Dabur India has joined the increasing list of FMCG players in India who are focusing more andmore on the food and beverage segment to beat the current inflationary environment and stay on course for growth.
In case of Dabur, apart from expanding its distribution network for its beverage portfolio to increasingly cover rural areas and town classes beyond the tier-1 cities, the company is also foraying in the food segment. The `588 crore acquisition of Badhsah Masala being a major step in that direction.
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Additionally, of the `326 crore capital expenditure approved by the company’s board earlier this week, there is a higher allocation of `187 crore towards adding capacity in the beverage segment for juices, versus `139-odd crore for Dabur’s red tooth paste. The company is proposing to add 58,700 kilo litre of production line of one litre juice packs and increase portion packs capacity of juices by another 17,600 kilo litre from 34,000 kilo litre currently. The plant is already running at 90% capacity after starting in June.
“We have a vision to expand our beverage portfolio to a food and beverage portfolio. We have a 70% market share in the beverage play, but we would like to extend this to the food segment,” Mohit Malhotra, CEO, Dabur India, told analysts over the earnings call for the quarter ended September.
According to Malhotra, the acquisition of Badshah Masala, which is into ground spices and condiments, will give Dabur an edge as it looks to expand into the food segment. “In the inflationary environment like this, when all companies are taking price increases, there are some categories which are more elastic than the others. The food and staple market in India remains largely unbranded in nature. So, no matter how much inflation, or the market passes on the inflationary pressure to the consumer, this is an inelastic demand, be it edible oils or food. Which is why food category is growing at a fast pace,” he said.
In terms of numbers, in the September quarter, the food and beverage business posted a growth of 30%. “The beverage business is on a strong footing and outperformed the industry significantly, with our market share in juices and mixers category increasing by 410 basis points, which was further bolstered by a strong traction in our food drinks and milkshake portfolio. This has helped us expand our entire addressable market substantially. The food business also performed well with a growth of 21%,” he said.
On the beverage front, the company is looking to scale up its Real portfolio from being present in the the juices and mixers category, to now also looking at the drinks segment. “We have expanded the total addressable market from roughy around `1,700-1,800 crore to `8,000-9000 crore, as we entered the drinks space. In the juices and mixers category we have a market share of 65-67%, and when compared to drinks category where our market share is pretty minuscule at 10%,” Malhotra said.
Mayank Kumar, marketing head (foods and beverages), Dabur India said that rural market and smaller towns provide a big opportunity for growth in this segment, and the company is strengthening its distribution through outlets outside of its traditional FMCG portfolio.
Dabur is also banking on quick commerce for its beverage portfolio expansion.
“Earlier quick commerce contributed 15% of revenues for beverages, and now it has gone to 30-33%, so quick commerce is really helping,” he said.