 "FMCG company Dabur rural business continues to outpace urban in Q1")
Fast-moving consumer goods (FMCG) company Dabur reported a 7.8 per cent uptick in net profit to Rs 500 crore during Q1FY25 compared to the corresponding period last year, as rural business continued to outpace urban.
The company had reported a net profit of Rs 464 crore in the same period last year.
The maker of Real fruit juice and Hajmola candy reported a 7 per cent increase in net sales to Rs 3,349 crore in Q1FY25 from Rs 3,130 crore in the corresponding period last year. Meanwhile, its profit before interest, depreciation and tax (PBIDT) rose 9.8 per cent to Rs 784 crore from the same period last year.
The company reported a volume growth of 5.2 per cent in the quarter and its rural business continued to outpace urban by 350 basis points. While the rural market reported a 9 per cent growth, urban lagged behind at 5.5 per cent.
“It's been a good start to the new financial year as we drove sequential recovery in volume growth, driven by rural markets. With long-term inflation going down, the rural consumer is coming back into the folds of consumption,” said Mohit Malhotra, chief executive officer, Dabur India.
However, the company stated that the country’s demand environment remains challenging, marked by high food inflation and unemployment rate.
“The timely arrival of monsoon coupled with a rural-centric Budget with a focus on rural infrastructure, agriculture, and employment is a key positive for the overall sector,” he added.
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While the company’s food and beverages business reported a growth of 21.3 per cent, the nectar segment under beverages remained mute.
“While market share in the juices and nectar segment improved by 330 basis points, it has been muted. This is because of cola price wars, which started with the entry of a third player. The price index between juices and cola has increased to 3.2x from the earlier 2.2x,” Malhotra told investors during a post-results earnings call.
Under the beverages segment, the company reported a 21 per cent growth in the 100 per cent juice category, 19 per cent in drinks, and 100 per cent growth in carbonated fruit drinks.
“With colas becoming cheap, consumers are trading out of nectar into cola. The summer season has accentuated this problem, because the consumer wants more hydration and more refreshment rather than nourishment and health. So, it's dual impact that we are facing,” he added.
Additionally, riding on growing demand for its flagship Dabur Red Paste and the premium brand Meswak, the toothpaste business reported a 12 per cent growth during the quarter.
“Our digestives business posted a 11 per cent jump. The shampoo portfolio also grew by 13.7 per cent, while the health supplements business posted a 7 per cent growth during the quarter,” stated an earnings release.
The company made market share gains across 95 per cent of its portfolio.
Spice controversy impacts Dabur's exports
The recent incident of ETO (ethylene oxide) contamination of Indian spices in the export market has led to delays in exports for Dabur. The company exports Badshah Masala to markets like the US, UK and Western Asia.
“As far as the international bit is concerned, we have also faced pushback from international regulators, especially in the UK. There has been very tight screening and scrutiny of all the dispatches from India,” said Mohit Malhotra, CEO, during an earnings call.
Due to this, “there's a long queue and backup of supplies, which is lining up and leading to delays in the supply chain,” he added.
Meanwhile, Badshah Masala recorded a growth of 15 per cent in Q1.