Real hope for Dabur as Madhesis end Nepal border blockade

Nepal plant supplies nearly 60% of juices for Dabur India; Madhesi crisis hit company's sales in third quarter, 2015-16, that led to Rs 100-cr loss in sales

Dabur India is expected to revive its sales in the coming months as supply of goods have resumed between India and Nepal after the agitating group of Madhesis suspended the five-month-long blockade on Monday. Between October and December, the political crisis in Nepal caused the company, loss of Rs 100 crore because the supply of Real fruit juices from the hilly nation got snapped.

"We expect operations at our Nepal subsidiary's plant (at Birgunj) to return to normal in due course of time and we will be in a much better position to service the peak season demand for juices going forward," the company stated.

The political turbulence in Nepal over the promulgation of a new constitution, which led to roadblocks on the Indo-Nepal border, had forced Dabur to shut down its Birgunj production unit for two days in October.

According to Edelweiss Securities research analyst Abneesh Roy, Dabur was the most impacted company in the consumer goods space as the blockade impacted the supply of juices, accounting for nearly 10 per cent of sales. "Since now the blockade is lifted, it is expected that Dabur can likely meet 100 per cent of the demand for juices. Also, on the concall, the management has highlighted that 80 per cent gap may be addressed by Sri Lanka and Rajasthan plants. If the rail network opens from Nepal and some containers get out then 100 per cent demand can be met," he said.

Fruit juice brand Real is a major revenue contributor in Dabur's food business, which accounts for a fifth of the consumer goods giant's total revenue. During the last quarter, its "Foods business declined 23.7 per cent due to supply disruptions of fruit juices from Nepal," the company told its investors in January.

Civil disturbances in the hilly nation hit Dabur's juice business in the December quarter because supply virtually stopped since late September. To bridge the gap, Dabur increased production at its Rajasthan and Sri Lanka plants. The company also sourced from third-party manufacturers. Despite all this, demand couldn't be matched.

Dabur's manufacturing unit in Nepal produces nearly 60 per cent of its juices sold in India - the rest being met by factories domestically. Dabur Nepal Pvt Ltd, a subsidiary, is a Rs 450-crore entity, which includes products sold in Nepal.

Real commands 62 per cent share in India's packaged fruit juice market. It has been posting double digit growth since last one year. Food business is the second largest revenue contributor for Dabur after its hair-care division which generates 23 per cent revenue.
GETTING READY

• Nepal plant supplies nearly 60% of juices for Dabur India
• Madhesi crisis hit Dabur's sales in the third quarter, 2015-16, that led to Rs 100-cr loss in sales
• Food business, which accounts for 20% of Dabur's revenue, declined 24% in the third quarter
• During the crisis, Dabur had to shut the Nepal plant temporarily
• Production in Rajasthan and Sri Lanka plants stepped up