Dabur India Ltd. - Globalization Nitya Subramani, X, Y

Agenda

The Indian CPG market and industry

Dabur in India

Dabur globally

Dabur in Nigeria

Recommendation

India’s CPG market is attractive and among the fastest growing in the world

Total market size 2006: $13.1 billion

Food (incl. groceries) Non-Food

44% 56%

CAGR previous 3 years

Forecast growth 2007-2008

+8.6% +9.2%

Total market size 2015: $33.4 billion

Growth categories: • Personal care • Food • Beverages • Household care

50%

Percentage of India’s 1 billion people under the age of 20:

160m teens

The CPG industry is still fragmented, presenting an opportunity for consolidation

of CPG sales come from mom-and-pop outfits making and selling unbranded and unpackaged goods

>50%

Rank Company Net sales (INR million)

1 Hindustan Lever (Unilever) 110,800

2 ITC 97,860

3 Nestle India 24,750

4 Asian Paints 24,410

5 Nirma 19,170

6 Nirma Consumer Care 18,140

7 Britannia Industries 17,130

8 Dabur India 13,430

9 Johnson & Johnson 13,300

However, building national scale in India is a key challenge

Market heterogeneity: High

• National coverage: • Millions of retail outlets

• Majority in rural areas

• People-intensive operations

• Underdeveloped supply chain

• Costly logistics

• Marketing: • Diverse consumer base

• Many small individual transactions, unremunerative for marketers

6 million Retail outlets

4 million rural

2 million urban

Dabur has built a successful business in India, achieving significant scale by 2007

1884 Established

450 Number of products in 2007:

1.5m National coverage:

retail outlets

47 clearing & forwarding locations

1,500 distributors

22.6 billion Consolidated sales:

Dabur’s assets span 4 business units and several production facilities in India and abroad

4 business units:

• Consumer care • Hair care • Oral care • Health supplements • Digestives and candies • Baby and skin care products

• Consumer healthcare • Prescription medicines • Over-the-counter medicines

• Foods • Fruit juices • Cooking pastes • Sauces • Bulk items for institutions

• International

8 manufacturing plants in India

5 Production units outside India:

Birganj (Nepal)

Dhaka (Bangladesh) Dubai (UAE) Cairo (Egypt) Lagos (Nigeria)

Dabur’s herbal image and mass market pricing helped it become a top 10 player in India

Core capabilities:

• Identify consumer needs • Develop localized products • Create niches to drive long-term

growth

Niche categories:

• Underpenetrated and high-growth categories

Differentiated herbal image:

• Unique positioning: Ayurveda platform

Mass market pricing

• Capturing the large rural market in India

Dabur is well-positioned to capture share domestically, but rising competition is a threat

Strengths Weaknesses

• Local consumer knowledge • Indian heritage • Ayurvedic (herbal) platform • Product engineering (R&D) • New product introductions (5-7% of revenue

annually) • Targeted and priced at mass market • Strong rural presence (50% of sales) • Focus on channels (loyalty programs,

software)

• Niche market • Expensive raw materials (natural ingredients) • Focused on therapeutic (rather than higher

margin cosmetic) products

Opportunities Threats

• Young, dynamic population • Fast growing domestic market • Brand extensions (herbal platform)

• Rise in competitive intensity in its core categories like hair care, putting pressure on volumes

• Slowdown in rural demand

How should Dabur strategically expand its product portfolio in India?

Strategic choice: Pros: Cons:

Target an herbal niche in oral care?

• Differentiated herbal product and branding possible

• Builds on expertise in traditional medicine

• Use competency gained through 2003 acquisition of Balsara Hygiene Products

• Large market size (in value)

• Strong, established competition (Colgate , HLL – 67% of market)

• No home-grown competencies

Extend herbal equity to skin care and soap?

• Differentiated herbal product and branding possible in medicated soaps

• Builds on expertise in traditional medicine, especially for baby care

• Higher margin categories

• Highly competitive, crowded in soaps

• Medicated soaps present only 25% of the category

• Strong MNC competitors (Reckitt Benckiser’s Dettol)

Leverage strengths in hair care to the cosmetic segment?

• Differentiated herbal product and branding possible

• Leverages equity in therapeutic value to higher margin categories

• Competition • Traditional mass market

targeting and pricing a problem in more aspirational cosmetic segment

For continued long term growth, international markets are becoming more and more relevant

2003 2004 2005 2006 2007

Domestic Sales International Sales

Global Revenue

GCC

Egypt

Pakistan

Bangladesh

Nigeria

US

UK

Initial Global Business Model Follow Indian diaspora to Persian Gulf

o Primary demand generation o Minimal product adaptation

Follow existing manufacturing locations Expand to other target segments

Long-term Global Business Model Target local mainstream population

o Explore cost of existing products adaptation o Explore products most easily adapted to new

market Adopt necessary heterogeneity

o Introduce country specific products

Key external environment considerations o Product fit o Integration o Alien nature of market o Supply chain considerations o Costly logistics

Dabur International has traditionally focused on different categories with African consumers

Arab consumer Asian consumer African consumer

Footprints Middle East & North Africa South Asia, UK & US East, West & South Africa

Target customer Arab female Asian male African male & female

Core categories

Hair oils Hair creams Shampoos Oral care

Hair oils Shampoos Digestives Oral care

Oral care Personal wash Home care (insect repellent)

Core market Dubai India Nigeria

Total market size (INR mil.)

1,340 1,500 320

Regional split (INR mil.)

GCC – 760 North Africa – 460 Iran, Iraq - 120

Pakistan – 440 Nepal – 640 Bangladesh – 200 UAE - 210

Central Africa – 10 East Africa – 60 South Africa – 10 West Africa – 240

Key market attributes

• 80% of population is Arabic

• High purchasing power

• Replicating Indian brand architecture and product portfolio

• Leveraging learning from Indian marketing mix and media strategy

• High oral care penetration • English speaking • Medium competitive

intensity

vs.

Dabur needs to adapt strategy to local consumer markets in Nigeria

Oral Care Skin Care Hair Care Health Care Home Care

Market Size (INR Million)

5,000 6,000 N/A 350 N/A

Products Toothpaste Soap Relaxers Hair pomade

Glucose Mosquito repellent cream

Strategic Intent To become second largest player

To become the third largest player in soaps

To create a market for hair oils

To become a strong player in glucose market

To replicate the Indian product portfolio

Imperatives -Become a leader in herbal niche -Launch herbal gel

Launch a herbal soap with localized ingredients

Launch Dabur Glucose

-Leverage India competency -Launch Odomos cream

Strategic Issues -Unilever and P&G strong -Herbal niche not crowded

-Fragmented market, small players -Soap is not core category for Dabur

-Hair care is beauty related and cosmetic -Dabur has therapeutic and not cosmetic equity

One player play -Coil is the predominant product form -No market for cream

Oral Care Skin Care Hair Care Health Care

Home Care

Market Size (INR Million)

5,000 6,000 N/A 350 N/A

Products Toothpaste Soap Relaxers Hair pomade

Glucose Mosquito repellent cream

Strategic Intent To become second largest player

To become the third largest player in soaps

To create a market for hair oils

To become a strong player in glucose market

To replicate the Indian product portfolio

Challenge Can Dabur successfully target herbal niche and establish a strong market presence

Can Dabur operate in soap successfully? Can it extend herbal equity to soap?

Can Dabur leverage it’s strengths?

Can Dabur become No.2 player?

Should Dabur create a new cream category in Nigeria?

Recommendation Yes High potential market

Maybe Therapeutic, not cosmetic

No Cosmetic not therapeutic consumer focus

Yes Potential expansion into food category

Yes Keep natural product value proposition

Dabur should focus on oral, health and home care markets in Nigeria

Avoid product standardization and adapt to local markets herbal platform in Nigeria

Build up the a new product category market focused on local consumer needs

• Perform a deep dive market analysis on Nigerian consumer • Target consumer directly • Keep herbal platform and transfer herbal value proposition to mosquito repellents • Use product expertise to expand into oral care

External dynamics

• Geopolitical risk: variation in government (state) support • Production infrastructure: ability to accommodate

new product production

Final Recommendations

Dual strategy Consolidate the domestic market and expand internationally in selected

growth markets

Leverage core therapeutic herbal/ ayurvedic platform Build a platform to enable Dabur to become a global ayurvedic leader

Although requiring an adaptive strategy, Nigeria can be an attractive market for Dabur International

Where is Dabur now?

Leading consumer goods company in India (Turnover $1 billion)

2 Strategic Divisions:

• Consumer Care Business: Addresses consumer needs across FMCG spectrum • International Business Division: Addresses health and personal care needs of international

customers

2 subsidiary group companies and 8 step-down subsidiaries

Product presence in over 60 countries

17 international manufacturing locations

12 Billion-Rupee brands (over $18M)

2012 Dabur product representation

5 Master Brands

Dabur, Vatika, Hajmola, Real, Fem

Dabur Chyawanprash is the largest selling ayurvedic medicine (65% share)

Market leader in herbal digestives (90% share)

Hajmola market leader in digestive tablets category (60% share)

25 M Hajmolas consumed in a day in India

Strategically positioned Honey as a food product- Resulted in market leadership (75%) of branded honey market

Separate Consumer Health Division (CHD) that builds on the Ayurvedic heritage

Offers a range of classic medicines

Global Market

• International Business Division (IBD) caters to markets in Nepal, Bangladesh, Middle East, North and West Africa, EU and US

• Contributes to 30% of total sales

• Promoting Dabur and Vatika in these markets

• Vatika is the fastest growing hair-care brand in the Middle East

• Leveraging the ‘natural’ preference among local customers.

Thank you!