Changing Dynamics of Business at Dabur: Amit BurmanAdded 15th Jun 2008
Amit BurmanVice Chairman, Dabur India
When the 114-year-old Dabur outsourced its IT in order to stay quick-footed, plenty of industry watchers held their breath. After all, only a handful of large Indian companies had attempted something similar - and none of them had a century-worth of baggage. But it's worked for Dabur. It's given them plenty of flexibility, if the way the company is expanding and taking one smaller and more nimble brands is any commentary. When a titan of the old economy opens a new road, it leaves behind a large swath for others to follow.
- Q.CIO: After 114 years, Dabur handed the business over to professionals. How has that worked out?
- Q.You took ayurvedic medicine corporate. But now with over 50 brands, how do you maintain brand sanctity?
- Q.But doesn't the Balsara(homecare) acquisition seem like a move outside the herbal space?
- Q.Why did Dabur exit the pharma business?
- Q.You have forayed into health and beauty products. Why?
- Q.Why did Dabur outsource its entire IT infrastructure?
- Q.One of your strategic intents is to provide consumers with innovative products within easy reach. How?
- Q.You are also in the food business. How does IT help manage products with sixmonth shelf lives?
- Q.You aim to increase penetration in south India. What is your strategy?
- Q.What about via M&As?
- Q.In the future, do you think ‘natural’ will drive the health products industry in India?
- Q.Can you tell us more about Lite Bite, the new brand you are promoting?
Full Interview with Amit Burman
In 1998, the Burman family passed the management of the company over to a professional CEO and limited their role to strategic inputs at a board level. We have reduced our strength on the 10-member board of directors to four members and only provide broad policy guidelines for growth and diversification. The family provides strategic direction to the company and the group and evaluates newer avenues for growth. The decision was taken in response to the changing dynamics of our business and to inculcate a spirit of corporate governance within Dabur. We felt the need to look at management succession more seriously. We felt it was time for us to sit back and look at the big picture and let able and talented managers to run the show. However, we also believe that the family has a trusteeship role to follow both in terms of perpetuating the family business and in preserving and growing the business.
For Dabur, the family and the business are institutions to preserve. The move has been a success. Dabur has grown under professional management. Some of its brands - particularly in the highly competitive oral care and shampoo markets - have emerged as the fastest growing brands in the market - ahead of established multinationals. For example, Vatika has, for two years running, been the fastest growing shampoo in India. Three of our toothpaste brands - Dabur Red, Babool and Meswak - are the fastest growing toothpaste brands in India for three years now and have taken away market share from our competition.
Today, Dabur is the world's largest natural healthcare company and while it is true that Dabur's brand portfolio has grown, the fact also remains that a common thread binds them all together: the company's herbal and ayurvedic heritage. All the products in Dabur's portfolio are based on herbal and ayurvedic ingredients and this herbal heritage helps it maintain brand sanctity, whether in the personal care space, or in health supplements. All new product developments are also based on a herbal platform. This heritage helps Dabur's brands outpace MNCs - both in the oral care space and in the hair care space - and become the fastest growing brands in their categories.
The homecare portfolio is the only product line that operates outside the herbal space; it is an acquired line-up. In our core FMCG portfolio, which includes personal care and health care products, Dabur India continues to operate in the herbal and ayurvedic space. All new product developments in our core categories also continue to operate in the herbal and ayurvedic arena. Dabur has a huge herbal heritage and we intend to continue operating on the herbal platform in the future.
IT was a strategic decision by the Burman family. The family is happy to have created significant shareholder value through this business in a short span of time. The proceeds from the divestment of Dabur Pharma will go into family investments. There are several options we could look at - insurance being one. Going forward, we need to re-evaluate our entire portfolio before we invest elsewhere.
Dabur recognized a gap in the health and beauty retail space in India. There's a growing need for quality service and store environment in that space. With no major
player, moving in now would give us an early mover advantage. The Indian consumer has come of age. But the shopping experience here has not kept pace with this change. Even though retail outlets have mushroomed across the country, most of them still do not offer consumers the kind of shopping experience that people in the rest of the world are used to. Dabur intends to tap the growth prospects in both the retail market and the health and beauty segments. Our USP will be an unique store environment and a diversity of products that will be on offer at the stores. Dabur has set up a wholly owned subsidiary, H&B Stores, which is in the process of establishing a pan- India chain of specialty retail stores in the beauty, health and wellness sphere.
The first of these retail outlets, branded new u, opened its doors to customers in Delhi in March 2008. With new u, we are committed to bring a world-class shopping experience to India. We have already established six new u outlets and are expanding its presence to more cities. While these stores are targeted at women, they seek to create a fun and fashionably colorful environment that is not alienating to non-core customers - particularly men. The stores will be affordable and classy and will provide all the top mass-market brands. The product mix at the stores will cover pharmacy and OTC (over the counter), personal care,baby care, cosmetics, general merchandise and confectionery.
Beauty and wellness products are key parts of the stores, with sizeable shelf space allocated to both leading Indian and international brands operating in this space. The new u stores offer the entire range of beauty, health and wellness products under one roof. In the future, we also intend to have a private label presence. Dabur India is investing Rs 140 crore into this venture, and is confident that the venture will report profits in its fourth year.
To ensure a constant flow of IT talent - even during phases of expansion. Since we planned for rapid expansion, IT had a critical role to play. If we want to continue being on the leading edge of technology, the people we need will always be in high demand. Attrition could be a huge problem and we would not be able to maintain bench strength. But, an outsourcing partner can.
Dabur has initiated a program to improve distribution effectiveness. Under it, we have organized sales teams on the lines of channel expertise (separate teams for modern trade, grocers and chemists) in urban markets and exclusive rural teams in six focus states. Today, the servicing needs of the industry are vastly different from what the traditional stores can provide. The exciting new formats also open up opportunities for brand activation at the point of purchase. The system uses vastly different and superior selling skills.
A team with appropriate skill sets has been put in place to respond to the needs of modern trade and the results are most encouraging. The channel strategy has been devised to focus on key segments based on strategic attractiveness and total-cost-to-serve principles. To address the complexities posed by the rapid ramp up of modern trade, our traditional distribution system - stockists servicing all outlets irrespective of format - was overhauled. Since the servicing needs of these outlets are different, Dabur configured exclusive modern trade stockists in large towns to service these stores. Direct supplies are also available to distribution centers with formats like Cash & Carry and large national chains.
And with a company sales team, Dabur is geared to meet the servicing needs of emerging formats. The challenges posed by the expectation of higher levels of efficiencies on shelf availability and inventory are also being addressed by our supply-chain system. More efficient supplychain practices like electronic order and data processing and changing processes to facilitate e-payments, etcetera have been put into place.
IT played a key role in the foods business rollout. To start with, we upgraded our IT systems to ensure a First-In-First-Out (FIFO) policy - for both raw materials and finished foods. Then, training programs were introduced at the stockists' level to ensure the smooth movement of stocks.
From rechristening brands in local languages to creating special products with a local flavor and even roping in local celebrities as brand ambassadors, Dabur India is using every possible route to drive deeper into the south Indian market. Often, people treat India as one big market, but the reality is that India is more like the European Union: a mix of different cultures, languages and markets. With these initiatives, Dabur India is taking advantage of this diversity by creating and adapting brand mixes for the south Indian market. Here are some examples: we have rechristened Dabur Lal Dant Manjan as Dabur Sivappu Pal Podi in Tamil Nadu.
Similar local brands are planned for a host of other products. The idea is to give brands a local flavor to make them easily understandable to a Tamil speaking populace. The key is to get brands more recognition and acceptability down south. We are also tailoring products to suit a south Indian audience. Recognizing a south Indian consumer's want for natural products, Dabur Herbal toothpaste was launched only in Kerala and Tamil Nadu, where it has established itself as a niche player. An ayurvedic product called Dabur Shwaasamrit was also launched in Karnataka and Kerala, and is successful, mainly because Shwaasamrit provides relief from breathlessness, chronic cough, cold and bronchitis, which are common in Karnataka and Kerala. Tailor-made television ads are also being created for south India. These campaigns were put together after intense research revealed that the messaging to the southern consumer needs to be more rational and needs to portray a south Indian ambience.
So, Dabur is signing on south Indian celebrities to endorse various brands in these markets. We have already signed on south Indian film star Khushbu to endorse our Dazzl range of hard-surface cleaners and Genelia D'Souza as the brand ambassador for the Vatika hair care range. With these initiatives, we are on track to expand our presence in south India.
Dabur India is actively looking at acquisitions, both in India and in the overseas markets. But, it is too early to talk about that.
We are already seeing this happening. A growing number of consumers, particularly in urban markets, are increasingly taking to healthy foods. Though it is still a largely urban phenomenon, the consumer base for such products in on the rise. Dabur has been at the forefront of healthy and natural products, which is one of the prime reasons for our continued growth. In fact, we are now witnessing many MNCs trying to follow this path by introducing natural variants of their products.
Dabur - with its portfolio of juices under the Réal and Activ brands - is already a dominant player in the health food and drinks market. Today, Réal is India's leading packaged, preservative-free fruit juice brand. From its launch in 1997 as India's first juice brand, today Réal offers the largest range fruit juices. It is also first brand to create variants suited to the Indian palate, like Litchi, Guava and Mausambi. That said, we continue to look at adding greater value to the product by offering an even healthier version.
A step in this direction was the introduction of the Activ range a few years back. This range does not have any added sugar. Activ also offers a range of healthy fruit variants like fruit and vegetable blends including orange-carrot, mixed fruitcucumber- spinach, etcetera. We have also introduced vegetable juices and a fruit soya range. This last combines the taste of fruits and the goodness of soya, which is known to be one of the best sources of vegetable proteins. Fruit soya is targeted at health conscious consumers.
Let me first clarify that Lite Bite Foods is not part of Dabur India. It's a distinctly separate entity. Lite Bite is a recently established highgrowth venture focused on the food and beverage service sector, with formats ranging from quick service restaurants (QSR), casual dining restaurants (CDR), express outlets, to entire food-courts, with a brand portfolio of leading international and local concepts. Lite Bite is promoted jointly by me and two others. We recently finalized a strategic alliance with PVR Cinemas where Lite Bite will manage their food courts, and PVR Cinemas will come on board as a Lite Bite shareholder. Lite Bite will run outlets of many formats in a wide range of locations, not only malls, but also office complexes, high streets, highway locations, hospitals, metros and airports. Lite Bite has also established a joint venture with the Eat Out Group, part of Spain's leading business house Agrolimen.
The Eat Out Group is one of Europe's leading restaurant groups with over 600 restaurants. They own brands such as FrescCo, Pans&Company, Bocatta, and Fresh&Ready. Our venture will invest about Rs 50 crore to establish a chain of specialty restaurants in India and mark Eat Out's entry here. The joint venture will initially focus on launching the 'FrescCo' concept in India. FrescCo is a restaurant chain with a distinct Mediterranean Europe heritage. It specializes in food like salads, pastas, pizzas and soups, in a casual-dining setting. What FrescCo offers is excellent value-for-money, thanks to its 'All You Can Eat' formula.
The venture plans are to open at least 50 restaurants in 10 years, both in commercial malls, office complexes, high street and highways. In addition, we also plan to expand the brand portfolio of the Indian JV and establish additional international Eat Out concepts in India. In addition to these strategic alliances, we are in the advanced stages of finalizing tie-ups with a number of leading local and international brands, which we will announce shortly.
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