Dabur: A Record - Breaking Brand Through the Ages

Dabur India Limited, one of the Fortune India 500 companies, voted a Power Brand in 2012, the second most social brand in India, the most trusted market leader in the healthcare category in 2012, ranked 37 among the greatest wealth creators in 2011 and ranked among the top 30 most employment creators by Corporate India, the world's largest natural healthcare company and possessing many more enviable credentials, has become an unforgettable name not only in India but also globally in the Herbal and Ayurvedic domain.

Being on the Herbal and Ayurvedic platform and with the demand of the products in the Healthcare, Personal Care, Home Care and Food categories exponentially increasing, the company is aptly placed to serve the existing and unattended geography globally; it has positioned itself in all continents, but it focusses only on selected regions.

Dabur Timeline

For domestic FMCG major Dabur, with Ayurvedic products as its intrinsic strength, emerging strongly out of a serious health crisis could well be part of its legacy. The companys sensitivity to its innate culture and values never conflicted with the requirements of fast growth. The core values of the organisation have always been central to progress and change and have been global in terms of ownership, passion for winning, people development, consumer focus, team work, innovation and integrity. The strategic growth of the company has been scripted based on three pillars: Expansion, Innovation and Acquisition.

Brief Background

The company commenced from a humble beginning in 1884 when Mr S K Burman started the Ayurvedic medicine business in Calcutta and targeted rural Bengal for its products. The business continued to show moderate growth and expanded outside Bengal too. Owing to the 1969 unrest in Bengal, the company shifted its whole setup of Operations and Marketing to Delhi. Production of Dabur products commenced in 1976 in the National Capital Region. The company exhibited strong growth from 1970 to 1990, which resulted in it being recognised as one of the leading FMCG companies in India.

Daburs growth story created pressures on the company to go public and it chose to expand its presence by increasing its production capacity, setting up new factories, developing new products and remodelling its distribution channel to compete with large multinationals. Dabur became a public limited firm in 1987 with oversubscription of the IPO followed by a growth rate beating the industry growth rate in the domain. With new policies in place in 1991 for globalisation, privatisation and liberalisation, India opened its gates to all companies in the world. Upon identifying the increasing consumer demand and high consumer base, many MNCs entered the Indian market.

With success on the way, new realisations were made for a higher degree of institutional wisdom. Dabur undertook a thorough revamping of all domains Operations, Production, Marketing, Research and Governance based on the philosophy that professional excellence is the key to long-term leadership. The sudden demise of Mr G C Burman, Vice Chairman, in 2001, who was a reservoir of tacit knowledge of the company, upset Daburs growth story for a short period. The exigency demanded a recovery mechanism with respect to the organisations learning process and knowledge transfer systems.

Dabur initiated a large project to assess the need for professional management for organisational leadership. By the 1990s, we had grown to more than 100 crore in revenue. We realised that the company was now in a position from where it could grow exponentially. We roped in McKinsey to help devise a strategy for the future, said Chairman Dr Anand Burman. McKinsey suggested the exiting of the family and the handing over of the operations to professionals. Leadership implemented the advice and Dabur invited its first non-family CEO in 1998. The strategy was successful and Dabur grew exponentially under professional management systems.

Dabur grew from 20 crore ($4 million) in 1980 to 100 crore ($20 million) in 1990s and hit the 1000 cr ($200 million) mark in 2000. The real impact of strategic interventions was reflected in 2007 when the company hit the $540 million mark in 2007 and reached 6150 crore ($1 billion dollar) revenue in 2012, a disruptive growth journey of almost 5 times the revenue in one decade.

Mr Sunil Duggal, CEO, recalls, Dabur figured out the requisites to get bigger in the year 2000 and the company started a deep dive into innovation and strategic expansion, which helped us grow in terms of products and performance in India as well as internationally. The four acquisitions made in the domestic and international markets were not only important strategic decisions but also proved to be successful. Led by the innovation DNA, Research and Development gave a strong impetus to launch new products and redefined the distribution system supporting marketing.

Dabur has set up a great example of innovation and marketing in emerging markets. Today, Dabur has the third largest revenue in the FMCG sector in India. Mr Duggal says, We are proud of our capacity to renovate and innovate with least bureaucracy and high adaptation capability. Our ability to transform and bring change in the company inherently is extraordinary.

Strategy and Innovation

The marketing strategy is led by the corporate strategy, which is based on the Vision Cycle (VC), coupled with consumer opportunities at Dabur. These consumer prospects are rooted in consumer insights and need gap study, which is supported by the market research team and partners. The four-year VC is the key force towards the change and innovation Dabur effects in the organisation.

The Strategy Cycle (SC) is governed by the Vision and it evolves from the market knowledge. Two fundamental factors contribute to the growth in the market. First, Dabur decided to create a four-year VC in 2003 to accelerate the growth ecosystem, learning that consumer taste usually changes in this duration; second, it has great talent to change management with an exceptionally affirmative process and 360-degree engagement.

Starting from 2003, Vision Cycle 1 (2003-06) created the agenda of Reconstruct and Renew, which accelerated the top-line and drove around 36 percent bottom-line growth, driven by mapping of opportunities within and outside the herbal space. This phase observed entry into new categories like Toothpaste and significant growth in the Shampoo business, where herbal positioning could offer a competitive positioning to customers. VC 1 also worked on organisational restructuring that included the creation of a unified sales team, which was distinct from the divisional sales team.

Vision Cycle 2 (2006-10) comprised the theme Transform and Grow and influenced both the top-line and the bottom-line growth, driven by domestic acquisitions (Balsara for home and personal care category; Fem care pharma for skincare) and by entry into new categories, such as skincare. This VC guided the master plan for the marketing strategy, given that the structure of the sales force had changed and was now smooth and effective. This was also reflected in the performance statistics.

Vision Cycle 3 (2010-14) positioned Accelerate and Globalise as the next mantra of strategic growth through strategic restructuring to increase rural footprint, brand renovation and innovation and overseas acquisitions. The first two drivers in this vision were primarily the responsibility of Marketing and they involved all important terminals given that the structure was flexible and communication channels were open.

Marketing Insights

Dabur has been the receiver, with all humility, of consumer-based knowledge from all corners. Learning from consumers gave insights into devising better products and pricing, which helped in framing the marketing strategy that fructified speedily. Dabur has 14 brands in the $20 million club and 3 brands in the $100 million club and these brands enjoy strong consumer equities. They also offer the potential to leverage both within their product scope and across new product categories. The foray into the light hair oil segment has been a tremendous success.

Marketing strategy is anchored by the Product and the Brand and aligned with consumer opportunities and market need analysis. 'In product space, the starting point is consumer need. Here, we explore opportunities across healthcare and personal care categories, says Mr Devendra Garg, Senior Executive Director. Dabur has reached a leadership position in healthcare and it defines its task as category expansion; personal care is allotted the challenger position and defines the task as drive market share.

In brand space, Dabur focusses on stretching the brands with their attributes, benefits, ingredients and emotional associations into product categories, where they can offer strong value propositions to customers. For example, Vatika started as a herbal hair oil player and stretched successfully to the shampoo category. Their positioning brought a good market share since the launch.

Today, some of the brands, such as Vatika and the toothpaste brand Dabur Red, are among the most valuable brands in the country created in the last decade. The competitive category and decline in the competitors market share indicate the success of Daburs marketing strategy in terms of both planning and execution.

Internal and External Environment

Daburs Capability and Internal Thinking

The focus of the marketing strategy of Dabur has been to leverage consumer opportunities. Their VC directed the restructuring of the sales focus from divisional structure to unified structure, which not only helped optimise the efforts but also increased product knowledge. The continuous feedback on the need assessment by the field team was of great advantage to the company.

Dabur had to invest huge energy, time and money in product training and capacity building of the sales team because the market ranged from paanwala (street kiosk) and beauty parlours to doctors, and the presentation strategy was uneven. In an effort to expand and consolidate the domestic rural market to exploit high growth, Dabur created a focused rural activation team.

Daburs External Environment

Broadly, Daburs strategy is to drive the healthcare vertical business and enjoys a leadership position by making it more relevant to consumers. Dabur grows its market share in home and personal care, which is in Challengers space, through differentiated products and anchor in natural goodness. This strategic initiative demanded great products and delightful presentations. Dabur strengthened its research and development and packaging capabilities to support its initiatives.

Mr Garg happily stated, In-house insight has been incredible, but we also had great inputs from marketing research partners who unearthed the right needs, tested the product performance, assessed the competitors in the space we had chosen to play in and tested the design and functionality of the packaging. Additionally, Dabur leveraged on distributors after unified structuring in 2003, as a combination of stockists with higher capacity and greater market appetite created a bold presence for the company. Many channel partners helped the company in mining and engaging in communication insights.

Dabur has built its credibility and strength over years, but sometimes, it is perceived as a traditional and stuffy brand among the younger generation. This image challenge scenario has been addressed by Dabur by its best-in-class product launch, packaging and communication to drive a lifestyle that is both natural and modern.

Also, competitors have sought to edge out the company on natural variants based on their brand glamour by media and celebrity power. Not only has it managed to fend off the challenges and continues to grow, it has also become stronger by addressing the issues through a robust mix of marketing Ps Product, Packaging, Promise and Personality.

Contemplating Daburs Strategy

A reflection on its strategy is a must. Dabur has actualised planning and execution through market capitalisation, top-line growth and bottom-line growth via key benchmark competitors and profits. Between 2002 and 2012, the top line has grown by 5 times, bottom line has grown by 10 times and the top line - bottom line value growth outstrips that of the key benchmark competitors.

Dabur has achieved a market capitalisation of $5 billion. The company is characterised by its high efficiency in marketing delivery. Their marketing strategy is refreshed every 4 years under the VC, which takes care of the changes in consumer preferences, the opportunities arising out of new trends and the changing competitive landscape.

As a concluding remark, Mr Sunil Duggal said, We are proud of our capacity to renovate and innovate with least bureaucracy and high capability to adapt to Change. I take great pride in the exemplary entrepreneurial culture in our teams.

Q. Analysing the external business environment

What is your assessment of the external business environment of Dabur? Explain in terms of: a. Operating environment - Uncertainties associated with Daburs business b. Macro environment - Factors affecting Dabur at a national or global level c. Industry environment - Competitive rivalry in the industry and the impact of market forces