Dabur has gained back all lost ground in healthcare from Patanjali: Mohit Malhotra

Demand should revive post elections because the stimulus which all the manifestos of political parties have promised should finally get implemented and directly reach out to the end consumers, said Mohit Malhotra, CEO, Dabur India. Malhotra and Lalit Malik, CFO Dabur India, were in a conversation with ETNOW.

Edited excerpts:

You have mentioned certain factors like prolonged winter which has affected only the March quarterHave factors like agrarian crisis, liquidity also trickled into the first quarter numbers?

Mohit Malhotra: If you look at the overall numbers and if you see the trend and the reality in the marketplace, we definitely see rural distress and economic slowdown and demand slowdown effects being felt here. The demand slowdown is because of agrarian crisis or the stimulus not reaching the end consumer, maybe the implementation of the stimulus is not there and there is some liquidity crisis. It is actually a mixed bag of the factors which are leading to some sort of demand slowdown. I will not attribute this entire growth being a little sluggish in this quarter to winters. Winter is a predominant factor but it is also attributed to employment rates which had been low in past two years. IIP has been almost flat in last two years. The affect is being seen in the economy.

If you look at the recent data on the FMCG growth rates, we find both the volume and the value trajectory have actually come down. Last quarter, we saw growth of around 15.9% coming down to around 10% now and going down toward single digit. If you look at the volume trajectory of FMCG market, it was in the range of around 12%, going down to 10% and if I look at the exit rates of March, it is going down to around 7%. I do not know how long this will last…

Many consumption facing companies we have been interacting with are saying that demand should revive post elections. Is that your belief as well?

Mohit Malhotra: Yes, we are hopeful about it. We think demand should revive post elections because the stimulus which all the manifestos have actually promised should finally get implemented and they should directly reach out to the end consumers. Then we will see the sentiment recovering because the demand for discretionary and staples should revive and even the first half , we should see some sort of demand revival happening.

While many of your segments have seen double digit growth, which ones were affected by winter? How much growth does the beverage segment see for instance?

Lalit Malik: This quarter, our food segment has actually declined by almost 5.5 percentage. The extended winter has caused slowdown in demand. As we move into quarter one, we are seeing that in view of the summer, demand is coming back. Primarily it is extended winter that has caused to some extent, impact on our food category.

Apart from that, even in hair oils, especially when we are more focussed on north India, the extended winter has lowered demand. That has also contributed to reduction in hair oil category. Overall, we have seen even the consumer sentiments being low.

Mohit Malhotra: To add to what Lalit is saying. even the category growth of beverages has declined by 2% to 3%. That being said, the brand remains very robust. The Real brand has got all-time high market share increases. 56% is the kind of market share that we have seen which is up by around 400 bps from last year this time. I do not think there is anything fundamentally wrong with our brands. We are doing the right things. Structurally, business is back on track. It is just that one blip that we have seen and that hopefully should get corrected going forward in the first quarter, followed by subsequent quarters.

How has the international business done? How much of havoc did the currency fluctuation wreck?

Lalit Malik: As far as international business is concerned, we saw two impacts. Number one is the steep devaluation of currency, especially in Turkey and also partly in Nigeria and Pakistan. In the local currency, there have been a very healthy growth of approximately 40% in Turkey and approximately 28% in Pakistan. But because of currency translation, the impact gets nullified to a major extent and from 40% it gets reduced to 10% and 28% is getting reduced to almost 10%.

Therefore, currency has an impact a) on translation and b) also in on profitability. In addition to that, what we have seen is in the MENA (Middle East and North Africa) region. There has been a slowdown with regard to the overall demand side of the product category that we are present in.

There is a pressure on demand of the products in the MENA region, though there again we have gained market share through promotional initiatives but the overall market has contracted. The impact of that pressure we have seen in quarter four. On an annualised basis, we do see a stable growth compared to Q4 and going forward we will have to see the impact of exchange coming and also the market revival in the MENA region will determine in terms of the steady growth going forward in the current fiscal year 2019-20.

The OTC Ayurveda segment has grown in double digits. Would it be safe to say that the whole Patanjali impact is firmly behind you? Are you witnessing any market share gain in the toothpaste segment?

Mohit Malhotra: OTC and healthcare business for us is doing great guns. We are growing by around 14.7% on an annual basis and because of the prolonged impact of winters, Chyawanprash has been our hero, growing by around 30% odd.

We have gained back 300 bps in terms of market share in chyawanprash which sits at around 61%. Even Glucose is doing good for us and our OTC portfolio driven by Hajmola is doing exceedingly well. Pudin Hara is firing. In the beginning of this financial year, we had communicated a strategy that we will have three scalable brands which we will put disproportionate investment behind and we will try to grow them in healthcare vertical which was Pudin Hara, Lal Tail and Honitus. All the three brands have actually delivered a high double digit volume growth. Lal Tail has gained some 200 bps market share gain, Pudin Hara is doing well and so is Honitus.

In full year, we are getting a growth of around 15% plus. We are on the right track fundamentally. As regards Patanjali, I think Patanjali impact is kind of mitigated in the healthcare space for us definitely because we have gained back all the lost ground whether it is honey or it is chyawanprash or it is Lal Tail or any other category in healthcare.

The other big focus area has been new launches which the company wants to pick up. With you joining at the helm of the company, what will be the nature of the new launches?

Mohit Malhotra: We have been a little slow in the past two to three years as far as the NPD agenda is concerned. While we have got a very robust and a healthy pipeline of new products already with us and along with that we have got this entire ayurvedic vertical which we call consumer health division which is albeit small of around Rs 200-250 crore odd, but it has got a range of products which are just waiting to be unearthed and we will have to just choose a couple of gems from that portfolio and then transition them from the ethical prescription route to OTC, from OTC to FMHG, (fast moving consumer health products) just put in some investment and growth them big.

You will see a spate of new product launches in all our key segments whether it is home and personal care or haircare, oralcare or heathcare, across the board. We will step up on the innovation which was a little muted in the past couple of years because the consumption environment was not really conducive in terms of accepting the NPDs. Going forward, things will get better and now there are better platforms available including e-commerce which is like a cradle of checking out NPDs. Once NPDs are successful there, we can roll it out to modern trade and the GT. Now the risk appetite of the company is also going up and there are areas where you can take small risk and check out the response to NPD.