Analyst Corner: Dabur likely to perform well in medium-term

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Published: January 14, 2020 12:30:49 AM

Dabur has channelled its ad spend in driving higher growth in its eight power brands — media spends grew 20% for power brands vs 6% for overall domestic business.

Dabur remains our top pick in Staples along with Godrej Consumer.Dabur remains our top pick in Staples along with Godrej Consumer.

Amid the current demand slowdown, we reiterate Dabur as our preferred pick in Staples, given its strong bottom-up thesis. We believe it is likely to outperform in the medium term led by focus on execution under new CEO Mohit Malhotra. Dabur’s power brand strategy appears significantly different from HUL (in the early 2000s) as it emphasises greater focus on core brands rather than defocusing on the non-core. Cluster-based approach through RISE programme provides another leg to growth. Strong positioning in Ayurveda and a faltering Patanjali bodes well for Dabur to capture the growth in the fast-growing naturals segment. We do note that weak performance in juices could be a drag in near term. Dabur remains our top pick in Staples along with Godrej Consumer.

Dabur has channelled its ad spend in driving higher growth in its eight power brands — media spends grew 20% for power brands vs 6% for overall domestic business.

We like Dabur’s growth focus through increasing usage occasions for Chyawanprash, highlighting health benefits of Honey (innovate and increase food usage), launching different versions of Hajmola (Chat Cola) and Pudin Hara (Powder Fizz) and targeting new consumers (launch of products like Dabur Amla Kids Shampoo).

Regional focus through RISE helps Dabur embark on initiatives like using the Dabur Red Paste (over-indexed in South) as carrier pack to distribute other brands. Other examples include initiatives in North-East and South India.

Dabur was earlier losing market share in light hair oil to competitors, primarily Marico. Over the past year though, we see strong signals from Dabur to defend its market share through aggressive price actions in its coconut oil brand and strong marketing campaign targeting Marico. We believe the increasing focus on health and wellness is the likely cause for the weak growth.

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