Strategic Manageme nt

Submitted to: Prof Amar KJR Nayak Submitted by: Sourabh Choudhary (U108109) Shekhar Mandal (U108110) Sujit Kumar Sahoo (U108111) Kar (U108112) Sweta Sah (U108113) (U108114) Thendral I (U108115) Satpathy (U108116) Vibhav Kumar (U108117) Krishnan Mahajan (U108118)

Dabur India Ltd.

Subhranshu Swarup Kumar Tanya Gupta Uday Bhanu Vikrant

Table of Contents

1.Introduction....................................................................................................... 3 2.Phase I.............................................................................................................. 4 3.Phase-II (1998-2003).......................................................................................... 5 3.1 Phase#2 IT perspective.............................................................................. 7 3.2 Phase#2 Marketing perspective.................................................................7 3.3 Phase#2 HR perspective............................................................................8 3.4 Phase#2 Finance perspective...................................................................8 4.Phase III (2003 onwards)....................................................................................9 4.1 Phase#3 Financial Perspective.................................................................10 4.1.1 VISION 2010: ANALYSIS.......................................................................13 4.2 Phase#3Marketing Perspective................................................................15 4.2.1 Daburs Rebranding Exercise...............................................................18 4.3 Phase#3 Information Technology Perspective.........................................19 4.4 Phase#3 HR Perspective..........................................................................20 Operations Strategy of Dabur India Limited........................................................27 Manufacturing.................................................................................................. 27 Supply Chain Initiatives at Dabur India Limited...............................................29 Procurement.................................................................................................... 31 Quality............................................................................................................. 32 Research and Development.............................................................................32 Vendor Management 3.................................................................................... 33 Corporate Governance........................................................................................ 33 Dabur-Sustainability ........................................................................................... 35 Porters Five Forces Model for Dabur..................................................................36 EXHIBITS............................................................................................................. 39 REFERENCES....................................................................................................... 45 2

1. Introduction
Dabur India Limited (DIL) is the fourth largest FMCG Company in India with business interests in Healthcare, Personal care and Food products. It has revenue of about US$600 Million (over Rs 2834 Crore) & Market Capitalization of over US$2.3 Billion. Dabur India is a 126 years old company and is the world leader in Ayurveda with a portfolio of over 250 Herbal/Ayurvedic products. Dabur since its inception has focused on manufacturing and selling Ayurvedic products targeted at the mass consumer segment. There are number of personal care products, Ayurvedic tonics and oral care products which it launched between 1940 and 1970 have become leading brands today. Daburs top nine brands had 65% or more market share in their respective product categories. These include the health tonic Chyawanprash, Hajmola digestive tablets and candy, digestive Pudin Hara, Dabur Lal Dant Manjan and Dabur Amla hair oil. Dabur manufactures over 450 products, covering a wide range in health and personal care. Dabur India has 14 manufacturing locationseight in India and six in contries like Nepal Nepal, Egypt UK etc.It has three Subsidiary Group companies - Dabur Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care International, Fem Care Pharma and newu and 8 step down subsidiaries: Dabur (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle LLC (Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA). It has wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over2.8 million retail outlets all over India. Dabur India limited is divided into three SBUs. 1) Consumer Care Division: This SBU caters to the consumer needs pertaining to Personal Care, Health Care, Home Care & Foods. The major Brands under this SBU are Dabur, Vatika, Hajmola, Real and Fem. 2) Consumer Health Divison: This SBU pertains to the Ayurvedic medicines and ayurvedic OTC. Major categories in traditional formulations include Asav Arishtas, Ras Rasayanas, Churnas, Medicated Oils. 3

3) International Business Division: It caters to the health and personal care needs of international consumers in middle east, north and west Africa, EU and US. This division has high level of localization of manufacturing and sales & marketing.

2. Phase I
Dabur was set up by in 1884 by Dr. S K Burman in West Bengal as a proprietary firm for manufacturing of ayurvedic drugs .Dabur is an acronym of the name DAktar BURrman, its founder. In the year 1896 a small manufacturing plant was set up near Calcutta for mass production of Ayurvedic Drugs and Chemicals. Dabur started its operations in 1896 with the manufacture of drug called Plagin to counter the wide spread plague at that time. In the 1900s next generation of Burmans took the firm further and they believed that Ayurveda was the mantra which can be sustainable and can meet the needs of low income countrymen. As a result a research laboratory was formed in 1919, followed by manufacturing units at Kolkata (then Calcutta) and Bihar. In 1936, Dabur India Pvt Ltd. was incorporated which took over the business from the proprietary firm. Dabur expanded its distribution network in the next two decades. It launched Dabur Amla Hair Oil in 1940 and Dabur Chyawanprash in 1949. In 1969 there was unrest and business uncertainity in calcutta which led the family to expand its manufacturing operations in Delhi. The next product came out in 1970 in the form of Dabur Lal Dant Manjan followed by the Hajmola Tablet in 1976. Through the 80s and 90s Dabur performed well but was established as a brand for the elderly because of its image of an Ayurvedic Company Although later in 1989 it launched Hajmola candy which was targeted towards the children segment. In 1986, Dabur became a public limited company through a reverse merger with Vidogum Ltd. and was renamed as Dabur India Limited. A reverse merger is acquisition of a public company by a private company which allows the private company to bypass the lengthy and complex process of going public. In the following year to cater to the global markets needs it set up a facility at Noida Export processing Zone. In 1991,Dabur Overseas Ltd. 4 was set up in Cayman Islands to cater to the needs of overseas investment and this later

funded the set up of Dabur Egypt Ltd., in Cairo, which was set to manufacture personal care and food products. In 1992, Dabur entered into 49:51 joint venture with the Spanish confectionery major Agrolimen group under the name General De Confeteria India Ltd. (GCI) by investing an amount of INR 92.3 Million. Also Dabur entered into a biscuit joint venture named Excelcia Foods with Nestle. In 1993 Dabur decided to go to public and came up with an initial public offer in 1994 with Rs 10 face value share at a premium of Rs 85. The issue was oversubscribed 21 times and total amount raised was Rs 541.5 million. The reasons for tapping the equity markets were: Additional funds were required to expand production and set up new factories Launch diversified range of products and compete against FMCG MNCs

In 1994, Dabur reorganised its business in three separate divisions of Sales, Marketing and Operations.In 1995, Dabur launched Vatika and hoped to change the perception in the consumers, and was successful to a certain extent too. In 1997, Foods division was carved out which consisted of Real Fruit Juice and Homemade cooking pastas. Also in the same year the company launched a unique initiative called STARS (Strive to Achieve Record Success) to achieve accelerated growth in the future years.

3. Phase-II (1998-2003)
In 1997, Dabur had started facing issues as two out of its four flagship brands Chyawanprash and Hajmola - were slipping due to product life cycle issues. Another of its flagship brand Dabur Amla Hair Oil was also growing at a lessthan-satisfactory rate, at five per cent. Post-liberalization, with the Indian economy opening up and foreign players entering Indian markets, Dabur realized that competition will be picking up very soon. In April 1997, Dabur hired the leading management consulting firm McKinsey & Co. for mapping out a comprehensive restructuring plan for its varied businesses and strengthen its competitive position. McKinsey primarily offered the following advices: 5

1) To improve profitability, stay focused on core competencies i.e. ayurveda and health care products 2) Advised Burman family to lay off from the day-to-day operations and leave the company in the hands of professionals. Dabur paid a fee of Rs 10 crore to McKinsey & Co. and started following its advice religiously. In 1999, It off loaded its entire 49 per cent stake in the confectionery joint venture General De Confiterria to its Spanish partner Agrolimen for Rs 35 crore. The Rs 100 crore GCI product portfolio comprised of two categories -- Boomer bubble gum and soft-filled candies, Bonkers and Donaldo. While setting up the confectionary jointventure GCI in 1994, DIL had estimated that the booming candy and bubble gum market would provide it with ample opportunity to turn the venture into a profit maker. The Spanish partner was roped in considering the highly intensive technology nature of the confectionery market. However, the joint venture has not worked out according to the plan as only a handful of products saw the light of the day. Dabur India limited also scaled down its stake in Excelsia Foods to 40 per cent, handing over control to in favour of Nestle SA to become a minority partner. Dabur sold its 20 per cent stake in Excelcia Foods Ltd for Rs 10.6 crores. The company also reduced its exposure to Dabur Finance, where it held 90 per cent stake. The finance arm sold its retail business to Birla Global Finance in 1999. It also discontinued its Samara line of herbal cosmetics that it introduced in early 1997. The Burman family handed over management of the company to a professional CEO and limited their role to strategic inputs at the Board level in 1998. The decision was taken in response to the changing dynamics of business and to inculcate a spirit of corporate governance within Dabur India. Post-1998, the Burman family has receded from the day-to-day operations of the Company and has strength of 4 members in Board of Directors. In 2001, Family Council was constituted for formalizing the promoter familys role in managing the business interests encompassing all group companies. Dabur roped in Accenture to define clear roles and responsibilities of its board of directors and the chief executive officer to prevent any overlap. The roles of Management Committee, Board of Directors and Family Council were defined and formalized. 6

In 2002, Dabur again roped in Accenture to study its sales and distribution system. As per its recommendations, Dabur restructured its Pharmaceutical business and separated it from its FMCG business. Dabur tried to reposition itself as a herbal specialist rather than flogging its ayurvedic lineage alone. Confining itself to the ayurvedic platform would have been restrictive as the domain could only be stretched to a certain level and not beyond. DIL also decided to have five main brands Dabur, Vatika, Anmol, Real and Hajmola, and every product was to be migrated to one of these. Not only would it have helped Dabur to focus but also it would help it to aggregate its media spend.

3.1 Phase#2 IT perspective

In Dabur knowledge and technology were the key resources which had helped the company to achieve higher levels of excellence and efficiency. Towards this overall goal of technology-driven performance, Dabur started to utilize IT. This helped in integrating a vast distribution system spread all over India and across the world. It also helped to cut down the costs and improve profitability. Dabur leveraged information technology to drive supply chain efficiencies and had invested to the tune of Rs. 12 crores by 2004 for the IT backbone of the organisation. The company started to work on two ERP systems - Baan and Mfg Pro in 2001, in production and distribution respectively. This was a good move to cut down the operational costs, reduce redundancies and errors and increase efficiency, all contributing to increase in the bottom-line. Dabur a 114 year old firm - showed a new path to the industry by successfully outsourcing the complete IT infrastructure. Many other companies followed the suit thereafter.

3.2 Phase#2 Marketing perspective

As discussed earlier, during this phase Dabur wanted to reposition its image of an Ayurvedic company to a major FMCG player with diversified product categories. Dabur concentrated n differentiated product offering and meticulous 7

brand building initiatives. The company concentrated on differentiating the brand in all aspects, right from positioning to packaging. The biggest example is Dabur Vatika which it positioned as value-added hair oil that contained pure coconut oil enriched with natural ingredients such as Henna, Amla and lemon against the market leader Maricos Coconut Oil.

3.3 Phase#2 HR perspective

DABURS willingness to persevere with professionals, and not family members, is quite unique in itself. In 1998, the promoters (the Burman family) first experimented with a non-family CEO, Ninu Khanna who had been recruited from P&G to lead the company. That year a whole host of professionals had also been inducted at senior positions. However, Ninu Khanna left by 2001. But instead of abandoning its experiment, as had been widely expected, the board plumped for Sunil Duggal, an old Dabur hand, in 2002 and the family, which still controls 75 per cent of the companys equity, has since followed a hands-off policy. (Currently, six of the 10 board members do not belong to the promoter family.) In the year 2001 the company began to feel the need to put its HR systems in place to ensure that organizational and individual goals were aligned. It began institutionalizing empowerment in the workplace. Employee empowerment: The idea was to make employees feel like stakeholders. For example, Dabur has an ESOP scheme that is democratic by industry standards in the sense that it is not based only on seniority, but also on the importance of the assignment of the employee. Preserving the Dabur values: A whistleblower policy introduced. It sought to put a cap on business practices that were out of character with Daburs values. Employee Referral Programme: Existing employees could refer candidates they thought to be suitable. Incentives would be provided to such employees that not only provides employee with monetary benefits but also builds a relationship based on trust and reliability.

3.4 Phase#2 Finance perspective

Dabur India Limited has benefitted from the advice of Mckinsey in the long run. The Profitability of Dabur India Limited increased in the long run with Net profit margin rising from 4.64% in Mar-99 to 14.74% in Mar-09. The operating margin has also approximately doubled from 9.83% in 1999 to 18.33% in 2009.This is 8

primarily due to implementation of ERP in 1999 which allowed it to integrate the internal functions such as supply chain, purchase, stores and manufacturing. The prime impact of this was on the cost incurred as this reduced the working capital requirement by1/3rd of its usual level. As can be seen in the graph below, except for a small dip in FY02, there has been a consistent growth in both operating margin and net profit margin. The growth has trend has stagnated since FY06.

4. Phase III (2003 onwards)

In 2003, Dabur collaborated with Accenture so as to keep itself competitive. The need of the hour was to work smarter and faster so as to improve profitability and revenue growth. Accenture advised Dabur to focus on the following key areas: Competing on core competencies, while outsourcing non-core functions to trusted third-party providers. Viewing information technology (IT) as a strategic asset that creates real valuesnot simply a cost to be managed. Streamlining processes wherever possible

Dabur implemented Accentures advice and went ahead with the following strategies in each of the following functions.

4.1 Phase#3 Financial Perspective

Cost Cutting Measure In 2003-04 Dabur India procured Rs.210 crore of raw materials through esourcing which was almost 50 per cent of total raw material expenditure that it incurred. As a result of which Dabur considerably controlled raw material costs which were on a rise. Due to e-procurement it was able to save considerably in raw material costs which in turn, translated into higher operating profit margins for DIL. Daburs net profit during the quarter was up 30% from the year-ago period. The firm registered an operating profit margin of around 19% compared with around 17% a year ago. But, the savings visible on the raw material cost front was also due to the higher inventory base that the company used when the material costs were low. As a result of these savings it was able to spend more on advertisements and new launches.

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Dabur Pharma Demerger In May 2003, the board of Dabur India demerged the pharmaceuticals business and created a separate entity Dabur Pharma Ltd. At that point of time pharmaceuticals contributed around 15% of total sales. In 2007, the company sold its non-oncology business to Alembic for Rs 159 crore to focus on its oncology segment. In 2008 German major Fresenius Kabi acquired 73% stake in Indias largest anti-cancer drug maker Dabur Pharma for around Rs 872 crore. With this, the Burman family, the promoters of the company and holding 65% stake got around Rs 775 crore and exited the pharmaceutical business so as to focus on its core competence and come out as a pure FMCG player. Oncology (Anticancer) is a lucrative segment & requires high-level research and development (R&D) but the parent company DIL long term strategy is to buy brands and aggressively expand its FMCG business. One of the reason they sold the company could be that its unit in Baddi completed its 10-year tax exemption benefit during the quarter ended December 2007.Hence it made economical sense for them not to continue with that and sell it off to a Big Pharma player like Fresenius Kabi as Dabur Pharma also holds a substantial number of drug registrations in Asia, Europe and the US.

Acquisition of Balsara In Jan 2005, Dabur India Ltd (DIL) acquired three Balsara group companies for Rs143 crore in an all-cash deal. It mopped up Rs. 120 crores through internal accruals and financed the remaining Rs. 23 crores through borrowings. As per the deal it had acquired 99.4 per cent stake in Balsara Hygiene Products, 100 per cent in Balsara Home Products and 97.9 per cent in Besta Cosmetics. The acquisition was part of its inorganic growth strategy which it had planned well in advance and was in line with its plan to
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expand the company's scale of operations and strengthen its presence in the FMCG sector. As 44 per cent of Balsara's revenue came from home care products and the oral care segment accounted for nearly 56 per cent which had witnessed growth in excess of 15 per cent, also Balsara deal was a strategic fit in both oral and home care market as it acquired the 2nd largest selling toilet cleaner Sanifresh in 2000 Cr. Home care Mkt. Also its market share in tooth paste Industry grew by 6% from 1.8% to 8% which substantially covered the acquisition amount it paid for Balsara. Balsara had sales of Rs 199.6 crore & losses of about Rs 8 crore in the period, But with readjustment in focus, streamlining of distribution and reduction in the wage bill helped Dabur India turn Balsara Home Products around. It reduced the distributors of Balsara from 500 to a few dozens while giving business to its own distributor. This put more bargaining power in Daburs hands in negotiating a reduction in distributors margins as well as in making its purchases. Reduction in no of employee reduced the wage bill by 60% along with substantial reduction in other overheads. Also, Dabur payed 1/5th of what Balsara used to pay for advertisements, hence, increasing its visibility and revenues. In six months of its take over Balsara added about 11% to total revenue and showed great potential in terms of revenue growth and profitability posting 35% growth in sales and a net profit of Rs. 14.8 crores during the year. The Balsara acquisition boosted its revenues and savings in excise duty (due to shifting of manufacturing to tax-free zones) which also enhanced its profit margins as seen in the following tables. . Figures in Crores FY FY 00 01 Sales 982 110 0 Other 34 19 Income EBITDA 128 137

FY 02 120 0 12 144

FY 03 128 5 7 162

FY 04 123 6 9 164
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FY 05 141 7 9 217

FY 06 175 7 13 300

FY 07 208 0 26 376

FY 08 239 6 34 443

FY 09 283 4 47 517. 3

Growth in Sales

12 %

9%

7%

-4%

15 %

24 %

18 %

15 %

18%

We can see that the financial year ending 2005 had shown an increase of 15% in sales which was immediately after the acquisition of Balsara. Hence Daburs acquisition of Balsara not only strengthened its position in FMCG but also its turnaround within six months made Balsara one its profitable subsidiary.

DABUR FEMCARE DEAL Dabur acquired Fem care in June 2009 and the result has been phenomenal. The market share in the skin segment increased from 1% to 6.6% within 5 months of this deal, making DIL the second biggest skincare company in the country behind HUL. The Fem Care brand accounts for half of the skincare segment within the Dabur portfolio and 4.2 per cent of Daburs total revenue. First Dabur India had acquired 72.15% of Fem for Rs203.7 crore in an allcash deal. Further due to SEBIs guideline (substantial acquisition of shares and takeovers) Regulation,2007. Dabur acquired additional 20% stake for Rs54 crore through an open offer. The deal has been done at more than a 21% premium to the prevailing share price of Rs 656 of Fem Care at Rs 800/share. The deal fetched a very attractive valuation for Fem Care Pharma. With the completion of this transaction, Fem Care Pharma is now a 100% subsidiary of Dabur India. Marico Industries and Godrej were also reported to be in race for Fem Care Pharma but it was eventually won by Dabur which shows its seriousness towards FEM Acquisition.

4.1.1 VISION 2010: ANALYSIS

1. Doubling of Sales Figure from 2006. After the successful implementation of 4-year business plan from 2002 to 2006, Dabur had launched another vision for 2010. One of the plans for 2010 was to double the sales figure from what it had been in the year 2006. From the exhibits, 13

we can see that the sales figure at the end of the year 2006 was Rs. 1757 crores and by the end of year 2009, it was Rs. 2834 crores which shows an increase of 61% in the sales. Though it has not yet reached the double figure, it seems close to achieving the figure in 2-3 years. 2. Growth to be achieved through international business, homecare, healthcare and foods The division wise revenue is: Consumer Care Division (CCD) 69% Consumer Health Division (CHD) 7.9% International Business Division (IBD) 18.1% Others 5%

Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December 2009. o o o CCD grows by 16.1% CHD grows by 15.8% IBD grows by 31.1%

3. Southern markets will remain as a focus area to increase its revenue share to 15 per cent The south India market share has increased from 6% in 2002 to 12% in 2009. This is the result of the initiatives taken by Dabur to suit the south Indian market e.g. launching herbal toothpaste in Kerala and Tamilnadu and launching Dabur Lal Dant Manjan as Dabur Sivappu Pal Podi etc. The market share increased after the acquisition of Balsara as Balsara had strong presence in the south and western region. The other factors were POS promotion, customised packaging and commercials & customised product launch.

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4.2 Phase#3Marketing Perspective

It was only after its association with its partner, Accenture, that it made radical changes in its strategy. A company which was considerably inept to changes, both organically and inorganically, now started planning acquisitions and detailed 5 year plans for its existing segments. The reasons behind these initiatives are as follows: 1. Its existing products were considered to be targeting the mid aged and above aged segments, but the demography was changing in the country. India was emerging to be a young nation and Dabur recognized the need to have products for the younger generation, while retaining the older segment. 2. Rise of the regional players. Players like Balsara, Zandu, Emami were fast emerging highly competitive with more or less similar products. The market share of Dabur was suddenly shrinking in some of the categories. 3. Rise of the Rural India. With disposable incomes rising in Rural India, Dabur could use its distribution channel to meet the demand in Rural India with differentiated products in newer segments at affordable prices. 4. Low penetration levels in certain categories. The acquisition of Balsara and Fem were mostly due to this reason. 5. Expanding in the new markets, especially the international markets. With a diversified kitty and acquisition of established players (Fem - South East Asia, Balsara - South India), Dabur could reach out to new markets. The initiatives required strategic changes across all functions. The marketing strategy was the key behind these changes as FMCG business runs on the brand value created over the years. The marketing strategy changed to a mix of product branding and umbrella branding from being only umbrella branding in the past. Products like Chyawanprash, Hair Oil, Hajmola retained the umbrella branding while acquired products and new products like Odomos, Real, Vatika adopted product branding. The CCD division or the Consumer Care division has evolved considerably over the last decade and so has its marketing strategy. CCD now comprises of FPD and HCPD in addition to the Fem and Balsara. Dabur has invested hugely in the advertisement of its products and differentiated its product offerings too. The present structure of Daburs strategic units is:

DABUR
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CCD (72.8%) HEALTH CARE 44% PERSONAL CARE 37% FOOD --- 13% HOME CARE 06% ---

CHD (07.3%) --- OTC 57% --- ETHICAL

IB (18.5%) --- HAIR OIL 54% -----------

--- 43% HAIR CREAM 23% ORAL CARE 12% FOOD 06% OTHERS 05%

Post 2000, Dabur concentrated and differentiated product offering and meticulous brand building initiatives. The company concentrated on differentiating the brand in all aspects, right from positioning to packaging. The biggest example is Dabur Vatika which it positioned as value-added hair oil that contained pure coconut oil enriched with natural ingredients such as Henna, Amla and lemon against the market leader Maricos Coconut Oil. It started with an increase in Advertisement spent by bringing in leading filmstars (Amitabh Bachchan & Preity Zinta) and sport-stars (Dhoni & Sehwag) in its campaigns. The frequency of the advertisements and the modes of advertisements increased significantly. Brand ambassadors were also changed according to the re-branding of the products. Amitabh bachchan was replaced by Dhoni for Dabur Chyawanprash as Dabur started to concentrate on the younger generation by launching new variants of Dabur Chyawanprash (Chyawan Junior & Chyawanshakti). The reason behind this rebranding was the market stagnation in the Chyawanprash category. Dabur targeted the institutional markets by partnering with institutional clients (Discovery Channel, Mickey Mouse) which included hotels and airlines to increase its market share.

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It launched new packaging in several products to address the needs of the customers in a much more efficient manner. Not only it increased the top-line through higher volumes (low priced products are a hit among price-sensitive rural consumers) but it also increased the bottom-line through higher margins in these smaller SKUs. With a diversified kitty, Dabur required different campaigns for different segments. To resolve the issue, a lot of BTL activations were done so that it can reach directly to the consumers and also solve the issue pertaining to the segment. Some of such activations are as follows: HAIR OIL Dabur Launched beauty and talent shows in Rural areas of Northern India where it has considerable presence. Initiatives like "Banke Dikhao Rani Pratiyogita" and Dabur Vatika Koyal Punjab Di" were launched to tap the existing users and convert them into loyal customers of its brand. CHYAWANPRASH Dabur organized Mobile road shows in association with JAGRAN SOLUTIONS in 200 remote villages of UP. It emphasized on Direct Interaction with consumers, giving information about the benefits of Chyawanprash in their everyday life and was backed by media coverage. Modern trade also allows more space and provides an established route to launch new products. Modern trade accounts for about 5-10 per cent of urban sales for FMCG companies and this can go up to 25 per cent for southern markets. In the modern trade segment, Dabur has opened its retail subsdiary called H&B Stores Ltd. in NCR and South India. At present there are 11 stores functional and there are plans of 12 stores to be opened in the future. Dabur initiated a programme christened DARE (Driving Achievement of Retail Excellence) to improve its effectiveness in organised retail in 2009. For Dabur, about 3 per cent in 2008 of sales come from modern trade and it was expected to grow up to 7.5 per cent in 2010.
CATEGORIES Mark et Shar e Market Leader Major brands of Dabur URBAN INDIA

RURAL INDIA Penetrati on 93% Growt h 19.4%

PERSONA L CARE

Hair Oil

16.0

Marico 36.0%

Dabur Amla, Vatika

Penetrati on 96%

Growth 20.2%

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Sham poo Oral care Skin care Diges tive HEALTH SUPPLEMENTS FOOD HOME CARE

6.2 12.8 6.6 55.0 60.3 45.0 20.0

HUL 45.4% Colgate 48.7% HUL 58.9% DABUR DABUR DABUR Premium 31%

: : :

Vatika, Dabur Total Dabur Lal, Meswak,Babool Gulabari, Fem Skin Hajmola, Candy Chyawanprash, Glucose-D, Honey Real, Real Active, Real Burrst Odonil, Odomos, Saini Fresh

46% 45% 19% NA 5% 10% 20%

13.3% 8.0% NA NA 8.75% NA NA

62% 79% 30% NA 14% 30% 58%

9.3% 6.1% NA NA 2.5% NA NA

Daburs acquisition of Balsara and Fem are largely to the fact that the products they deal have low penetration levels. The skin care segment stands at 19% and 30% penetration levels for the rural and urban levels respectively, which an attractive market is, given the rise in education, disposable income of the people living in rural India. The food industry too is window of opportunity, where there is a penetration level of 10% in Rural India. With signs of slowing down of aerated drinks, Dabur can cash in the displaced consumers to its juice business. However the health supplement category is more of a worry than opportunity. In-spite of its presence in rural India and the category for over 50 years, Dabur has still not able to increase the penetration levels. As a result, market is stagnant for years, though there are signs of recovery in the past few years.

4.2.1 Daburs Rebranding Exercise

In the year 2004-05 a whole new brand identity of Dabur was born. The old Banyan tree was replaced with a new, fresh Banyan tree.

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The logo was changed to a tree with a younger look. The leaves suggesting growth, energy and rejuvenation, twin colors reflecting perfect combination of stability and freshness, the trunk represented three people raising their hands in joy, the broad trunk symbolized stability, multiple branches were chosen to convey growth, and warmth and energy were displayed through the soft orange color. Celebrating Life was chosen as a new tag that completely summarized the whole essence.

4.3 Phase#3 Information Technology Perspective

By 2005 Dabur started to feel the pinch of maintaining two independent ERP systems. They were facing following issues: 1. There were still data redundancies and inconsistencies at times. 2. Considerable amount of rework was necessary in just data format conversion between the two systems. 3. It still did not provide a holistic picture and thus posed problems in formulating a strategy or taking business critical decisions. 4. Maintenance costs climbed up because of the above stated points. Therefore, to realize not just the operational excellence but also decision support infrastructure, the idea of a single organization wide ERP implementation was proposed in Dabur. So, With Accentures help, Dabur implemented strategic and operational changes by implementation of organization wide SAP core modules.

Major IT initiatives:
1. Migrated from standalone ERP systems - Baan and Mfg to centralized SAP ERP system from 1st April, 2006 for all business units (BUs). 2. Implemented a country wide new WAN infrastructure for running centralized ERP system. 3. Setting up of new data center at KCO head office in Ghaziabad. 4. Extension of Reach system to distributors for capturing Secondary Sales Data to collect near real-time pipeline information was done by 2004 1.
1

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5. Roll out of IT services to new plants.

Benefits from these initiatives:

1. Increase in annual sales by 17% whereas increase in profits by over 40% showing more operational efficiency and cutting down of costs. 2. The distribution network expanded by 19% bringing the total to about 630,000 sales outlets. 3. Dabur estimated about 6% of its total of 14% growth from the new strategy alone, in the year 2007. 4. Accenture provided help in merging the systems of the entities after the Balsara merger.

Future Challenges:
1. Forward integration of SAP with distributors and stockists. 2. Backward integration of SAP with suppliers. 3. Implementation of new Point of Sale (POS) system at stockist point and integration with SAP ERP. 4. Implementation of SAP HR and payroll. 5. SAP roll out to Dabur Nepal Pvt. Ltd. (DNPL) and other businesses.

4.4 Phase#3 HR Perspective

Dabur rears a culture that gives full autonomy to its employees. It cares for the employees development along with the growth of the organization. Dabur believes in nurturing a familial bond with its people by creating a harmonious and value based work environment that encourages team spirit, and also rewarding individual initiative. It follows more of a paternalistic approach to care about its employees. It has implemented various training and development programs like Young Manager Development Program, Prayas, Leading and Facilitating Performance, Campus to Corpora and a Balanced Scorecard

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approach

to

performance

evaluation,

have

been

implemented

to

help

employees realize their potential. The company believes that good HR policies, by themselves, dont create a great workplace. They need to be accompanied by ambition and a sense of daring. So, these new HR policies have also gone hand-in-hand with plenty of action on the business front. Dabur has made its brand identity more contemporary. It has also taken the first steps towards becoming a true multinational, rather than a company that does some international business.

Employee Bonus: In 2005, Dabur gave Bonus to its employees after 12 years. It announced issue of 1:1 Bonus share to the shareholders of the company, i.e. one share for every one share held. This boosted the employee morale further.

Young Managers Development Programme (YMDP): Dabur has a twopronged approach in recruiting dynamic professionals as lateral recruitments and the Management Trainee Engineer/Trainee recruitments at entry level under YMDP. Each year, it is upgraded to make the learning experience more enriching and rigorous with a greater focus on functional and conceptual inputs and an objective learning evaluation system.

Acquiring Balsara: The people paradox

The deal created a lot of unrest but the biggest issue was, of course, people. Dabur already had 2,300 people on its rolls, while Balsara had 600. There was a huge chaos as there was no room for any duplication for posts. Though Dabur did not retrench anybody, but close to 300 people quit. These exits were the most painful part of Dabur India's acquisition of the Balsara group's hygiene and home products business. A number of people quit citing locational constraints as Balsara is a Mumbaibased company, while Dabur is headquartered at Sahibabad, near Delhi. Despite of these problems, some areas were integrated smoothly. For example Balsara's R&D team was seamlessly absorbed into the larger organization. Dabur had no experience in home care, which made integration of that division invaluable on the other hand the oral care research division possessed skills that complemented Dabur's own team.

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Even the manufacturing facilities didn't pose too many problems. The fact that neither of the organizations were unionized helped as well. It aided in decision making about Balsara's three plants -- at Silvassa (Dadra & Nagar Haveli), Kanpur (Uttar Pradesh) and Baddi (Himachal Pradesh) much easier. Also the Kanpur factory was a small scale factory, with just 10 workers hence the decision to stop manufacturing there didn't cause too much disruption. The Silvassa plant was overstaffed with 100 workers, hence about 30 of them were shifted to Baddi, a new factory, which was understaffed at just eight employees, thus solving two problems. Following Dabur policies at Balsara did mean some expense. Salaries were hiked to bring them in line with the Dabur structure; and external consultants were brought in to conduct detailed assessments of all employees and redeployments were made on the basis of their recommendations.

Major issues
The major portion of trouble for the HR division lay with sales. Before the acquisition two distinct distribution networks were in place at Dabur. While the decision was taken to aggregate the smaller business into Dabur's infrastructure, suitable modifications were also necessary. Dabur's original distribution was along two verticals: Line 1 for health care and Line 2 for personal care. Now, with new product portfolios coming in, a third line was created that to look after home care and all oral care (including Dabur's range) products. Dabur's consumer care frontline was made to have a total of 400 people, of whom 120-odd were from Balsara. Had Dabur continued with just two lines Balsara may not have got the required focus. Since Line 3 covered Dabur and Balsara products, managed by employees of both organisations, substantial re-training in selling techniques to match up with that of Dabur was also required. Using the "train the trainer" module, about 55 managers conducted workshops for sales staff across the country. Dabur had to invest in several thousand manhours of training. Inspite of the above mentioned factors that year's wage bill was likely to be 50 per cent lower than last year's. While the departures have meant huge savings in staff expenses, recruitment costs also came down across the group, since Balsara people helped fill vacancies in group companies.

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Challenges faced in the modern era

Dabur is a hundred year old organization. For such an old organization to be successful in changing times it must innovate continuously and evolve over a period of time. This requires modernization in practically every aspect. But such an initiation requires a very difficult milestone to be achieved, i.e. changing mindset of the people associated with the company. There were people who had been in the company for long, and were used to doing things in a certain set way. To overcome this challenge, the management ran a comparison between both, conventional as per my experience perspective, and a more system-and-facts based decision-making model, on computer-generated programs. This let the organization clearly see realistic and practical answers to the questions raised with regards to modernization.

PEST Analysis of Dabur India Limited (Period 2005 onwards) Political Factors The key factors that have triggered growth for the FMCG industry in the period include reduction in excise duties, relaxation of licensing restrictions and reduced dominance of unorganized sector due to creation of level playing field. With the revival in demand in the FMCG sector and capacity planning done by all major FMCG companies in tax haven areas the future looks promising. Also, the government thrust on agriculture and rural economy has facilitated improved demand for the FMCG products. The hair oil industry is witness to a large amount of unbranded oil manufacturers that account for nearly half of the total coconut oil market. This also provides a significant upside potential for companies like Marico and Dabur. The implementation of Value added tax is also expected to tilt the balance in favor of organized players. Given the fact that there is only a moderate scope for differential in coconut oil segment, the players concentrated on value added oils like Amla, Badam and so on. The addition of these high margin products in the portfolio also leverage the players against the no frills coconut oil segment. They have been

23

successful in the venture with brands like Vatika, Dabur Amla (Dabur) and Hair & Care (Marico) firmly rooted in the markets. While the coconut oil brand of Marico, 'parachute' grew by 8% in volumes in FY '05, the growth of value added oils like Sampoorna, Shanti Amla and Hair & Care has been comparatively faster at 14%. Even for Dabur, the flagship brand 'Dabur Amla' reached a milestone in FY '05 by crossing a turnover of Rs 200 crore and registered a 16% growth. This speaks of the success of the value added products. In 2008-09, finance ministers decision to reduce CENVAT rate to 14% was in line with the GST roadmap, and this coupled with lower income tax incidence on individuals will accelerate disposable incomes, and thus augurs well for the FMCG sector. Economic Factors Better reforms and investment policies attract foreign investments, which ultimately improves the standard of living of the people in that country. With improved standard of living more and more consumers prefer using branded FMCG products which have so far remained an aspiration. Consumers who are already using branded products will upgrade themselves to premium products. We could expect similar recovery in our economy in the FMCG segment in the coming years. FMCG sector is going to be in the limelight with strong economic fundamentals, rising demand and a growing GDP. The future growth is expected to come from newer segments such as the youth and through increased rural and small town penetration. The Internet and e-commerce will change the dynamics of this industry helping companies improve their procurement, distribution and selling efficiencies. FMCG market remains highly fragmented with almost half of the market representing unbranded, unorganized sector products. This presents a tremendous opportunity for makers of branded products who can convert consumers of unbranded products to branded products.

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In the scheme of things, Dabur Foods Limited' was merged with Dabur India Ltd. in 2007. It was now an over Rs 2,200-crore entity including the Rs 200-crore from Dabur Foods. It thus became one of the business divisions of Dabur India, alongside consumer care division (CCD) that encompassed all the personal care and home care products, and consumer health division (CHD). Dabur also made retail venture under the health and beauty format, through its wholly owned subsidiary, H&B Stores. It envisaged selling products ranging from personal care, cosmetics, baby care to over-the-counter drugs. Social Factors In 2004, the frequency of usage of oral care products in India as compared to developed world was very low, giving scope for growth to the sector. Per capita consumption of toothpaste in the country was only 70 gm compared with 300 gm in Europe and 150 gm in Thailand. Also, a critically low dentist to population ratio in our country, results in low oral hygiene consciousness and widespread dental diseases. This provided a good opportunity to expand the market and encourage people to use modern dentifrice to improve oral hygiene. Moreover, it is one of the larger players in the toothpowder category. However the company is witnessing negative growth rates in the category, as there seems to a shift of the consumer from toothpowder to toothpaste segment. The company is compensating for the loss in the category by launching Dabur Red toothpaste that has grown into Rs 50 crore brand in two years of its launch. It was also worthwhile for Dabur India Ltd. to consider inorganic growth. Even though Balsara (with brands Promise, Meswak, Babool etc.) was making losses, it did possess synergies with the growing oral care business of Dabur. Dabur estimated the market for this category to be Rs. 2500 crores growing @ 10% p.a., which made the market very lucrative. Thus, acquiring Balsara was an obvious step to grow inorganically.

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The penetration levels of shampoo are abysmally low in the country. The penetration in urban areas is around 65% while its just 35% in rural areas. Also the per capita consumption of shampoo is just 16 ML compared to 1000 ML in UK and US. This provides an opportunity to the players to improve the market and their size. The Indian shampoo market is characterized by sachets. Around 70% of total shampoo sales are through sachets. The general trend in the international markets is to introduce a brand through sachets and thereafter upgrade the consumer to bigger bottles. Dabur thus shifted gears to anti-dandruff shampoo (Dabur Vatika anti-dandruff shampoo) in 2004. It also relaunched brand Vatika in 2007. Technological Factors The market size of bleach products in India is around Rs 85 crore and is growing at 15% with Fem holding 60% market share in it. The market size of hair removing cream is around Rs 110 crore and is growing at 22% with Fem having around 7% market share. The liquid soap market size in India is around Rs 50 crore and is growing at 25%, where Fem has 2 main competitors, Dettol and Lifebuoy. In 2009, Dabur acquired 72.15% stake in Fem Care to provide the company with the technology to enter high-growth skin care market with an established brand name 'FEM'. Apart from Fem bleach, other popular brands by the firm are Oxybleach cream, Botanica anti-ageing cream, Stratum colour protecting hair conditioners, SAKA men's bleach and Bambi fabric softeners. Fem is world leader in bleaching cream category by tonnage. Fem brand is very well placed in India and aboard. With this acquisition, Dabur will become key player in skin care category. Fem has reach of around 25000 parlours, which can be leverage by Dabur for promoting its own Gulabari skin care products and its Vatika brand. Dabur was thinking of launching its products into ayurvedic skin care category, will delay its launch by couple of months due to acquisition. The company will continue its
26

initiative in skin care category through Gulabari, its ayurvedic products which will launch shortly and through Fem.

Operations Strategy of Dabur India Limited

The Operations Strategy of Dabur India Limited has changed as their business has evolved over time. The section below tracks the various key operations strategy such as the Manufacturing ( processes involved and locations), the Supply chain initiatives over the years, Inventory Management, Quality Management, Research and Development Initiatives, Procurement procedure, Vendor Management etc over the time frame from late 1990s till 2009. The section highlights the key defining operational strategies adopted by the company during this period.

Manufacturing
By the year 2002-03 the company had 6 manufacturing facilities at Sahibabad (Uttar Pradesh), Baddi (Himachal Pradesh), Alwar (Rajasthan), Katni (Madhya Pradesh), Kalyani and Narendrapur (West Bengal). The APIs and formulations of the Company are manufactured in-house at Kalyani, Sahibabad and Baddi. Fifty per cent of FMCG products, comprising the Health care products and Ayurvedic specialities portfolio, are manufactured in-house, while the Personal care products portfolio, which accounts for the remaining 50 per cent, are outsourced to eight contract manufacturers. Dabur was in the process of setting up a manufacturing facility at Jammu, for manufacturing Personal care products. Jammu had been selected as the new site in order to avail fiscal benefits offered for setting up manufacturing facilities in that location. Dabur has been giving considerable emphasis on improving manufacturing and operational efficiencies. During the year under review, Dabur focused on enhancing productivity of capital and existing assets, improving plant efficiencies in the existing manufacturing facilities and following more stringent quality control and supervision norms at outsourcing locations. Standardisation of processes, tight budget controls and energy audits constituted some of the other initiatives undertaken by the Company to improve its operational performance. As a result of these measures, operating profit margin (excluding other income) of the Company had improved from 9.2 per cent in 2001-02 to 10.3 per cent in 2002-03. The chart below shows the continuous improvement of the Companys productivity (defined as value of sales per worker), from 1998-99 to 2002-03. Productivity increased by almost 18 per cent, from Rs.28 lacs per worker in 2001-02 to Rs.33 lacs per worker in 2002-03, mainly due to better shop floor 27

practices, lower breakdowns and improved efficiency in energy use. Wastage on the shop floor had reduced by more than 20 percent in 2002-03 over 2001-02.

Source: Dabur Annual Report 2002-03

In 2002-03, Total Quality Management (TQM) techniques were implemented on a pilot basis at two plants in the area of statistical process control. The purpose of implementing TQM was to achieve lower rejection of raw materials, time savings, and make the procurement process more efficient. The Company had plans to implement TQM for other functional areas in the future. In addition, Total Production Maintenance (TPM) measures were initiated in two locations in 2003-04, and hence TPM has become an integral part of the production processes of your Company. This initiative is aimed at improving the productive efficiency of capital assets In 2004-05, Dabur successfully commissioned its largest and state-of-the-art manufacturing facility at Rudrapur, Uttaranchal. It was set up in a record time of four months, the plant was used to manufacture Chyawanprash, Hajmola tablets, Amla hair oil, Vatika hair oil, Lal Tail and Janam Ghunti. While the Rudrapur facility enjoyed similar fiscal benefits as the Jammu and Baddi plants, the Company remained focused on leveraging higher operational efficiencies and superior quality levels from this plant. Daburs Jammu plant which was commissioned in 2003, was utilized to manufacture hair oils, shampoos, Gulabari, Kewra water and intermediaries. This plant featured a modern and compact shop floor design, lean organization structure, improved system processes and stringent quality control norms. Higher batch sizes and larger scales of production at this facility contributed to major improvements in product quality, consistency and productivity. As a result of the Balsara acquisition in the fiscal year 2004-05, Dabur added three more manufacturing facilities to its fold, located at Silvassa, Baddi and Kanpur. While the Silvassa and Kanpur facilities were primarily engaged in manufacturing household range of products and the private label business, the Baddi plant produced oral care products, including fluoride based toothpaste. This plant was set up in 2004-05 and enjoyed greater tax benefits as were available to new units in Himachal Pradesh. Dabur Foods multi-fruit processing facility at Siliguri, West Bengal, became fully operational during the year. The plant produced pulp and concentrates and 28

brought the Company a step closer to achieving full backward integration and realising the resultant cost efficiencies. The location of this plant was a major source of its competitive strength. It was located at the heart of a major fruit-producing and trading area, thus, giving it access to a variety of fruits including litchi, guava, mango and tomato at competitive prices. Moreover, it was in close proximity to the Dabur Foods juice plant located in Nepal, thereby reducing time and cost of transportation. In 2004-05, Dabur Foods acquired a new facility near Jaipur for manufacturing fruit juices. The plant had manufacturing facilities for 200 ml packs. This plant was upgraded to manufacture 1 litre and 200 ml packs of Real brand of fruit juice and the Coolers range of products. The success of DIL's manufacturing lies in is its ability to regularly produce and meet requirements of the sales plan. This is achieved through an efficient production planning system that is a part of the overall supply chain initiative called project Garuda. The initiative has helped reduce stocks and, therefore, requirement of space with the CFAs. The ability to sustain much higher levels of growth with the same level of inventory as 2006-07 bears testimony to efficiency of DIL's production and supply chain system.

Supply Chain Initiatives at Dabur India Limited

1) In 2001, Dabur decided to tackle its extended supply chain of over 30 factories, six key warehouses, and 52 stocking points distributing over 1,000 SKUs to 10,000 stockists countrywide. The company needed a system to accurately control distribution and sales forecasting to reduce inventory in the pipeline.A2 Dabur built a system using Visual Basic and ASP with SQL Server 2000 as the database. Dabur had purposely decided not to use a packaged SCM solution due to high cost. Fifty-five Ku Band TDMA VSATs were used to link primary distributors to the system. Factories were hooked up using PAMA (Permanent Assigned Multiple Access) VSATs. At some locations VPNs had to be used because it was not possible to set up a dish. The zonal offices in Mumbai were hooked up in a similar manner. The hardware was mostly owned by the primary CFA (Carry and Forward Agent) except for the networking equipment, which was owned by Dabur. A The integrated primary and secondary system had a number of unique features. The features included tight integration of schemes stockists credit limit control automated banking of cheques online cheque reconciliation

2A

http://www.networkmagazineindia.com/200312/events05.shtml

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The incorporation of these top stockists into its supply chain was a first for any FMCG company in India. A 'My Page' feature allowed the dealer to "see if the details of yesterday for intransit shipments, carrier information, copies of orders, account status, the status of checks, credit notes and dealing with complaints. The integrated system allowed each Area Manager to plan for the month's sales forecasts, stockists performance, and sales officers' performance. The integration allowed better control on pipelines in primaries and secondaries, brings down inventories, and offers better control on production and sales against a confirmed forecast. The BenefitsA By integrating its primary and secondary supply chains, Dabur intended to reduce the days of inventory carried in the pipeline by four days from the present 29 days. The main aim was to save Rs 5 crore by means of this system. Beyond this, the system could forecast seasonal spikes in sales and manufacture accordingly. The aim was to shift focus to the stockists rather than the CFAs to get a true picture of what's happening in the market and react faster.

2) Efficient supply chain management had always been critical to Dabur, which markets over 600 SKUs. The supply chain integrates a wide range of functions encompassing production scheduling to materials planning and procurement to primary distribution. Information Technology (IT) has played a major role in strengthening the supply chain management by improving operational efficiencies in procurement, production and delivery systems. With the implementation of Baan and Mfg Pro, supply chain management has benefited from stable and more efficient production planning on the basis of accurate secondary sales and stock data. Efficient supply chain management has enhanced the flexibility of operations;lowered operation cycles and finished goods inventories;reduced delivery costs, while improving customer-servicing levels. In addition to meeting tight budgetary controls, these improvements have resulted in substantial reduction in costs due to freeing up of extra working capital. Dabur had over 500 vendors through which they source their raw materials. During 2002-03, the Company followed a strategy of rationalising its vendor base. The Company also appointed Freemarkets, a leading e-procurement company,to assist the Company in implementing its e-sourcing initiatives. During the year, the Company conducted successful reverse auctions for two raw materials saffron and jadi-booti as well as for fixing freight rates. These initiatives resulted in a saving of around 7 per cent to 8 per cent on current prices of these raw materials. The Company adopted plans to procure more products through the reverse auction route. This initiative would help rationalise 30

and upgrade the vendor base of the Company, while at the same time result in substantial savings and greater transparency in the procurement process. 3) During the year 2004-05, Dabur continued to realize procurement efficiencies and reduce its input costs in spite of inflationary pressures. In fact, Dabur was one of the few companies in the FMCG industry which had reduced its input costs consistently over the last few years by focusing on high degree of skills in the area of procurement and materials management. Through usage of innovative procurement strategies and modern forecasting and research tools, the Companys material cost as percentage of sales came down from 43.7 percent in 2003-04 to 42.9 per cent in 2004-05. During the year the Company successfully deployed the Spend Visibility programme in collaboration with Ariba (earlier FreeMarkets) to further strengthen its procurement efficiencies. This program had significantly enhanced the quality of information and visibility in sourcing priorities of the Company. 4) The Company was also intent upon creating a backward integration platform for herbal inputs, especially those on the endangered list. To this end, Dabur made a foray into contract farming for selected herbs as part of the Agrobiotechnology initiative. Under this initiative, a number of backward integration programmes had been set up in Andhra Pradesh, Tamil Nadu, Haryana, Uttar Pradesh, Himachal Pradesh, Uttaranchal , Jammu and Kashmir and Nepal to develop sustainable cultivation of these engendered species through contract farming and buy back arrangements. Dabur entered into contract farming agreements with farmers through a local coordinator. The Company also organized quality-planting material with promising genetic potential to farmers on no-profit-no-loss basis and provides additional technical support. 5) Project Garuda was launched by DIL in the year of 2006, along with the software services major Accenture. Project Garuda was expected to improve business and capital efficiency and reduce working capital requirements. Other important benefits of the project would have been to decrease the total delivery costs and a supply chain system which would VAT-compliant, which came force in 2005.

Procurement
Controlling costs in the inflationary scenario was one of the biggest challenges faced by DIL over the years. The company effectively tackled this challenge on the strength of its strategic futuristic planning, use of calibrated hedging mechanisms and e-sourcing initiatives. One of the key factors that enabled the Company to keep costs under control was the short and medium-term planning programme that ensured regular forecasts from its team of strategic planners within each division and departanent. Three-month forecasts on the industry 31

scenario were provided by these planners to the brand teams for taking effective measures to combat inflation. Concurrently the creation of a Dabur Inflation Basket focusing on the commodities most relevant to the Company's operations helped maintain and manage costs effectively. The Dabur Inflation Basket, which was linked to WPI( whole sale price index), helped the Company come out with actual Inflation figures that enabled it to plan ahead in a more focused manner.

Quality
Dabur remains resolute in its commitment to enhance quality levels across its product portfolio. In this regard, over the last few years, the Company has maintained a sharp focus on upgrading technology and improving manufacturing processes at all its plants. As part of its quality assurance programme, it undertakes regular factory quality audits by trained quality auditors, ensures compliance with ISO 9000 procedure and implementation of established standard operating procedures across its manufacturing bases. Examples Through significant technological up-gradation, the manufacturing process of Hajmola Anardana Goli was made free from human touch, thus, bringing in improvement in hygiene. The production process of Hajomla candy was upgraded to convert the product into depositor form, thus giving it a smoother finish. The Honitus and Nature Care product lines at the Baddi plant was set-up to meet appropriate standards of safety, quality, performance and effectiveness as set by Medicines and Healthcare Products Regulatory Agency (MHRA) the executive agency of the Department of Health, Government of UK. Apart from this, the plants manufacturing Chyawanprash, Glucose and Honey received Hazard Analysis and Critical Control Point (HACCP) certifications. Dabur Honey

has stringent measures of quality. The process of making honey has been mechanised completely and the final product confirms the statutory requirements of Agmark and the PFA. Dabur, in order improve its production and operation management, has gone into kaizen, automation, debottlenecking and wastage control. Food products industry is something which needs primary emphasis on quality improvement and standard control. This has been achieved in Dabur India also.

Research and Development

Dabur with its rich experience in health care and consumer products industry has its knowledge base and research as its main asset. Traditional Ayurvedic products had been the primary focus of Dabur India and it continues to take advantage on the value by effective Research
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and Development. This has been facilitated by Dabur Research Foundation which was set up in 1979. The research facilities in the research foundation are modern and there are scientists from all the relevant fields to contribute to the research and innovation process. The research not only focuses on upgrading the current consumer products but also to make a mark on highly specialised areas and in significant aspects of health care like cancer therapy. There are over ten diverse areas in which Dabur Research Foundation carries out research besides conducting tests and trials. They are Ayurvedic Research, Pharmaceutical research, Phytopharmaceuticals, Biotechnology, Agronomy, Personal care products, analytical, synthetic chemistry, oncology research, peptide research, food research and clinical research. It could be observed that before 1994, the Research process was concentrated in healthcare and such products and after the Joint ventures from 1995, we could observe that the range of research has been diversified which would be analysed in detail later.

Vendor Management

Dabur is in continuous process of developing strong vendor base for varied variety of items procured. Every vendor is rated yearly on the basis of parameters laid down to gauge vendor performance. Vendors are communicated about the same with an objective to improve their performance and build long term relationship. Suppliers of quality items procured by Dabur have been welcomed to furnish details of their products, establishment and other parameters as mentioned in Vendor Registration Form. A well-defined process has been laid out for qualification of a supplier as Approved Vendor. It includes obtaining samples from suppliers for quality assurance and visit of Dabur team to vendor location. Quality parameter of inputs, which in turn determine the quality, and cost of output is laid down meticulously for each items and strictly followed and adhered to in procurement process. 3

Corporate Governance

http://www.dabur.com/ 33

Corporate Governance refers to the blend of law, regulations and voluntary practices that are able to attract the best of capital and talent. Strong corporate governance is indispensable for safeguarding the interests of shareholders and other stakeholders. Excellence in governance and superior financial performance go hand in hand. Dabur is a strong proponent of efforts towards improving transparency in operations. The Burman family - promoters of Dabur - has reduced its strength on the Board of Directors to 4 members and provides only broad policy guidelines for growth and diversification. The promoters provide the strategic direction to the Company and the group, besides evaluating newer avenues for growth. In 2004 itself, Dabur came up with a process of performance evaluation system for its board of directors. As per the process, an evaluation committee comprising its 10 board members will assess the performance of each board member including Chairman VC Burman, Vice-chairman Dr Anand Burman and other directors. The three broad areas around which the board members will be evaluated are: the guiding strategy; monitoring and management performance and and development/compensation statutory compliance corporate

governance. Within that, each member will have to score on various parameters like role in defining the mission, policies and long-term goals/plan for the company; role in setting up annual business plan; role in reporting major performance deficiencies; role in succession planning for senior management and others. Besides above, the other initiatives of Dabur on corporate governance include: Professionalization of the board Lean and active Board (reduced from 16 to 10 members) Less number of promoters on the Board More professionals and independent Directors for better management Governed through Board committees for Audit, Remuneration,

Shareholder Grievances, Compensation and Nominations Meets all Corporate Governance Code requirements of SEBI 34

Dabur-Sustainability
Conservation of natural resources and the environment is of great importance at Dabur. Dabur incorporates the concept of sustainability by a three pronged approach:

a) Conservation of Energy
Dabur has been undertaking a host of energy conservation measures like use of bio-fuels in boilers, generation of biogas and installation of energy efficient equipment. Successful implementation of various energy conservation projects have resulted in a 13.8% reduction in the Companys energy bill in the 2008-09 fiscal alone. This reduction has come despite an 8-9% volume increase in manufacturing, and an average 11.7% increase in cost of key input fuels. These measures helped to lower the cost of production, besides reduce effluent and improve hygiene conditions & productivity.

b) Technology Absorption
Dabur has also made continuous efforts towards preserving natural resources by technology absorption and innovation, like: Improvement in water treatment plant through introduction of RO (Reverse Osmosis) system for DM water, reutilization of waste water from pump seal cooling and RO reject waste-water management Introduction of water efficient CIP system with recycling of water in fruit juice manufacturing Minimum use of water in process by pre-concentration of herbal extract and reduction in concentration time Development of in-house technology to convert fruit waste into organic manure by using the culture Lactobacilus burchi Uniform heating in VTDs by hot water as against steam earlier, resulting in 30% reduction in bulk wastage by using non-stick coating and formulation change

35

The Company has achieved a host of significant benefits in terms of product improvement, cost reduction, product development, import substitution, cleaner environment and waste disposal by these measures.

c) Health Safety & Environmental Review

Dabur addresses to the safety of its three core resources People, Technology and Facilities by having a dedicated Safety Management Team, that would not only work towards the prevention of untoward incidents at the corporate and unit level, but also educate & motivate employees on various aspects of Health, Safety and Environment. Other efforts include: Continuously monitoring its waste in adherence with the pollution control norms Conserve and maintain the ground water level by rain water harvesting Initiated a Carbon footprint study with an aim of becoming carbon positive company in near future a

Porters Five Forces Model for Dabur

1) Threat of competitors The threat of competitors is high because there are a lot of players in the Market. The ayurvedic platform is also being used by other players like Emami and Ayur. Premium personal care products face competition from international brands as well as boutique products. Existing players are entering new segments which will increase the competition e.g. Casper entering the vaporizer segment and Good Knight the personal spray and gel segment.

2) Threat of New Entrants 36

In case of home care segment the entry barriers are low since the costs to set up manufacturing facility is not very high. The exit barriers are low and thereby firms can enter and exit easily. But the entry barriers in terms of building a national brand as well the distribution network is high. So is the exit barrier.

3) Threat of Substitute Products Substitutability is highest in Food category followed by Personal care category, where product innovation is high Home grown and traditional substitutes to Home care products e.g. traditional insect repellents.

4) Threat of Buyers Bargaining Power The buyers bargaining power is low since they cannot influence the prices to such a great deal. Even in case of Modern trade the buyers bargaining power is moderate as it generates less than 10% of FMCG sales. Price sensitivity is high especially in the Food and Home Care category

5) Threat of Suppliers Bargaining Power The number of suppliers is low for the Home Care category e.g. Certain oils are not available everywhere which increases the raw material suppliers bargaining power when negotiating the price with Godrej etc.

SWOT Analysis for Dabur India Limited

Strengths Unique Ayurvedic and Health Positioning Extensive market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India* 37

High brand awareness and perception of Dabur, Vatika, Hajmola, Ral Monopoly status in multiple product categories like digestives (90% MS), branded honey(75% MS) and Chyawanprash(65% MS)

Weaknesses Low Penetration in Rural areas in Food, Health Supplements and Home care categories. (Appendix 5) Daburs R&D work is low and insignificant, which is a major weakness in FMVG as it is constantly creating new products.

Opportunities Packaged Foods category Sugar free food Chyawanprash and health care substitutes e.g. Sugar Free

Expanding size of pie in Home care segment due to efforts by firms like GodrejSara Lee and niche products like Jyothy laboratories Increasing Modern trade is a good indicator for Personal care segment as it provides higher visibility, higher rotations and a personal touch(relevant for premium products).

Threats Counterfeit products in the Food and Home care category Increasing competition from private labels Increasing bargaining power of modern trade especially in the Personal Care segment

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EXHIBITS

39

Product Category Hair oil Shampoo

Products Vatika, Amla, (Anmol coconut) Vatika heena conditioning, strengthening Anmol-natural shine, silky Sarso root-

Baby & Skin Care

Vatika fairness, Gulabari, Vatika fairness face pack Janmaghutti, Olive oil, Gripewater, Dabur lal tel Hajmola range, Hingoli, Pudin hara Chyawanprash, chyawanshakti, Dabur Honey, Glucose Babool (rural market), Meswak (unani method), promise, Lal paste, Binaca, Promise Odomos, Odonil, Odopic, Sanifresh

Digestive Health Supplements Oral Care

Home Care

Financial Ratios Liquidity Ratios Current Ratio Quick Ratio Management Efficiency Ratios Receivables Turnover Inventory Turnover Asset Turnover Ratio Financial Leverage Ratios Debt Ratio Debt to Equity Ratio Interest Coverage Ratio Profitability Ratios Gross Profit Margin Return on Assets 40

2009

1.19 0.99

22.63 10.94 4.84

0.21 0.27 38.34

17.19 23.73

Return on Capital Employed Return on Net Worth Dividend Policy Ratios Dividend Yield Payout Ratio

38.8 48.4

0.2052 47.41

Ten Year Highlights

RS Crores FY00 Operating Results: Sales 982 1100 1200 1285 1236 1417 1757 2080 2396 2834 FY01* FY02** FY03 FY04*** FY05 FY06# FY07^ FY08 FY09

Other Income

34

19

12

13

26

34

47

EBITDA

128

137

144

162

164

217

300

376

443

517.3

EBITDA Margins (%)

13.0

12.5

12.0

12.6

13.3

15.3

17.1

18.1

18.5

18.3

Profit Before Tax (PBT)

81

85

82

106

124

176

257

319

384

445

Taxes

14

14

15

19

30

39

52

54

Tax Rate (%)

4.5

8.5

16.6

13.3

12.0

10.8

11.7

12.1

13.4

12.1

Profit After Tax (PAT)

77

78

64

85

107

156

214

282

333

391

PAT Margins (%)

7.9

7.1

5.4

6.6

8.6

11.0

12.2

13.5

13.9

13.8

Financial Position: Fixed Assets (Net) Current Assets, Loans & Advances Current Liabilities & Provisions Net Working Capital 251 243 371 257 250 295 512 379 465 559

412

393

504

522

340

408

471

640

774

951

108

158

183

241

294

400

436

452

732

808

304

235

322

281

46

35

189

42

143

Days of Sales

113

78

98

80

14

33

18

41

Total Assets

609

558

705

640

433

543

624

670

749

1081

Share Capital

29

29

29

29

29

29

57

86

86

86.5

Reserves & Surplus

292

334

365

388

257

335

440

393

531

731

Shareholders Funds

320

362

393

417

286

364

497

480

618

818

Loan Funds

289

196

304

964

132

164

121

160

99

228

Total Capital Employed Return Ratios: ROCE (%)

609

558

705

640

433

543

624

670

749

1081

17.0

19.5

12.6

16.1

28.6

31.3

39.0

45.7

47.6

38.8

RONW (%) Equity Share Data: Earnings Per Share (Rs)

24.7

22.0

16.6

20.6

38.1

43.5

46.1

61.3

55.3

48.4

27.1

2.7

2.3

3.0

3.7

5.4

3.7

3.3

3.9

4.5

Dividend Per Share (Rs)

10.0

1.0

0.5

1.4

2.0

2.5

1.8

1.42

1.5

1.75

No of Shares (In Crs)

2.9

2.9

28.6

28.6

28.6

28.6

57.3

86.3

86.4

86.5

Manufacturing Locations of Dabur India Limited in India and Abroad.

42

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

The Research and Development Strengths of Dabur India Limited

43

Source: DIL Investor Presentation Goldman Sachs Conference, August 2009, taken from company website www.dabur.com

Dabur Hair Care BCG Matrix

Dabur Chyawanprash BCG Matrix

44

Dabur Real Juice BCG Matrix

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 http://www.dailyexcelsior.com/99june10/busi.htm http://www.business-standard.com/india/news/12-swap-for-dabur-firmsdemerger/133410/ http://www.chillibreeze.com/articles_various/Dabur-story.asp http://www.rediff.com/money/2005/sep/06spec.htm http://www.thehindubusinessline.com/2007/03/10/stories/2007031002540 500.htm http://www.neytri.com/fem-care-gives-dabur-a-facelift http://www.livemint.com/2009/06/25183508/Dabur-India-completesacquisit.html http://www.business-standard.com/india/news/12-swap-for-dabur-firmsdemerger/133410/ http://www.fingad.com/review/show/dabur_india http://www.moneycontrol.com/company-facts/daburindia/history/DI http://profile.iiita.ac.in/pchand_mba05/pom/dabur.pdf http://www.authorstream.com/presentation/purushotamsati-103204strategic-planning-marketing-dabur-ppt-education-powerpoint/ http://www.pressreleasepoint.com/dabur-appoints-dr-ajay-duaindependent-director http://www.dabur.com/About%20Dabur-Corporate%20Governance http://www.tribuneindia.com/1998/98sep10/biz.htm#9 http://www.expressindia.com/news/ie/daily/19990421/ibu21098.html http://www.domainb.com/companies/companies_d/dabur/19990512dabur.html http://www.financialexpress.com/old/fe/daily/19990225/fma25053.html http://profile.iiita.ac.in/pchand_mba05/pom/dabur.pdf 46

 http://www.scribd.com/doc/18435906/Dabur-Herbal-Promise http://www.scribd.com/doc/22107413/Entrepreneurship-Project http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HR%20Restructuring-Coca%20Cola %20&%20Dabur-Case%20Studies.htm http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HR%20Restructuring-The%20Coca %20Cola%20&%20Dabur%20Way.htm#The_Leader_Humbled http://www.icmrindia.org/casestudies/catalogue/Human%20Resource %20and%20Organization%20Behavior/HROB003.htm http://www.businessworld.in/index.php/NO.-10-DABUR-INDIA.html http://www.dabur.com/Suppliers-Access%20to%20Supply http://www.networkmagazineindia.com/200312/events05.shtml

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