Business growing faster due to new investment cycle: Dabur's Mohit Malhotra

After heading Dabur’s international business for years, Mohit Malhotra has taken charge of its India business that contributes over two-third to the ayurveda major’s sales. A Dabur India veteran, he recently shifted base from Dubai to Ghaziabad. Edited excerpts of a talk with Arnab Dutta.

Where would your international experience come handy?

One important area is modern trade (MT). Its significance as a business avenue is growing fast. The industry average for its contribution to total sale is now 10 per cent but is close to 15 per cent for Dabur. It is crucial for FMCG (fast-moving consumer goods) brands to lure consumers. We are observing 25 per cent (annual) growth from MT.

As we speak, a fierce battle is been fought between major players in the sector to grab larger shelf space in MT outlets. Ideally, one’s share of shelf space in MT should be higher than market share in general trade (GT); ours is less. For example, in toothpastes, our market share is 12.9 per cent and in MT shelf space is less than 10 per cent. This needs to improve. We are getting aggressive to grab larger shelf space, where other players are also spending heavily.

Dabur’s India revenue is still lower than the 2016 level but margins have improved since. What went wrong and how do you plan to fix it?

Demonetisation and introduction of the goods and services tax have had their impact. A subdued business environment also kept investment in check. That is changing and we are now ramping up investment in advertising and promotion, through both above-the-line and below-the-line activities. We are growing the spending on the MT channel, where cost is usually higher than in general trade. With inflationary pressure also on the horizon, these factors might put pressure on our margins in the short run. However, these investments are expected to improve our top line (revenue).

Your strategy to grow the business?

We have taken a focused approach to grow our brands. Under this new plan, we will choose three to four in-house brands every year and scale these up to above Rs 1 billion. We will be investing in the selected brands and expand these by adding new products. In 2018, we are betting on Honitus, Pudin Hara, and Dabur Lal, which had sales each in the range of Rs 300-500 million last year. Honitus is already growing at over 20 per cent (yearly), due to growing incidence of cough and cold.

The brand has huge potential. We have a Rs 6-billion (annual) revenue target for Honitus in the long run.

Are you feeling inflationary pressure? What is the plan on price hikes?

The costs of packaging and logistics have gone up. With a hike in (government-set) Minimum Support Prices, those of agricultural commodities have gone up and so have those of herbs. For us, the rise in total cost is around five per cent (annually). Inflationary pressure will be there for the next few quarters. We have to pass on the additional burden in a calibrated manner, varying from category to category, depending on how much the consumers can accept and price hikes by competitors.

We have already selectively effected a 2.5 per cent price increase in categories like honey, Chavanprash, Odonil and Dabur Lal oil. We are not hiking prices in categories like fruit juice and amla oil, as competition is fierce in these areas.

How is the e-commerce channel doing for Dabur?

It is increasingly becoming exciting. Unlike matured markets like America, no company in India will probably have a near-monopoly. The fierce competition among e-commerce players is boosting growth. While we started the year with a 0.8 per cent share of business from e-commerce, it is now 1.8 per cent. In the past quarter, we recorded 128 per cent growth and expect to end the year with close to Rs 1 billion in business from e-commerce. With Walmart now into the field, next year could be action-packed.