A PROJECT REPORT ON STRATEGIC MANAGEMENT OF THE FMCG SECTOR WITH REFERENCE TO DABUR UNDER THE SUBJECT STRATEGIC MANAGEMENT

IN PARTIAL FULFILLEMENT OF THE DEGREE OF MASTER OF COMMERCE BANKING & FINANCE SEMESTER II (2012-2013) SUBMITTED BY PRIYANKA SUREKA ROLL NO. 41 UNDER THE GUIDANCE OF MR.SAMADHAN KHAMKAR

SIES COLLEGE OF COMMERCE AND ECONOMICS, Plot No. 71/72, Sion Matunga Estate T.V. Chidambaram Marg, Sion (East), Mumbai 400022.

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CERTIFICATE
This is to certify that Ms. PRIYANKA SUREKA of M .Com Banking & Finance Semester II (2012-2013) has successfully completed the project work entitled STRATEGIC MANAGEMENT OF THE FMCG SECTOR WITH REFERENCE TO DABUR Under the guidance of MR.SAMADHAN KHAMKAR

____________________ ____________________
Project Guide/ Internal Examiner (MR. SAMADHAN KHAMKAR) ( External Examiner )

____________________ ____________________
Course Co-ordinator (MRS.SHAILASHRI UCHIL) DATE: PRINCIPAL ( DR. MINU THOMAS)

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PLACE:

DECLARATION

I, MS. PRIYANKA SUREKA, the student of M.com (Banking & Finance) semester II (2012-2013) hereby declare that I have completed the project on STRATEGIC MANAGEMENT OF THE FMCG SECTOR WITH REFERENCE TO DABUR The information presented through this project is true and original to the best of my knowledge.

______________ Date : Place: PRIYANKA SUREKA Roll no. 41

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ACKNOWLEDGEMENT

The project on STRATEGIC MANAGEMENT OF THE FMCG SECTOR WITH REFERENCE TO DABUR in STRATEGIC

MANAGEMENT is a result of cooperation, hard work and good wishes of many people. I student of SIES COLLEGE OF COMMERCE AND ECONOMICS would like to thank the project guide MR. SAMADHAN KHAMKAR) for his involvement in my project work and timely assessment that provided me with valued guidance throughout my study. I express my deep gratitude to all my college friends and my family members whose efforts and creativity has helped me giving a final shape and structure to the project work. I am also thankful to all those seen and unseen hands and heads, which have been of director help in the completion of this project work.

Priyanka P. Sureka

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INDEX

Sr No. 1.

Content

Page No

FMCG Sector Introduction Market Overview Industry Analysis Opportunities In The Sector Government Policies & Framework Segment Framework

Regulatory

2.

DABUR Company Overview History Strategic Intent Financial Perspective PEST Analysis Operations Strategy Sustainability Porters Five Forces Model Future Of Dabur India

3.

Bibliography

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FMCG SECTOR
INTRODUCTION
The Fast Moving Consumer Goods (FMCG) sector in India has been growing at a healthy CAGR of 11% over the last decade Riding on the back of increasing demand and changing consumer preferences, thanks to higher disposable incomes and the retail revolution, the sector has been posting double-digit growth over the past couple of years The industry is volume driven and is characterized by low margins. The products are branded and backed by skilled marketing, heavy advertising, slick packaging and strong distribution networks. Also, raw material prices play an important role in determining the pricing of the final product Modern retail formats too have contributed in a major way in pushing the growth in the FMCG sector. With rising income levels and the spread of modern retail, the FMCG industrys future prospects look bright which is expected to further boost sales Growth in the sector is led by higher urban and rural demand. Going forward , the governments growing support to agriculture will drive long-term growth in consumption from the rural sector In our view, amongst all the FMCG segments, the food segment will outperform over the coming years. The Indian food industry is a significant part of economy,(food constitutes about 36% of the consumer wallet) the Indian

The Indian food industry is poised to grow by a whopping 63.5% from Rs 788,100crs now to Rs.1,288,900crs in next 5 years and by 137.8% to Rs. 1,874,100crs in next 10 years, throwing up huge opportunities for investments across the entire value chain India faces contrasting problems of having one of the highest malnutrition cases and also being the diabetes capital of the World.In our view, both of these are an opportunities for Food companies. The Health foods segment is likely to see one of the highest growth in the Food segment To exploit this trend many companies have launched health based products viz. Britannia launched Nutrichoice biscuits, Danone launching probiotic yogurt, Dabur introduced a juice with fiber and HUL introduced Soya and multigrain atta, iodized salt, energy drinks We believe that the demand for these products is going to outpace the overall Food Category growth for the years to come

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MARKET OVERVIEW
Industry Overview
Fast Moving Consumer Goods (FMCG) goods, popularly named as consumer packaged goods, play a vital role as a necessity and as an inelastic product. The Indian FMCG sector is the fourth largest sector the economy with a total market size of Rs. 167,100crs. The market is estimated to grow to US$ 100 billion by 2025. In the last decade the FMCG sector has grown at an average of 11% a year; in the last five years, annual growth accelerated to 17%. The FMCG Industry is characterized by a well established distribution network, low penetration levels, low operating cost, lower per capita consumption and intense competition between the organized and unorganized segments. FMCGs are slowly and gradually positioning and deeply penetrating in the fast growing rural market. The Rural mindset is open to consumption of newer, more contemporary food categories and as a result, drive consistent growth.

Urban V/S Rural

FMCG Industry Size (in Rs bn)
1671 960
15.8%

FMCG Industry Urban (in Rs bn)

1111

1451

15.1%

CY10

CY11

CY10

CY11

FMCG Industry Rural (in Rs bn) 559 491

13.8%

The FMCG sector in India continues on a strong growth path with both Urban and Rural India contributing to its growth. Rural India contributes one third of FMCG sales in India Growth driven by increasing consumption led by rise in incomes, changing lifestyles and favorable demographics

CY10
CY11

CY11

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Rural India accounts for more than 700 Million consumers or 70% of the Indian population and accounts for 40% of the total FMCG market. The Rural market is a large market space with very low organized player penetration. Across the globe, the Indian rural market is probably the single largest unit of opportunity. Also with changing lifestyle and increasing consumer demand, the Indian FMCG market is expected to cross $80 billion by 2026 in towns with population of up to 10 lakh. The sector has a tremendous opportunity for growth in India, with the growing population, the rising incomes, education and urbanization, the advent of modern retail, and a consumption-driven society.

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Evolution of the Indian FMCG Sector

Porters 5 Forces Model

Threat of Substitutes : High Multiple brands positioned with narrow product differentiation. Companies entering a category / trying to gain market share compete on pricing which increases product substitution.

Threat of new entrants: Moderate Low regulatory barriers. High competitive intensity requires large investments in brand building which deters small players.

Overall: Moderately Attractive FMCG Industry

Bargaining power of Suppliers: Moderate Prices are generally governed by international commodity markets, making most FMCG companies price takers. Due to the long term relationships with suppliers etc., FMCG companies negotiate better rates during times of high input cost inflation.

Bargaining power of consumers: Low High brand loyalty for some products, thereby discouraging customers product shift Low switching costs Aggressive marketing strategies induce customers to switch between products

Rivalry among competitors: High More MNCs entering the country Advertising spends continue to grow and marketing budgets as well as strategies are becoming more aggressive

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SWOT Analysis
Strengths Moderate operating costs Presence of established distribution networks in both urban and rural areas Presence of well-known brands in FMCG sector Favorable government policies

Weaknesses Lower scope of investing in technology and achieving economies of scale, especially in small sectors Low exports levels Counterfeit Products

Opportunities Untapped rural market Rising income levels, i.e. increase in purchasing power of consumers Large domestic market- a population of over one billion Export potential High consumer goods spending

Threats Removal of import restrictions resulting in replacement of domestic brands Slowdown in rural demand Tax and regulatory structure

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INDUSTRY ANALYSIS
Key Challenges

Commodity

Price of inputs

prices fluctuate, which make it difficult to finalize raw material prices, affecting the final price of the product Indian consumers are very price-sensitive and value conscious, making it difficult for FMCG firms to pass on the increased costs

Private

Emergence of Private Labels

labels serve to lower the consumers price points, particularly at the mass level Conflicts of interest when a retail chain has its own label whose packaging looks like category leaders and stocks brands of other manufacturers, (in terms of display space, promotions etc)

Counterfiet And Pass-offs

These products narrow the scope of FMCG products in rural and semi-urban market The spurious pass off products affect large, high quality brands which have actually invested money in research and development to create their products and build brand equity.

Power Costs

Infrastructural Bottlenecks

Transportation Infrastructure Agricultural Infrastructure

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Industry Trends

Consolidation

Indian FMCG companies are consolidating their existing business portfolios

Product innovation

Several companies have started innovating by launching or customizing their existing product portfolios for new consumer segments

Lifestyle products

Lifestyle and premium range products are the current hot target product segments among Indian FMCG players

Expanding horizons

A number of companies are exploring the business potential of overseas markets and several regional markets

Backward integration

Backward integration is becoming the preferred strategy for increasing profit margins

Expanding distribution networks

Companies are now focused on improving their distribution networks to expand their reach in rural India

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Third-party manufacturing

FMCG players often outsource manufacturing or processing of a certain range of products to small vendors. This approach has helped companies focus on front-end marketing.

Rising importance of smaller-sized packs

Companies are increasingly introducing smaller stock keeping units at reduced prices. This helps them sustain margins, maintain volumes from price-conscious customers and expand their consumer base

Increased hiring from tier II/III cities

Small towns are emerging as significant hiring zones. FMCG companies are hiring field staff from areas such as Kalpa (Himachal Pradesh), Mangaliya (Madhya Pradesh), Kota (Rajasthan), and Shirdi (Maharashtra) to sell diverse products

Focus on enhancing presence in Africa

FMCG companies entering Africa as it helps to be close to consumption markets within Africa. Such foreign investments are encouraged by local governments, as they offer incentives to enter the markets

Reducing carbon footprint

FMCG players in India are focusing on reducing their carbon footprint. They generate the required energy from renewable sources and earn CER credits for the same FMCG players in India are focusing on reducing their carbon footprint. They generate the required energy from renewable sources and earn CER credits for the same

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Growth Drivers

Large Market

Spending Pattern

FDI Support

Rise of rural consumers

Growth Driver

Increasing per capita income of urban population

Growing popularity of organized retail

Changing Profile and Mind Set of Consumer

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OPPORTUNITIES IN THE SECTOR

Untapped rural market :
The fragmented and untapped huge rural market, which houses 2/3rd of the total Indian population, is vital for the growth of FMCG sector as a whole.

In order to reduce the marketing costs and raise efficiency through van sales or by creating rural supermarkets, the FMCG companies should join forces in targeting the fragmented and broken rural market

Food-Processing Industry : Penetration level as well as per capita consumption in most product categories like jams, toothpaste, skin care, hair wash etc in India is low, indicating the untapped market potential. With 200 million people expected to shift to processed and packaged food, India needs around US$ 30 billion of investment in the food processing industry.

Lack of Infrastructure and storage facilities : Huge shortage of infrastructure facilities and storage facilities in rural areas of the country, which makes its difficult for FMCG companies to market their products. Huge investments in developing rural infrastructure and efficient utilization of resources like our coast line, solar energy and vast human resources is imperative for FMCGs overall growth in India

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GOVERNMENT POLICIES & REGULATORY FRAMEWORK

Investment Approval: Automatic investment approval up to 100 per cent foreign equity for NRI and overseas corporate bodies. These investments are allowed in food processing segments such as coffee and tea. FDI in organized retail: India currently allows 100 per cent FDI in Cash & Carry segment and 51% in single-brand retail, which is expected to be further increased to 100%. India is also expected to allow 51% FDI in multi-brand retail, which will boost the nascent organized retail market in the country. Priority Sector: The Government of India recognizes food processing and agro industries as priority sectors. Relaxation of license rules: Industrial licenses are not required for almost all food and agro-processing industries, barring certain items such as beer, potable alcohol and wines, cane sugar, and hydrogenated animal fats and oils as well as items reserved for exclusive manufacturing in the small-scale sector. Statutory Minimum Price: In October 2009, the government amended the Sugarcane Control Order, 1966, and replaced the Statutory Minimum Price (SMP) of sugarcane with Fair and Remunerative Price (FRP) and the State- Advised Price (SAP).

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Segment Overview

The food and beverages segment is the highest contributor to the FMCG sector

The FMCG market has three major segments

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Household Care
The detergents segment dominates the household care segment and has been growing at an annual growth rate of 10-11% in the past five years. Local and unorganized players account for a major In the washing powder share of the total volume of the detergent market. segment, HUL is the leader and other major players like The Household care segment is plagued by intense Nirma, Henkel and Proctor & competition and high level of penetration. With Gamble continue to provide rapid urbanization, emergence of small pack sizes stiff competition/innovation and sachets is picking up.

Personal Care
The Personal care segment includes personal washing products, hair care products, oral care products, cosmetics, skin care etc The hair care market can be segmented into hair oils, shampoos, hair colorants & conditioners, and hair gels. The coconut oil market accounts for 72% share in the hair oil market The skin care market is at a primary stage in India. With the change in life styles, increase in disposable incomes, greater product choice and availability, people are becoming more alert about personal grooming The oral care market can be segmented into toothpaste 60%; toothpowder 23%; toothbrushes 17%. The Indian personal care segment is set to change significantly in the coming years as consumption habits, fuelled by rising disposable income and changing lifestyles, align themselves with global trends. E.g. bath soaps are likely to be replaced by shower gel or liquid soap variants and there will be growing use of hair conditioners and electronic tooth brushes

Food and Beverages

The Food and Beverages segment comprises of the food processing industry, health beverage industry, bread and biscuits, chocolates & confectionery, Mineral Water and ice creams The three largest consumed categories of packaged foods are packed tea, biscuits and soft drinks The Indian hot beverage market is dominated by tea and the major share of the tea market is dominated by unorganized players India is one of the fastest growing branded restaurants markets in the world, where the organized eating-out market is currently estimated at US$ 2 billion and growing at a CAGR of 25% Sahara India reportedly plans to enter into dairy production business by opening the world's biggest dairy on April 1, 2013 and could be a serious threat for Anand based Amul

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DABUR
COMPANY OVERVIEW

Incorporation Year

1975

Industry Group

Personal care

Main Product

Diversified

Board Of Directors

Chairman

Anand Burman (Dr.)

Vice Chairman

Amit Burman

Exec. Director

Pradip Burman

Exec. Director

P D Narang

Director

Mohit Burman

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ABOUT DABUR
Dabur India Limited has marked its presence with significant achievements and today commands a market leadership status. Our story of success is based on dedication to nature, corporate and process hygiene, dynamic leadership and commitment to our partners and stakeholders. The results of our policies and initiatives speak for themselves.

Leading consumer goods company in India with a turnover of Rs. 5,283 Crore (FY12) 2 major strategic business units (SBU) - Consumer Care Business and International Business Division (IBD) 2 Subsidiary Group companies - Dabur International and NewU and several step down subsidiaries: Dabur Nepal Pvt Ltd (Nepal), Dabur Egypt Ltd (Egypt), Asian Consumer Care (Bangladesh), Asian Consumer Care (Pakistan), African Consumer Care (Nigeria), Naturelle LLC(Ras Al Khaimah-UAE), Weikfield International (UAE) and Jaquline Inc. (USA) 17 ultra-modern manufacturing units spread around the globe Products marketed in over 60 countries Wide and deep market penetration with 50 C&F agents, more than 5000 distributors and over3.4 million retail outlets all over India

Consumer Care Business adresses consumer needs across the entire FMCG spectrum through four distinct business portfolios of Personal Care, Health Care, Home Care & Foods

Master brands: Dabur - Ayurvedic healthcare products Vatika - Premium hair care Hajmola - Tasty digestives Ral - Fruit juices & beverages Fem - Fairness bleaches & skin care products 12 Billion-Rupee brands: Dabur Amla, Dabur Chyawanprash, Vatika, Ral, Dabur Red Toothpaste, Dabur Lal Dant Manjan, Babool, Hajmola, Dabur Honey, Glucose, Fem and Odonil Strategic positioning of Honey as food product, leading to market leadership (over 75%) in branded honey market Dabur Chyawanprash the largest selling Ayurvedic medicine with over 65% market share. Vatika has been the fastest growing hair care brand in the Middle East Hajmola tablets in command with 60% market share of digestive tablets category.

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About 2.5 crore Hajmola tablets are consumed in India every day Leader in herbal digestives with 90% market share Consumer Health Division (CHD) offers a range of classical Ayurvedic medicines and Ayurvedic OTC products that deliver the age-old benefits of Ayurveda in modern ready-to-use formats Has more than 300 products sold through prescriptions as well as over the counter Major categories in traditional formulations include: - Asav Arishtas - Ras Rasayanas - Churnas - Medicated Oils

Proprietary Ayurvedic - Nature Care Isabgol - Madhuvaani - Trifgol

medicines

developed

by

Dabur

include:

Division also works for promotion of Ayurveda through organised community of traditional practitioners and developing fresh batches of students.

International Business Division (IBD) caters to the health and personal care needs of customers across different international markets, spanning Nepal, Bangladesh, the Middle East, North & West Africa, EU and the US with its brands Dabur & Vatika

Contributes to about 30% of total sales Leveraging the 'Natural' preference among local consumers to increase share in personal care categories Focus markets: -GCC -Egypt -Nigeria -Bangladesh -Nepal AND - US

High level of localization of manufacturing and sales & marketing

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HISTORY
1884 1896 Early 1900s 1919 1920 1936 1972 1979 1986 1992 1993 1994 1995 1996 1997 1998 2000 2003 2005 2005 2006 2006 2007 2007 2007 2008 2009 2010 2011 2011 2012 Birth of Dabur Setting up a manufacturing plant Ayurvedic medicines Establishment of research laboratories Expands further Dabur India (Dr. S.K. Burman) Pvt. Ltd. Shift to Delhi Sahibabad factory / Dabur Research & Development Centre (DRDC) Public Limited Company Joint venture with Agrolimen of Spain Cancer treatment Public issues Joint Ventures 3 separate divisions Foods Division / Project STARS Professionals to manage the Company Turnover of Rs.1,000 crores Dabur demerges Pharma Business Dabur aquires Balsara Dabur announces Bonus after 12 years Dabur crosses $2 Bin market Cap, adopts US GAAP Approves FCCB/GDR/ADR up to $200 million Celebrating 10 years of Real Foray into organised retail Dabur Foods Merged With Dabur India Acquires Fem Care Pharma Dabur Red Toothpaste joins 'Billion Rupee Brand' club Dabur makes its first overseas acquisition Dabur enters professional skin care market Dabur India acquires 30-Plus from Ajanta Pharma Dabur crosses Billion-Dollar Turnover Mark

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STRATEGIC INTENT
We intend to significantly accelerate profitable growth. To do this, we will:

Focus on growing our core brands across categories, reaching out to new geographies, within and outside India, and improve operational efficiencies by leveraging technology Be the preferred company to meet the health and personal grooming needs of our target consumers with safe, efficacious, natural solutions by synthesizing our deep knowledge of ayurveda and herbs with modern science Provide our consumers with innovative products within easy reach Build a platform to enable Dabur to become a global ayurvedic leader Be a professionally managed employer of choice, attracting, developing and retaining quality personnel Be responsible citizens with a commitment to environmental protection Provide superior returns, relative to our peer group, to our shareholders.

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

Dabur Pharma Demerger

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

Acquisition of Balsara
In Jan 2005, Dabur India Ltd (DIL) acquired three Balsara group companies for Rs143 crore in an all-cash deal. It mopped up Rs. 120 crores through internal accruals and financed the remaining Rs. 23 crores through borrowings.

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

FY 01 1100 19 137 12%

FY 02 1200 12 144 9%

FY 03 1285 7 162 7%

FY 04 1236 9 164 -4%

FY 05 1417 9 217 15%

FY 06 1757 13 300 24%

FY 07 2080 26 376 18%

FY 08 2396 34 443 15%

FY 09 2834 47 517.3 18%

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

Dabur FEMCARE Deal

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

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PEST ANALYSIS OF DABUR INDIA LIMITED (PERIOD 2005 ONWARDS)

Political Factors
The key factors that have triggered growth for the FMCG industry in the period include reduction in excise duties, relaxation of licensing restrictions and reduced dominance of unorganized sector due to creation of level playing field. With the revival in demand in the FMCG sector and capacity planning done by all major FMCG companies in tax haven areas the future looks promising. Also, the government thrust on agriculture and rural economy has facilitated improved demand for the FMCG products. The hair oil industry is witness to a large amount of unbranded oil manufacturers that account for nearly half of the total coconut oil market. This also provides a significant upside potential for companies like Marico and Dabur. The implementation of Value added tax is also expected to tilt the balance in favor of organized players. Given the fact that there is only a moderate scope for differential in coconut oil segment, the players concentrated on value added oils like Amla, Badam and so on. The addition of these high margin products in the portfolio also leverage the players against the no frills coconut oil segment. They have been successful in the venture with brands like Vatika, Dabur Amla (Dabur) and Hair & Care (Marico) firmly rooted in the markets. While the coconut oil brand of Marico, 'parachute' grew by 8% in volumes in FY '05, the growth of value added oils like Sampoorna, Shanti Amla and Hair & Care has been comparatively faster at 14%. Even for Dabur, the flagship brand 'Dabur Amla' reached a milestone in FY '05 by crossing a turnover of Rs 200 crore and registered a 16% growth. This speaks of the success of the value added products. In 2008-09, finance ministers decision to reduce CENVAT rate to 14% was in line with the GST roadmap, and this coupled with lower income tax incidence on individuals will accelerate disposable incomes, and thus augurs well for the FMCG sector.

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Economic Factors
Better reforms and investment policies attract foreign investments, which ultimately improves the standard of living of the people in that country. With improved standard of living more and more consumers prefer using branded FMCG products which have so far remained an aspiration. Consumers who are already using branded products will upgrade themselves to premium products. We could expect similar recovery in our economy in the FMCG segment in the coming years. FMCG sector is going to be in the limelight with strong economic fundamentals, rising demand and a growing GDP. The future growth is expected to come from newer segments such as the youth and through increased rural and small town penetration. The Internet and ecommerce will change the dynamics of this industry helping companies improve their procurement, distribution and selling efficiencies. FMCG market remains highly fragmented with almost half of the market representing unbranded, unorganized sector products. This presents a tremendous opportunity for makers of branded products who can convert consumers of unbranded products to branded products. In the scheme of things, Dabur Foods Limited' was merged with Dabur India Ltd. in 2007. It was now an over Rs 2,200-crore entity including the Rs 200-crore from Dabur Foods. It thus became one of the business divisions of Dabur India, alongside consumer care division (CCD) that encompassed all the personal care and home care products, and consumer health division (CHD). Dabur also made retail venture under the health and beauty format, through its wholly owned subsidiary, H&B Stores. It envisaged selling products ranging from personal care, cosmetics, baby care to over-the-counter drugs.

Social Factors
In 2004, the frequency of usage of oral care products in India as compared to developed world was very low, giving scope for growth to the sector. Per capita consumption of toothpaste in the country was only 70 gm compared with 300 gm in Europe and 150 gm in Thailand. Also, a critically low dentist to population ratio in our country, results in low oral hygiene consciousness and widespread dental diseases. This provided a good opportunity to expand the market and encourage people to use modern dentifrice to improve oral hygiene.

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Moreover, it is one of the larger players in the toothpowder category. However the company is witnessing negative growth rates in the category, as there seems to a shift of the consumer from toothpowder to toothpaste segment. The company is compensating for the loss in the category by launching Dabur Red toothpaste that has grown into Rs 50 crore brand in two years of its launch. It was also worthwhile for Dabur India Ltd. to consider inorganic growth. Even though Balsara (with brands Promise, Meswak, Babool etc.) was making losses, it did possess synergies with the growing oral care business of Dabur. Dabur estimated the market for this category to be Rs. 2500 crores growing @ 10% p.a., which made the market very lucrative. Thus, acquiring Balsara was an obvious step to grow inorganically. The penetration levels of shampoo are abysmally low in the country. The penetration in urban areas is around 65% while its just 35% in rural areas. Also the per capita consumption of shampoo is just 16 ML compared to 1000 ML in UK and US. This provides an opportunity to the players to improve the market and their size. The Indian shampoo market is characterized by sachets. Around 70% of total shampoo sales are through sachets. The general trend in the international markets is to introduce a brand through sachets and thereafter upgrade the consumer to bigger bottles. Dabur thus shifted gears to anti-dandruff shampoo (Dabur Vatika anti-dandruff shampoo) in 2004. It also relaunched brand Vatika in 2007.

Technological Factors
The market size of bleach products in India is around Rs 85 crore and is growing at 15% with Fem holding 60% market share in it. The market size of hair removing cream is around Rs 110 crore and is growing at 22% with Fem having around 7% market share. The liquid soap market size in India is around Rs 50 crore and is growing at 25%, where Fem has 2 main competitors, Dettol and Lifebuoy. In 2009, Dabur acquired 72.15% stake in Fem Care to provide the company with the technology to enter high-growth skin care market with an established brand name 'FEM'. Apart from Fem bleach, other popular brands by the firm are Oxybleach cream, Botanica anti-ageing cream, Stratum colour protecting hair conditioners, SAKA men's bleach and Bambi fabric softeners.

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Fem is world leader in bleaching cream category by tonnage. Fem brand is very well placed in India and aboard. With this acquisition, Dabur will become key player in skin care category. Fem has reach of around 25000 parlours, which can be leverage by Dabur for promoting its own Gulabari skin care products and its Vatika brand. Dabur was thinking of launching its products into ayurvedic skin care category, will delay its launch by couple of months due to acquisition. The company will continue its initiative in skin care category through Gulabari, its ayurvedic products which will launch shortly and through Fem.

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OPERATIONS STRATEGY OF DABUR INDIA LIMITED

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

Manufacturing
By the year 2002-03 the company had 6 manufacturing facilities at Sahibabad (Uttar Pradesh), Baddi (Himachal Pradesh), Alwar (Rajasthan), Katni (Madhya Pradesh), Kalyani and Narendrapur (West Bengal). The APIs and formulations of the Company are manufactured in-house at Kalyani, Sahibabad and Baddi. Fifty per cent of FMCG products, comprising the Health care products and Ayurvedic specialities portfolio, are manufactured in-house, while the Personal care products portfolio, which accounts for the remaining 50 per cent, are out-sourced to eight contract manufacturers. Dabur was in the process of setting up a manufacturing facility at Jammu, for manufacturing Personal care products. Jammu had been selected as the new site in order to avail fiscal benefits offered for setting up manufacturing facilities in that location. Dabur has been giving considerable emphasis on improving manufacturing and operational efficiencies. During the year under review, Dabur focused on enhancing productivity of capital and existing assets, improving plant efficiencies in the existing manufacturing facilities and following more stringent quality control and supervision norms at outsourcing locations. Standardisation of processes, tight budget controls and energy audits constituted some of the other initiatives undertaken by the Company to improve its operational performance. As a result of these measures, operating profit margin (excluding other income) of the Company had improved from 9.2 per cent in 2001-02 to 10.3 per cent in 2002-03. The chart below shows the continuous improvement of the Companys productivity (defined as value of sales per worker), from 1998-99 to 2002-03. Productivity increased by almost 18 per cent, from Rs.28 lacs per worker in 2001-02 to Rs.33 lacs per worker in 2002-03, mainly due to better shop floor practices, lower breakdowns and improved efficiency in energy use. Wastage on the shop floor had reduced by more than 20 percent in 2002-03 over 2001-02.

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Source: Dabur Annual Report 2002-03

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

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

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

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Besides above, the other initiatives of Dabur on corporate governance include: Professionalization of the board Lean and active Board (reduced from 16 to 10 members) Less number of promoters on the Board More professionals and independent Directors for better management Governed through Board committees for Audit, Remuneration, Shareholder Grievances, Compensation and Nominations Meets all Corporate Governance Code requirements of SEBI

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

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

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

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c) Health Safety & Environmental Review

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

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PORTERS FIVE FORCES MODEL FOR DABUR

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

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

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

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

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

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SWOT ANALYSIS FOR DABUR INDIA LIMITED

Strengths Unique Ayurvedic and Health Positioning Extensive market penetration with 50 C&F agents, more than 5000 distributors and over 2.8 million retail outlets all over India* High brand awareness and perception of Dabur, Vatika, Hajmola, Ral Monopoly status in multiple product categories like digestives (90% MS), branded honey(75% MS) and Chyawanprash(65% MS)

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

Opportunities Packaged Foods category Sugar free food and health care substitutes e.g. Sugar Free Chyawanprash Expanding size of pie in Home care segment due to efforts by firms like GodrejSara Lee and niche products like Jyothy laboratories Increasing Modern trade is a good indicator for Personal care segment as it provides higher visibility, higher rotations and a personal touch(relevant for premium products).

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

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FUTURE OF DABUR INDIA Retail Store

New U A retail store for complete makeover of women The brands under NewU includes Daburs own private label, NewU, range of affordably priced cosmetics such as nail paints, facial kits and hair accessory among others Rising beauty consciousness. The roughly Rs 7,000 crore organized and unorganized hair and beauty industry is growing at the CAGR of 35%. At this rate, it has the potential to become a Rs-30 ,000 crore business by 2015 Expansion of presence in Retail sector. FDI in Muli-Retail Online Marketing.

Criteria of M&A
Foreign Company/Indian Company Plans to expand/Already established retail player in Beauty Care

Growth in African market

Africa Epi-Center of our growth Africas real compound GDP growth, about 5 percent annually between 2002 and 2009 Consumer Spending to be boosted by 35% till 2015. New plants in South Africa, Kenya and Nigeria coming up. Products acquired through Namaste Lab and Hobi have to be leveraged in these markets Manufacturing Plants to be set up in Egypt and Nigeria Inorganic growth

Rural Plans
FMCG Rural rush Low Penetration levels High Demand Revamped Distribution System in 2011. Need Sound logistics systems to supplement

Criteria
Expansion of Health Suppliments Expansion of OTC & Ethicals and of Ayurvedic Products.

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BIBLIOGRAPHY
http://www.scribd.com/doc/18435906/Dabur-Herbal-Promise http://www.scribd.com/doc/22107413/Entrepreneurship-Project http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Or ganization%20Behavior/HR%20Restructuring-Coca%20Cola%20&%20DaburCase%20Studies.htm http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Or ganization%20Behavior/HR%20RestructuringThe%20Coca%20Cola%20&%20Dabur%20Way.htm#The_Leader_Humbled http://www.icmrindia.org/casestudies/catalogue/Human%20Resource%20and%20Or ganization%20Behavior/HROB003.htm

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