Looking to buy small brands, scale them up: Sunil Duggal

Interview with Chief Executive Officer, Dabur India

Faced with competition from Patanjali, the 132-year-old Dabur is planning to leverage the growing popularity of ayurveda by acquiring smaller brands at home and overseas. In an interaction with Arnab Dutta and Sudipto Dey, Dabur India Chief Executive Officer Sunil Duggal shares his plans. Edited excerpts:

On pain points in the FMCG market

Typically, when there is a consumption slowdown, all players become aggressive in promotion and other activities. That is at an all-time high. There is comparatively less innovation happening because the market is less receptive. New product launches are muted. There is a proxy price war on  — no one has taken down prices much, but all are offering better value. This exerts pressure on volumes as one gives more for the same price.  

But, these cycles generally play out once in 10 years. Cycles of strong demand compression are generally followed by long periods of boom, such as in 2008-2014. We may not reach those levels quickly, as those were driven by a different set of economic priorities that basically sacrificed investment-led growth for consumption-led growth.  However, we expect the consumption boom to revive in a year or two.

On measures to increase volume in rural markets

The idea is to have right-sized products. The consumer is very resistant to downtrading. They may stick to the brand they prefer but buy a little bit less. There is a huge amount of downsizing happening. In most areas, the fastest growth packages are the smaller ones. This does put some pressure on companies as smaller stock keeping units are less profitable.

We are right-sizing our rural distribution, withdrawing from some areas and getting into others. We are not shrinking our distribution. But, expansion has come to a halt till we find another stimulus. The triggers for that are a good monsoon and firm staple prices. Other triggers are government-driven, such as a rise in the minimum support price, spending on NREGA, and infrastructure works translating into jobs.

On Patanjali’s effect on business

Patanjali has triggered a fairly high awareness for ayurvedic products. Ramdev is instrumental because of his large number of followers. He tapped into the preference for traditional Indian remedies, herbal and natural products, and wellness. In the short term, Patanjali will cause most companies some stress. Maybe over the next two or three quarters. This has been exaggerated by the lack of growth in the market.  

For Dabur, the advent of Patanjali is beneficial over the long term. We plan to leverage our ayurvedic heritage and also stress on the fact that our ayurveda is based on science and validation, and not just on faith.  

On M&A plans

We are pretty keen on acquiring brands and plants. In India, our priority is herbal, ayurvedic and natural healthcare products. Rather than buying a Rs 300-400 crore brand, our interest is in a Rs 50 crore brand that can be grown to Rs 200 crore. It has to be scalable. We have a corpus of Rs 1,000 crore for the domestic market and another Rs 500 crore for overseas.