Nepal unrest might see Dabur juice sales feeling the squeeze

This, due to absence of supply from manufacturing units in the neighbouring country

The long civil disturbance in Nepal is expected to hit Dabur India’s juice business in the December quarter, as supply from its manufacturing unit there remains frozen. Dabur has increased production of its REAL brand of juices from its other two plants, one in Sri Lanka and the other in Rajasthan. “However, it is unlikely that the loss in supply can be met soon,” a company executive said, on condition of anonymity.

Earlier supply disruption had hit its food business in India during the July to September quarter. Disruption of production and supply from Nepal had (apart from subdued consumer sentiment in India) led to tepid sales growth of 2.4 per cent in this category. “Supply disruptions from Nepal due to political disturbances,” Dabur had told its investors was a part-reason, after that quarter’s results were out.

Dabur had anticipated the negative impact on its sales in early October. It had informed its shareholders that the company was raising output of REAL juices in India and Sri Lanka as supply from Nepal had been affected. Market analysts say Dabur India produces 40 per cent of its fruit juice products in Nepal under the REAL brand. While, the company does not reveal its revenue from operations in Nepal, it gets 18 per cent of its domestic sales from its food division. REAL juices, market leader in the category with 62 per cent share, had been posting double-digit growth for a year, till the disruption in the September quarter. The food business, comprising REAL juices, cooking pastes and aids, is the second-largest revenue contributor for the company after its haircare division, which generates 23 per cent of Dabur’s revenue.

While the juice business suffered due to supply constraints in the September quarter, its haircare, oral and health supplements businesses grew by 9.4, 18.7 and nine per cent, respectively, year on year. Volume growth for Dabur was 5.5 per cent; “excluding the beverage segment, volume growth was in line at seven per cent, year on year”, reported market research firm Religare Capital.

Experts say changes in drinking habit had raised the demand for fruit juices, with consumers shifting from carbonated soft drinks to those thought to be healthier. “While, the growth in carbonated drinks has been negative during the past two quarters, the growth of fruit juices is over 10 per cent in the country,” said a market-research analyst.