Ladies and gentlemen, good day and welcome to the Q1 Results Investor Conference Call of Dabur India Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you.
Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this conference call pertaining to results for the quarter ended 30th June 2020. Present here with me are Mr. Mohit Malhotra, Chief Executive Officer, Dabur India Limited. Mr. Adarsh Sharma, Executive Director Sales. Mr. Lalit Malik, CFO. Mr. Ashok Jain, Senior Vice President, Finance and Company Secretary, and Mr. Ankush Jain, Head Financial Planning and Analysis. We will now start with an overview of the company's performance by Mr. Malhotra, followed by a Q&A session. I now hand over to Mohit. Thank you.
Thank you very much. Good afternoon, ladies and gentlemen. Thank you for joining us on Dabur India Limited conference call pertaining to the results for the quarter ended 30th June 2020. I sincerely hope that all of you are safe and healthy. The COVID-19 pandemic continues to impact our lives and livelihood across the globe, with number of confirmed cases increasing to 16.3 million globally and 1.3 million in India. While the world waits for the COVID vaccine to become a reality, the global community is adapting to this new normal and lockdowns are being gradually eased across the globe. COVID has impacted economy significantly, and the world's GDP is expected to decline by 5% during 2020 calendar year. In these challenging times, our company has stayed true to its vision of being dedicated to the health and well-being of every household.
This is demonstrated by our recent launches that are anchored on growing consumer need for immunity, health, and hygiene. Coming to our performance for the quarter, we saw a 12.9% decline in consolidated revenue from operations. Our domestic FMCG business saw a decline of 6.9%. While April was complete washout on account of lockdowns, we saw sequential improvement in the months of May and June, with business returning to a near normal level. While our consolidated profit after tax declined by 5.9%, the standalone profit actually grew at 12.3% in net profit, aided by aggressive and proactive cost management in India business. Our range of relevant immunity-building products and innovative new product launches helped the healthcare portfolio record a strong 29.2% growth. This was supported by series of topical marketing campaigns, localized sales activations, and sustained investments behind our power brands.
The health supplement business grew by 52.6%, led by 7x surge in sales of Dabur Chyawanprash, strong double-digit growth in Dabur Honey. Dabur Chyawanprash and Dabur Honey saw an increase of around 600 basis points and 300 basis points in their market share, respectively. Digestive category recorded a decline on account of restricted outdoor activity, minimal outside food consumption, and closure of restaurants and HoReCa business. OTC business reported a strong growth of 34.4% on back of robust performance of Honitus and NPD like Tulsi Drops, Haldi Drops, Ashwagandha Tablet, Dabur Immunity Kit, et cetera. The ethical business also performed very well, reporting a 10.7% growth on back of strong demand for immunity boosting products such as Dabur Ayush Kwath, Ashwagandha, Giloy Ghan Vati, and expansion of our churna range.
Within FMCG business, toothpaste portfolio recorded a growth of 2.6% with Dabur Red Toothpaste continuing to outperform the category and growing at 8.1%. Our market share in the toothpaste category witnessed a 60 basis point gain vis-a-vis last year. The quarter also marked the test launch of a new Ayurvedic toothpaste, Dabur Dant Rakshak, in select markets where the equity of Dabur Red paste is weak. Hair oils reported a decline on account of continued slowdown in the category. Dabur Sarson Amla posted a high single-digit growth during the quarter. Our market shares increased by 20 basis points in the coconut oil category and 40 basis points in the value-added hair oil category. We are witnessing a higher demand for economy offerings in the hair oils category as we continue to pursue the flanker brand strategy with investments behind our power brand, Dabur Amla.
The shampoo portfolio recorded a 9.3% decline. In comparison, the overall shampoo category reported a decline of 25% during the quarter. Our market share in shampoo market increased by 120 basis points, touching 6.4%. Our focus continues on increasing the bottle saliency and widening our portfolio on Ayurvedic/Herbal platforms. Home care and skin care categories reported a muted performance during the quarter due to discretionary nature of the portfolio. That said, our recently launched products, the Dabur Sanitize hand sanitizers and the cleaning and disinfectant range under Dabur Sanitize and Dazzl brands, posted a strong performance. In fact, the newly launched Dabur Sanitize brand has registered a growth of INR 90 crores during the quarter. With the institutional HoReCa enterprise and CSD businesses shut down due to the COVID-19 lockdown, the foods business reported a decline of 34%.
The minimal out-of-home consumption and consumers staying away from cold beverages due to the fear of getting cold and cough further hurt this business. That said, our market shares in J&N category saw an increase of 300 basis points, reaching 60%. We have expanded our foods portfolio with the launch of Réal Mango drink in the PET bottle and milkshakes under the Réal brand, which marks our entry into the value-added milk category. The culinary business under the Hommade brand recorded a growth of 6%. We are expanding our portfolio under Hommade with the introduction of chutneys and pickles, which were launched during the quarter. International business recorded a decline of 21.6% during the quarter. While markets like Turkey, Bangladesh, and the U.S. witnessed a strong growth, the overall business was dragged down by declines in MENA, SSA, and Nepal markets.
MENA continued to face macroeconomic headwinds due to lower crude prices and outward movement of expats, which has led to shrinkage in the population and hence decline in categories. We are trying to mitigate these headwinds by tapping into newer categories, driving sales aggressively. We are also looking at cost optimization initiatives across the business, which will help us manage our profitability. We have stepped up innovation across the categories. In addition to the products I mentioned in the last call, we have launched a range of new products to address emerging consumer needs in the health and hygiene segment. The new launches during the first quarter include Tulsi and Ashwagandha variants of Dabur Honey, Dabur Ashwagandha tablets and capsules, Ayush Kwath and Kadha, Honitus Adulsa Cough Syrup , and CalDab , which is Ayurvedic calcium supplement for kids in a healthcare space.
In the household and personal hygiene category, we have expanded the Dabur Sanitize brand with the introduction of antiseptic liquids, germ protection soap, air sanitizers, besides launching a Veggie Wash under the Dabur brand. Going forward, we intend to drive our business by staying focused on health and hygiene, driving innovation, broadening our play in select markets, focusing on e-commerce and modern trade, besides expanding and enhancing our efficiency in our distribution network. These initiatives will be further coupled with cost and cash flow management to ensure healthy margins. I would like to take this opportunity to acknowledge the superlative efforts of each and every member of the Dabur family, from our plants to the sales organization, who have gone above and beyond their call of duty to ensure uninterrupted supply of our products to consumers in these extremely challenging times.
The pandemic has also transformed Dabur into a stronger, more agile enterprise with the entire organization working together as a cohesive team to ensure profitable growth. We have significantly enhanced risk-taking ability as an organization, moving from a fearful to a fearless attitude. COVID has, in fact, acted as a catalyst for change. Going forward, we will continue to build on this transformation and take our business on a stronger growth trajectory by leveraging our power brands, exploring new opportunities, and broadening our portfolio potential across categories. With this, I now open the Q&A and invite your questions. Thank you .
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may please press star, then one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star then two. Participants are requested to use handsets while asking a question. Anyone who wishes to ask questions, please press star then one. The first question is from the line of Manoj Menon from ICICI Securities. Please go ahead.
Hi, Mohit and team. Absolutely brilliant performance, actually, in the context. My first question is actually on the new launches which you had, two ways of looking at it. There's a lot of new launches which you had, which appears tactical, quite a few of them structural and quite a few of them possibly for the medium term. Just wanted to pick your brain on two things. With these number of launches that you have done, is it now more of the consolidation for the rest of the year and maybe even for a couple of years? Is that one way to look at it? Second question here is, some of the launches, specifically, let's say the toothpaste launch, just trying to understand what is the need gap which you're trying to address.
You're right. Hi, Manoj, thanks for your compliments. I think indeed a superlative work done by the team here, like I mentioned. On the new product launches, I think new products contributed to the 6.1% of our overall turnover that we registered in the first quarter. I think this is completely stupendous. Since I took on the business here, I wanted to embark on innovations in Dabur, which is taking time. I think because of this COVID time, we could really usher in this fearless attitude of doing innovation. Doing innovation in the company is very structural, it's very planned, it's extremely strategic. It is not at all tactical. I think in all product categories, wherever we are representing, we have to innovate. Innovate, whether it's in efficiencies or innovation in packaging or innovation in the appeal or innovation in improvement of products.
That, in any case, any company has to do if it has to survive over a longer period of time. Now coming to your question over the tactical structural. I think we have launched NPDs in the areas wherever we saw contextual relevance here. We saw contextual relevance happening in immunity-based products. You see the entire healthcare portfolio that we have launched during this period is extremely immunity-led. It's very relevant, and therefore it's extremely structural and strategic. I don't think post-COVID it will disappear in any which way. Giving you some illustrative examples like Tulsi Drops, Haldi Drops that we launched. This market was already there, and the way Chyawanprash came into Dabur's portfolio some years back, so has Tulsi Drops now come in.
Whether it is Tulsi Drops or Tulsi tablets or Tulsi powder, this is very structural for us, and it already existed in our ethical portfolio. What we've actually done is we have expedited the transition or the movement from ethical range to OTC range and started giving it a facelift and making it available to the grocery channel and the mainstream chemist channel, rather than going through a doctor prescription route. Healthcare, extremely strategic. The hygiene products that we've rolled out, sanitizers, in which we've got a sale of roughly around INR 80 odd crores on the global business. That is also structurally done because it was extremely contextual at this time, and most of the FMCG companies went into sanitizers. Whether sanitizer as a business will perpetuate and sustain, I cannot say.
The way COVID is going and the cases are increasing, I think hygiene as a habit will get more ingrained and will sustain over a longest period of time. Not to the extent sales we've seen now, it will mute, but it will sustain as a habit. In the home hygiene, whatever we've launched personal and home hygiene, some of them are structural and some of them are tactical in nature. Broadly, I think it's more strategic the way we've gone. If you look at a power brand strategy also in oral care, we saw a gap, a sweet spot of around INR 40 price point, which we were not there. Our Dabur Red is at INR 50 price point for 100 g. Patanjali occupies this INR 40 sweet spot with the consumer, which we were not plugging the gap.
We have just test marketed in the Hindi-speaking world where Dabur Red happens to be weak, and we are testing it out offering. The product is extremely good. The initial response is around 20%-30% repeat, but we just started advertising, early days yet for us to talk about it. In hair oil business, we've introduced a lighter format under Dabur Amla, strengthening the Dabur Amla franchise. This is also extremely strategic for us. Yeah. I think I've answered your question.
Yeah, understood. When you were just speaking, I was thinking about the first meeting I had with you maybe a couple of years back or even before that when you had just come back to India. I think a lot of those which you told me just reverberated as you were speaking, actually just playing in front of me. Good luck. Second question on top-down, and then I have a few brand questions which I'll take separately after the call, is on your thoughts currently on, let's say, the new ways of working, new ways of, let's say, looking at costs, new ways of reaching the consumer, the customer, the telecalling, the new CRS.
Just some thoughts at this point in time on three or four big changes which you would think will stay with the organization and potentially complete advantage after in all of COVID hopefully gets over in a few months.
Yeah. I think first I'll talk about the GTM. In GTM, there are some structural changes that we've made. I think first I'll talk about immediate changes which just came into being and some of the changes that we were planning for a long run, which has happened to fructify right now. The first immediate change which actually happened post-COVID is actually post-March. In March, we could not actually do a pre-season loading, so therefore, we corrected our pipelines in March, and we further corrected the pipelines going forward in the month of April due to the lockdown, and then in May and June. We've not filled up the pipeline. Our pipeline used to be in the range of around 21 to 22 days. It now got corrected to around 16 days. I think there is still a further scope of correcting the pipeline.
This is what we wanted to maintain a hygiene at this time because we wanted to ensure ROI of the distributor because liquidity is in a big crunch with the distributor. We wanted to correct the pipeline, and it happened so that we've been able to correct the pipeline while increasing secondaries with the NPDs coming in. The turnover did not suffer, and we could correct the pipeline in our regular power brand. That's first structural change that we've done by reducing the pipelines. We could reduce the pipelines, we've embarked on secondary-based sales monitoring system. When we say secondary-based sales monitoring system, this is being implemented because the pipelines have got reduced.
We are monitoring the secondary, we are maintaining a norm of the inventory and secondary translating into primary, this is a CRS that we are implementing on a system basis, a continuous replenishment model. That's the second change that we are doing. The third change what we have done is we have upgraded our DRISHTi. DRISHTi is a retail app in which the salesperson actually books the order, we have the visibility. We had a old system called Core Stocky. We've actually based Stocky to Core Stocky. We've actually upgraded our DRISHTi system. That is the third change which has actually happened for us. The fourth change which has happened is because we were monitoring the debtors very closely. Earlier, we were dependent on the stockist checklist.
We used to take the checkbook from the stockist, we have converted that physical transmission of payments to digital mode of transmission of payments by implementing NEFT, etc., and digital payments through it. The system that we've already implemented, around 75% of the stockists have already moved on. Balance 25% also, we are closely monitoring and will actually move on. We are settling the claims, which used to be paper-based, now completely paperless claims will be there. During the COVID situation, what happened, demand was yo-yoing. We did not really know that where the demand would be. To estimate the demand, it was very important for us to indicate the supply chain as to how is the demand moving, so that the production capacities could be spruced up, manufacturing could be spruced up to suit the demand. Therefore, we embarked on rapid S&OP meetings.
Instead of doing a sales and operation planning meeting every month, now we are doing sales and operation planning meeting every week. That has really helped us to understand the pulse of the business and to be able to deliver on time in full to e-commerce, to modern trade, and also to the stockist end. We are also putting up a system wherein we are monitoring the inventories at the stockist level, at the SKU level. Minimum quantities will be kept at the stockist level, and the norms would be formed. These are some of the structural changes which will endure over a period of time as far as S&D is concerned for us. The second big structural change within the organization is that we've become very nimble and agile.
We've found a formula on how to crunch the new product launch timeline from maybe one and a half years to almost two months, and not to compromise on the quality of the product, thanks to COVID. We've become more agile and nimble as an organization, and also more fearless in terms of culture of the company. These are the broad changes, but there are a lot of other changes also in HR that we have done, et cetera, but I think we can take it offline from here.
Understood. Thank you, Mohit. That was extremely detailed. Just only one aspect. Thanks for covering the front-end part of it. Also if any comments on anything on the cost side, which is going to stay with you for longer.
We've embarked on a project called Project Samriddhi. What we are doing in Samriddhi project is we are looking at all aspects of the value chain in the company, right from sourcing to raw materials to packaging materials to supply chain, direct cost, indirect cost, fixed cost, variable cost, infrastructure cost, CapEx. Everything is being seen fine-tooth comb here. We are trying to benchmark ourselves to the best in class. We are seeking some expertise from outside consultants, and we are actually benchmarking our raw material, packaging material prices. We've already budgeted INR 40 crore of savings in the budget that we've taken, and we expect around INR 100- INR 120 crore saving coming out of Samriddhi project. All that will not flow into the operating margin. That will be required for deploying it back in the brand building.
This exercise of Samriddhi is also not one-off. This is an ongoing activity. We have started right now because we had to become very cost-conscious because of the deleverage happening from top-line deflation. We had to embark on cost-saving activities. This will endure over a period of time. This could be Samriddhi 1 and Samriddhi 2.0, et cetera. We keep perpetuating going forward. Even in terms of international business, we've taken on cost-saving projects there.
Thank you. Thank you so much, Mohit. All the very best.
Yeah, thank you so much.
Thank you. The next question is from the line of Latika Chopra from J.P. Morgan. Please go ahead.
Hi, Mohit.
Hello.
My first question was on the revenue growth momentum. Clearly, in this quarter was supported by healthcare portfolio. How sustainable you think these trends are, particularly for Chyawanprash? How much of this growth would be opportunistic in the sense that you would have got new consumers on board? How much of this demand you think will stay sticky? What I'm just trying to understand is, you've typically always highlighted that 8% to 10% is a more normalized growth momentum for Dabur. Do we see a case now with all these initiatives in place where this could be increased?
Okay, Latika, as far as I already added some color to it, healthcare in my mind is not all the new initiatives that we've taken in healthcare. They are not tactical nature, they are more strategic in nature, we are also trying to get into more mainstream categories. I did not add here, we propose to get into value-added teas also, which is extension of thoughts from our Honitus brand and Dabur launching a Kadha. We are therefore introducing a value-added immunity tea also. These trends will endure because those categories are huge, we will only gain share in those categories. Also we might take Chyawanprash into a different format. That is also being explored that in the next quarter you'll see some action happening on that. These trends will endure, they are not tactical in nature.
As far as Chyawanprash surge of sales is concerned, yes, this is off-season for Chyawanprash. Last year around INR 10 odd crore, this year we've done a 7x kind of growth in Chyawanprash. The huge surge that we've seen, this may not sustain over a period of time, this will get compensated by a lot of newer entries that we have between. That will structurally sustain in the business. Overall, I feel healthcare's contribution to business will increase. In this quarter, it's gone up by 10 percentage points. From 30% contribution, it's almost 40% contribution now. I think healthcare contribution, which is also profitable and more margin accretive to us, will only go up from here.
Sure. You mentioned about you want inventory levels to be lower in the channel structurally. Are you now back to comfortable inventory levels or there's still more to go at a retail level as the full reopening of economy happens? Also any comments on your direct reach impact?
Yeah. Inventory levels are actually okay. We are pretty much at the peak of high yield levels that we could have 16 days of inventory is fine. If you ask me, is this a best-in-class? Answer is no. I think there is a fair amount of inventory correction still required of around four or five days of inventory still needs to be corrected, if we really need to be operating a best-in-class inventory management company with the stockists. For that, we have to improve our SKU level availability, our range level availability at the stockist end, which is what we are looking at today. Our RA level availability at the stockist is in the range of around 70% to 75%.
The moment it goes up to around 90% stage point levels, we'll be in a position to reduce this inventory by another five days and bring it to around 11-12 days level so that the market servicing is not impacted, and there's no loss of sales because we have such a huge portfolio. There is a bit of inventory correction. We will try to do that during the course of this year, depending upon how the business trends and how our new products fare, we will have to look at the inventory corrections more so. What was the second part of the question?
I was just trying to understand. What you're saying is that sequentially you feel, from a channel selling perspective, there is no further scope in the current quarter for you to grow because April you would have seen a correction in inventory levels and you would have increased it through the course of the quarter?
Whatever downside that we had in the month of April got compensated. Whatever SDRs were lost at the retail level, that got more than filled in the month of May and June. Even if you look at July, we are almost trending at the levels of June business. Whatever we lost in terms of inventory, that already got plugged in. In July also we are seeing similar trends. That said, there are pockets of disturbances, and there are pockets of channels where still things have not really come to a near normal, like PHC has not opened up, like cash and carry has not opened up, like kids' tutors, HoReCa channels. That is impacting our food business. That is still yet to get into the recovery path.
Whatever pipelines that we have lost there will get plugged in those channels as and when those channels also open.
Sure. Thank you so much, Mohit.
Thank you, Latika. Yeah.
Thank you. The next question is from the line of Percy Panthaki from IIFL. Please go ahead.
Hi. Good afternoon, Mohit and team, and congrats on a good set of numbers. My first question is on your gross margins. Your gross margin has on a year-over-year basis remained flat. Just wanted to understand if there is any adverse mix effect which has led to this, because crude is down and across the board this quarter, promotional expenses are down in FMCG. Gross margin should have expanded. Also, the fact that your foods business is down much more, that's actually a positive mix, at least on that count. Why is it that your gross margins are sort of flat year-over-year?
Yeah. Percy, if you look at the India business, the gross margins actually expanded by around 126 basis points, and that expansion is on account of benign raw material prices. To your point also, the food prices have been low, and that's the benefit that we've had in our FMCG business. That said, FMCG business actually declined by 15% for us. It wasn't too much exaggerated, this impact. Also the consumer promotions and trade promotions have been lower. To that extent, gross margins have got increased. Plus there was a 1.5% of price increase carryover which happened from last year. That has also led to this 125 basis points of gross margin increase in the India business. When you look at international business, the things reverse.
In international business, our TP actually went up because there was so much pressure in the market, we had to give consumer promotions, so therefore the gross margin came down. The MENA business, which is a high gross margin business, went down to around 42%, where other businesses like Turkey and U.S., which are low gross margin businesses increased. Country mix unfavorably impacted the gross margins in the international business. The sum of two, you see almost flattish sort of gross margin. In India, gross margin definitely expanded, and that has flowed down to the operating margin. That's why you see operating margin growth of more than 250 basis points.
Mohit, the fact that even in India, pricing is up 150 basis points, and even if costs were flat, that should have given 150 basis points. The fact is cost is down, pricing is up, mix is favorable, and promotions are lower. It should have been much higher than 125, isn't it?
Not really. Our agri commodity basket has actually gone up, Percy. We are seeing an inflation in our agri commodity because Amla, because of surge in Chyawanprash-Amla fruit wasn't available, and there's been a surge in prices of Dabur Amla fruit, and this happens to be off-season for us. That has led to an agri basket increase inflation happening. We are seeing a 3% inflation, whereas 1.5% was the price increase. To that extent, there was a dent. Your point is right. Even the food business, which is a low margin business, was dilutive. That's also happened. Plus, there were some other impact of area-based exemption also, which we lost. That's also impacting our gross margins in the India business.
How do we look at this number going ahead? This quarter, as I said, you had several tailwinds. Going ahead, your foods business will improve, so the mix will actually, from a margin point of view, worsen. Your promotions will increase from a very low base that you've seen in June. No further benefit will come in terms of cost. Unless you're going to increase prices in the near future, this 125 basis points will sort of disappear going ahead. Is that right?
Not really. The fruit prices still remain benign. Part of our portfolio is definitely impacted, which is going to be margin accretive to us in gross margin. Foods portfolio, yeah, there will be improvements. That will negatively impact the gross margin. Our health portfolio continues to see a surge. I don't see Chyawanprash and the season of Chyawanprash is approaching, and season of honey is approaching being winters. There also, this is a high margin season for us because our healthcare portfolio goes up. That's the second piece. We see a 3% inflation happening in agri commodity, but that will be to a certain extent, offset by the price increases that we will have to do. We don't have so much of competitive intensity in the health portfolio that we cannot take up this price increase.
We are the price makers in the market space, we will take up that price increase also. That is the third factor. We told you that we are embarking on Samriddhi as a project, and we've already budgeted INR 40 crore of savings on account of Samriddhi. That will also kick in. As we speak, those savings will come in. I will see an increase in the gross margin for sure. That will now flow down into operating margin because I have to fund A&P also for new products. It will be partially funded, and partially there will be a flow-through into the operating margin. We are not overtly worried on the operating margin vis at the moment, at least.
Understood. My second question is, could you give some idea on what is the secondary sales growth, in June in India?
Our secondary sales growth in June in India will be in the range of around 7%-8%, roughly. 7% will be our secondary sales growth. If you look at the whole quarter also, while the business has gone down by around 6.8%, our secondary business is only down by 5%, and we've done that pipeline correction to that extent. Secondary business is trending at around 7%, despite HoReCa, institutions, CSD, modern trade, all not firing.
Okay. This 7% growth that you're seeing in June on a secondary basis, again, here the data is not very clearly available, so I will go with whatever your best estimate is. How much of that is pipeline fill into the retail or wholesale?
Very difficult for us to estimate. As I told you, there is not much of pipeline fill because we see a similar secondary trend happening in the month of July also.
Right.
I don't think it's too much. I think it may not be sustainable, but there are a lot of channels which are still not operating at the near normal level. Like the modern trade is not operating at a near normal level. It's still shut. Big Bazaar is still down. CSD is not opened up. Broadly, I think we should be in a position to sustain around that kind of a secondary level.
On the point of channels, could you give some idea on what is online channel now as a % of your sales and what kind of growth you are seeing there?
Yeah. Online has been a star in this period. Like Dabur Chyawanprash has been a star in our portfolio, in channels, online has been a star. E-commerce percentage of business from 1.5% has gone up to 5.6%, and it's only trending up from here. That's doing exceedingly well for us.
Okay. Also, if you could give some granularity. This 5.6%, is it split across different channel partners, or is it that sort of only one strong player is actually taking all the gains?
No, I think it's across. It's very secular growth that we're seeing across different platforms, whether it's grocery channel, which is BigBasket and Grofers, or pharmacy channel, it's PharmEasy or Netmeds and others, or we see the likes of Amazon and Flipkart. All the three channel types are seeing a growth, and it is secular across.
The reason why I ask this is that a lot of people are scared that if online becomes large enough, then sort of they have power to squeeze margins or launch their own private labels, et cetera. I'm just asking in that context because if online is big as a whole, but each individual player still remains small, then I think that risk is not there, right?
Yeah, because there's so many players per se, there's no risk of they arm-twisting us and the bargaining power shifting in their hands because there's so many players, unlike in the U.S. market, where there's a complete monopoly of one, Amazon, which is handling big. Here, there's Grofers, there's BigBasket, there is Amazon, Flipkart, Netmeds, there's Tata 1mg, there are so many players here, I don't see that risk happening at all. What we've actually done during this period is that earlier we were dependent on a doctor to service these online platforms. Now we've gone direct with them. When we go direct with them, we have a saving of around 5% of that margin that we were giving to the intermediary. All these channels have now become very profitable for us.
Right. I thought this is just a good point to address because there's a lot of questions coming across on this, in a five-year, seven-year view, what can happen, if online becomes really big? Do we see bargaining power shifting away from FMCG consumers, et cetera?
No, I don't think that will ever happen in a country like India, which is so entrepreneurial, and private equity investment keeps flowing into this country, so it will not happen.
Right. That's all from me, Mohit. Thanks, and all the best.
Thank you.
Thank you. The next question is from the line of Arnab Mitra from Credit Suisse. Please go ahead.
Hi, Mohit, and congratulations on a very good performance in this context. My first question was again on the new launches. It seems like very well thought out, the launches bit, the products look quite good. I was just concerned that because you've done so many launches in such a short period of time, is there a risk that you're running that some really good products could actually fizzle out because the consumer needs to be aware that such a product is there, like let's say the flavored honey, the distribution has to be there, which you can find it where you want to buy. The retail, the distribution channel has to handle a lot of new things. How are you protecting against that risk that you do a lot of good launches, but actually so much bunched together that many of them fail?
Arnab, you're right, but I think we have to be otherwise, we waited for two decades for the time to be right for a NPD to be launched. After, I think, around one or two decades, we've seen the time is right for our NPDs, which are there in the ethical business for us to actually launch, because the consumer mind is now quite skewed or inclined towards adopting these NPDs, which are more immunity-led. I think rather than looking at our focus, we looked at more consumer space, and I think our sales force was hungry for NPDs. You're right, NPD success rate is generally in the range of around 10%, 20%. For us, I think even if it is around 50%, 60%, we are fine with it, yeah.
To add to that, Arnab, we also have the e-commerce platform, which makes the products available. Otherwise, typically, it's very hard to ramp up the new products. That is one benefit which we will channel, which we will utilize to scale up these NPDs.
To e-commerce's point, a lot of NPDs that we've launched, like Veggie Wash, et cetera, they're exclusively for e-commerce, and they'll be scaled up, and we're launching an entire baby range also, which is e-commerce exclusive. What's happening is Amazon and Flipkart are also asking for exclusive brand launch. Like apple cider vinegar that we've rolled out is also exclusively for Amazon on Amazon. Only once it scales up do we extend it to modern trade, et cetera. That gives us a cradle to actually test all the NPDs for.
Right. In terms of just making these products aware to the consumer, because they are relatively small and you have so many of them, is it a digital approach to make people aware that such a product exists? I'm just trying to see how you bridge that gap, let's say, of a Tulsi or a flavored Honey. Is it still through mass media or other routes that you think this job will be done?
No. We are using definitely mass media and digital to advertise and also e-commerce platforms. One, I think digital is really helping us. Our digital investment has gone up from 4% to 14% as we speak. A lot of these NPDs which have been played out in e-commerce are being activated digitally, and we are spreading the awareness on digital and also for the products which are showing promise. Like Tulsi Drops in one quarter has become INR 7 crore for us, it's showing a very good promise for us. This we have immediately shifted to mass media. Tulsi it will be mass media. The products in which we don't find too much of traction, they will be more digital initially. Once we scale up, then we'll shift the investments to mass media also as and when we see the turnovers coming in.
Okay. My last question was on this recovery in June and July that you spoke about through positive secondary sales. Is it across the board or are you seeing your weaker segments like foods and personal care, which were deeply negative for the full quarter, come back much more, while the healthcare business growth is similar to the full quarter levels? Any sense of the recovery in the weaker parts of the business?
You're right, Arnab. We are seeing recovery also in shades. For example, in haircare, the recovery, the brands and the categories are still in the negative trajectory. In home care also it's negative, in skincare also negative. In healthcare, we are seeing an even positive trajectory happening. In home and hygiene, there is a positive trajectory. In the areas where there was negative trajectory, there is definitely a recovery. In food, which was down by almost 50%, is now down to a level of around 17%-odd. In haircare, which was down, hair oils which was down by around 25%, now we see the business down by around 12 percentage point levels. That's the kind of recovery what we've seen. Not in every category have we seen a green recovery which is completely in positive.
Okay. Thanks. That's it from my side, Mohit. All the best.
Yeah, thank you. Thank you, Arnab.
The next question is from the line of Prakash Kapadia from Anived PMS. Please go ahead.
Thanks for the opportunity. I have two or three questions. On health supplements, we've done wonderfully well. Congrats for the new pipeline and the new purchase. My question was, what is the consumer behavior which you are seeing? Historically, what I understand was Chyawanprash taste acceptance was always a big challenge for us. Now what are the trends you are seeing in consumer behavior based on our leadership in this category? Is there a plan to launch smaller SKUs, induce trials, and then get consumers to migrate to larger SKUs, especially Chyawanprash?
Great. Because consumers are actually shifting towards Ayurvedic-based health supplements as prevention and prophylactic sort of prevention for COVID, and therefore Chyawanprash comes in to expand immunity or help as an immunity aid. For sure. Therefore, what's happening is penetration of Chyawanprash used to be low single digits. I would anticipate the results are yet to be out from a consumer panel, I think the penetration of Chyawanprash would have drastically gone up, and these are these black swan events which actually take up the penetrations of product categories like Chyawanprash and Honey. Definitely that behavior change has actually happened, and now people have got used to the taste, and if there's a barrier to try a brand, and once the barrier is released because of the COVID or whatever the situation is, then the continuity will be established and the penetrations actually go up.
The second point to your question is, are we launching newer formats or affordable SKUs? Yes, we are launching newer formats which will bring the price down. I can't talk on that right now. Yes, we are planning newer formats which will take down the prices and also make Chyawanprash available in better formats. Powder I alluded to before, but there are other formats also in the pipeline that we guys are planning on Chyawanprash, and this is the best time to extend Chyawanprash into other convenient formats for the consumers to try.
Absolutely. If I look at the foods business from a longer term perspective, it has been five or six years now, we've been around that INR 1,000 crores. What is the biggest challenge? Is it repeat purchases from existing consumers not happening, which is why we see that kind of a trend? What has been the contribution of HoReCa and CSD? That can have a near to midterm impact given what is currently happening.
What's happening in foods, the categories actually declining by more than 50% in foods. We are increasing our market share. Our market share has actually gone up by 300 basis points in the Réal brand. We are definitely ahead of the curve as far as other companies are concerned in beverage business, especially J&N business. What's happening to the beverage business, why the business is down, is people are moving to cheaper alternatives. They're also moving to milk-based alternatives. Milk has really seen a surge during this time, and because people were not moving out-of-home consumption got impacted. 200 ml, which is a SKU for out-of-home consumption, contributes to more than 40% of our business. That got impacted quite a bit, and people were also not wanting to drink cold beverages, and juices are, in ways, they are cold.
Therefore, they were avoiding those also, and sugary drinks also people were avoiding. This is not completely sugar-free. That's why that also took a toll on our foods business. As far as channels are concerned, HoReCa, enterprise, and modern trade. HoReCa, enterprise, these businesses contribute around 15%, 10%-15% of the turnover in quarter one, which happens to be the season, comes from these channels. They were completely shut down. Now, if I have to give you what is the future of this, if you look at three months back, the growth of beverage business in the last quarter before March was around 10 percentage points. Now, we think we should go back post-normalcy to this trajectory of around 10-odd percentage point levels once these channels normalize in foods.
Not just to operate in J&N category, we've also extended ourselves into larger categories, which is a PET bottle and also INR 10 price point in coolers, now we've gone into milk-based beverages and also launched a Réal Apple variant in INR 10. I think on back of all these initiatives and innovations, we should turn the bend on foods. I know I've been saying that since many calls, but we get interfaced with these one-off events like COVID and all, nobody could help that.
Is it repeat purchases not happening by existing consumers a bigger challenge, or is it newer consumers not getting nectar and juices category a bigger challenge?
Sorry, I didn't get the last part of the question.
I'm saying in the foods business, is repeat purchases not happening a bigger issue for growth or newer consumers not coming in a bigger challenge?
I think it's both. It's just not one. Newer consumers are not coming, and existing consumers are downgrading to cheaper alternatives, which prior to COVID was more soft drinks and more others. I think an out-of-home consumption has got severely impacted because people are not moving out, existing consumer base is not moving out. If they don't move out, 200 ml as a pack gets impacted. While 1 L has seen recovery in the month of June and July. We are seeing a major recovery happening in 1 L, which is in-home consumption. Out-of-home consumption of 200 ml is still declining for us. It's both in a sense.
Lastly, we've seen all of these product launches. Are these available online across the country? We can experiment and feedback is much faster across wide spectrum of markets. For still they are to be done and certain are on Amazon or Flipkart or Big Bazaar. How is the order?
The NPDs will be available. We are giving a first priority to e-commerce because that's the first port of call for any consumer to go to e-commerce channels and purchase. That we are doing. Our distribution expansion will only take its own time. While we are making the products available to 40,000 to 50,000 outlets, to go to a 1.2 million or 1 million outlets will definitely take its own time, but we are making an attempt to make them available on online platforms for sure.
If you see majority range should be available on Amazon. To add it up, we've also opened up dabur.com. d abur.com, consumers can also go onto dabur.com and place our order there. That order is redirected to Amazon if the product is available there. If it is not available there, we are also opening up e-commerce service through Dabur itself. That will take another month or so. That is also being opened up. Yeah.
Great. Thank you. All the best.
Thank you, Prakash. Thank you very much.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in this conference call, please limit your questions to two per participant. For any further questions, you may come back for a follow-up. The next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.
Hi. Good evening, Mohit and team.
Hi, Vivek.
Hi. Both the questions are on new launches only. First, Mohit, you mentioned about inventory days going down, the endeavor to use this as an advantage. When you're launching products so aggressively, is it possible to actually prune down the overall channel inventory? Because there will be a build-out phase when you're launching product across the basket. Why and how will it happen?
Yeah. Vivek, inventory is more so in the existing products. The new products have just come in. I think that's what we are trying to do. We're trying to cut and bring the hygiene in the existing product portfolio that we have, where the inventories were very high, and it was impacting the business and the distributor ROI. The NPDs that we are launching are more healthcare, they are actually ROI accretive to the distributor. He'll also be willing to add inventory of these products as existing inventory of products goes down.
Only then we'll be able to get into the newer inventory. That's what we are trying to balance, and we are putting in a CRS system in place, which is also going to be helping the NPDs as well. Whatever secondary sales happen will be the primary sales. It's both for the existing products and also the NPDs going forward.
Okay. The other bit is, philosophically speaking, let's say, the way in which I look at your portfolio, at least the one that you had in the past, let's say Réal in foods and, let's say, Odomos in home care. In both these cases, Dabur was not at the center, the brand Dabur, but it was more the Réal and the Odomos. Whereas when I look at your home care and even Hommade portfolio, Dabur is right at the center. Do you see any risk to Dabur as a brand? What it stands for? Let's say a pickle and a chutney, it doesn't fit into that Dabur architecture. How do you think about it? Is there any risk whatsoever from that perspective?
No, not really. We've kept Dabur away from brands where we feel there could be an issue, for example, Odonil or Odomos, and that's why. Fem brand, which is a depilatory brand. Therefore, barring that, I think we are existing in all the categories which are more health and wellness than food. Health and wellness extends to foods also. Hommade is actually a brand in itself, but Dabur provides credibility, it provides the trust, it provides that legacy of trust to the brand. It only adds to the Dabur, and the brand introduction also adds back if the product quality is good. In healthcare, definitely it makes eminent sense for us. In Réal, we've kept it Réal, but the new Amla juices and the other juices, the health juices that you see, they are coming under the Dabur brand.
The Dabur Amla Juice is what we've introduced. I don't think in Hommade Dabur is played up as much. Hommade is a brand in itself, and Dabur is just providing that kind of umbrella branding or trust in it. We have no intent of getting away from Hommade and only having Dabur. Actually, it's the other way around. Once the brand is established gradually, slowly, we will move Dabur out, and it will become an independent brand called Hommade. That's the way it happened in Dabur Vatika, also in international business. Earlier it was Dabur Vatika, Dabur providing trust. As the brand becomes bigger, we release the Dabur's name, and we get the clutches out of the brand, and the brand becomes independent. In the beginning, before we want to establish the brand, we definitely want to keep the word Dabur here.
As long as there is no negative impact of the category on Dabur, and which is a study that we do. Only if Dabur lends credibility to the brand and the category where we are rolling it out. We put Dabur. Like in Sanitize, we have put Dabur because Sanitize as a brand is all about health and wellness to the consumer, whether it's antiseptic liquid or it is a sanitizer or it is a soap. We are very conscious and cognizant of the fact that we don't dilute equity of the brand Dabur.
Sure. Lastly, in terms of measuring the success, what are the milestones that you're looking at for all your launches? Where do you see NPD as a percentage of overall revenue in the next three years?
The NPD as a percentage of revenue used to be around 1%. From 1%, we've actually moved to around 5%-6% in the quarter because we just launched. We'll be okay if we move to around 3% and 4% of the total turnover coming from the new product launches. That should be fine, because a lot of NPDs may not be successful, and we are conscious of the fact that it may not be, that's fine as long as it's 3%-4%. We want innovation to be right across the portfolio of the company, whether to reposition or to revamp or to repackage or to improve the formulations, et cetera. That will happen. We have not given ourselves a threshold level of turnover for it to be successful or not to be successful. We want to gain share in the category that we are entering.
That's the milestone that we give ourselves, that are we gaining share from the category? Earlier, what used to happen is we used to look at if a brand does INR 100 or INR 10 crore only, will it be successful. We have taken off those guardrails now of turnover for a brand to be successful. If you put those guardrails, then there is that internal reluctance on the brand team and the marketing team to launch the product. If the product doesn't click and doesn't do INR 10 crore, they would be reluctant to launch it. I think there's a little disturbance now.
Sure, Mohit. Thank you, and wish you all the best.
Thanks, Vivek.
Thank you. The next question is from the line of Tejas Shah from Spark Capital. Please go ahead.
Hi, Mohit and team. Thanks for the opportunity. Mohit, just if we go back to pre-COVID days, we were working with the power brand construct, and then COVID opened up new tactical opportunities in health and hygiene. To date, looking at it, obviously health and hygiene has priority in everybody's strategy. Where does it leave the power brand strategy now?
Tejas, power brand strategy still remains. In my conference call address also, I mentioned that power brands are doing better. If you look at the total turnover of the company, we declined by 12.9%, but power brands were almost at around 1.2%, 1.3% decline. Chyawanprash happens to be a power brand. Honey happens to be a power brand. Honitus happens to be a power brand. Réal is a power brand which is under pressure, and so is Dabur Amla under pressure. We continue with the power brand strategy and the flanker brand strategy on hair oils. Dabur Red happens to be a power brand that has actually grown by 8%, whereas the overall portfolio has only grown by 2.6%.
Across the board, if you see, we are focusing on power brands, and power brands are the ones which are taking our growth forward, and we are increasing our innovations in power brands. To your point, hygiene has come in as a separate, and we did not have a power brand in hygiene. Not that we are introducing Sanitize as a power brand, but to capitalize on the existing opportunities, it was important for us to get into this category, and therefore, Dabur Sanitize and Odomos, Odonil, and Dazzl, they are the ones which have come up as new products. I hope I've been able to answer your question.
Sure. Yeah. This was helpful. Second, Mohit, you spoke about being fearless. Hello? Am I audible?
I can hear you.
Mohit, you spoke about being fearless and going for boldness and NPD also, and that is very much visible in last year or so. What are the stencils? How are we going about this in terms of how can we improve the strike rate of new products? Second, what is the GM stencil or benchmark, gross margin benchmark that we are using to select or eliminate potential new launches?
Tejas, we are very conscious on the gross margin levels and the categories that we are getting in. If you look at Dabur is existing in two categories or two portfolios of products in which we gain market share, in which we create markets. If you see the new product launches also that we've done, we've done it very consciously in the two portfolios. One portfolio.
Yeah. Hello.
Yeah, Tejas, I answered your question on the power brands.
Sir, you were just talking about NPD and gross margin and the strike rate improvement.
Yeah, that's right. As I told you that we don't have a strike rate target right now on these NPDs because there are so many NPDs that we guys are rolling out. On the gross margin, there is definitely a guardrail that we put in place. We are looking at Tejas, apologies for this connection disturbance.
No worries.
Coming back to your question. On the NPDs, if you look at the Dabur's portfolio, we have two types of portfolios. One portfolio in which we identify the markets in which we enter, and therefore gain market share. The market size should be sizable enough, and which is essentially our HPC portfolio and the foods portfolio. The second part is where we are market creators. Like in healthcare, we are market creators. Like in Chyawanprash, we have the market lead, and we are the ones who create the market there. If you look at the NPD launches, there also, we've done the same thing. We have identified the key markets of home and hygiene, which are big enough markets, and we've entered those markets. Be it a sanitizer or antiseptic soap or an antiseptic liquid or an air sanitizer, et cetera.
These are big markets in which we'd take share. Healthcare, we are market creators. Tulsi Drops market doesn't exist. Haldi Drops market doesn't exist. Ayush Kwath market doesn't exist. In tea, where the market is existing, and we will be gaining share. Therefore, that's our strategic approach to go after those markets.
Great, sir. Sir, last one question, if I may squeeze them in. Sir, two quarters back, you had touched upon opportunities of non-linearity margins coming from employee cost. Any update on that or any firm plan there?
Sorry, I didn't quite get your question.
Sir, you had called out that there is an opportunity to expand margins to employee costs, not controlling, but rationalizing that line item. Any firm plan on that?
As part of the Samriddhi Project, what one is actually doing is we are looking at a span of control in the organization and looking at and benchmarking ourselves in terms of employee cost to sales and cost to profit ratios, and trying to do some rationalization. That's also very much a part of the Samriddhi Project, and redefining the span of controls in the sales and marketing and across the board, all the functions.
Very helpful, sir. Thanks a lot.
Thank you.
Thank you. The next question is on the line of Sanjay Manyal from ICICI Direct. Please go ahead.
Hi, sir. Just two questions. One specifically on hand sanitizer or Dabur Sanitize you mentioned. If I'm not wrong, you mentioned INR 90 crore sales in the quarter.
That's right. Almost INR 90 crore sales across India and IBD and international business.
Okay. Where would it fit in the subcategories in India?
Yeah, we fitted into skin care. That's what I said, in skin care, our decline is actually 50% odd because of sanitizers, you see a decline of around 12.5% in skin care.
Okay. Which means that current sale is INR 72 crore, so a large part of it is only the sanitizers now.
Yeah, quite a bit the sanitizers here, because the Fem brand and the Gulabari brand had a major headwind in terms of they being discretionary categories and out-of-home consumption and salon visits were quite restricted. That's the reason hand sanitizers really came in as a savior.
Right, sir. Sir, secondly, as you mentioned that this is an off-season for Chyawanprash, how it has been for the Honey, and what would be the growth rates in Honey in this particular quarter?
Honey has actually grown by almost 69% for us. Again, off-season for honey. Honey also picks up during the winter season. Because honey is adjuvant and actually used as an adjunct with all the Matru and Ayurvedic products, that's why there was a surge in the honey market also. We did all tactical, topical marketing campaigns on Honey, and honey being used as a big immunity booster. That has helped. Honey has really done very well. We actually had a shortage of Honey in between, and glass bottles of Honey were not available, and we had to approach the government and get the permissions, and finally, we had to get it going. We lost some sales in the bargain around a week or so because of the lockdown period. Fair enough, we've grown by 70% odd, yeah.
Sir, if I just can ask last one, specifically on the rural growth, are you really seeing some impact of the pandemic spreading in the hinterland?
We're not seeing an impact. Actually, we see a positive impact because the reverse migration happening to the rural areas, we see rural business actually growing by 1% and urban business declining by 13% for us. Rural is showing a surge. As to the Nielsen figures also, we see a surge in the rural by around 12.5%. I don't know how correct those numbers are. I'm seeing those numbers with a lot of doubt because all the surveys of Nielsen happened by staying at home by telephone call. There could be an issue there. That said, rural recovery was much faster as compared to the urban recovery. Because all the population scarcity or population spread out in the rural areas, social distancing is very natural there. Spread of COVID wasn't as much in rural.
I understand the instance of COVID spreading now in Bihar and the situation is exacerbated by the floods and all. At the moment, we are not seeing too much of impact. Our super stockist, sub-stockist network is doing far better as compared to the urban business.
Okay, sir. Thank you very much.
Thank you, Sanjay.
Thank you. The next question is on the line of Rahul Maheshwari from Ambit Asset Management. Please go ahead.
Good evening, Mohit and entire team on fantastic set of numbers in such tough times. I have.
Excuse me, this is the operator. Mr. Maheshwari, your voice is breaking.
Right now, am I audible now?
Yeah.
Yes, sir. Thank you.
Good set of numbers to entire Dabur team. Sir, my two questions are there. First, as in last one year, you tried to fix the domestic portfolio in terms of the new product launches and the distribution and across the projects which is there, and as Mohit, you have spent the most of the time into the international division, more than a decade, how you would be changing the structural thing at international, because there is lot of inconsistency. I'm not talking from just one quarter point of view, but throughout the many years. Going forward in terms of the launches, in terms of the contribution to the overall consolidated and also from the capital allocation point of view. Any color from a long-term point of view, how international business would be looking from an overall journey for Dabur?
International business continues to trend well, except that MENA region, wherein we are market leaders in most of the categories where we exist in, is facing severe headwinds because of the crude prices being low and the economy being dependent on the crude prices. Moreover, what's happening because of COVID, a lot of population shrinkage is also happening where expats are leaving this country. That said, our market share is because of local Arab population, and we are entering into newer categories and looking at TPs and CPs to expand those categories and get into newer ones. I think that business should recover on its own. We are in a very good space as far as MENA is concerned, and we are used by the captive population there. It's a momentary issue.
Which I think once the macro-economic headwinds, which are not controllable by us, once they are not there, I think the MENA business should trend back. As well as other pockets are concerned, in Egypt, we are market leaders, and Egypt continues to grow except for this COVID wherein declined by 26% again because of corona pandemic. I think post that should be back on recovery. Our Turkey business, which wasn't doing very well, has now started doing very well. It's turned the leaf. It's grown by around 33%. Our U.S. business, which was also not doing well because the headwind of the category due to corona, what's happened there, people have resumed the usage of relaxers. Because the salons are shut, so people are using relaxers at home now, and we are the market leaders in relaxers, and that business has picked up.
As we speak in the quarter, while all other businesses declined, our U.S. business actually grew by 12.5%. Our Sub-Sahara Africa business is also doing reasonably well. In the COVID, it declined by 40% because of the curfew in a lot of markets in Sub-Sahara Africa. Our Bangladesh business, we've done a management change, and Bangladesh business during COVID times also has grown by 14%. Nepal's business was the one which suffered quite a bit, more than 50% decline in COVID because of the juice reliant and out-of-home consumption being very big there, and there was a curfew situation which has just got lifted in the month of July. Barring that, I think our international business is in a good space and extremely profitable. I don't see there's a long-term problem there.
There's a huge headroom for growth because our oral care market shares are still in the range of low single digit, low double digit there. Our shampoo is into low double digit. In hair oils, we are the market leaders. In hair creams, we are the market leaders. We are getting into a lot of other categories where we will only gain share. If you look at America also, we've gone into styling category, where also we are into low single-digit market share. There's a huge headroom for growth in all the markets for us. I think it will trend up long-term pretty well for us. There are pockets, but those pockets will be corrected, and that said, we are now being very cost-conscious on international business also, because if the headwind persists in MENA region, then we'll have to curtail our cost to ensure profit protection.
From ROI point of view, basically from international business, it is equivalent to India business or how is the trajectory in return on investment or the capital which is being deployed for international business? Any highlight? Second, also you told about the Nepal business because of the curfew and Agro foods, the juice business is one of the good part of our domestic business. Earlier also there was issue and we had some facility in Sri Lanka. Can you give some color that how much dependency is there from Nepal and in case if there are further more restrictions or any such uneven, how much impact can be there? We have created a backup and there won't be any such kind of supply chain problem for the juices business.
I think I'll just talk with regard to ROI perspective. If you look at MENA region, I think in view of the product mix categories, the ROI is much better because it is less capital-intensive, and therefore the ROI-wise it is better. Even when we look at Namaste, because it is outsourced, the ROI-wise it is much better. It is Nepal, which is a juice category, where it requires a high capital investment in terms of the plant and machinery. That is where the ROI is comparatively lower than the other categories. Coming to the question with regard to Sri Lanka. Sri Lanka has been as a backup plan for us in case if there is any supply constraint.
We observed that couple of years back when Nepal was shut down, we were able to get the supplies from Sri Lanka, and that has been very useful for us in terms of export to India. At the same time, now we are also utilizing the capacity to export even beyond India to other countries, including U.S. and other countries also. Therefore, Sri Lanka is a very useful plan for us strategically to de-risk in case of any eventualities in other markets for the manufacturing, and therefore, that works very well in those times when it is required. Having said that, we are not utilizing the capacity at current level to fullest, and we are trying to utilize by exploring other markets. It certainly acts as a very important backup in case of Nepal or any other manufacturing units.
Okay. Thank you so much to entire team and Mohit, especially to you, the kind of agile and fearless attitude which you brought to the entire company, that's phenomenally incredible.
Thank you, Rahul. Thank you.
Thank you. The next question is from the line of Krishnan from Motilal Oswal. Please go ahead.
Yeah. Thanks for taking my question, and congrats on a very good set of numbers in the current environment. Mohit, my question was more on the baby range that you talked about, where you're looking for e-commerce. I know you've spoken in the past that this was a bit of a lost opportunity for you given the space vacated by Johnson & Johnson and which Himalaya was able to successfully capture. A, will this be under the Lal Tail brand? Has this range been already launched or is it under plan? It's a big plan now.
Yeah. As we speak, we are waiting for the big day in Amazon, and we'll be rolling out this as an exclusive Amazon launch on the big day of Amazon. It'll be rolled out. Earlier, the problem was that we only had one brand, Lal Tail, as compared to J&J, which existed as a whole full range of baby. When the mothers buy, they buy into the full range, whether it's a soap or a powder or oil, et cetera, there are gift hampers. We didn't have that range. We had created that range in international business, so we have rolled out that range in India also, and it'll be now launched in Amazon. If the traction is there, then we'll roll it out in modern trade and in general trade also. It's a very big play.
Rightly identified as Johnson, a little weak player as compared to Dabur, but we will not have a new brand as baby care is also extension of healthcare for kids. Therefore, we are extending Dabur. It will be called Dabur Baby and not Lal Tail or any other brand. It will be under the Dabur brand with that craft and quality assurance.
Understood. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Amnish Aggarwal from Prabhudas Lilladher. Please go ahead.
Yes. Hi, Mohit and team. Very good set of numbers in the current situation. I have a couple of very strategic questions. If I look back at the history of Dabur always had a lot of products under its belts. Somehow or the other, the issue always was to support so wide a portfolio. The kind of launches we have done, I think perhaps this is the maximum number of launches that we even put together last five, ten years. How much of these launches do you think are strategic and you would like to scale them up in the long term while some of them may be a sanitizer or even in some of these are surface sanitizer and some of these, they may, as an industry only, they may try to fizzle out, say, after a few months.
Yeah. Therefore, we have two sets. If you look at the categories where we've actually launched, we've launched either in healthcare, which is immunity-led products, or we've launched products in personal and home hygiene. If you look at the healthcare, most of the products that we've rolled out are category creators like Tulsi Drops, Haldi Drops, single herb ranges for us, Ayush Kwath. They will all be very strategic for us, and we would want to create categories out of these. The way Chyawanprash became a category or Giloy Ghanvati will become a category in our mind. Like that, they'll be very strategic. These don't require high decibel advertising or resources behind them because competitive intensity is not there, and we will be category creators. One, advertising is 100% share of voice here.
We don't see an issue in these brand, and potentially they are very big in terms of scaling up. I don't think that's an issue. Now, number two is other tactical efforts like personal care and personal and home hygiene category where we've rolled out. If sanitizer mutes as a category, we will also mute. I think we've capitalized on the situation, and we've established ourselves as first mover in Dabur Sanitize. That said, the habit of personal and home hygiene is got ingrained now with the consumer because COVID-19 has lasted and it's going to last for almost one year. It's not disappearing. These habits will get ingrained in the consumer behavior. I don't think they will disappear overnight. Home care is a very strategic part of our business.
To that extent, they will live under our portfolio, may not be under the Dabur brand architecture, but definitely will live under the portfolio the way the other portfolio is sitting. That said, we are looking at a lot of rationalization of portfolio of the tail products and SKUs that we have with the company. The company will undertake the exercise of reducing the tail, which doesn't have a turnover or which are not margin accretive to the company. We would be embarking on a project of cutting out on the tail so that there's not too much of pressure as far as the back end is concerned. A lot of products also with the e-commerce work for us, which will be margin accretive, which will be exclusively for e-commerce. In the past, when Dabur had launched, there was no e-commerce as a channel.
E-commerce contribution is almost 5.6%. I think we'll end up the year with also 5% contribution, which is a very sizable contribution, and that calls for a lot of e-commerce exclusive products. Veggie Wash that we've introduced as an e-commerce exclusive, Baby range will be e-commerce, apple cider vinegar will be e-commerce. As and when it scales up on e-commerce, when it scales up, the way we scale up products in ethical business, we will scale up the products for upmarket consumer or urban consumer in the e-commerce. As and when it scales up, we will roll it out in the GT business. Where we see immediate traction, they will be rolled out in GT. For example, Ayush Kadha or Kwath, which was desired. Immunity Kit was desired. Tulsi Drops, Haldi Drops were desired. Single herb range was desired. They will be rolled out to mass market.
I think we should have a 40%-50% acceptance rate in the marketplace, even for our new product launches.
Okay. My second question, Mohit, is regarding the international business, where particularly two of our acquisitions, one is our Hobby in Turkey and one is Namaste. There it is more like a switch on and off. Sometimes, it seems to be coming on track, and then again, they go off track. I would like your comment on whether do you see now them moving strategically and in any particular direction where we can see higher amount of profitability and growth over there. Thank you.
Yeah. It's like any other business, Amnish. Businesses are cyclical. When there is a headwind, business gets into a trough, and whenever there's a tailwind, the business gets into a crest. You can't have a constant business surge happening in any business. At the moment, what we see in the Hobby, we are seeing a tailwind because of COVID. It's a hand wash, body wash kind of a portfolio. That's doing exceedingly well, and the profitability is also improved in the Hobby business. That's trending very well for us. Even the Namaste business has got a tailwind. As I told you, relaxer business is now on a surge. In between, there was a trend towards new naturals, so therefore, relaxers were out and naturals were in, and now relaxers are back again.
I think, the market dynamics and the consumer sentiment dictates as to how the business is doing, and we keep recalibrating our strategies basis what the consumer behavior demands. We launched styling products under the Curls Unleashed when the relaxers were down, and now the relaxers are up. We are now focusing back again on relaxers. I think that kind of a cyclical dynamism will happen in the consumption as we speak. Structurally and strategically, these two businesses have improved their profitability now, and they are trending at very good double-digit profits for us.
Okay. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, as there are multiple participants in the queue waiting to ask their questions, we will move to the next caller soon after the first question is answered. The next question is from the line of Harit Kapoor from Investec. Please go ahead.
Yeah. Hi, good evening. My questions were regarding the innovation intensity. The first thing was on, if you look at the India business for the last four or five years, your ad spend as a percentage has been in the 8%-9% range, actually more eight than nine. Just wanted to get your sense on how you're looking at it going forward, given the intensity has been so sharp on the innovations over the last two, three quarters. Is there a material step-up on the ad spend side, which you expect going forward and stay there from there on?
Yeah. That is absolutely right. I think our ad spends are low, and we are cognizant of the fact that our ad spends are low, and we are making attempts to see an increase in the ad spends going forward. The budget also, we've now planned an increase in ad spend, especially to support the entities and also the power spend. The part of the Samriddhi saving will be used for increasing our above-the-line spend and generate the demand for our power brands and also new products. We are cognizant, and we are investing in the same. In COVID situation, you saw a depression of around 22% in the ad spend. That is because structurally, the media changed. We stopped spending in outdoor. We stopped spending in press. We focused all our resources on electronic media.
That too, outside of GEC into Doordarshan, because that's where the eyeballs were, that's where the GRPs were, and that came at a much lower cost. While we spend low - 22%, our GRPs went up by 70 percentage points while spending one-fifth. That's how.
Thank you.
Thank you.
The next question is from the line of Shirish Pardeshi from Centrum. Please go ahead.
Hey. Hi, Mohit. My personal compliment to you for good execution and banking on the opportunity. I have one question that is related to distribution. Could you give some color how the GT and modern trade has performed in the month of July, and what level of recovery we are seeing in these two channels? Related question is that what is the CSD doing in this quarter? Maybe you can give how July has performed in here.
What happened is GT has actually recovered quite a bit. GT, which declined by around 13%, is back on the recovery path now. Modern trade is far away from recovery. Modern trade declined by around -28%, still we see modern trade not recovering. There is a pressure in modern trade. CSD continues to be down. It declined by around -50%, even in the month of July, we do not see too much of a recovery. Recovery is expected going forward as the government releases fund for the CSD, they'll be able to buy and also pay their debts going forward. Modern trade is a concern, which is still at -25% of baseline level because of Big Bazaar, which is a big boy, and even DMart not doing as well the way they were in pre-COVID levels. GT is definitely recovered.
Thank you. The next question is from the line of Prasad Deshmukh from Bank of America. Please go ahead.
Good evening. Mohit, we hear about these clinical trials for Ayurvedic products across multiple universities by Ministry of AYUSH. This is to check the immunity boosting properties against COVID-19. Would you have an idea as to what is the status of these trials and what part of Dabur's portfolio would benefit from these if there is a favorable outcome?
We've already put our products into the clinical trials, Prasad, but the results are still awaited. I think part of the study is over and the part of the study is yet to come. We've not even got the initial findings, it'll be incorrect for me to comment at this point in time. Chyawanprash, Ashwagandha, Tulsi Drops, Ayush Kwath, all that are a part of the Ministry trials and also trials are initiated by Dabur. There are trials happening at all ends, the result is not yet out.
Thank you.
Yeah.
The next question is on the line of Kalpesh Jain from Ambit Capital. Please go ahead.
Yeah. Hi, Mohit. Congratulations on a good set of numbers for Q1. Mohit, you mentioned somewhere, when one of the participants asked you about June growth, you said that June growth had bounced up to 7% positive territory. Now that a significant portion of July has also expired, what is the kind of a growth traction we are seeing in the month of July?
Sorry, you're talking about the recovery, Kalpesh, in the month of July?
Right. I just wanted to have a broad sense on the indicative growth numbers for July.
July, our growth is roughly around 5% to 6% odd secondary levels of growth, is what we are looking at. That said, our modern trade is still under pressure and so is cash and carry. Institutional and HoReCa channels are still not opened up. That's why it's in the range of low to mid single digit kind of growth rates that we are seeing.
It's not significantly different from June?
Not significantly different from June, yeah.
One more question. On your market share, as far as your hair care category is concerned, we had Marico posting its quarterly numbers a couple of days back. They said that their decline was about 12% in the hair care portfolio, value-added portfolio also declined by 32%. Have you seen some sort of a market share gains as far as your hair care portfolio is concerned, or it's been flattish?
See, we listen to two parts of our portfolio, coconut oil portfolio and value-added portfolio. In coconut oil, we've gained 20% market share.
20 basis.
20 basis points. Sorry. 20 basis point market share, and in value-added, we've gained 40 basis points market share in both. Our declines are lesser than the category declines in both coconut oil and also value-added.
Thank you. The next question is from the line of Aditya Soman from Goldman Sachs. Please go ahead.
Hi, good evening, Mohit. My question is on new product launches. You indicated that INR 90 crores of your revenue came from sanitizers. How much would the contribution be of the other new products in, say, healthcare?
Yeah, healthcare NPD will be roughly around INR 50 odd crores broadly.
INR 93.
INR 50 crore is what the NPD.
Aditya.
INR 93 is global.
No.
Healthcare.
INR 93 is also India.
If I remove INR 48, it will be around INR 40.
Yeah, around INR 50 crore odd, Aditya.
Thank you.
Yeah, thanks.
The next question is from the line of Rohit Dokania from IDFC Securities. Please go ahead.
Hi, good evening. Thank you for the opportunity. Thanks, Mohit, for giving us an idea of the international business from a medium-term perspective. Could you also talk about any recovery that could have happened, at least in the month of July across the global markets?
Even global markets have seen a recovery. It is a recovery to an extent around 1.8%, which happened in the month of June, around 2% odd. We are seeing release of lockdowns happening and unlocking of markets happening there also. We are seeing significant recovery, barring Nepal where the business is still down by around -17 odd percent. Rest of the places we are seeing recovery in, again, low to mid single digits, even in international business.
Thank you. The next question is from the line of Shirish Pardeshi from Centrum. Please go ahead.
Yeah. Thanks for the opportunity. Mohit, quick question. We are seeing two new players coming to the Honey segment. What is it that exciting or if you can give me some color on what's happening in honey in terms of competition?
Yeah, see, in honey what has happened is we've actually surged our market share numbers. Prior to COVID, our market shares were in the range of around 30 odd% levels. Whatever data that we have in consumer panels, we see our market share surged to 50 percentage point levels where we've grown by around 60%. I think honey penetration in the country has gone up. A lot of smaller players have vanished during the COVID because of supply constraints of honey, and they could not purchase. We've been able to gain market shares from those players. There are some organized players like Lion and Hitkari, which still remain in the market, and there are a couple of multinationals who also entered the honey market.
I think we are staying on course to defending our market share and gaining our market share and increasing the penetrations of honey in the country. That's why you've seen we launching value-added honeys in terms of Tulsi and Ashwagandha at one end. Also for e-commerce, we are launching exclusive offerings like Himalayan honey and organic honey. That's also being launched as we speak. I think next month or month after, you'll see those launches also. We will keep also making honey in accessible price points as we go forward. We are growing the market irrespective of what the competition. If the competition comes in, they will grow the market at a faster pace. The penetrations of honey in the country are still very low.
The more the amount of advertising in honey, the more the market will grow, and we will be the beneficiaries there. We'll be conscious that we don't lose share, and we have to gain share from unorganized and at the top end, keep innovating so that we keep growing the category as a leader too.
Thank you. The next question is from the line of Rahul Ranade from Goldman Sachs. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just wanted to understand out of this healthcare NPD that we said for INR 30 crores, how much of it would be mainstreaming out of the ethical portfolio where we already had products, versus how much is completely new products? Second question is it fair to assume that, whatever we are mainstreaming from the ethical, it should have a higher success rate since the efficacy of these products is kind of proven.
It will be, I think, broadly around INR 12 odd crores will be a part of the ethical portfolio mainstreaming, and around INR 38 crores will be new NPDs, et cetera. Ayush Kwath and Kadha, for example, we were the first movers in the market, and this was a advisory given by the government, and we quickly churned out a formulation, and we rolled it out as per the Ministry of AYUSH guidelines. That was completely new to us. Tulsi and Haldi Drops, while we had it in other formats, but drops as a format wasn't available. That came in. That's around INR 7, 8 crores, completely new, which wasn't there. A lot of other products have come in. Yeah.
Thank you. The next question is from the line of Sakshi Mehra from Citi. Please go ahead.
Hi.
Excuse me, this is the operator. I'm sorry to interrupt. Sakshi Mehra, may we request you to use your handset, please?
Hi. Thanks for the opportunity. We have recently increased our market stake in Eveready business. Can you please throw some light on it? Are we planning to acquire it or just keep it as an investment?
I think Eveready business is by the promoters in their individual capacity. Therefore, as a Dabur India Limited, we have no linkage or any role to play in that. That is purely their personal investment. We cannot comment anything further on that.
Thank you. The next question is from the line of Suvarna Joshi from Axis Securities. Please go ahead.
Thank you for the opportunity. Congrats for a good set of numbers in this tough times. You mentioned about rural market growing by 1% while urban declining 13%. Now we've been seeing that the number of COVID cases have been growing in the hinterlands. What is your assessment going forward in terms of the impact on the business that this will have? Do you see that rural market will still remain resilient despite the rising number of COVID cases? That was one. The second bit was, is this growth also driven by the distribution expansion strategy that we have given a year or two? We think that rural is likely to contribute healthily to the growth going forward. Thanks for these two questions.
I think rural continues to grow for us, and we don't see any sort of downside in rural, even in the month of July. We also hear news flashes saying that community spread is happening in rural India. At the moment, we are not yet impacted, except for the flood situation in Bihar and some few lockdowns have impacted us in some sporadic districts and cities, in Bihar and Madhya Pradesh, and also Northeast, et cetera. We see rural attending well. The difference between rural and urban is quite a bit. As I was telling you, that Nielsen is talking about a growth of 12.5% in rural as compared to 1.5 negative in urban. There's a huge gap. I think rural recovery is much faster.
I was telling you, as the population is spread out in rural areas, therefore the COVID cases will not spread out in the rural as much as they've done in urban. I remain very hopeful as far as the rural is concerned. The rural traction had also happened because of population reverse flow, which has happened in rural. Because of that, also the demand surge has happened. To add it up, government is also adding around INR 150,000 crore package is what PM Modi announced for rural, there is additional INR 40,000 in MGNREGA. Support prices of crops have gone up. Monsoon has been great. The initial crop has been fantastic. I think all those tailwinds are going in favor of rural areas. Tractor sales have also gone up in quarter one, which is a great barometer of the rural performance.
Everything is going in the favor of rural. That said, we've also expanded our rural infrastructure in terms of number of villages. We've completed around 52,600 odd villages, and we are committed to going up to around 60,000 odd villages in two years' time.
Okay.
In this year or a year and a half, so I think depending on the COVID-19 situation and our accessibility. Also we are looking at now village-level entrepreneurs to be sown in the rural, so that we are able to really spread out deep into the hinterland. As you know, there are six large villages in India, and we are only talking about 16,000 villages here. This is a huge headroom for growth as rural is becoming more accessible with roads and the infrastructure going up. Plus, we've also launched LUPs, which is low unit price points, which only help the rural infrastructure that we've built for us to build the business there. I hope I've been able to answer your question, Suvarna Joshi.
Thank you. The next question is from the line of Ankit Babel from Subhkam Ventures. Please go ahead.
Good evening, sir. I hope you are doing fine. You people are doing a wonderful job. I mean, launching so many new products, bringing in so much of efficiencies in your operations, savings of around INR 100 crore-INR 150 crore each year. Plus, you have a change in the trend of shift from unorganized to organized. We are gaining market share also. Of all these happenings, is it fair to assume that barring any economic shocks, going forward, Dabur is ready for a mid to high kind of a growth with margins, say, 23%, 24% because of all these savings and improving efficiencies maybe in next two, three years? What is your
Ankit, your voice is not very clear. Can you repeat? I understood the first part, but the second part I'm not able to hear clearly.
My second part was that, with all these positive things happening into the company, is it fair to assume that barring any economic shocks, now Dabur is ready for a mid to high teen kind of a growth with the margins in the range of 23%-24% going forward in next three years?
I can't give you a guidance, Ankit, here as to are we ready or not, but we are doing all the right things in our mind, which could change the trajectory of the company and take it to the next level. That's what I can say. As far as the immediate term is concerned, we're looking at something like around low to mid single digit, to compensate for the COVID impact with all these initiatives what will happen for a full year. That's the best guidance that I can provide you, but I think that's for you to expect what the growth will be. We are doing all the right things, whether it's systems, processes, or IT interface or technology.
We are launching innovations, the team is stretching and trying to make all the products which are available, get into mainstream categories and larger categories also as we speak going forward so that we are able to take the business to the next level, to benchmark to the best-in-class in the industry and try to bridge the gap in terms of revenues in long term.
Thank you.
Thank you.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments.
Thank you. Thank you for participating in this conference call. A webcast recording of this call and transcript will be available on our website. Thank you, and have a very nice evening ahead.
Thank you very much. Ladies and gentlemen, on behalf of Dabur India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.