Strategic Management Project for Dabur India Limited

Strategic Manageme nt

Dabur India Ltd.

Submitted to: Prof Amar KJR Nayak Submitted by:

Sourabh Choudhary (U108109) Shekhar Mandal (U108110)

Subhranshu

Sujit Kumar Sahoo (U108111) Kar (U108112)

Swarup Kumar

Sweta Sah (U108113) (U108114)   Thendral I (U108115) Satpathy (U108116) Vibhav Kumar (U108117)

Tanya Gupta Uday Bhanu Vikrant

 Table of Contents

Introduction Introdu ction ........... ...................... ....................... ........................ ....................... ....................... ........................ ....................... ....................... ................ .... 3 Phase –I........... –I....................... ....................... ....................... ........................ ....................... ....................... ........................ ....................... ................ .......... ..... 4 Phase-II (1998-2003) (1998- 2003) ........... ....................... ........................ ....................... ....................... ........................ ....................... ................... ............. ..... 5 3.1 Phase#2 –IT – IT perspective perspecti ve............ ........................ ....................... ....................... ........................ ....................... ................. ......... ... 7 3.2 Phase#2 –Marketing –Mar keting perspective perspe ctive........... ....................... ........................ ....................... ....................... ................. ........ ... 7 3.3 Phase#2 –HR perspective perspecti ve........... ....................... ....................... ....................... ........................ .................. ........... .......... ........ ... 8 3.4 Phase#2 – Finance perspective perspecti ve............ ........................ ....................... ................... ............. .......... .......... .......... .......... ..... 8 Phase III (2003 onwards) onwar ds)........... ....................... ....................... ....................... ........................ ....................... ....................... ................. ....... .. 9 4.1 Phase#3 –Financi – Financial al Perspective Perspecti ve........... ....................... ........................ ....................... ....................... ................... .........10 4.1.1 VISION 2010: ANALYSIS ........... ...................... ....................... ....................... ................ .......... .......... .......... .......... ....... .. 13 4.2 Phase#3–Marketin Phase#3–Ma rketing g Perspective.......... ...................... ........................ ....................... .................... .............. .......... .......14 4.2.1 Dabur’s Dabu r’s Rebranding Rebrand ing Exercise Exerci se............ ....................... ....................... ........................ ...................... ............... ....... .. 18 4.3 Phase#3 –Information Technology Perspective........... .......................................... ............................... 19 4.4 Phase#3 –HR Perspective Perspecti ve........... ....................... ....................... ....................... ...................... ............... .......... .......... ......... .... 20 Operations Operati ons Strategy Strateg y of Dabur India Limited .......... ...................... ........................ ....................... ................ .......... ....... .. 26 Manufacturing Manufa cturing ............ ....................... ....................... ........................ ....................... ....................... ........................ ..................... .............. ........ ... 26 Supply Chain Initiatives at Dabur India Limited........... ................................................ ..................................... 28 Procurement Procureme nt............ ....................... ....................... ........................ ....................... ....................... ................... ............ .......... .......... .......... ......... .... 31 Quality Qualit y.......... ...................... ........................ ....................... ....................... ........................ ....................... ................. .......... ......... .......... .......... ......... ......31 Research and Development Develop ment........... ...................... ....................... ........................ ....................... ..................... ............... .......... .......32 Vendor Management Ma nagement 3 ............ ........................ ....................... ....................... ........................ ....................... ....................... ................ .... 33 Corporate Corpora te Governan Governance ce.......... ...................... ........................ ....................... ....................... ........................ ................... ............ .......... ........ ... 33 Dabur-Sustaina DaburSustainabilit bility y ........... ...................... ....................... ........................ ....................... ....................... ........................ ..................... ........... .. 34 Porter’s Five Forces Model Mod el for Dabur........... ....................... ........................ ................... ............ .......... .......... .......... .......... ..... 36 EXHIBITS ........... ....................... ........................ ....................... ....................... ........................ ....................... ................. ........... .......... .......... .......... ........ ... 38 REFERENCES REFERENCE S........... ...................... ....................... ........................ ....................... ....................... ........................ ................... ............ .......... .......... .......44 2

Introduction Dabur India Limited (DIL) is the fourth largest FMCG Company in India with business interests in Healthcare, Personal care and Food products. It has revenue of about US$600 US$600 Million (over (over Rs 2834 Crore) Crore) & Market Market Capitalization Capitalization of over US$2.3 Billion. Dabur India is a 126 years old company and is the world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur since its inception has focused on manufacturing and selling Ayurvedic products targeted at the mass consumer segment. There are number of personal care products, Ayurvedic tonics and oral care products which it launched between 1940 and 1970 have become leading brands today. Dabur’s top nine brands had 65% or more market share in their respective product categories. These include the health tonic Chyawanprash, Hajmola digestive tablets and candy, digestive Pudin Hara, Dabur Lal Dant Manjan and Dabur Amla hair oil. Dabur manufactures over 450 products, covering a wide range in health and personal care. Dabur India has 14 manufacturing locations—eight in India and six in contries like Nepa Nepal, l,

Egyp Egyptt

UK

etc. etc.It It has has

three hree Subs Subsid idia iary ry

Grou Group p

comp compan anie ies s

- Dabu Daburr

International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur Nepa Nepall

Pvtt Pv

Ltd Ltd (Nep (Nepal al), ), Dabu Daburr

Egyp Egyptt

Ltd Ltd (Egy (Egypt pt), ), Asia Asian n

Cons Consum umer er

Care Care

(Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle Naturelle LLC (Ras Al Khaimah-UA Khaimah-UAE), E), Weikfield Weikfield Internatio International nal (UAE) (UAE) and Jaquline Jaquline Inc. (USA). It has wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over2.8 million retail outlets all over India. Dabur India limited is divided into three SBU’s. 1) Cons Consum umer er Care Care Divis ivisio ion: n: This This SB SBU U

cate caters rs to the the cons consum umer er need needs s

pertaining pertaining to Personal Personal Care, Health Care, Home Care & Foods. The major Brands under this SBU are Dabur, Vatika, Hajmola, Real and Fem. 2) Consumer Health Divison: This SBU pertains to the Ayurvedic medicines

and ayurvedic OTC. Major categories in traditional formulations include Asav Arishtas, Ras Rasayanas, Churnas, Medicated Oils. 3) Intern Internati ationa onall Busine Business ss Division Division:: It caters caters to the health health and persona personall care care needs of international consumers in middle east, north and west Africa, EU 3

and US. This division has high level of localization of manufacturing and sales & marketing.

Phase –I Dabur was set up by in 1884 by Dr. S K Burman in West Bengal as a proprietary firm for manufacturing of ayurvedic drugs .Dabur is an acronym of the name DAktar BURrman, its founder. In the year 1896 a small manufacturing plant was set up near Calcutta for mass production of Ayurvedic Drugs and Chemicals. Dabur started started its operations operations in 1896 with the manufactur manufacture e of drug called Plagin to counter the wide spread plague at that time. In the 1900’s next generation of  Burman’s took the firm further and they believed that Ayurveda was the mantra which can be sustainable and can meet the needs of low income countrymen. As a result a research laboratory was formed in 1919, followed by manufacturing units at Kolkata (then Calcutta) and Bihar. In 1936, Dabur India Pvt Ltd. was incorporate incorporated d which took over over the business business from the proprieta proprietary ry firm.

Dabur

expanded its distribution network in the next two decades. It launched Dabur Amla Hair Oil in 1940 and Dabur Chyawanprash in 1949. In 1969 there was unrest and business uncertainity in calcutta which led the family to expand its manufacturing operations in Delhi. The next product came out in 1970 in the form of Dabur Lal Dant Manjan followed by the Hajmola Tablet in 1976. Through the 80s and 90s Dabur performed well but was established as a brand for the elderly because of its image of an Ayurvedic Company Although later in 1989 it launched Hajmola candy which was targeted towards the children segment. In 1986, Dabur became a public limited company through a reverse merger with Vidogum Ltd. and was was renamed as Dabur India Limited. A reverse merger merger is acquisition of a public company by a private company which allows the private company to bypass the lengthy and complex process of going public. In the following year to cater to the global market’s needs it set up a facility at Noida Export Export processing processing Zone. In 1991,Dabur 1991,Dabur Overseas Overseas Ltd. Ltd.

was set up in Cayman Cayman

Islands to cater to the needs of overseas investment and this later funded the set up of Dabur Egypt Ltd., Ltd., in Cairo, which which was set to manufacture manufacture personal personal care and food products. In 1992, Dabur entered into 49:51 joint venture with the 4

Spanis Spanish h confec confectio tioner nery y major major Agrolim Agrolimen en group group under under the name name Genera Generall De Confeteria India Ltd. (GCI) by investing an amount of INR 92.3 Million. Also Dabur entered into a biscuit joint venture named Excelcia Foods with Nestle. In 1993 Dabur decided to go to public and came up with an initial public offer in 1994 with Rs 10 face value share at a premium of Rs 85. The issue was oversubscribed 21 times and total amount raised was Rs 541.5 million. The reasons for tapping the equity markets were: •

Additi Additiona onall funds funds were were requir required ed to expand expand produc productio tion n and set up new factories

•

Launch diversified range of products and compete against FMCG MNC’s

In 1994, Dabur reorganised its business in three separate divisions of Sales, Marketing and Operations.In 1995, Dabur launched Vatika and hoped to change the perception in the consumers, and was successful to a certain extent too. In 1997, Foods division was carved out which consisted of Real Fruit Juice and Homem Homemade ade cookin cooking g pastas pastas.. Also Also in the same year year the company company launch launched ed a unique unique initia initiativ tive e called called STARS STARS (Striv (Strive e to Achiev Achieve e Record Record Succes Success) s) to achiev achieve e accelerated growth in the future years.

Phase-II (1998-2003) In 1997, Dabur had started facing issues as two out of its four flagship brands Chyawanprash and Hajmola - were slipping due to product life cycle issues. Another of its flagship brand ‘Dabur Amla Hair Oil’ was also growing at a lessthan-s than-sati atisfa sfacto ctory ry rate, rate, at five five per per cent. cent. PostPost-libe liberali ralizat zation ion,, with with the Indian Indian economy opening up and foreign players entering Indian markets, Dabur realized that competition will be picking up very soon. In April 1997, Dabur hired the leading management consulting firm McKinsey & Co. for mapping out a comprehensive restructuring plan for its varied businesses and strengthen its competitive position. McKinsey primarily offered the following advices: 1) To improve improve profitability, profitability, stay stay focused focused on core competencies competencies i.e. i.e. ayurveda ayurveda and health care products 5

2) Advised Advised Burman Burman family to lay off from from the day-to-day day-to-day operations operations and leave leave the company in the hands of professionals. Dabur paid a fee of Rs 10 crore to McKinsey & Co. and started following its advice religiously. In 1999, It off loaded its entire 49 per cent stake in the conf confec ecti tion oner ery y join jointt vent ventur ure e Gene Genera rall De Conf Confite iterr rria ia to its its Span Spanis ish h part partne nerr Agrolimen for Rs 35 crore. The Rs 100 crore GCI product portfolio comprised of  two catego categorie ries s -- Boome Boomerr bubble bubble gum and soft-f soft-fill illed ed candie candies, s, Bonke Bonkers rs and Donaldo. While setting up the confectionary jointventure GCI in 1994, DIL had estimated that the booming candy and bubble gum market would provide it with ample opportunity to turn the venture into a profit maker. The Spanish partner was was rope roped d in cons consid ider erin ing g the the high highly ly inte intens nsiv ive e tech techno nolo logy gy natu nature re of the the confectionery market. However, the joint venture has not worked out according to the plan as only a handful of products saw the light of the day. Dabur India limited also scaled down its stake in Excelsia Foods to 40 per cent, handing over control to in favour of Nestle SA to become a minority partner. Dabur sold its 20 per cent stake in Excelcia Foods Ltd for Rs 10.6 crores. The company also reduced its exposure to Dabur Finance, where it held 90 per cent stake. The finance arm sold its retail business to Birla Global Finance in 1999. It also discontinued discontinued its Samara Samara line of herbal herbal cosmetics cosmetics that it introduced introduced in early 1997.  The Burman family handed over management of the company to a professional CEO and limited their role to strategic inputs at the Board level in 1998. The decision was taken in response to the changing dynamics of business and to inculcate a spirit of corporate governance within Dabur India. Post-1998, the Burman family has receded from the day-to-day operations of the Company and has strength of 4 members in Board of Directors. In 2001, Family Council was constituted for formalizing the promoter family’s role in managing the busine business ss intere interests sts encomp encompass assing ing all group group compan companies ies.. Dabur Dabur roped roped in Accenture to define clear roles and responsibilities of its board of directors and the chief executive officer to prevent any overlap. The roles of Management Committee, Board of Directors and Family Council were defined and formalized. In 2002, 2002, Dabur Dabur again again roped roped in Accent Accenture ure to study study its sales and distri distribut bution ion system. As per its 6

reco recomm mmen enda datio tions ns,,

Dabu Daburr

rest restru ruct ctur ured ed

its

Phar Ph arma mace ceut utic ical al

busi busine ness ss

and and

separated it from its FMCG business. Dabur tried to reposition itself as a ‘herbal specialist’ rather than flogging its ayurvedic lineage alone. Confining itself to the ayurvedic platform would have been restrictive as the domain could only be stretched to a certain level and not beyond. DIL also decided to have five main brands — Dabur, Vatika, Anmol, Real and Hajmola, and every product was to be migrated to one of these. Not only would it have helped Dabur to focus but also it would help it to aggregate its media spend.

3.1 Phase#2 –IT perspective In Dabur knowledge and technology were the key resources which had helped the company to achieve higher levels of excellence and efficiency. Towards this overall goal of technology-driven performance, Dabur started to utilize IT. This helped in integrating a vast distribution system spread all over India and across the world. It also helped to cut down the costs and improve profitability. Dabur leveraged information technology to drive supply chain efficiencies and had invested to the tune of Rs. 12 crores by 2004 for the IT backbone of the organisation. The company started to work on two ERP systems - Baan and Mfg Pro in 2001, in production and distribution respectively. This was a good move to cut down the operational costs, reduce redundancies and errors and increase efficiency, all contributing to increase in the bottom-line. Dabur – a 114 year old firm firm - show showed ed a new new path path to the the indu indust stry ry by succ succes essf sful ully ly outs outsou ourc rcing ing the the complete IT infrastructure. Many other companies followed the suit thereafter.

3.2 Phase#2 –Marketing perspective As discussed earlier, during this phase Dabur wanted to reposition its image of  an Ay Ayur urve vedi dic c comp compan any y to a majo majorr FMCG FMCG play player er with with dive divers rsif ifie ied d prod produc uctt categories. Dabur concentrated n differentiated product offering and meticulous brand building initiatives. The company concentrated on differentiating the brand in all aspects, right from positioning to packaging. The biggest example is Dabur Vatika which it positioned as value-added hair oil that contained pure coconut oil 7

enriched with natural ingredients such as Henna, Amla and lemon against the market leader Marico’s Coconut Oil.

3.3 Phase#2 –HR perspective DABUR’S willingness to persevere with professionals, and not family members, is quit quite e uniq unique ue in itse itself lf.. In 1998 1998,, the the prom promot oter ers s (the (the Bu Burm rman an fami family ly)) firs firstt experimented with a non-family CEO, Ninu Khanna who had been recruited from P&G to lead the company. That year a whole host of professionals had also been inducted at senior positions. However, Ninu Khanna left by 2001. But instead of  abandoning its experiment, as had been widely expected, the board plumped for Sunil Duggal, an old Dabur hand, in 2002 and the family, which still controls 75 per per cent cent of the the comp compan any’ y’s s equit equity, y, has has sinc since e follo followe wed d a hand handss-of offf polic policy. y. (Currently, six of the 10 board members do not belong to the promoter family.) In the year 2001 the company began to feel the need to put its HR systems in place to ensure that organizational and individual goals were aligned. It began institutionalizing empowerment in the workplace. •

•

•

Employee empowerment: empower ment: The idea was to make employees feel like stakeholders. For example, Dabur has an ESOP scheme that is democratic by industry standards in the sense that it is not based only on seniority, but also on the importance of the assignment of the employee. Preserving the Dabur values: A whistleblower policy introduced. It sought to put a cap on business practices that were out of character with Dabur‘s values. Employee Referral Programme: Existing Existin g employees could refer candidates candida tes they thought to be suitable. Incentives would be provided to such employees that not only provides employee with monetary benefits but also builds a relationship based on trust and reliability.

3.4 Phase#2 – Finance perspective Dabur India Limited has benefitted from the advice of Mckinsey in the long run.  The Profitability of Dabur India Limited increased in the long run with Net profit margin rising from 4.64% in Mar-99 to 14.74% in Mar-09. The operating margin has also approximately doubled from 9.83% in 1999 to 18.33% in 2009.This is primarily due to implementation of ERP in 1999 which allowed it to integrate the internal functions such as supply chain, purchase, stores and manufacturing. The prime impact of this was on the cost incurred as this reduced the working capital 8

requirement by1/3rd of its usual level. As can be seen in the graph below, except for a small dip in FY02, there has been a consistent growth in both operating margin and net profit margin. The growth has trend has stagnated since FY06.

Phase III (2003 onwards) In 2003, Dabur collaborated with Accenture so as to keep itself competitive. The need of the hour was to work smarter and faster so as to improve profitability and revenue growth. Accenture advised Dabur to focus on the following key areas: 

Competing on core competencies, while outsourcing non-core functions to trusted third-party providers.



Viewing information technology (IT) as a strategic asset that creates real values—not simply a cost to be managed.



Streamlining processes wherever possible

Dabur Dabur implem implement ented ed Accent Accenture ure’s ’s advice advice and went went ahead ahead with with the follow following ing strategies in each of the following functions.

9

 4.1 Phase#3 –Financial Perspective Cost Cutting Measure

In 2003-04 Dabur India procured Rs.210 crore of raw materials through esourcing which was almost 50 per cent of total raw material expenditure that it incurred. As a result of which Dabur considerably controlled raw material costs which were on on a rise. Due to e-procurement e-procurement it was able to save save consid considera erabl bly y in raw materi material al costs costs which which in turn, turn, transl translate ated d into into higher higher operat operatin ing g profit profit margin margins s for DIL DIL.. Dabur’ Dabur’s s net profi profitt during during the quarter was up 30% from the year-ago period. The firm registered an operating profit margin of around 19% compared with around 17% a year ago. But, the savings visible on the raw material cost front was also due to the higher inventory base that the company used when the material costs were low. As a result of these savings it was able to spend more on advertisements and new launches.

10

Dabur Pharma Demerger

In May 2003, the board of Dabur India demerged the pharmaceuticals business and created a separate entity Dabur Pharma Ltd. At that point of  time pharmaceuticals contributed around 15% of total sales. In 2007, the company sold its non-oncology business to Alembic for Rs 159 159 cror crore e to focu focus s on its its onco oncolo logy gy segm segmen ent. t. In 2008 2008 Germ German an majo majorr Frese Freseniu nius s Kabi Kabi acquir acquired ed 73% stake stake in India’ India’s s large largest st anti-c anti-canc ancer er drug drug maker Dabur Pharma for around Rs 872 crore. With this, the Burman family, the promoters of the company and holding 65% stake got around Rs 775 crore and exited the pharmaceutical business so as to focus on its core competence and come out as a pure FMCG player. Oncology (Anticanc cancer er)) is a lucr lucrat ativ ive e segm segmen entt & requ requir ires es high high-l -lev evel el rese resear arch ch and and development (R&D) but the parent company DIL long term strategy is to buy brands and aggressively expand its FMCG business. One of the reason they sold the company could be that its unit in Baddi completed its 10year year tax tax exem exempt ptiion benef enefiit duri durin ng the the quar quarte terr end ended Decem ecembe berr 2007.Hence it made economical sense for them not to continue with that and sell it off to a Big Pharma player like Fresenius Kabi as Dabur Pharma also holds a substantial number of drug registrations in Asia, Europe and the US.

Acquisition of Balsara

In Jan 2005, Dabur India Ltd (DIL) acquired three Balsara group companies for Rs143 crore in an all-cash deal. It mopped up Rs. 120 crores through internal accruals and financed the remaining Rs. 23 crores through borrowings. As per the deal it had acquired 99.4 per cent stake in Balsara Hygiene Products, 100 per cent in Balsara Home Products and 97.9 per cent in Besta Cosmetics. The acquisition was part of its inorganic growth strategy which it had planned well in advance and was in line with its plan to 11

expand the company's scale of operations and strengthen its presence in the FMCG sector. As 44 per cent of Balsara's revenue came from home care products and the the oral oral care care segm segmen entt acco accoun unte ted d for for near nearly ly 56 per per cent cent wh whic ich h had had witnessed growth in excess of 15 per cent, also Balsara deal was a strategic fit in both oral and home care market as it acquired the 2nd largest selling toilet cleaner Sanifresh in 2000 Cr. Home care Mkt. Also its market share in tooth paste Industry grew by 6% from 1.8% to 8% which substantially covered the acquisition amount it paid for Balsara. Balsara had sales of Rs 199.6 crore & losses of about Rs 8 crore in the period, But with readjustment in focus, streamlining of distribution and reduction in the wage bill helped Dabur India turn Balsara Home Products around. It reduced the distributors of Balsara from 500 to a few dozens while while givin giving g busine business ss to its its own distri distribut butor. or. This This put more more bargai bargainin ning g power in Dabur’s hands in negotiating a reduction in distributors’ margins as well as in making making its purchases purchases.. Reductio Reduction n in no of employee reduced reduced the wage bill by 60% along with substantial reduction in other overheads. Also, Dabur payed 1/5th of what Balsara used to pay for advertisements, hence, increasing its visibility and revenues. In six months of its take over Balsara Balsara added about 11% to total total revenue revenue and showed great potential potential in terms of revenue growth and profitability posting 35% growth in sales and a net profit of Rs. 14.8 crores during the year. The Balsara acquisition boos booste ted d its its reve revenu nues es and and savi saving ngs s in exci excise se duty duty (due (due to shif shifti ting ng of  manufacturing to tax-free zones) which also enhanced its profit margins as seen in the following tables. . Figures in Crores FY  FY  00 01 982 110 Sales Other Income EBITDA

FY  02

FY  03

FY  04

FY  05

FY  06

FY  07

FY  08

FY  09

34

0 19

120 0 12

128 5 7

123 6 9

141 7 9

175 7 13

208 0 26

239 6 34

283 4 47

1 28

137

144

162

164

217

300

376

443

517. 3

12

Growth in Sales

12 %

9%

7%

-4%

15 %

24 %

18 %

15 %

18%

We can see that the financial year ending 2005 had shown an increase of  15% in sales sales which which was immedi immediate ately ly after after the acqui acquisit sitio ion n of Balsar Balsara. a. Hence Dabur’s acquisition of Balsara not only strengthened its position in FMCG but also its turnaround within six months made Balsara one its profitable subsidiary. subsidiary.

DABUR FEMCARE DEAL

Dabur abur acqu acquiired Fem car care in June une 2009 2009 and and the result sult has been been phenomenal. The market share in the skin segment increased from 1% to 6.6% within 5 months of this deal, making DIL the second biggest skincare company in the country behind HUL. The Fem Care brand accounts for half of the skincare segment within the Dabur portfolio and 4.2 per cent of Dabur’s total revenue. First Dabur India had acquired 72.15% of Fem for Rs203.7 crore in an allcash cash deal. deal. Furthe Furtherr due to SEBI’s SEBI’s guidel guideline ine (subst (substant antial ial acquis acquisiti ition on of  shares and takeovers) Regulation,2007. Dabur acquired additional 20% stake for Rs54 crore through an open offer. The deal has been done at more than a 21% premium to the prevailing share price of Rs 656 of Fem Care at Rs 800/share. The deal fetched a very attractive valuation for Fem Care Pharma. With the completion of this transaction, Fem Care Pharma is now a 100% subsidiary of Dabur India. Marico Industries and Godrej were also reported to be in race for Fem Care Pharma but it was eventually won by Dabur which shows its seriousness towards FEM Acquisition. Acquisition.

4.1.1 VISION 2010: ANALYSIS 1. Doubling Doubling of Sales Sales Figure Figure from 2006.

After the successful implementation of 4-year business plan from 2002 to 2006, Dabur had launched another vision for 2010. One of the plans for 2010 was to double the sales figure from what it had been in the year 2006. From the exhibits, we can see that the sales figure at the end of the year 2006 was Rs. 1757 crores 13

and by the end of year 2009, it was Rs. 2834 crores which shows an increase of  61% in the sales. Though it has not yet reached the double figure, it seems close to achieving the figure in 2-3 years. 2. Growth Growth to be achie achieved ved throug through h inter internat nation ional al busine business, ss, homeca homecare, re, healthcare and foods

 The division wise revenue is: •

Consumer Care Division (CCD) – 69%

•

Consumer Health Division (CHD) – 7.9%

•

International Business Division (IBD) – 18.1%

•

Others – 5%

Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December 2009. o

CCD grows by 16.1%

o

CHD grows by 15.8%

o

IBD grows by 31.1%

3. Southern Southern markets markets will will remain as a focus area area to increase its revenue revenue share to 15 per cent

 The south India market share has increased from 6% in 2002 to 12% in 2009. This is the result result of the initiatives initiatives taken by Dabur to suit the south Indian Indian market market e.g. launching herbal toothpaste in Kerala and Tamilnadu and launching Dabur Lal Dant Manjan as Dabur Sivappu Pal Podi etc. The market share increased after the acquisition of Balsara as Balsara had strong presence in the south and western regi region on.. The The othe otherr fact factor ors s were were POS POS prom promot otio ion, n, cust custom omis ised ed pack packag agin ing g and and commercials & customised product launch.

 4.2 Phase#3–Marketing Perspective It was only after its associatio association n with its partner, Accenture, Accenture, that it made radical radical changes in its strategy. A company which was considerably inept to changes, 14

both both orga organic nical ally ly and and inor inorga ganic nicall ally, y, now now star starte ted d plan planni ning ng acqu acquis isit itio ions ns and and deta detail iled ed 5 year year plan plans s for for its its exis existi ting ng segm segmen ents ts.. The The reas reason ons s behi behind nd thes these e initiatives are as follows: 1. Its exist existing ing product products s were were conside considered red to be target targeting ing the mid aged and above aged segments, but the demography was changing in the country. India was emerging to be a young nation and Dabur recognized the need to have products for the younger generation, while retaining the older segment. 2. Rise of the the regional regional players. players. Players Players like Balsara, Balsara, Zandu, Zandu, Emami Emami were fast fast emergi emerging ng highly highly compet competitiv itive e with with more more or less less simila similarr produc products. ts. The market share of Dabur was suddenly shrinking in some of the categories. 3. Rise Rise of the the Rura Rurall Indi India. a. With With disp dispos osab able le incom incomes es rising rising in Rura Rurall Indi India, a, Dabur could use its distribution channel to meet the demand in Rural India with differentiated products in newer segments at affordable prices. 4. Low penetrat penetration ion levels levels in certain certain categories. categories. The The acquisition acquisition of Balsara Balsara and Fem were mostly due to this reason. 5. Expanding Expanding in the new markets markets,, especially especially the internati international onal markets. markets. With With a diversified kitty and acquisition of established players (Fem - South East Asia, Balsara - South India), Dabur could reach out to new markets.   The initiatives required strategic changes across all functions. The marketing strategy was the key behind these changes as FMCG business runs on the brand value created created over the years. years.

The marketing marketing strategy strategy changed changed to a mix mix of 

product branding and umbrella branding from being only umbrella branding in the past. Products like Chyawanprash, Hair Oil, Hajmola retained the umbrella branding while acquired products and new products like Odomos, Real, Vatika adopted product branding.  The CCD division or the Consumer Care division has evolved considerably over the last decade and so has its marketing strategy. CCD now comprises of FPD and HCPD in addition to the Fem and Balsara. Dabur has invested hugely in the advertisement of its products and differentiated its product offerings too. The present structure of Dabur’s strategic units is:

DABUR CCD (72.8%) HEALTH CARE 44%

CHD (07.3%) --- OTC

IB (18.5%)

--- HAIR OIL 54%

57% 15

---

PERSONAL PERSONAL CARE 37%

ETHICA CAL L --- ETHI

----- 43% 43% HAIR HAIR CREA CREAM M 23%

FOOD --- 13% HOME CARE 06%

---

-----

ORAL ORAL CARE 12%

---

FOOD 06%

---

OTHERS 05%

---

Post Post 2000 2000,, Dabu Daburr conc concen entr trat ated ed and and diff differ eren enti tiat ated ed prod produc uctt offe offeri ring ng and and metic eticul ulou ous s

bran brand d

buil build ding ing

init initia iati tive ves s.

The The

comp compa any

conc oncent entrate rated d

on

differentia differentiating ting the brand in all aspects, aspects, right from positioning positioning to packaging. packaging. The biggest example is Dabur Vatika which it positioned as value-added hair oil that contained pure coconut oil enriched with natural ingredients such as Henna, Amla and lemon against the market leader Marico’s Coconut Oil. It started with an increase in Advertisement spent by bringing in leading filmstars (Amitabh Bachchan & Preity Zinta) and sport-stars (Dhoni & Sehwag) in its campa ampaig igns ns..

The The

freq freque uenc ncy y

of

the

adve dvertis rtise ements nts

and

the the

mode odes

of 

advertisements increased significantly. Brand Brand ambass ambassado adors rs were were also also change changed d accordi according ng to the re-bra re-brandi nding ng of the the products. Amitabh bachchan was replaced by Dhoni for Dabur Chyawanprash as Dabur Dabur starte started d to concen concentra trate te on the younge youngerr genera generatio tion n by launch launching ing new variants of Dabur Chyawanprash (Chyawan Junior & Chyawanshakti). The reason behi behind nd this this rebr rebran andin ding g was was the the mark market et stag stagna nati tion on in the the Chya Chyawa wanp npra rash sh category. Dabur targeted the institutional markets by partnering with institutional clients (Discovery Channel, Mickey Mouse) which included hotels and airlines to increase its market share. It launched new packaging in several products to address the needs of the customers in a much more efficient manner. Not only it increased the top-line through higher volumes (low priced products are a hit among price-sensitive rural consumers) but it also increased the bottom-line through higher margins in these smaller SKUs. 16

With With a dive divers rsif ifie ied d kitt kitty, y, Dabu Daburr requ require ired d diff differ eren entt camp campai aign gns s for for diff differ eren entt segments. To resolve the issue, a lot of BTL activations were done so that it can reach reach direct directly ly to the consumer consumers s and also also solve solve the issue pertainin pertaining g to the segment. Some Some of such activations are as follows: HAIR OIL



Dabur Launched beauty and talent shows in Rural areas of Northern

India where it has considerable presence. Initiatives like "Banke Dikhao Rani Prat Pratiy iyog ogit ita" a" and and “D “Dab abur ur Vati Vatika ka Koya Koyall Pu Punj njab ab Di" Di" were were launc launche hed d to tap tap the the existing users and convert them into loyal customers of its brand. CHYAWANPRASH

Dabu Daburr

orga organiz nized ed Mobi Mobile le road road show shows s in asso associ ciat ation ion with with

  JAG JAGRA RAN N SOLU SOLUTI TION ONS S in 200 200 remo remote te vill villag ages es of UP UP.. It emph emphas asiz ized ed on Dire Direct ct Inte nteract ractio ion n

with ith

cons onsumer umers s,

giv giving ing

infor nform matio ation n

about bout

the the

bene beneffits its

of 

Chyawanprash in their everyday life and was backed by media coverage. Modern Modern trade also also allows allows more more space space and provid provides es an establ establish ished ed route route to launch new products. Modern trade accounts for about 5-10 per cent of urban sales for FMCG companies and this can go up to 25 per cent for southern markets. In the modern trade segment, Dabur has opened its retail subsdiary called H&B Stores Ltd. in NCR and South India. At present there are 11 stores functional and ther there e are are plan plans s of 12 stor stores es to be open opened ed in the the futu future re.. Dabur Dabur initiat initiated ed a progra programm mme e christ christene ened d DARE DARE (Driv (Driving ing Achiev Achieveme ement nt of Retail Retail Excell Excellenc ence) e) to improve its effectiveness in organised retail in 2009. For Dabur, about 3 per cent in 2008 of sales come from modern trade and it was expected to grow up to 7.5 per cent in 2010. CATEGORIES

PERSONA L CARE

HEALTH

Hair Oil Sham poo Oral care Skin care Diges tive

Mark   Market et Leader Shar e

16.0

55.0

Marico 36.0% HUL 45.4% Colgate 48.7% HUL 58.9% DABUR

60.3

DABUR

6.2 12.8 6.6

Majo Major r brand brands s of  Dabur

: : : :

Dabur Amla, Vatika Vatika, Dabur Total Dabur Lal, Meswak,Babool Gulabari, Fem Skin Hajmola, Candy Chyawanprash,

17

URBAN

INDIA

Growth

RURAL INDIA

Penetrati on 93%

Growt h 19.4%

Penetrati on 96%

20.2%

46%

13.3%

62%

9.3%

45%

8.0%

79%

6.1%

19%

NA

30%

NA

NA

NA

NA

NA

5%

8.75%

14%

2.5%

SUPPLEMENTS FOOD

45.0

DABUR

HOME CARE

20.0

Premium 31%

:

Glucose-D, Honey Real, Real Active, Real Burrst Odonil, Odom Odomos os,, Sain Sainii Fresh

10%

NA

30%

NA

20%

NA

58%

NA

Dabur’s acquisition of Balsara and Fem are largely to the fact that the products they deal have low penetration levels. The skin care segment stands at 19% and 30% penetration levels for the rural and urban levels respectively, which an attractive market is, given the rise in education, disposable income of the people living in rural India.  The food industry too is window of opportunity, where there is a penetration level of 10% in Rural India. With signs of slowing down of aerated drinks, Dabur can cash in the displaced consumers to its juice business. However the health supplement category is more of a worry than opportunity. Inspite of its presence in rural India and the category for over 50 years, Dabur has still not able to increase the penetration levels. As a result, market is stagnant for years, though there are signs of recovery in the past few years.

4.2.1 Dabur’s Rebranding Exercise In the year 2004-05 a whole new brand identity of Dabur was born. The old Banyan tree was replaced with a new, fresh Banyan tree.

  The logo was changed to a tree with a younger look. The leaves suggesting growth, energy and rejuvenation, twin colors reflecting perfect combination of  stability and freshness, the trunk represented three people raising their hands in   joy, joy, the broad broad trunk trunk symbol symbolize ized d stabil stability ity,, multip multiple le branch branches es were were chose chosen n to convey growth, and warmth and energy were displayed through the soft orange

18

color. ‘Celebrating Life ’ was chosen as a new tag that completely summarized the whole essence.

 4.3 Phase#3 –Information Technology Perspective By 2005 Dabur started to feel the pinch of maintaining two independent ERP systems. They were facing following issues: 1. There were were still still data redundanc redundancies ies and incons inconsisten istencies cies at times. times. 2. Cons Consid ider erab able le amou amount nt of rewo rework rk was was nece necess ssar ary y in just just data data form format at conversion between the two systems. 3. It stil stilll did did not not prov provid ide e a holi holist stic ic pict pictur ure e and and thus thus pose posed d prob proble lems ms in formulating a strategy or taking business critical decisions. 4. Maintenance Maintenance costs costs climbed climbed up up because because of the above above stated stated points. points.  Therefore, to realize not just the operational excellence but also decision support infrastructure, the idea of a single organization wide ERP implementation was proposed in Dabur. So, With Accenture’s help, Dabur implemented strategic and operational changes – by implementation of organization wide SAP core modules.

Major IT initiatives: 1. Migrated from standalone ERP systems - Baan and Mfg to centralized SAP

ERP system from 1 st April, 2006 for all business units (BUs). 2. Imple plement ented a coun countr try y wide wide new WAN infr infras astr truc uctu ture re for for runn runnin ing g centralized ERP system. 3. Setting Setting up of new new data data center center at KCO head office office in in Ghaziabad. Ghaziabad. 4. Extension of Reach system to distributors for capturing Secondary Sales

Data to collect near real-time pipeline information was done by 20041. 5. Roll Roll out of of IT servi service ces s to new new plants plants..

Benefits from these initiatives: 1. Increa Increase se in annual annual sales by 17% wherea whereas s increase increase in profits profits by over over 40% showing more operational efficiency and cutting down of costs.

1

19

2. The The dist distrib ribut utio ion n netw networ ork k expa expand nded ed by 19% 19% bring bringin ing g the the tota totall to abou aboutt 630,000 sales outlets. 3. Dabu Daburr esti estima mate ted d abou aboutt 6% of its its tota totall of 14% 14% grow growth th from from the the new new strategy alone, in the year 2007. 4. Accent Accenture ure provide provided d help help in merging merging the systems systems of the entit entities ies after after the Balsara merger.

Future Challenges: 1. Forward Forward integration integration of SAP SAP with distribu distributors tors and stockis stockists. ts. 2. Backward Backward integra integration tion of of SAP with suppliers. suppliers. 3. Imple Implemen mentat tation ion of new Point of Sale (POS) (POS) syste system m at stockis stockistt point point and integration with SAP ERP. 4. Imple Implemen mentat tation ion of SAP SAP HR and payro payroll. ll. 5. SAP roll out out to Dabur Nepal Nepal Pvt. Pvt. Ltd. Ltd. (DNPL) (DNPL) and other other business businesses. es.

 4.4 Phase#3 –HR Perspective Dabur rears a culture that gives full autonomy to its employees. It cares for the employ employees ees’’ develo developme pment nt along along with with the growt growth h of the organiz organizati ation. on. Dabur Dabur believes in nurturing a familial bond with its people by creating a harmonious and and valu value e base based d work work envi enviro ronm nmen entt that that enco encour urag ages es team team spiri spirit, t, and and also also rewarding individual initiative. It follows more of a paternalistic approach approach to care about about its employ employees ees.. It has implem implement ented ed various various traini training ng and develo developme pment nt progra programs ms like like Young Young Manage Managerr Develo Developme pment nt Progra Program, m, Prayas Prayas,, Leadin Leading g and Facilitating Performance, Campus to Corpora and a Balanced Scorecard approach to performance evaluation, have been implemented to help employees realize their potential.  The company believes that good HR policies, poli cies, by themselves, don’t create a great workplace. They need to be accompanied by ambition and a sense of daring. So, these new HR policies have also gone hand-in-hand with plenty of action on the business front. Dabur has made its brand identity more contemporary. It has also 20

taken taken the first first steps steps toward towards s becom becoming ing a true true multin multinati ationa onal, l, rather rather than than a company that does some international business.

•

Employee Employee Bonus: In 2005, Dabur gave Bonus to its employee employees s after after 12 years. It announced issue of 1:1 Bonus share to the shareholders of the comp compan any, y, i.e. i.e. one one shar share e for for ever every y one one shar share e held. held. This This boos booste ted d the the employee morale further.

•

  Young Young Manage Managers rs Develo Developme pment nt Progra Programme mme (YMDP (YMDP): ): Dabur Dabur has a twotwopron pronge ged d

appr approa oach ch

in

recr recrui uiti ting ng

dyna dynami mic c

prof profes essi sion onal als s

as

late latera rall

recruitments and the Management Trainee Engineer/Trainee recruitments at entry level level under YMDP. Each year, it is upgraded to make the learning experience more enriching and rigorous with a greater focus on functional and conceptual inputs and an objective learning evaluation system.

Acquiring Balsara: The people paradox   The deal created a lot of unrest but the biggest issue was, of course, people. Dabur already had 2,300 people on its rolls, while Balsara had 600. There was a huge chaos as there was no room for any duplication for posts. Though Dabur did not retrench anybody, but close to 300 people quit. These exits were the most painful part of Dabur India's acquisition of the Balsara group's hygiene and home products business. A number of people quit citing locational constraints as Balsara is a Mumbaibased company, while Dabur is headquartered at Sahibabad, near Delhi. Despite of these problems, some areas were integrated smoothly. For example Balsara's R&D team was seamlessly absorbed into the larger organization. Dabur had no experienc experience e in home care, which made integration integration of that division invaluable invaluable on the the

othe otherr

hand hand the the

oral oral care are

res researc earch h

div divisio ision n

pos possess essed skills ills tha that

complemented Dabur's own team. Even the manufacturing facilities didn't pose too many problems. The fact that neither of the organizations were unionized helped as well. It aided in decision making making about about Balsa Balsara' ra's s three three plants plants -- at Silvas Silvassa sa (Dadra (Dadra & Nagar Nagar Haveli Haveli), ), Kanpur Kanpur (Uttar (Uttar Prades Pradesh) h) and Baddi Baddi (Himac (Himachal hal Prades Pradesh) h) much much easier easier.. Also Also the Kanpur factory was a small scale factory, with just 10 workers hence the decision to stop manufacturing there didn't cause too much disruption.  The Silvassa plant was overstaffed with 100 workers, hence about 30 of them were were shif shifte ted d to Badd Baddi, i, a new new fact factor ory, y, wh whic ich h was was unde unders rsta taff ffed ed at just just eigh eightt employees, thus solving two problems. 21

Following Dabur policies at Balsara did mean some expense. Salaries were hiked to bring them in line with the Dabur structure; and external consultants were brought in to conduct detailed assessments of all employees and redeployments were made on the basis of their recommendations.

Major issues   The The majo majorr port portio ion n of trou trouble ble for for the the HR divi divisi sion on lay lay with with sale sales. s. Befo Before re the the acquisition two distinct distribution networks were in place at Dabur. While the decision was taken to aggregate the smaller business into Dabur's infras infrastruc tructur ture, e, suitab suitable le modifi modificat cation ions s were were also also necess necessary ary.. Dabur' Dabur's s origina originall distribution was along two verticals: Line 1 for health care and Line 2 for personal care. Now, with new product portfolios coming in, a third line was created that to look after home care and all oral care (including Dabur's range) products. Dabur's consumer care frontline was made to have a total of 400 people, of  whom whom 120-odd 120-odd were from from Balsa Balsara. ra. Had Dabur Dabur contin continued ued with just just two lines Balsara may not have got the required focus. Since Line 3 covered Dabur and Balsara products, managed by employees of  both organisations, substantial re-training in selling techniques to match up with that of Dabur was also required. Using the "train the trainer" module, about 55 managers conducted workshops for sales staff across the country. Dabur had to invest in several thousand manhours of training. Inspite of the above mentioned factors that year's wage bill was likely to be 50 per cent lower than last year's. While the departures have meant huge savings in staff expenses, recruitment cost costs s also also came came down down acros across s the the grou group, p, sinc since e Bals Balsar ara a peop people le help helped ed fill fill vacancies in group companies.

Challenges faced in the modern era Dabur is a hundred year old organization. For such an old organization to be successful in changing times it must innovate continuously and evolve over a period of time. This requires modernization in practically every aspect. But such an initiation requires a very difficult milestone to be achieved, i.e. changing mindset of the people associated with the company.  There were people who had been in the company for long, and were used to doing things in a certain set way. To overcome this challenge, the management ran ran a comp compar aris ison on betw betwee een n both both,, conv conven enti tion onal al ‘as ‘as per per my expe experi rien ence ce’’ perspe perspecti ctive, ve, and a more more system system-an -and-f d-fact acts s based based decisio decision-m n-maki aking ng model, model, on 22

computer-generated programs. This let the organization clearly see realistic and practical answers to the questions raised with regards to modernization.

PEST Analysis of Dabur India Limited (Period 2005 2 005 onwards) Political Factors

 The key factors that have triggered growth for the FMCG industry in the peri period od incl includ ude e redu reduct ctio ion n in exci excise se duti duties es,, rela relaxa xati tion on of lice licens nsin ing g restrictions and reduced dominance of unorganized sector due to creation of level playing field. With the revival in demand in the FMCG sector and capacity planning done by all major FMCG companies in tax haven areas the future looks promising. Also, the government thrust on agriculture and rural economy has facilitated improved demand for the FMCG products.   The The hair hair oil oil indu indust stry ry is witn witnes ess s to a larg large e amou amount nt of unbr unbran ande ded d oil oil manufacturers that account for nearly half of the total coconut oil market.  This also provides a significant upside potential for companies like Marico and Dabur. The implementation of  Value added tax is also expected to tilt the balance in favor of organized players. Given the fact that there is only a moderate scope for differential in coconut oil segment, the players conc concen entr trat ated ed on valu value e adde added d oils oils like like Amla Amla,, Bada Badam m and and so on. on. The The addition of these high margin products in the portfolio also leverage the play player ers s agai agains nstt the the no fril frills ls coco coconu nutt oil oil segm segmen ent. t. They They have have been been successful in the venture with brands like Vatika, Dabur Amla (Dabur) and Hair & Care (Marico) firmly rooted in the markets. While the coconut oil brand of Marico, 'parachute' grew by 8% in volumes in FY '05, the growth of value added oils like Sampoorna, Shanti Amla and Hair & Care has been comparatively faster at 14%. Even for Dabur, the flagship brand 'Dabur Amla' reached a milestone in FY '05 by crossing a turnover of Rs 200 crore and registered a 16% growth. This speaks of the success of the value added products. In 2008-09, finance minister’s decision to reduce CENVAT rate to 14% was in line with the GST roadmap, and this coupled with lower income tax 23

incid incidenc ence e on indivi individua duals ls will will accele accelerat rate e dispos disposabl able e income incomes, s, and thus thus augurs well for the FMCG sector. Economic Factors

Better reforms and investment policies attract foreign investments, which ultimately improves the standard of living of the people in that country. With improved standard of living more and more consumers prefer using bran brande ded d FMCG FMCG prod produc ucts ts wh whic ich h have have so far far rema remain ined ed an aspi aspira rati tion on.. Cons Consum umer ers s wh who o are are alre alread ady y usin using g bran brande ded d prod produc ucts ts will will upgr upgrad ade e themselves to premium products. We could expect similar recovery in our economy in the FMCG segment in the coming years. FMCG FMCG sect sector or is goin going g to be in the the lime limeli ligh ghtt with with stro strong ng econ econom omic ic fundamentals, rising demand and a growing GDP. The future growth is expected to come from newer segments such as the youth and through increased rural and small town penetration. The Internet and e-commerce will change the dynamics of this industry helping companies improve their procurement, distribution and selling efficiencies. FMCG market remains highly fragmented with almost half of the market representing unbranded, unorganized sector products. This presents a tremendous opportunity for makers of branded products who can convert consumers of unbranded products to branded products. In the scheme of things, ‘Dabur Foods Limited' was merged with Dabur India Ltd. in 2007. It was now an over Rs 2,200-crore entity including the Rs 200200-cr cror ore e from from Dabu Daburr Food Foods. s. It thus thus beca became me one one of the the busi busine ness ss divisi divisions ons of Dabur Dabur India, India, alongs alongside ide consum consumer er care care divis divisio ion n (CCD) (CCD) that that enco encomp mpas asse sed d all all the the pers person onal al care care and and home home care care prod produc ucts ts,, and and consumer health division (CHD). Dabur also made retail venture under the healt health h and beauty beauty format format,, throug through h its wholl wholly y owned owned subsi subsidia diary, ry, H&B H&B Stor Stores es.. It envi envisa sage ged d sell sellin ing g prod produc ucts ts rang rangin ing g from from pers person onal al care care,, cosmetics, baby care to over-the-counter drugs. Social Factors

24

In 2004, the frequency of usage of oral care products in India as compared to developed world was very low, giving scope for growth to the sector. Per capita consumption of toothpaste in the country was only 70 gm compared with 300 gm in Europe and 150 gm in Thailand. Also, a critically low dentist to population ratio in our country, results in low oral hygiene consci conscious ousnes ness s and widesp widespre read ad dental dental diseas diseases. es. This This provid provided ed a good good opportunity to expand the market and encourage people to use modern dentifrice to improve oral hygiene. Moreover, it is one of the larger players in the toothpowder category. Howe Howeve verr the the comp compan any y is witn witnes essi sing ng nega negati tive ve grow growth th rate rates s in the the category, category, as there seems to a shift shift of the consumer consumer from toothpowder toothpowder to toothpaste segment. The company is compensating for the loss in the category by launching Dabur Red toothpaste that has grown into Rs 50 crore brand in two years of its launch. It was also worthwhile for Dabur India Ltd. to consider inorganic growth. Even Even though though Balsar Balsara a (with (with brands brands Promis Promise, e, Meswa Meswak, k, Babool Babool etc.) etc.) was maki making ng loss losses es,, it did did poss posses ess s syne synerg rgie ies s with with the the grow growin ing g oral oral care care business of Dabur. Dabur estimated the market for this category to be Rs. 2500 crores growing @ 10% p.a., which made the market very lucrative.  Thus, acquiring Balsara was an obvious step to grow inorganically.  The penetration levels of shampoo are abysmally low in the country. The penetration in urban areas is around 65% while it’s just 35% in rural areas. Also the per capita consumption of shampoo is just 16 ML compared to 1000 ML in UK and US. This provides an opportunity to the players to impr improv ove e the the mark market et and and thei theirr size size.. The The Indi Indian an sham shampo poo o mar market ket is characterized by sachets. Around 70% of total shampoo sales are through sachets. The general trend in the international markets is to introduce a brand through sachets and thereafter upgrade the consumer to bigger bottles. Dabur thus shifted gears to anti-dandruff shampoo (Dabur Vatika anti-dandruff shampoo) in 2004. It also relaunched brand Vatika in 2007. Technological Factors 25

 The market size of bleach products in India is around Rs 85 crore and is growing at 15% with Fem holding 60% market share in it. The market size of hair removing cream is around Rs 110 crore and is growing at 22% with Fem having around 7% market share. The liquid soap market size in India is around Rs 50 crore and is growing at 25%, where Fem has 2 main competitors, Dettol and Lifebuoy. In 2009 2009,, Dabu Daburr acqu acquir ired ed 72.1 72.15% 5% stak stake e in Fem Fem Care Care to prov provid ide e the the company with the technology to enter high-growth skin care market with an established brand name 'FEM'. Apart from Fem bleach, other popular brands by the firm are Oxybleach cream, Botanica anti-ageing cream, Stratum colour protecting hair conditioners, SAKA men's bleach and Bambi fabric softeners. Fem is world leader in bleaching cream category by tonnage. Fem brand is very well placed in India and aboard. With this acquisition, Dabur will become key player in skin care category. Fem has reach of around 25000 parlours, which can be leverage by Dabur for promoting its own Gulabari skin care products and its Vatika brand. Dabur was thinking of launching its products into ayurvedic skin care category, will delay its launch by coup couple le of mont months hs due due to acqu acquis isit itio ion. n. The The comp compan any y will will cont contin inue ue its its initiative in skin care category through Gulabari, its ayurvedic products which will launch shortly and through Fem.

Operations Strategy of Dabur India Limited  The Operations Strategy of Dabur India Limited has changed as their business has evolved over time. The section below tracks the various key operations strate strategy gy such such as the Manufa Manufactu cturing ring ( proces processe ses s involv involved ed and locati locations ons), ), the Supp Supply ly chain chain init initiat iativ ives es over over the the year years, s, Inve Invent ntor ory y Mana Manage geme ment nt,, Qual Qualit ity y Management Management,, Research Research and Developme Development nt Initiative Initiatives, s, Procureme Procurement nt procedure, procedure, Vendor Management etc over the time frame from late 1990s till 2009. The sectio section n highli highlight ghts s the the key definin defining g operat operation ional al strate strategie gies s adopte adopted d by the company during this period.

Manufacturing

26

By the year 2002-03 the company had 6 manufacturing facilities at Sahibabad (Uttar (Uttar Pradesh), Pradesh), Baddi (Himachal (Himachal Pradesh), Pradesh), Alwar (Rajasthan), (Rajasthan), Katni (Madhya Pradesh), Kalyani and Narendrapur (West Bengal). The APIs and formulations of  the Company are manufactur manufactured ed in-house in-house at Kalyani, Kalyani, Sahibabad and Baddi. Baddi. Fifty per cent of FMCG products, comprising the Health care products and Ayurvedic spec specia ialit litie ies s port portfo folio lio,, are are manu manufa fact ctur ured ed in-ho in-hous use, e, wh whil ile e the the Pers Person onal al care care products portfolio, which accounts for the remaining 50 per cent, are out-sourced to eight contract manufacturers. Dabur was in the process of setting up a manufacturing facility at Jammu, for manufacturing Personal care products. Jammu had been selected as the new site in order to avail fiscal benefits offered for setting up manufacturing facilities in that location. Dabur has been giving considerable considerable emphasis emphasis on improving improving manufacturing manufacturing and oper operat atio iona nall effi effici cien enci cies es.. Du Durin ring g the the year year unde underr revi review ew,, Dabu Daburr focu focuse sed d on enhancing productivity of capital and existing assets, improving plant efficiencies in the exist existing ing manufa manufactu cturin ring g facilit facilities ies and follow following ing more more string stringent ent qualit quality y contro controll and superv supervisi ision on norms norms at outsou outsourci rcing ng locati locations ons.. Standa Standardis rdisati ation on of  processes, tight budget controls and energy audits constituted some of the other initiatives undertaken by the Company to improve its operational performance. As a result of these measures, operating profit margin (excluding other income) of the Company had improved from 9.2 per cent in 2001-02 to 10.3 per cent in 2002-03. The chart below shows the continuous improvement of the Company’s productivity (defined as value of sales per worker), from 1998-99 to 2002-03. Productivity increased by almost 18 per cent, from Rs.28 lacs per worker in 200102 to Rs.33 lacs per worker in 2002-03, mainly due to better shop floor practices, lower breakdowns and improved efficiency in energy use. Wastage on the shop floor had reduced by more than 20 percent in 2002-03 2002-03 over 2001-02.

Source: Dabur Annual Report 2002-03

In 2002-03, Total Quality Management (TQM) techniques were implemented on a pilot basis at two plants in the area of statistical process control. The purpose of  implementing TQM was to achieve lower rejection of raw materials, time savings, and make the procurement process more efficient. The Company had plans to 27

impl implem emen entt TQM TQM for for othe otherr func functi tion onal al area areas s in the the futu future re.. In addit addition ion,, Tota Totall Production Maintenance (TPM) measures were initiated in two locations in 200304, and hence TPM has become an integral part of the production processes of  your Company. This initiative is aimed at improving the productive efficiency of  capital assets In 2004-05, 2004-05, Dabur successfully successfully commissio commissioned ned its largest largest and state-of-th state-of-the-art e-art manufacturing facility at Rudrapur, Uttaranchal. It was set up in a record time of  four months, the plant was used to manufacture Chyawanprash, Hajmola tablets, Amla hair oil, Vatika hair oil, Lal Tail and Janam Ghunti. While the Rudrapur faci facilit lity y enjoy enjoyed ed simi simila larr fisc fiscal al bene benefi fits ts as the the Jamm Jammu u and and Badd Baddii plan plants ts,, the the Company remained focused on leveraging higher operational efficiencies and supe superi rior or qual qualit ity y leve levels ls from from this this plan plant. t. Dabu Dabur’ r’s s Jamm Jammu u plan plantt wh whic ich h was was comm commis issi sion oned ed in 2003 2003,, was was util utiliz ized ed to manu manufa fact ctur ure e hair hair oils oils,, sham shampo poos os,, Gulabari, Kewra water and intermediaries. This plant featured a modern and comp compac actt shop shop floo floorr desi design gn,, lean lean orga organi niza zati tion on stru struct ctur ure, e, impr improv oved ed syst system em processes and stringent quality control norms. Higher batch sizes and larger scales of production at this facility contributed to major improvements in product quality, consistency and productivity. As a result of the Balsara acquisition in the fiscal year 2004-05, Dabur added three more manufacturing facilities to its fold, located at Silvassa, Baddi and Kanpur. Kanpur. While While the Silvas Silvassa sa and Kanpur Kanpur facilit facilities ies were were primari primarily ly engage engaged d in manufacturing household range of products and the private label business, the Baddi plant produced oral care products, including fluoride based toothpaste.   This plant was set up in 2004-05 and enjoyed greater tax benefits as were available to new units in Himachal Pradesh. Dabur Foods’ multi-fruit processing facility at Siliguri, West Bengal, became fully operat operation ional al during during the year. year. The plant plant produc produced ed pulp pulp and concen concentra trates tes and brought the Company a step closer to achieving full backward integration and realising the resultant cost efficiencies.  The location location of this plant was a major source of its competitiv competitive e strength. It was located at the heart of a major fruit-producing and trading area, thus, giving it acce access ss to a varie variety ty of frui fruits ts incl includ udin ing g litch litchi, i, guav guava, a, mang mango o and and toma tomato to at competitive prices. Moreover, it was in close proximity to the Dabur Foods’ juice plant located in Nepal, thereby reducing time and cost of transportation. In 2004-05, Dabur Foods acquired a new facility near Jaipur for manufacturing fruit juices. The plant had manufacturing facilities for 200 ml packs. This plant was upgraded to manufacture 1 litre and 200 ml packs of ‘Real’ brand of fruit  juice and the ‘Coolers’ range of products.  The success of DIL's manufacturing lies in is its ability to regularly produce and meet meet requir requireme ements nts of the sales sales plan. plan. This This is achiev achieved ed throug through h an effici efficient ent production planning system that is a part of the overall supply chain initiative called project Garuda. The initiative has helped reduce stocks and, therefore, requirement of space with the CFAs. The ability to sustain much higher levels of  growth with the same level of inventory as 2006-07 bears testimony to efficiency of DIL's production and supply chain system.

Supply Chain Initiatives at Dabur India Limited  1) In 2001 2001,, Dabu Daburr deci decide ded d to tack tackle le its its exte extend nded ed supp supply ly chai chain n of over over 30 factories, six key warehouses, and 52 stocking points distributing over 1,000 28

SKUs SKUs to 10,0 10,000 00 stoc stocki kist sts s coun countr tryw ywid ide. e. The The comp compan any y need needed ed a syst system em to accurately control distribution and sales forecasting to reduce inventory in the pipeline.A2 Dabur built a system using Visual Basic and ASP with SQL Server 2000 as the database. Dabur had purposely decided not to use a packaged SCM solution due to high high cost cost.. Fift Fiftyy-fi five ve Ku Band and TDMA TDMA VS VSAT ATs s were were used used to link link prim primar ary y distributors to the system. Factories were hooked up using PAMA (Permanent Assi Assign gned ed Mu Mult ltip iple le Ac Acce cess ss)) VS VSAT ATs. s. At some some loca locati tion ons s VP VPNs Ns had had to be used used because it was not possible to set up a dish. The zonal offices in Mumbai were hooked up in a similar manner.  The hardware was mostly owned by the primary CFA (Carry and Forward Agent) except for the networking equipment, which was owned by Dabur. A  The integrated primary and secondary system had a number of unique features.  The features included 

tight integration of schemes



stockists credit limit control



automated banking of cheques



online cheque reconciliation

 The incorporation of these top stockists into its supply chain was a first for any FMCG company in India. A 'My Page' feature allowed the dealer to "see if the details of yesterday for intransi transitt shipme shipments nts,, carrie carrierr inform informati ation, on, copies copies of orders orders,, accoun accountt status status,, the status status of check checks, s, credit credit notes notes and dealin dealing g with with compla complaint ints” s”.. The integr integrate ated d system allowed each Area Manager to plan for the month's sales forecasts, stockists performance, and sales officers' performance.  The integration allowed better control on pipelines in primaries and secondaries, brings brings down down invent inventori ories, es, and offers offers better better contro controll on produc productio tion n and sales sales against a confirmed forecast. The BenefitsA

By integr integrati ating ng its primary primary and secon secondar dary y supply supply chains chains,, Dabur Dabur intend intended ed to reduce the days of inventory carried in the pipeline by four days from the present 29 days. The main aim was to save Rs 5 crore by means of this system. Beyond this, the system could forecast seasonal spikes in sales and manufacture accordingly. The aim was to shift focus to the stockists rather than the CFAs to get a true picture of what's happening in the market and react faster.

2A

http://www.networkmagazineindia.com/200312 http://www.networkmagaz ineindia.com/200312/events05.shtml /events05.shtml

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2) Efficient supply chain management had always been critical to Dabur, which markets over 600 SKUs. The supply chain integrates a wide range of functions encompass encompassing ing production production scheduling scheduling to materials materials planning planning and procuremen procurementt to primary distribution. Information Technology (IT) has played a major role in strengthening the supply chain chain mana manage geme ment nt by impr improv ovin ing g oper operat ation ional al effi effici cien enci cies es in procu procure reme ment nt,, production and delivery systems. With the implementation of Baan and Mfg Pro, supp supply ly chain chain mana manage geme ment nt has has bene benefi fite ted d from from stab stable le and and more more effi effici cien entt production planning on the basis of accurate secondary sales and stock data. Efficie icien nt supply chain management has enhanced the flexibilit ility y of  operations operations;lowe ;lowered red operation operation cycles cycles and finished finished goods inventorie inventories;red s;reduced uced delivery costs, while improving customer-servicing levels. In addition to meeting tight tight budget budgetary ary contro controls, ls, these these improv improvem ement ents s have have result resulted ed in substa substantia ntiall reduction in costs due to freeing up of extra working capital. Dabur had over 500 vendors through which they source their raw materials. During During 2002-03 2002-03,, the Compan Company y follow followed ed a strate strategy gy of rationa rationalisi lising ng its vendo vendorr base. base. The Compan Company y also also appoin appointed ted Freema Freemarke rkets, ts, a leadin leading g e-proc e-procure ureme ment nt company,to assist the Company in implementing its e-sourcing initiatives. During the year, year, the Compan Company y conduc conducted ted succes successfu sfull revers reverse e auctio auctions ns for two raw materials – saffron and  jadi-booti – as well as for fixing freight rates. These initiatives resulted in a saving of around 7 per cent to 8 per cent on current prices of these raw materials. The Company adopted plans to procure more products through the the reverse auction route. This This initiative would would help rationalise and upgrade the vendor base of the Company, while at the same time result in substantial savings and greater transparency in the procurement process. 3) During the year 2004-05, Dabur continued to realize procurement efficiencies and reduce its input costs in spite of inflationary pressures. In fact, Dabur was one of the few companies in the FMCG industry which had reduced its input costs consistently over the last few years by focusing on high degree of skills in the area of procurement and materials management. Through usage of innovative proc procur urem emen entt stra strate tegi gies es and and mode modern rn fore foreca cast sting ing and and rese resear arch ch tool tools, s, the the Company’s material cost as percentage of sales came down from 43.7 percent in 2003-04 to 42.9 per cent in 2004-05. During Duri ng the the year year the the Comp Compan any y succ succes essf sfull ully y depl deploy oyed ed the the ‘Spe ‘Spend nd Visi Visibi bilit lity’ y’ prog progra ramm mme e in colla collabo bora rati tion on with with ‘Ari ‘Ariba ba’’ (ear (earlie lierr Free FreeMa Mark rket ets) s) to furt furthe herr strengthen its procurement efficiencies. This program had significantly enhanced the quality of information and visibility in sourcing priorities of the Company. 4) The Company was also intent upon creating a backward integration platform for herbal inputs, especially those on the endangered list. To this end, Dabur made ade a foray oray int into cont contra rac ct farm farmin ing g for for selec lected ted herb herbs s as part part of the the Agro Ag robi biot otec echn hnol olog ogy y init initiat iativ ive. e. Un Unde derr this this init initiat iativ ive, e, a numbe numberr of back backwa ward rd integ integra rati tion on prog progra ramm mmes es had had been been set set up in An Andh dhra ra Prad Prades esh, h, Tami Tamill Nadu Nadu,, Haryana, Uttar Pradesh, Himachal Pradesh, Uttaranchal , Jammu and Kashmir and Nepal Nepal to develo develop p sustai sustainab nable le cultiv cultivati ation on of these these engen engender dered ed specie species s throug through h contra contract ct farmin farming g and buy back back arrang arrangeme ements nts.. Dabur Dabur entere entered d into into 30

contra contract ct farmin farming g agreem agreement ents s with with farmer farmers s throug through h a local local coordi coordinat nator. or. The Comp Compan any y also also orga organi nize zed d qualit qualityy-pl plan anti ting ng mate materi rial al with with prom promis isin ing g gene geneti tic c potential potential to farmers farmers on no-profit-no no-profit-no-loss -loss basis and provides provides additional additional technical technical support. 5)” Project Garuda “was launched by DIL in the year of 2006, along with the software software services major “ Accenture” Accenture”.. Project Project Garuda was expected expected to improve improve business and capital efficiency and reduce working capital requirements. Other important benefits of the project would have been to decrease the total delivery costs and a supply chain system which would VAT-compliant, which came force in 2005.

Procurement  Controlling costs in the inflationary scenario was one of the biggest challenges faced by DIL over over the years. years. The company effectively effectively tackled this this challenge on the the stre streng ngth th of its its stra strate tegic gic futu futuri rist stic ic plan planni ning ng,, use use of calib calibra rate ted d hedg hedging ing mechanisms and e-sourcing initiatives. One of the key factors that enabled the Company Company to keep costs under control was the short and medium-term medium-term planning programme that ensured regular forecasts from its team of strategic planners within within each division and departanen departanent. t. Three-mont Three-month h forecasts forecasts on the industry scenario were provided by these planners to the brand teams for taking effective measures measures to combat combat inflation. inflation. Concurrently the creation of a Dabur Inflation Basket focusing on the commodities most relevant to the Company's operations helped maintain and manage costs effectively. The Dabur Inflation Basket, which was linked to WPI( whole sale price index), helped the Company come out with actual Inflation figures that enabled it to plan ahead in a more focused manner.

Quality  Dabur remains resolute in its commitment to enhance quality levels across its produc productt portfo portfolio. lio. In this this regard regard,, over over the last few few years, years, the Company Company has maintained a sharp focus on upgrading technology and improving manufacturing proc proces esse ses s at all all its its plan plants ts.. As part part of its its qual qualit ity y assu assura ranc nce e prog progra ramm mme, e, it undertake undertakes s regular regular factory factory quality quality audits by trained trained quality quality auditors, auditors, ensures ensures compliance with ISO 9000 procedure and implementation i mplementation of established standard operating procedures across its manufacturing bases. Examples

  Through Through significant significant technological technological up-gradation up-gradation,, the manufactur manufacturing ing process process of  Hajmol Hajmola a Anarda Anardana na Goli Goli was made free free from from human human touch, touch, thus, thus, bringi bringing ng in impr improv ovem emen entt in hygi hygien ene. e. The The prod produc ucti tion on proce process ss of Hajo Hajoml mla a cand candy y was was upgraded to convert the product into depositor form, thus giving it a smoother finish. 31

 The Honitus and Nature Care product lines at the Baddi plant was set-up to meet appropriate standards of safety, quality, performance and effectiveness as set by Medicines and Healthcare Products Regulatory Agency (MHRA) — the executive agency of the Department of Health, Government of UK. Apart from this, the plants plants manufact manufacturin uring g Chyawa Chyawanpr nprash ash,, Glucos Glucose e and Honey receiv received ed Hazard Hazard Analysis Analysis and Critical Critical Control Control Point (HACCP) certifications. certifications. Dabur Honey has

stringent measures of quality. The process of making honey has been mechan mechanis ised ed comple completel tely y and the final final produc productt confir confirms ms the statut statutor ory y requirements of Agmark and the PFA. Dabur, in order improve its production and operation management, has gone into kaizen, automation, debottlenecking and wastage control. Food products industry is something which needs primary emphasis on quality improvement and standard control. This has been achieved in Dabur India also.

Research and Development  Dabur Dabur with with its rich rich experi experienc ence e in healt health h care care and consum consumer er produc products ts indu indust stry ry has has its its know knowle ledg dge e base base and and rese resear arch ch as its its main main asse asset. t.  Traditional Ayurvedic products had been the primary focus of Dabur India and it continues to take advantage on the value by effective Research and Development. This has been facilitated by Dabur Research Foundation whic wh ich h was was set set up in 1979 1979.. The The rese resear arch ch faci facili liti ties es in the the rese resear arch ch foundation are modern and there are scientists from all the relevant fields to contribute to the research and innovation process.   The The rese resear arch ch not not only only focu focuse ses s on upgr upgrad adin ing g the the curr curren entt cons consum umer er products but also to make a mark on highly specialised areas and in signific significant ant aspects of health health care like cancer therapy. therapy. There are over ten diverse areas in which Dabur Research Foundation carries out research besi beside des s cond conduc ucti ting ng test tests s and and tria trials ls.. They They are are Ay Ayur urve vedi dic c Rese Resear arch ch,, Phar Ph arma mace ceut utic ical al rese resear arch ch,, Phyt Ph ytop opha harm rmac aceu euti tica cals ls,, Biot Biotec echn hnol olog ogy, y, Agro Ag rono nomy my,, Pers Person onal al care care prod produc ucts ts,, anal analyt ytic ical al,, synt synthe heti tic c chem chemis istr try, y, oncology research, peptide research, food research and clinical research. It coul could d be obse observ rved ed that that befo before re 1994 1994,, the the Rese Resear arch ch proc proces ess s was was concentrated in healthcare and such products and after the Joint ventures from from 1995 1995,, we coul could d obse observ rve e that that the the rang range e of rese resear arch ch has has been been diversified which would be analysed in detail later.

32

Vendor Management 3 Dabur Dabur is in continu continuous ous proces process s of develo developin ping g strong strong vendo vendorr base base for varied varied vari variet ety y of item items s proc procur ured ed.. Ever Every y vend vendor or is rate rated d year yearly ly on the the basi basis s of  parameters laid down to gauge vendor performance. Vendors are communicated about the same with an objective to improve their performance and build long term relationship. Suppliers of quality items procured by Dabur have been welcomed to furnish details details of their their produc products ts,, establ establish ishmen mentt and other other parame parameter ters s as menti mentione oned d in Ven Vendor dor Reg Regist istrat ration ion For Form m. A wellell-de defi fine ned d proc proces ess s has has been been laid laid out out for for qualification of a supplier as Approved Vendor. It includes obtaining samples from suppliers suppliers for quality quality assurance assurance and visit of Dabur team to vendor vendor location. location. Quality parameter of inputs, which in turn determine the quality, and cost of  output is laid down meticulously for each items and strictly followed and adhered to in procurement process. 3

Corporate Governance Corpor Corporate ate Govern Governanc ance e refers refers to the blend blend of law, law, regula regulatio tions ns and volunt voluntary ary practices that are able to attract the best of capital and talent. Strong corporate governance is indispensable for safeguarding the interests of shareholders and other stakeholders. Excellence Excellence in governance and superior financial performance go han hand d in han hand. d. Dab Dabur ur is a st stron rong g pro propon ponent ent of eff effort orts s tow toward ards s imp improv roving ing transparency in operations.  The Burman family - promoters of Dabur - has reduced its strength on the Board of Directors to 4 mem members bers and provid provides es only broad policy guidelines guidelines for growt growth h and an d div diver ersi sifi fica cati tion on.. Th The e pr prom omot oter ers s pr prov ovid ide e th the e st stra rate tegi gic c di dire rect ction ion to th the e Company and the group, besides evaluating newer avenues for growth. In 2004 itself, Dabur came up with a process of performance evaluation system for for its its boar board d of dire direct ctor ors. s. As per per the the proc proces ess, s, an eval evalua uati tion on comm commit itte tee e comprising its 10 board members will assess the performance of each board member including Chairman VC Burman, Vice-chairman Dr Anand Burman and other directors.  The three broad areas around which the board members will be evaluated are: t he

guiding

strategy;

monitoring

management

performance

and

development/compensation development/compensation and statutory compliance and corporate governance. 3

http://www.dabur.com/ 33

Within that, each member will have to score on various parameters like role in defining defining the mission, policies policies and long-term goals/plan goals/plan for the company; company; role in setti etting ng up annua nnuall bus busines iness s plan plan;; role role in repo report rtin ing g majo ajor

perf erform ormance ance

deficiencies; role in succession planning for senior management and others. Besides above, the other initiatives of Dabur on corporate governance include: •

Professionalization of the board

•

Lean and active Board (reduced from 16 to 10 members)

•

Less number of promoters on the Board

•

More professionals and independent Directors for better management

•

Governed through Board committees for Audit, Remuneration, Shareholder Grievances, Compensation and Nominations

•

Meets all Corporate Governance Code requirements of SEBI

Dabur-Sustainability Conservation of natural resources and the environment is of great importance at Dabur. Dabur. Dabur Dabur incorp incorpora orates tes the concep conceptt of sustai sustainab nabilit ility y by a three three pronge pronged d approach:

a) Conservat Conservation ion of of Energy Energy Dabur has been undertaking a host of energy conservation measures like use of bio-fuels bio-fuels in boilers, boilers, generation generation of biogas and installatio installation n of energy effi effici cien entt

equi equipm pmen ent. t.

Succe Success ssfu full

impl implem emen enta tati tion on

of

vari variou ous s

ener energy gy

cons conser erva vati tion on proj projec ects ts have have resu result lted ed in a 13.8 13.8% % redu reduct ctio ion n in the the Company’s energy bill in the 2008-09 fiscal alone. This reduction has

come despite an 8-9% volume increase in manufacturing, and an average 11.7% increase in cost of key input fuels. These measures helped to lower the cost cost of produc productio tion, n, besid besides es reduce reduce efflue effluent nt and improv improve e hygien hygiene e conditions & productivity.

b) Technology Technology Absorption Absorption Dabu Daburr has has also also made made cont continu inuou ous s effo effort rts s towa toward rds s pres preser ervi ving ng natu natura rall resources by technology absorption and innovation, like: 34

•

Improv Improveme ement nt in water water treatm treatment ent plant plant throug through h introd introduct uction ion of RO (Reverse Osmosis) system for DM water, reutilization of waste water from pump seal cooling and RO reject waste-water management

•

Introduction of water efficient CIP system with recycling of water in fruit  juice manufacturing

•

Minimum use of water in process by pre-concentration of herbal extract and reduction in concentration time

•

Development of in-house technology to convert fruit waste into organic manure by using the culture Lactobacilus burchi

•

Unif Un ifor orm m heat heatin ing g in VTDs VTDs by hot hot wate waterr as agai agains nstt stea steam m earli earlier er,, resulting in 30% reduction in bulk wastage by using non-stick coating and formulation change

  The The Compan Company y has achiev achieved ed a host host of signif significa icant nt benef benefits its in terms terms of  produc productt improv improveme ement, nt, cost cost reduct reduction ion,, produc productt devel developm opment ent,, import import substitution, cleaner environment and waste disposal by these measures.

c) Health Health Safety Safety & Environm Environmenta entall Review Dabu Daburr addr addres esse ses s to the the safe safety ty of its its thre three e core core reso resour urce ces s – Peop People le,,   Techn Technolo ology gy and Facilit Facilities ies by having having a dedica dedicated ted “Safet “Safety y Manage Manageme ment nt   Team” Team”,, that that would would not only only work work toward towards s the preventi prevention on of untowa untoward rd incidents at the corporate and unit level, but also educate & motivate employees on various aspects of Health, Safety and Environment. Other efforts include: •

Continuously monitoring its waste in adherence with the pollution control norms

•

Cons Conser erve ve and and main mainta tain in the the grou ground nd wate waterr leve levell by rain rain wate waterr harvesting

•

Initiated a Carbon footprint study with an aim of becoming becoming a carbon positive company in near future

35

Porter’s Five Forces Model for Dabur 1) Threat of competitors •

•

•

•

 The threat of competitors is high because there are a lot of players in the Market.  The ayurvedic platform is also being used by other players like Emami and Ayur. Premiu Premium m person personal al care care produc products ts face face compet competitio ition n from from intern internati ationa onall brands as well as boutique products. Exis Existi ting ng play player ers s are are ente enterin ring g new new segm segmen ents ts wh whic ich h will will incr increa ease se the the competition e.g. Casper entering the vaporizer segment and Good Knight the personal spray and gel segment.

2) Threat of New Entrants •

•

•

In case of home care segment the entry barriers are low since the costs to set up manufacturing facility is not very high.  The exit barriers are low and thereby firms can enter and exit easily. But the entry barriers in terms of building a national brand as well the distribution network is high. So is the exit barrier.

3) Threat of Substitute Products •

•

Substi Substitut tutabi ability lity is highes highestt in Food Food catego category ry follow followed ed by Person Personal al care care category, where product innovation is high Home Home grow grown n and and trad tradit itio iona nall subs substi titu tute tes s to Home Home care care prod produc ucts ts e.g. e.g. traditional insect repellents.

4) Threat of Buyers Bargaining Power •

•

•

 The buyer’s bargaining power is low since they cannot influence the prices to such a great deal. Even in case of Modern trade the buyer’s bargaining power is moderate as it generates less than 10% of FMCG sales. Price sensitivity is high especially in the Food and Home Care category 36

5) Threat of Supplier’s Bargaining Power •

 The number of suppliers is low for the Home Care category e.g. Certain oils oils are are not not avai availa lable ble ever everyw ywhe here re wh whic ich h incr increa ease ses s the the raw raw mate materia riall supplier’s bargaining power when negotiating the price with Godrej etc.

SWOT Analysis for Dabur India Limited

Strengths •

•

•

•

Unique “Ayurvedic and Health” Positioning Exte Extens nsiv ive e mark market et pene penetr trat atio ion n with with 50 C&F C&F agen agents ts,, more more than than 5000 5000 distributors and over 2.8 million retail outlets all over India* High brand awareness and perception of Dabur, Vatika, Hajmola, Réal Monopoly status in multiple product categories like digestives (90% MS), branded honey(75% MS) and Chyawanprash(65% MS)

Weaknesses •

•

Low Penetration in Rural areas in Food, Health Supplements and Home care categories. (Appendix 5) Dabur’s R&D work is low and insignificant, which is a major weakness in FMVG as it is constantly creating new products.

Opportunities •

Packaged Foods category

•

Sugar free food and health care substitutes e.g. Sugar Free Chyawanprash

•

•

Expanding size of pie in Home care segment due to efforts by firms like GodrejSara Lee and niche products like Jyothy laboratories Increasing Modern trade is a good indicator for Personal care segment as it provides higher visibility, higher rotations and a personal touch(relevant for premium products).

Threats

37

•

Counterfeit products in the Food and Home care category

•

Increasing competition from private labels

•

Increasing bargaining power of modern trade especially in the Personal Care segment

EXHIBITS

38

Product Category

Products

Hair oil

Vatika, Amla, (Anmol coconut)

Shampoo

Vatika heena conditioning, strengthening Anmol-natural shine, silky

Baby & Skin Care

Sarso root-

Vatika fairness, Gulabari, Vatika fairness face pack   JJan anma magh ghut utti ti,, Oliv Olive e oil, oil, Grip Gripew ewat ater er,, Dabur lal tel

Digestive

Hajmola range, Hingoli, Pudin hara

Health Supplements

Chyawanprash, chyawanshakti, Dabur Honey, Glucose

Oral Care

Babool (rural market), Meswak (unani method method), ), promis promise, e, Lal paste, paste, Binaca Binaca,, Promise

Home Care

Odomos, Odonil, Odopic, Sanifresh

Financial Ratios

2009

Liquidity Ratios Current Ratio Quick Ratio

1.19 0.99

Management Efficiency Ratios Receivables Turnover Inventory Turnover Asset Turnover Ratio

22.63 10.94 4.84

Financial Leverage Ratios Debt Ratio Debt to Equity Ratio Interest Coverage Ratio

0.21 0.27 38.34

Profitability Ratios Gross Profit Margin Return on Assets

17.19 23.73 39

38.8

Return on Capital Employed Return on Net Worth

48.4

Dividend Policy Ratios Dividend Yield Payout Ratio

0.2052 47.41

Ten Year Highlights RS Crores

FY00

FY01*

FY02**

FY03

FY04***

FY05

FY06# FY07^

FY08

FY09

982

1100

1200

1285

1236

1417

1757

2080

2396

2834

34

19

12

7

9

9

13

26

34

47

EBITDA

128

137

144

162

164

217

300

376

443

517.3

EBITDA Margins (%)

13.0

12.5

12.0

12.6

13.3

15.3

17.1

18.1

18.5

18.3

81

85

82

106

124

176

257

319

384

445

4

7

14

14

15

19

30

39

52

54

Tax Rate (%)

4.5

8.5

16.6

13.3

12.0

10.8

11.7

12.1

13.4

12.1

Profit After Tax (PAT)

77

78

64

85

107

156

214

282

333

391

PAT Margins (%)

7.9

7.1

5.4

6.6

8.6

11.0

12.2

13.5

13.9

13.8

Fixed Assets (Net)

251

243

371

257

250

295

512

379

465

559

Current Assets, Loans & Advances

412

393

504

522

340

408

471

640

774

951

Current Liabilities & Provisions

108

158

183

241

294

400

436

452

732

808

Net Working Capital

304

235

322

281

46

8

35

189

42

143

Days of Sales

113

78

98

80

14

2

7

33

6

18

Operating Results:

Sales

Other Income

Profit Before Tax (PBT)

Taxes

Financial Position:

40

Total Assets

609

558

705

640

433

543

624

670

749

1081

29

29

29

29

29

29

57

86

86

86.5

Reserves & Surplus

292

334

365

388

257

335

440

393

531

731

Shareholders Funds

320

362

393

417

286

364

497

480

618

818

Loan Funds

289

196

304

964

132

164

121

160

99

228

Total Capital Employed

609

558

705

640

433

543

624

670

749

1081

ROCE (%)

17.0

19.5

12.6

16.1

28.6

31.3

39.0

45.7

47.6

38.8

RONW (%)

24.7

22.0

16.6

20.6

38.1

43.5

46.1

61.3

55.3

48.4

Earnings Per Share (Rs)

27.1

2.7

2.3

3.0

3.7

5.4

3.7

3.3

3.9

4.5

Dividend Per Share (Rs)

10.0

1.0

0.5

1.4

2.0

2.5

1.8

1.42

1.5

1.75

2.9

2.9

28.6

28.6

28.6

28.6

57.3

86.3

86.4

86.5

Share Capital

Return Ratios:

Equity Share Data:

No of Shares (In Crs)

Manufa Manu fact ctur urin ing g Lo Loca cati tion ons s of Da Dabu bur r In India dia Li Limi mite ted d in In Indi dia a an and d Abroad.

41

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

The Research and Development Strengths of Dabur India Limited

42

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

Dabur Hair Care BCG Matrix

Dabur Chyawanprash BCG Matrix 43

Dabur Real Juice BCG Matrix

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http://findarticles.com/p/articles/mi_m0DQA/is_1999_June_17/ai_55041071/

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http://www.dailyexcelsior.com/99june10/busi.htm 44

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http://www.business-standard.com/india/news/12-swap-for-dabur-firmsdemerger/133410/

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http://www.chillibreeze.com/articles_various/Dabur-story.asp

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http://www.scribd.com/doc/18435906/Dabur-Herbal-Promise 45

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http://www.scribd.com/doc/22107413/Entrepreneurship-Project

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http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HR%20Restructuring-Coca%20Cola %20&%20Dabur-Case%20Studies.htm

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http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HR%20Restructuring-The%20Coca %20Cola%20&%20Dabur%20Way.htm#The_Leader_Humbled

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http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HROB003.htm

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http://www.businessworld.in/index.php/NO.-10-DAB http://www.busines sworld.in/index.php/NO.-10-DABUR-INDIA.html UR-INDIA.html

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http://www.dabur.com/Suppliers-Access%20to%20Supply

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http://www.networkmagazineindia.com/200312/events05.shtml

46