'Growing the top line will not be easy this year'

Q&A: Sunil Duggal

Dabur India has new growth strategies across its core FMCG and retail business segments. It will also make an open offer to Fem Care shareholders next week, CEO Sunil Duggal tells Suvi Dogra. Edited excerpts:

How do you see your company in FY10?
We have registered a top line growth of around 20 per cent and a revenue growth of 31 per cent in a fairly difficult environment, so the revenue stream is intact and profit expansion is happening on the back of softer raw material prices. This financial year will not be easy, mainly due to lack of pricing opportunities.Still, if volume growth remains robust, profit expansion will be good.

We plan to plough back into advertising and marketing promotions. There will be much investment on products and expansion.

What are your plans for H&B stores, the retail venture?
The retail outlook remains murky, given the lack of clarity in the realty sector. We are rejigging to a revenue-sharing model; instead of rent, we will give a percentage, maybe 10-12 per cent, revenue to the landlord. The retail venture’s losses will be half of last year’s; Q4 losses were only Rs 2.5 crore, against Rs 17 crore for the year. We are proceeding slowly.

What about your consolidation plans for Fem Care?
The open offer will be lauched next week and a 15-day window will close around 17-18 May. It should be a subsidiary of Dabur by mid-June.

What about expansion plans domestically?
Two new units, one each in Himachal and Uttarakhand. The Baddi (Himachal) plant will be the largest under one roof. Uttarakhand will be more of an expansion of the facility. The units will be commissioned by the end of the fiscal year.

What’s your international business strategy?
Earlier, this business would pull our margins down, but not now. We have built strong capabilities to tap emerging opportunities. The company invested aggressively in brand building in the Arabic-speaking region, building demand even in a difficult terrain such as Algeria. At Dabur, we first set up distribution and then build on demand.

Next year, growth won’t come from the core Gulf market but from new ones where we are investing. Dabur Egypt had over 108 per cent growth this quarter. The facility there is running at full capacity. Our UAE plant, started last year, is running at full capacity. We are looking at East Africa, then at West and South Africa.

You revamped the sales structure.
The personal care portfolio is highly complex, with diverse stock-keeping units and products, so we split consumer care into two areas.The sales structure has been divided into independent units for foods, home and personal care and healthcare categories.

Are you planning any additions in products?
The focus will be more on health and personal care and our fruit drink venture. In foods, we may not go beyond beverages this year. An ayurvedic beauty care product will be test-launched in Q3. We now operate the skin care vertical under three core categories.

You said you’ll invest a lot in ads and marketing.
If raw material prices continue to be soft and since growth was volume-driven, there isn’t pressure on prices. Since pressure on margins is less, it is prudent to invest in brands.