Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Dabur India Ltd (BOM:500096, Financial) reported a consolidated revenue growth of 9.8% in constant currency and 7% in INR terms for Q1 FY25.
- The international business exhibited strong growth of 18.4% in constant currency terms, with significant contributions from Turkey, Egypt, MENA, SSA, and Bangladesh.
- The health care portfolio grew by 7%, driven by strong performance in digestives (11% growth) and health supplements (7% growth).
- The Home Care segment sustained robust growth with an 8% increase, particularly driven by Odonil's strong performance in aerosol and gel formats.
- Emerging channels like e-commerce and modern trade posted robust double-digit growth, now contributing around 20% of the India business.
Negative Points
- The Food and Beverage segment grew by only 4%, with the J&N segment impacted by exceptionally harsh summers, leading to a consumer shift towards carbonated beverages.
- The international business faced currency devaluations across emerging markets like Egypt, Nigeria, and Turkey, impacting INR performance.
- The hair oil segment saw competitive intensity increase, with new players like Bajaj becoming aggressive in the coconut oil category, leading to margin squeezes.
- The OTC and Ethical portfolio saw muted performance in some areas, particularly due to a high base effect from the previous year and the impact of harsh summers.
- The rural market recovery, while showing signs of improvement, is still uneven, with South India continuing to reel under pressure.
Q & A Highlights
Q: My first question is on Badshah. Would you be a bit disappointed with the 15% growth given you could have gained from the distribution expansion plus the market leader had quality issues in the international market? Can you gain in the international market because of this from a medium-term perspective?
A: Yes, in Badshah, the performance has been reasonably good with a volume growth of 16%. However, international business faced supply chain constraints due to regulatory scrutiny, which we aim to correct in the next quarter. (Mohit Malhotra, CEO)
Q: On oral care, you have done well with double-digit growth. Is this a signal that other FMCG categories could also revive? Also, Meswak has shown higher growth than Red Toothpaste this quarter. Is this a base effect or proactive steps?
A: Our strategy of building power brands like Dabur Red and Meswak is playing out well. We are also focusing on premium offerings and revenue growth management. The natural segment is growing faster than non-natural, indicating a positive trend. (Mohit Malhotra, CEO)
Q: Regarding the demand trends, what are you seeing in the last three to four months? Is there an accelerating trend?
A: Volume growth has been inching up sequentially, and we expect this trend to continue. However, the price increase component is now limited. The rural recovery is contributing positively to this trend. (Mohit Malhotra, CEO)
Q: On the juices portfolio, how should we think about the growth going forward given the subdued start due to weather conditions?
A: The beverage portfolio has mixed performance. While 100% juices and drinks are growing well, nectars are facing challenges due to cola wars and increased price index. We are ramping up capacity for other segments to address this issue. (Mohit Malhotra, CEO)
Q: Can you share any update on the OTC and Ethicals portfolio initiatives like Doctor Advocacy?
A: Doctor Advocacy is progressing well, reaching out to various practitioners. The OTC and Ethical business has shown growth, with new initiatives like Hajmola Zeera performing well. However, some brands like Honitus faced a base effect. (Mohit Malhotra, CEO)
Q: What changes are you seeing in rural growth? Is it improving post the Rabi harvest or due to other factors?
A: Rural growth is improving due to factors like inflation going down, better harvest, and government initiatives. However, the overall FMCG market is still showing a decline. We are optimistic about the subsequent quarters. (Mohit Malhotra, CEO)
Q: Can you discuss some trends in urban markets and the performance of Chyawanprash in the June quarter?
A: Urban markets are performing well, especially e-commerce and modern trade. Chyawanprash had a low saliency quarter due to the heatwave but showed growth post the monsoon campaign. We expect better performance in the upcoming winter season. (Mohit Malhotra, CEO)
Q: On the juices and nectars category, are you losing market share to competitors like Tropicana?
A: We have analyzed the data and found that we are not losing market share. In fact, Real has gained market share. The challenge is more in the coconut water segment, which we are addressing by ramping up capacity. (Mohit Malhotra, CEO)
Q: With respect to margins, are modern trade and e-commerce margins similar to general trade margins?
A: Yes, we have worked on improving margins in modern trade and e-commerce through negotiations, larger packs, and premiumization. This has led to margins being in line with general trade. (Mohit Malhotra, CEO)
Q: On the rural recovery, is this the first quarter where you are seeing money coming back faster from the channel?
A: Yes, we are seeing an improvement in the current quarter, especially in regions like UP and Bihar. However, South India is still under pressure. (Mohit Malhotra, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
