MxMIndia

Tag: Dabur India

  • Dabur had kept its advertising cost in control over the past several months in order to maintain its profitability

    … but rejoice! Dabur increases its adspends

    By Jwalit Vyas

     

    Dabur India delivered a good performance in June 2012 quarter. The major surprise of the June quarter numbers was the year-on-year 51 per cent jump in its advertising and publicity expenses.

     

    Dabur had kept its advertising cost in control over the past several months in order to maintain its profitability. However, the strategy seems to have changed as the company again has started pumping money in marketing its products.

     

    Its advertisement to sales ratio increased by 310 bps year-on-year to 15.7 per cent in March 2012 quarter. Its sales grew by 20 per cent y-o-y to Rs1,462 crore, which its net profit grew by 17 per cent to Rs 150 crore. Operating margins remained flat at 16 per cent which is positive for the company considering the additional advertisement expense.

     

    The second most diversified Indian FMCG company showed a healthy growth across segments. Its food business which contributes to around 15 per cent of the company’s net sales grew by 31 per cent, while its consumer care business which is 80 per cent of its total sales grew at 15 per cent. Its retail business (Kaya Skin Clinic) continues to be loss making but the size of this business is negligible when compared to its overall business.

     

    Dabur’s stock closed 0.1 per cent up at Rs 118 while the Sensex was down by 1.7 per cent. The company’s stock is trading at a price to earning multiple of 31.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Spurred by brand activation spends, such non-advertising spends, called below-the-line (BTL), are gaining share over advertising spends at several leading consumer companies

    HUL, LG etc look beyond regular advtg

    By Bhanu Pande & Ratna Bhushan

     

    PepsiCo is organising seven-a-side soccer tournaments in neighbourhoods, LG is showcasing its durables in residential complexes, Cadbury is standing outside super markets with its cookies, Hindustan Unilever is standing with a shampoo to assess the state of your scalp… These are some of the biggest companies, with hefty advertising budgets. Yet, to market their wares, they are increasingly looking beyond conventional, passive advertising and spending more on marketing activities where the connect with the target consumer is active and direct.

     

    In marketing lingo, such on-the-ground events and promotions are called ‘brand activation’, and they generally form the largest chunk of a company’s non-advertising activities. Spurred by brand activation spends, such non-advertising spends, called below-the-line (BTL), are gaining share over advertising spends at several leading consumer companies.

     

    According to LK Gupta of LG Electronics, 60 per cent of the company’s marketing

    budget is going towards BTL activities, against 35-40 per cent three years ago. “With increasing choices, the consumer has become more discerning,” said Mr Gupta, vice president-marketing. “Therefore, ground activations are gaining traction due to the added impact they give beyond the media clutter.”

     

    Elsewhere, Homi Battiwalla, category director, PepsiCo India, labels the increase in his company’s BTL spends as “significant”. “Today, consumers have started saying, ‘show me something real’,” he added. In April, in its advertising, PepsiCo India switched from cricket to soccer, and launched a campaign, ‘change the game’.

     

    Alongside, it hit neighbourhoods with ‘T-20 Football’ – a seven-a-side, 20-minute soccer tourney. “We realised plain advertising wasn’t enough,” said Mr Battiwalla. “We wanted to build the idea, and create an experiential engagement that is grassroots with our target audience.”

     

    All this is translating into more business for firms like New Delhi-based Candid Marketing, which helps companies with their brand-activation strategies. Its managing director Atul S Nath says its business is growing 25 per cent a year. “Clients are questioning the delivery from plain advertising,” he said. “Delivery from brand activation is almost immediate, though the latter has its limitations.”

     

    Mr Nath predicts that, in the next five years, the split between BTL and ATL (above-the-line, or advertising) spends will be equal. Currently, companies spend more on mass-media advertising than on events and promotions. He, however, feels, advertising budgets will not fall in absolute terms, but more of the incremental allocation will be to BTL activities. “Overall spends on BTL will significantly rise as people begin to see its impact,” he said.

     

    Mr Gupta of LG agrees, and attributes it partly to the rise of online marketing and social media, which conveys details of a product quicker than conventional advertising. “The influencing touch points are shifting,” he said. “The customer comes armed with his own research. So, conversion with demo and explanation has become an area of great focus.”

     

    It’s also the current tight business environment, said brand consultant Harish Bijoor, who sees advertising symbolising ‘theme’ and BTL representing ‘sales’. In a tough market, cash flows are an imperative. “So, they are putting their big bucks on BTL, and money is certainly moving from theme to scheme,” he said.

     

    Mayank Shah of Parle Products says the idea is to engage with the consumer despite the higher costs. “In case of traditional advertising on television or print, cost per contact is very low,” said Mr Shah, group product manager. “BTL activation is costlier, but it’s the quality of engagement with the consumer that makes a lot of sense. He feels, it is very important to generate trials in food products, which is the company’s main product category. “Sometimes it’s necessary to make consumer sample your products,” said Mr Shah. “And where there’s a big rural and semi-urban opportunity, we need to go BTL.

     

    Dabur India too has been relying heavily on BTL activities in tier-II and tier-III towns. “With rural consumers increasingly moving towards branded products, just leveraging mainstream media is not enough to connect with them,” said George Angelo, executive director-sales, Dabur.

     

    The company has the Dabur Amla ‘banke dikhao rani pratiyogita’, a rural beauty and talent hunt where rural women are groomed by trained beauticians. Another of its recent BTL activity was the Dabur Gulabari Miss Rose glow contest – a regional model hunt from state capitals, with the eventual winner receiving a wildcard to the Femina Miss India contest. “A BTL initiative involving Vanya Mishra (a wildcard who was one of the winners at the Miss India contest) resulted in Dabur Gulabari reporting its highest ever monthly sales in April,” said Mr Angelo.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Modern retail shoppers seem to be less impacted by economic factors like inflation, high interest rates and slower growth, says Nielsen's April report

    Shoppers at retail chains buy premium items

    By Sarah Jacob & Writankar Mukherjee

     

    Shoppers at food and grocery retail chains appear disconnected from the overall weak consumer sentiment in the country as they upgrade to premium products and buy bulk packs, helping big retailers and consumer goods firms boost average realisation per sale.

     

    Daily use products like hair oil, refined edible oil and toothpaste, and impulse-driven categories such as biscuits, beverages, salty snacks, instant noodles and chocolates are growing much faster in sales value than the number of units sold in modern trade, a report by market tracker The Nielsen Company says.

     

    Modern or organised retail within food and groceries refers to convenience stores, supermarkets and destination outlets called hypermarkets. This is opposed to the traditional kiranas or neighbourhood stores.

     

    Modern retail shoppers seem to be less impacted by economic factors like inflation, high interest rates and slower growth, says Nielsen’s April report.

     

    Industry officials say this trend also has to do with consumer’s shopping motivations. “Consumers are purchasing larger packs, and more value-added products in modern retail since they are showing a tendency to complete their monthly shopping in such stores. They are topping up with smaller purchases from kiranas,” said Dabur India CEO Sunil Duggal. Value growth of one-litre Real juice pack is almost double in modern retail than kiranas.

     

    Manish Tiwary, executive director-sales and customer development at the country’s largest consumer goods company Hindustan Unilever, said modern retail consumers are comparatively better off. “The profile of shoppers in modern trade clearly reflects a higher living standard measure. This is one of the main reasons for the slightly more premium portfolio (in big chains),” he said. HUL’s largest brands within the personal wash category in modern trade are Dove and Pears, while Lux and Lifebuoy rule the roost overall.

     

    Nielsen says stronger purchasing power of modern trade consumers and wider product assortment at such chains encourages impulse purchases and deal-based large-pack buys. “This mix of affluence and experimentation is an invaluable asset for all stakeholders. This can be useful in times of uncertainty like 2011 since the sharp increases in value growth indicates resilience amongst them,” said Adrian Terron, Nielsen Company’s executive director (retailer and shopper).

     

    He said refined edible oil and instant coffee are examples of categories where value growth outpaced volume growth by 2-3 times. Of course, product prices have increased 2-8 per cent over past year, but Nielsen says the effect has more to do with shopping behaviour.

     

    Spencer’s Retail chief (operations and merchandising) Mohit Kampani said nearly 30 per cent of growth that Spencer’s Retail posted across its 189 outlets was from consumers upgrading purchases last year. “This is also because the price points of products being stocked have widened considerably. A year ago, skincare brands would have been priced between 10 and 800 while today it is between 10 and 2,200,” he said.

     

    Devendra Chawla, president (Food Bazaar category) of India’s largest retailer Future Group, said value-added categories are incubated at modern trade outlets: “A lot more cookies, cream and health biscuits have been launched in the past 18 months than mass biscuits, which makes value contribution higher, although the category is growing double digits by volume.”

     

    Even in personal care, anti-ageing and performance creams are growing much faster than general-purpose creams.

     

    HUL’s Tiwary said it sometimes launch certain pack sizes in modern trade first and then in other channels. Future Group’s Chawla said launch of international foods is also contributing to this trend. This includes packaged cheese, international pasta and brands like Choco Pie among biscuits and Ferrero Rocher in chocolates that are resulting in faster value growth than volume. Overall, modern trade is proving more profitable for marketers because profit margin is higher on premium products and large packets.

     

    Meanwhile, mobile phone and durable makers too report higher sale realisation in large chains due to rising demand for premium products. Research in Motion (RIM), makers of the BlackBerry smartphones, said Indian consumers are upgrading from feature mobile phones to smartphones. “This is boosting the average selling price of the handset market, even though overall demand is yet to pick up,” RIM India Managing Director Sunil Dutt said. He estimates that the smartphones market is growing 60-70 per cent a year in the country, while feature phones at 10-15 per cent.

     

    Panasonic India Managing Director Manish Sharma said: “Consumers are increasingly going for large screen televisions, which is pushing up value sales.” The average selling price of the company’s flat panel TV business has gone up by more than 5 per cent in six months.

     

    Korean brand Samsung too says sales of its high-end split ACs, frost-free refrigerators and smartphones are growing faster than lower-end products.

     

    Source: The Economic Times
    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Analysts expect all leading FMCG companies to post strong results in the fourth quarter ended March and maintain their margins in the current fiscal

    FMCG players upbeat after Q4 sales boom

    By Ratna Bhushan & Sagar Malviya

     

    Consumer goods companies and retailers expect a spurt in demand this fiscal, buoyed by indications of better-than-expected earnings in the January-March quarter backed by a revival in consumer sentiment.

     

    Analysts expect all leading FMCG companies to post strong results in the fourth quarter ended March and maintain their margins in the current fiscal, even as gung-ho investors have pushed shares of most companies to their 52-week high on the Bombay Stock Exchange this month.

     

    “The last two quarters seem to have stabilised in terms of consumption though there have been price hikes,” said A Mahendran, MD, Godrej Consumer Products. The maker of Cinthol soap and Good Knight mosquito repellant expects its fourth quarter earnings to be better than analyst forecasts of 16-22 per cent increase in revenues.

     

    Growth in FMCG product sales signals revival of consumer sentiment over 2011 when market growth slipped to 8 per cent from 12 per cent the previous year.

     

    Companies now look to ride on high-margin products, rural demand and innovations to maintain the growth momentum without taking a hit on their margins.

     

    NO DOWN TRADING

    They are buoyed by the fact that there is no significant indication of down trading, or the trend of switching to a cheaper brand due to price increase, by consumers despite 5-10 per cent increase in prices of daily use items like soap, toothpaste and hair oil. “We have not seen downtrading,” Anand Burman, chairman of Dabur India, which makes Vatika shampoo and Amla hair oils, said. He added that a combination of rural consumption and growth from mass-priced products in urban markets were triggering demand for Dabur’s hair care and oral care products.

     

    But Harsh Mariwala, chairman and MD of Marico Ltd, which makes Parachute hair oil and Saffola edible oils, warned that margins may remain under pressure. “We expect healthy top line in continuation of the previous quarter…in terms of bottom line though, margin pressures will remain because of fluctuating raw material costs and complex global cycles,” he said.

     

    Prices of menthol have shot up 40 per cent over the past two months, while palm oil prices have surged 10 per cent in the last one month. But analysts expect margin pressure to ease with innovation gaining centrestage. Then companies will gradually increase their advertising and marketing expenditure, Edelweiss Financial Services research analyst Abneesh Roy said. “We expect margins to begin slow northward trajectory in the coming months as raw material prices cool off and rupee depreciation reverses,” Roy wrote in a report early this month.

     

    APRIL BOOM

    The country’s top retailer says that retail sales have picked up speed in the past two weeks and expects healthy demand to continue in the next two quarters. “While the January-March quarter was good and grew better than the same period last year with most retail segments growing by high single digits, we are seeing an upsurge in sales in the last two weeks across all formats,” Kishore Biyani, chairman of the country’s largest organised retailer Future Group, said.

     

    He said there is an upsurge in sales of even consumer durables April onwards, adding that Pantaloon, Big Bazaar and Home Town have witnessed high double-digit growth. Apparel, toys and footwear retailer Lifestyle International’s MD Kabir Lumba said its sales grew the most in the fourth quarter. “We have seen a lift from the lower trading conditions of September to November. While we grew 22 per cent overall last year, the fourth quarter grew faster,” he said.

     

    DURABLES STRUGGLE

    Makers of home appliances such as fridges and ACs are, meanwhile, reeling under the double whammy of late summer as well as price hikes. AC sales were down by 30-35 per cent year-on-year during the quarter, while there has been a marginal 3-5 per cent growth for refrigerators. “The overall market is down due to sluggish sales of cooling products. Temperatures are yet to rise to induce AC purchases, while the price increase for input cost and excise too have been a big dampener,” Kamal Nandi, VP (sales and marketing) at Godrej Appliances, said.

     

    Prices of products have gone up by 10-15 per cent due to input cost hikes, upgradation in star ratings for energy labelling and increase in excise duties in the Budget.

     

    While consumer sentiments had improved during the Republic Day period in January due to aggressive discounts and promotions by retailers, sales were muted in February and March. Whirlpool VP (corporate affairs and strategy) Shantanu DasGupta, however, said the new fiscal year has started in positive note. “April has started off okay, but it is early days yet,” he said.

     

    “Individual companies may be growing, but that’s not due to demand. Instead, it’s led by innovation in new launches and distribution gains,” Mr DasGupta added. Electronic firms are now betting more on LCD and LED televisions, washing machines and microwave ovens for growth.

     

    “Flat panel televisions continue growth momentum since this category did not see any significant price changes this year,” Samsung VP (audio-visual business) Raj Kumar Rishi said. Samsung expects sales of summer products like AC and refrigerators to gather momentum in the second quarter.

     

    (With inputs from Writankar Mukherjee and Sarah Jacob)
    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved