How Dabur is riding the new normal

You are likely to have been advised d this over the last several months. Multiple times. “Boost your immunity!” It is, after all, the only protection from the Covid-19 virus till we get a vaccine. While the jury is still out on whether—and how much—certain ingredients can actually shield you from infection, sales of immunity-related products have soared. And among the companies that have benefited from this trend is Dabur, the 136-year-old maker of Dabur Chyawanprash, Dabur Honey, and Real juices.

The unprecedented nature of the pandemic sent the economy into a tailspin, wiping out millions of jobs and thousands of businesses. But Dabur, which climbed 14 spots up the 2020 Fortune India 500 list to No. 160, recognised early that though this was a disruptive event, it also presented an opportunity. It aggressively ramped up new product development, pushed its digitisation and automation efforts, made necessary changes to its HR policies, and beefed up its e-commerce presence. Most significantly, Dabur sharpened its focus on its health portfolio.

Dabur’s healthcare vertical contributed about 40% to its overall sales in the second quarter of FY21, compared to about 32% in the comparable quarter last year. “We are completely envisioning that healthcare should become the mainstay; this is the core capability and competency of the organisation,” says Mohit Malhotra, chief executive officer, Dabur India. In its last annual report as well, the company had mentioned wanting to strengthen its healthcare portfolio with Ayurveda-based products in modern, ready-to-use formats, and reduce its reliance on the home and personal care (HPC) category. The HPC division contributed almost half of its revenue (48%) in Q2FY21 while the foods vertical accounted for 13%.

Since March, the Ghaziabad-headquartered company has launched 40 new products across segments, fast-tracking the process from the normal one-two years to two months. These include Tulsi Drops, Haldi Drops, Amla Juice, Aloe Vera Juice, and Wheatgrass Juice.

It plans to add to the offerings from its ayurvedic specialities division, which sells about 300 prescription products such as Dabur Ashokarishta, a tonic for menstrual cramps, fatigue, and weakness. These products are generally available in ayurvedic pharmacies and have seen a surge in sales as well.

Rajiva Kumar Rai, head-healthcare research, Dabur India, says the company typically has a pipeline of about 50-80 new products ready for launch at any time. “Covid-19 provided us with an opportunity to fast-track the launch of these new products, many of which addressed the emerging consumer needs,” he says.

The rapid response has paid off. In the three months ended September, the ayurvedic and natural healthcare company brought in ₹2,516 crore in revenue—a 13.7% gain over last year.

Some analysts caution that this kind of demand may not be sustainable in the long term, but Malhotra is confident. He argues that the penetration of health supplements in India is still very low; the nutraceuticals penetration is less than 10%, compared to around 80% in developed countries. “There is a lot of headroom for growth; we aren’t even scratching the surface yet,” he says. He believes healthcare demand will continue to surge for at least a year or two, and a protracted pandemic will mean that people will form new habits for preventive health products.

Some experts agree that Dabur will continue to benefit from Covid-19. Kavil Ramachandran, professor and executive director, Thomas Schmidheiny Centre for Family Enterprise, Indian School of Business, says, “several of the growth segments are likely to remain the same due to the basic switch of consumers while several others will switch partially”.

Not just Dabur, other companies are flourishing too. Kapiva, a four-year-old ayurvedic products firm funded by Fireside Ventures, the Mohandas Pai family office, and the Marico family office, says its overall business doubled during the pandemic, while its immunity portfolio grew even faster. Along with that, as disposable incomes rise, people will spend more on wellness, says the co-founder of Kapiva, Shrey Badhani. “I think concerns around wellness, spending on wellness, and preventive medicines will continue to rise as people become more aware, and environmental concerns amplify these trends,” he says.

As Malhotra puts it, the changes necessitated by the pandemic are here to stay. “For us, Covid was an inflection point. It ushered in change in the organisation,” he says. For instance, Dabur has stopped setting annual targets for employees to push fearless innovation, and removed the limit of a minimum three years to qualify for promotion. It has also started hiring from top-tier B-schools, like the Indian Institute of Management Ahmedabad. “This change in culture, in the way we operate, in the mindset of the company... it will endure over a period of time,” says Malhotra.

The last six months

So how did this FMCG giant navigate the pandemic and become future-ready in the process? Malhotra breaks it down. During the first month, he says, factories were closed and both the supply chain and distributor associations were disrupted. Business went down by almost half. Add to that, India saw an en masse migration of labourers from cities.

In the context of the mass migration, the first step for Dabur was to send out teams to states like Jharkhand and Chhattisgarh to recruit new labour. About 400-500 recruits were brought on board, housed at Dabur’s factories, trained, and put to work. They were crucial to the company’s plans of launching a slew of new products to meet the rising demand for health and immunity-boosting products. Dabur’s digitisation and automation efforts were also ramped up.

Also, as consumers hunkered down in their homes, e-commerce emerged as a preferred method of making purchases. Experts believe this trend is here to stay. “Targeting this emerging trend, we have already started launching a series of new products exclusively for online markets,” says Adarsh Sharma, executive director-sales, Dabur India. The company is using its e-commerce platform to experiment with premium, online only products, which saves them the distribution costs. For instance, apple cider vinegar, and a host of baby products. “We are trying out premiumisation on e-commerce and if it looks promising, we will launch [these products] in retail,” says Dabur chairman Amit Burman.

And though e-commerce may have become more important post-pandemic, Dabur has always believed it to be critical to gain and retain millennial consumers. “[The pandemic] has made us nimble-footed and agile as an organisation,” says Burman. “Our risk-taking ability has gone up… we are thinking at a much younger level for millennials, and how we get the distribution to, and product innovation for, them.”

Additionally, the company is experimenting with newer formats like a tablet form for products such as haldi (turmeric), giloy (heart-leaved moonseed), and ashwagandha (Indian ginseng) to make these more attractive to millennials and centennials. While Dabur Chyawanprash already commands over 60% share in the branded chyawanprash market in India, these innovations will be key if it wants to take overall pole position in consumer health products, an area that other FMCG companies and startups are eyeing as well. Competition is heightening with HUL making headway into the Ayurveda segment with Lever Ayush, while Marico extended its edible oil brand Saffola into the chyawanprash category recently.

Then there are the big acquisitions made in recent years. In 2018, Zydus Cadila bought Kraft Heinz’s consumer brand businesses, which makes Complan. Last year, Hindustan Unilever (HUL) acquired GlaxoSmithKline Consumer Healthcare, which makes Horlicks, Boost, and Maltova. Malhotra and Burman have hinted at an acquisition as well but no details are available yet.

Abneesh Roy, executive vice president, institutional equities, Edelweiss Securities, believes that Dabur is well-placed to ward off competition. “Dabur has got decades of experience being a homegrown brand. In FMCG, if you have 60%-65% market share in honey and chyawanprash, no player can really take market share from you,” he says.

The high stakes in the honey segment are reflected in the public spat between Dabur and Marico. In early December, the Centre for Science and Environment, a non-profit group, came out with a report claiming that almost all brands of honey being sold in India were adulterated with sugar syrup, which it found using the nuclear magnetic resonance (NMR) test. While Dabur’s sample failed the NMR test, Marico’s didn’t. This has led to both companies complaining about each other to the Advertising Standards Council of India.

For newer entrants, procuring raw materials could be another barrier. Dabur says it has medicinal herbs growing in over 6,000 acres in India and 542 acres in Nepal.

The one new entrant that had rocked Dabur’s boat was Patanjali. It deeply impacted Dabur’s honey and chyawanprash market share. However, various experts suggest that unplanned expansion and inconsistency in products—added to a slow economy—impacted Patanjali’s growth. According to Roy of Edelweiss, Patanjali seems to have lost its way. “Four years ago, they were considered a very serious company. Because of multiple issues, they are now a very small player in core FMCG. Their focus is now more on the commodities part of FMCG, like edible oil, rice, ghee, atta (flour), etc. In core Ayurveda, Dabur has got back all the market share that it had lost to Patanjali,” he says.

Burman too feels that the family’s decision in 1999 to hire good professionals who will lead Dabur into the future has proved pivotal; as chairman, his involvement is at a strategic level only. That faith seems to be leading to a happy— and healthy—outcome for the FMCG major, even in the toughest of times.

(This story appeared in Fortune India's January issue.)