Dabur worried about herbal promise

BHANU PANDE & SEEMA SHUKLA

TIMES NEWS NETWORK [ WEDNESDAY, DECEMBER 10, 2003 12:41:57 AM ]

Ensconced in Dabur’s non-executive chairman VC Burman’s plush palace — amidst

the Hussain paintings, teak furniture and Swarovski chandeliers — and chatting with
him over a cup of Swiss chocolate, it’s easy to get carried away with the finer things
of life. Golf, antiques and celebrity gossip besides, the chairman has his views on the
company and the direction it is moving in. After paying McKinsey a handsome Rs 10
crore, the promoters of Dabur are taking its advice rather seriously — to lay off from
the day-to-day operations and leave the company in the hands of professionals.

So it’s over to Sunil Duggal who took over as the new CEO late last year. It’s no mean
task to be CEO of a company where two of the four largest flagship brands —
Chyawanprash and Hajmola — are slipping, and the biggest brand Dabur Amla Hair
Oil (at Rs 175 crore) is growing at a less-than-satisfactory rate, at five per cent.
The problems don’t end here. The company’s baggage is too heavy for even an
aggressive CEO to lug. With hundreds of products — from therapeutics, juices, oral
care to personal care, digestives and honey — Dabur India hardly bears any
semblance to a high-growth, nimble-footed FMCG giant in the making. Yet the
company has big FMCG aspirations.
Duggal says he’s found a way to stem the decline and is busy putting in place a new
brand strategy. He made his intentions clear when he recently signed on Amitabh
Bachchan as brand ambassador, for all of Rs 8 crore. He plans to reposition the
company as a ‘herbal specialist’ rather than flogging its ayurvedic lineage alone.
“Confining ourselves to the ayurvedic platform was restrictive as the domain could
only be stretched to a certain level and not beyond,” he says. “We are as much of a
personal care and toiletries company as a healthcare company,” explains Duggal. So,
from now on, the platform for growth will be that of a ‘herbal specialist’. “It is
consistent with the business we are in,” says Duggal, and he’s confident that Dabur
will be able to span areas outside of the core of ayurveda.The new treatment of its
decade-old identity marks a fundamental shift in the company’s thinking. On the
other front, as recommended by Accenture, Dabur has reorganised its brand and
product portfolio — which right now contains 500 products and 14 brands, apart from
25 sub-brands

This has done little to hedge the company’s bets, as most are too small to make a
significant difference to the company’s fortunes. “Dabur’s portfolio seems like the
periodic table in chemistry,” says a former executive.

The company’s aware of the problem: “You can’t have a brand profile which is
proliferating and indisciplined,” says Duggal. “That was the legacy we had.” After
months of deliberations last year, the top management team at Dabur put together a
new brand architecture which will form the basis for all new launches.

The old architecture was very complex and Dabur was heavily leveraged. “The
emerging portfolio line-up will be more simple and focused,” Duggal says. And it will
leverage other strong brands for quicker growth. DIL will have five main brands —
Dabur, Vatika, Anmol, Real and Hajmola, and every product will be migrated to one of
these. “That will help us aggregate our media spend,” explains Duggal.
Each of the brands will have a specific role in the new scheme of things. Dabur, for
instance, which contributes over Rs 500 crore to the company’s topline is positioned
as a ‘natural health brand’ rooted in ayurveda. The mother brand will lend an identity
to an array of generics such as Chyawanprash, Lal Dant Manjan and Amla oil, all the
OTC healthcare products, and sub-brands in grey areas like Pudin Hara, Hingoli and
Himsagar.

While brand Dabur will be an anchor into the ayurvedic platform, others will make a
strong pitch in the herbal arena. These include Vatika and the newly created Anmol
apart from Real and Hajmola. Vatika will take a ‘herbal beauty plank’ and this Rs 106-
crore brand along with Anmol will spearhead DIL’s foray into personal care. Vatika,
earlier just a hair oil and shampoo brand now has a fairness face-pack on offer.
Launches of more skin care products are planned to give Vatika a complete natural
beauty face

Company watchers believe that Dabur has always been weak on the pricing front and
that’s where Anmol comes in. Anmol is positioned as a value-for-money brand that
will address a lower-SEC audience, competing with likes of Ayur and Cavin Kare. “We
plan to stretch Anmol across product categories such as hair care, oral and skin care
for specific target consumers,” says Duggal.

In the long run, DIL wants to have two flagship brands — Dabur and Vatika — which
will leverage and build on each other. “While Dabur will lend credibility, trust and
ayurvedic expertise to Vatika, the latter will give former modernity, youthfulness and
aesthetics,” says Duggal. By 2006-7, the company expects Dabur to become a Rs
1,400-crore brand, up from Rs 777 crore today. Similarly, Vatika should touch the Rs
300 crore mark. PD Narang, director-corporate affairs, expects new products to
contribute at least 10 per cent of the company’s revenues by then. Narang swears by
Accenture’s advice: “We don’t aim to be category leaders, instead we are happy
playing in profitable niches and will gun for growth from them,” he adds.

Other than making the portfolio more manageable, it’s the task of driving
heavyweights like Chyawanprash and Hajmola that is weighing heavily on Duggal’s
mind. The category itself hasn’t grown: “It has been facing product life cycle issues
which you disregard at your own peril,” says Duggal. But with new packaging and
communication, DIL expects a jump. “Amitabh Bachchan as a creative device is a
good fit to the brand,” explains Duggal.

According to FMCG analysts, the market expansion drive in healthcare categories

may force the company to sacrifice some margins, but that doesn’t bother DIL too
much. “We are building in more above-the-line support behind brands like
Chyawanprash and getting out of freebies and promos,” Duggal said in a post-result
investor conference call last month. His assumption: increased category expansion
driven by higher ATL spends would offset any pressures on margins.

Another issue with Chyawanprash has been the perception that it’s a winter product.
Earlier efforts to extend the brands consumption to the monsoons met with limited
success, but Dabur is determined to address the issue. “We could look at a
formulation to produce a summer variant for Chyawanprash,” says Duggal.

The digestive brand, Hajmola, is another top priority. And DIL doesn’t want it to
piggy-back on the mother brand any more. At Rs 100 crore in revenues, says Duggal,
Hajmola is strong enough to stand on its own feet. Besides, there’s an element of fun
or experience attached to Hajmola which is in conflict with the serious personality of
Dabur. “It is a tasty digestive whereas the brand Dabur is associated with purposive
healthcare,” says Duggal. And the two personalities need not mesh with each other.
Extending Hajmola’s equity, DIL has launched its first ever branded churan and is
test marketing Hajmola Mast Masala in Kolkata. Within the candy segment, Hajmola
Fun 2, Bahar Fruity, Andar Naughty has sparked off a flurry of variants. Packing more
punch into its flagging cash cows is fine, but there’s a general feeling within the
company that a broader reorganisation holds the real challenge.

Till last year, DIL had two large SBUs — family products and healthcare. The company
decided early this year to merge them into a single entity — consumer care. This, the
company feels, will drive large FMCG products that require high levels of distribution.
In the process, Dabur had to contend with the disruption of its entire channel
organisation being merged. This meant reducing the number of dealers — today the
integrated system is at 50-60 per cent of the previous level. Says Duggal, “While you
disengage a lot of dealers, you have to dry up pipelines to manage the whole exit in a
smooth way.” This was reflected in a temporary dip in sales during the first half of
2003, but DIL claims a smart recovery during the last two months.

FMCG analysts are bullish now that there’s less interference from the promoters. But
rivals say that the company’s biggest strength of being a 100 year old ayurvedic
specialist may prove to be a hindrance. “While the consumer profile has undergone a
drastic change during the last few years, Dabur’s image hasn’t managed to keep
pace with it,” says a senior executive at an FMCG major. There’s also the fact that it
never faced a challenge in any of its categories, until the last four or five years, when
large players like HLL as well as newcomers entered. So while it has rejuvenated its
product line and reorganised the company, it’s still facing the challenge of a market
that’s been transformed as well