopted the ‘trainthe trainer’ route.

In addition, a host of parlour traininginitiatives were also rolled out during the year which aimed at training the25,000 strong parlour network about the various products under the Femportfolio and their usage. Beauty experts were deployed to educate theparlour professionals about the variousaspects of bleaching. It was also aimed at shattering the various mythsaround bleaching apart from explainingthe importance of bleaching and how the Fem range works on improving theskin tone.

Another big initiative launched by Daburrecently was AdVenture - a combinationof the words 'Ad' and 'Venture'epitomizing the entrepreneurial spirit ofDabur. The purpose of the event was torecognize the best practices inadvertising and reward the peoplebehind the creatives. Under this

People always havebeen, and shallcontinue to be,central to Dabur'sgrowth story. Thecompany'scommitment canbe gauged by thefact that Daburabsorbed all theemployees of theacquired entity -Fem Care Pharma


initiative, nine marketing categories atDabur were asked to nominate oneadvertisement each in TVC and Printcategories, which was hosted on theDabur intranet for an online poll byDabur’s sales and marketing managersacross the country. Based on theoutcome of this poll, the top four TVCsand top four print ads were selected tomake the final presentation before aneminent Jury. The participating teamsalso included the members from theAgency which was involved in creatingthe advertisement.

Dabur also continued to drive forward itsrewards programme for employeesthrough the 'Applause' programme thatseeks to reward employees in variouscategories like the Rising Star (bestnewcomer), Honours Club (employee ofthe year), Trailblazer (employee of theyear) and Eureka (for the best ideageneration). Besides, spot awards arealso given to recognize employees at anytime for demonstration of actions, whichare innovative, save cost, promote teamspirit, institute new initiatives and raisestandards of performance. The responseto the Applause programme grewmanifold with huge participation fromthe manufacturing team.

The Company believes in totaltransparency and has put in place anumber of formal and informal processesto get employee feedback, along with asystem of holding a bi-annual survey. Akey HR initiative at Dabur is internalcommunication. Apart from Intranet,each manufacturing facility and regionaloffice has its own newsletter, with a locallanguage component.

A vibrant culture, a low averageemployee age of 31-32 years, directrecruitment from some of the top B-schools in the country under theYoung Managers' Development Programand Conduct of CompetencyDevelopment Centres for elevation weresome of the other important andcontinuous HR initiatives of thecompany. Riding on these initiatives, theattrition levels at Dabur continue toremain much lower than industry levels.

As of 31 March 2010, the companyemploys 4,984 people in various partsof its business.

Industrial Relations: The Companycontinues to have an excellent trackrecord of industrial relations, which, by and large, remained good during the year.

Corporate Social Responsibility: As aresponsible corporate citizen, theCompany has put in place severalinitiatives to fulfill its socialresponsibility and contribute actively tothe growth of the society. These havebeen covered in detail in a separatesection of this report.

Financial Review (on a consolidated basis)During 2009-10, your Companyregistered strong growth in revenues andprofitability.

Consolidated sales increased by 20.6%, mainly due to strong doubledigit volume growth. The acquisition of Fem Care Pharma Ltd. contributed to 3.5% increase in sales during the financial year.

EBIDTA margin of the companyimproved from 18.3% to 19.6%. Thiswas achieved despite inflationarypressures which started impacting ourcompany in October 2009. Inflationarypressures were managed well bydeploying modern forecasting tools,strategic stocking and e-sourcingtechnologies. This has led toimprovement in the gross margin whichenabled your company to increaseinvestment in advertisement andpromotional spends in a competitivemarket scenario.

The increase in MAT impacted yourcompany and the effective tax rate wentup from 12.1% to 16.7%. However, thestrong revenue growth and improvedEBIDTA margin enabled your companyto increase its PAT by 28.1%.


Inflationarypressures weremanaged well bydeploying modernforecasting tools,strategic stockingand e-sourcingtechnologies. This led toimprovement inthe gross margin,which helpedDabur increase itsadvertisement andpromotion spendsin a competitivemarket

Table 2: DIL - Key Profitability Ratios

2009-10 2008-09

EBITDA / Sales 19.6% 18.3%

EBIT / Sales 17.9% 16.5%

PAT / Sales 14.7% 13.8%

Earnings 5.8 4.5per share (Rs)

During the year, the Company completedthe merger of Fem Care Pharma Ltd.with itself and Fem Care Pharma Ltd.would henceforth cease to exist as asubsidiary of the Company. Theconsolidated financials of the DaburIndia Limited incorporate the financialsof Fem Care Pharma Ltd. with effectfrom 1st April 2009.

There has been a marked improvement

Table 3: DIL - Key Balance Sheet Ratios

2009-10 2008-09

ROCE 45.5% 39.4%

RONW 53.5% 47.7%

Book Value 10.8 9.5per share (Rs)

Net working -0.7 -0.4capital* in no. of days sales

*Excludes Cash and Bank Balances

Net operating working capital of thecompany continued at negative level.This was a result of efficientmanagement of supply chain,receivables and creditors. There was aremarkable reduction in Receivableoutstandings from 23 days of sales to 13days of sales. In addition, betterinventory management led to a reductionin Inventory from 48 days of sales to 46days of sales. Table 4 provides details ofworking capital.

The abridged P&L account and profitability ratios are given below:-

Table 1: DIL’s Abridged Profit and Loss Statement, on a consolidated basis (in Rs crore)

2009-10 2008-09 Change (%)

Sales 3,416.7 2,834.1 20.6%

Other Operating Income 24.4 25.6 -4.7%

Material costs 1,550.7 1,376.2 12.7%

Salaries & Wages 284.7 234.7 21.3%

Advertising & promotional expenses 493.5 343.3 43.8%

Other expenditure 432.4 380.8 13.5%

EBITDA 669.5 517.3 29.4%

Depreciation & Amortization 56.2 49.2 14.1%

EBIT 613.2 468.1 31.0%

Interest 12.3 23.2 -46.9%

PBT 600.9 444.8 35.1%

Tax Expenses 100.5 54.0 85.9%

PAT (after minority interest) 501.3 391.2 28.1%

in capital efficiency with the ROCEincreasing from 39.4% in 2008-09 to45.5% in 2009-10 and RONWincreasing from 47.7% to 53.5% in the same period. The improvement hasbeen a result of strong surge inprofitability and efficient managementof capital employed.


Table 4: DIL - Net Working Capital

in days sales 2009-10 2008-09

Net Working -0.7 -0.4 Capital* Days

Days Sales 13 23Outstanding (DSO)

Days Inventory 46 48Outstanding (DIO)

*Excludes Cash and Bank Balances

The company incurred Capitalexpenditure of Rs 160.4 crore duringthe year which was invested inexpansion of manufacturing capacitiesand regular maintenance expenditure.Debt level in the company remained lowas the business generated strong freecash flow. Total loans came down fromRs 230 crore to Rs 179 crore during theyear. In effect the company was in a net cash position as cash reservesexceeded the level of debt as on 31stMarch, 2010.

The Company had declared an interimdividend of 75% during the year and afinal dividend 125% which has led to total dividend of 200% being declaredfor the year. This translates into a payoutratio of 47% of standalone net profit.

Internal Control SystemsDabur has a robust internal audit andcontrol system managed by qualified andexperienced people. PriceWaterhouseCoopers is the internal auditor for thecompany and its subsidiaries.

The Company follows Standard

Operating Procedures (SOPs) that are inline with the best global practices, andhave been laid down across the processflows, along with authority controls foreach activity.

Dabur has also introduced the COSOframework for internal controls andadequacy of internal audit. Under thisframework, various risks facing theCompany are identified and assessedroutinely across all levels and functions,and suitable control activities aredesigned to address and mitigate thesignificant risks.

The internal audit department reports tothe Audit Committee of the Board ofDirectors, which recommends controlmeasure from time to time. To read thereport of the Audit Committee oninternal control and adequacy, refer tothe section on Corporate Governance ofthe Annual Report.

Risk ManagementDabur, like any other enterprise havingnational as well global business interests,is exposed to business risks which maybe internal as well as external. In thebroadest sense, we define risk as theeventuality of not achieving our financial,operative, or strategic goals as planned.To ensure our long-term corporatesuccess, it is therefore essential that risks be effectively identified, analyzedand then mitigated by means ofappropriate control measures. We have acomprehensive risk management systemin place, which enables us to recognizeand analyze risks early and to take the appropriate action. This system is

implemented as an integral part of our business processes across the entire Dabur operations and includesrecording, monitoring, and controllinginternal enterprise business risks andaddressing them through informed andobjective strategies.

The risk management system isspearheaded by the Chief Risk Officer(CRO) of the Company, who isresponsible for, and ensures, effectiverisk management - both riskidentification and mitigation. A team ofrisk officers at each Company locationsupports the CRO. Each employee isentitled to identify risk and report it tothe concerned risk officer, who in turnreports it to the CRO.

The risks are reported in the RiskRegister and classified in terms of their impact and probability of occurrence.The Risk Register is an inventory of risksaffecting Dabur, and covers variousfunctions like marketing, operations,regulatory affairs, finance and humanresource development. The risks arefurther mapped in terms of mitigationaction to be taken and the people who are responsible for taking suchactions. The Risk Register is reviewedperiodically by senior management andis presented to the Audit Committee ona quarterly basis.

One of the key risks faced by the companyin today’s scenario is rising inflationarytrend and high food prices which can leadto compression in demand for non foodconsumption activities. A poor monsoon,if it happens, can impact rural incomesand dampen rural consumption and


It is the turnover in Rupees Billion of brand Vatika. Vatika also

features among the onlyFMCG brands to enjoy

high popularity in boththe domestic andoverseas marketsevident from almostequal sales contributionfrom both thesemarkets to its topline

spends. Increase of imitation / fakeproducts and brands can hamper ourgrowth. Any unexpected changes inregulatory framework pertaining tofiscal benefits and health related issueswhich may impact parts of our businessor profitability is one of risks faced bythe company. A slowdown in overalleconomic growth can lead to pressureon disposable incomes and spendingpower of people.

The Company is well aware of theserisks and challenges and has put inplace mechanisms to ensure that theyare managed and mitigated withadequate timely actions.

Cautionary StatementStatements in this ManagementDiscussion and Analysis describingthe Company's objectives, projections,estimates and expectations may be'forward looking statements' within themeaning of applicable laws andregulations. Actual results may differsubstantially or materially from thoseexpressed or implied. Importantdevelopments that could affect theCompany's operations include adownward trend in the domesticFMCG industry, rise in input costs,exchange rate fluctuations, andsignificant changes in political andeconomic environment in India,environment standards, tax laws,litigation and labour relations.

management discussion and analysis - dabur.com€¦ · quality products for personal care and....

Documents