Dabur to increase ad, promo spends amid softening commodity prices
Dabur India expects to expand its gross margins in the current fiscal amid falling commodity prices, which will help the major domestic FMCG company to increase spending on advertising and promotion and gradually improve its operating margins.
Besides, Dabur India now has a portfolio of 23 brands, with a turnover of over Rs 100 crore each. Dabur said in its latest annual report that the company added five new brands to the list in the past year.
It added that its Real juice brand “achieved remarkable growth” in FY23 with revenues of over Rs 1,600 crore and is on track to cross Rs 2,000 crore in the next few years.
“In all, we now have 17 brands over Rs 100 crore but less than Rs 500 crore in volume; 2 brands over Rs 500 crore but less than Rs 1,000 crore in volume, and another 4 brands with turnover of more than Rs. 1,000 crore,” its chairman Mohit Burman told shareholders.
Presently, four brands – Dabur Amla, Dabur Vatika, Dabur Red Paste and juice brand Real – have a net worth of over Rs 1,000 crore, while two brands – Dabur Honey and Dabur Chyawanprash – are between Rs 500 crore and Rs. 1,000 crore in sales.
While discussing physical inflation, its CEO Mohit Malhotra said, in FY23, Wasp faced nearly 12 percent for the company.
“Fortunately, we are now witnessing a reversal in the commodity cycle, which has led to lower prices for most of our commodities, with the exception of the food and beverage basket. This development allows us to expect an increase in gross margins for the current year,” he said.
According to Malhotra, this expanded gross margin will be allocated in two primary ways – a portion will be allocated to advertising and promotion (A&P) investments, which have seen some moderation due to higher inflation. Secondly, the remaining part will contribute to the gradual improvement of the company’s operating margin.
Malhotra said: In FY24, Dapper embarked on a suite of cost saving initiatives to drive efficiencies across our functions, be it supply chain, procurement, packaging and indirect overheads.
He added, “These measures, along with moderation in inflation, provide a positive outlook for Dabur, allowing us to capture potential cost advantages and enhance our financial performance.”
In terms of innovations, Malhotra said that they have been a major focus of Dabur’s strategy and have played an important role in maintaining connectivity with consumers. It will continue to develop new products (NPDs). Over the past year, I’ve experienced several NPDs.
He added, “Looking into the future, we firmly believe that innovation will continue to be a vital driver of growth for us. Going forward, we will also focus on making greater investments and scaling our recent successful launches.”
Dabur currently owns eight energy brands, which “continue to support the company’s growth,” and Chairman Borman sees “significant opportunities” and believes that investments in building a strong supply chain, manufacturing infrastructure and enduring portfolio will enable growth opportunities to be captured.
The strong brands are: Dabur Chyawanprash, Dabur Honey, Dabur Honitus, Dabur PudinHara, Dabur Lal Tail, Dabur Amla, Dabur Red Paste, Real and Vatika.
Besides, Dabur will also continue to enhance its rural footprint, roll out premium consumer-centric innovations in urban India and plow through investments behind its energy brands.
“Our rural footprint has crossed the 100,000 village mark this year. We will continue to push deeper into the hinterland, moving forward,” he said.
Dabur, which became India’s first plastic waste-positive FMCG company in FY23, has set an ambitious target of achieving net zero across its entire value chain by 2045.
This will be “supported by a 200 percent increase in the area dedicated to sustainable cultivation of medicinal plants by 2030 and a 100 percent increase in the number of farmers participating in the exercise,” the chairman said.
In the financial year ended 31st March 2023, the consolidated revenue of Dabur India was Rs.11,529.9 crore.
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