Repositioning Dabur MKTG 099
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ICMR Case Collection ICFAI Center for Management Research y p o Repositioning Dabur C MKTG 099 t o This case was written by Ajith Sankar R.N, under the direction of Sanjib Dutta, ICFAI Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate eitherN effective or ineffective handling of a management situation. o D 2005, ICFAI Center for Management Research. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means- - electronic or mechanical, without permission. To order copies, call 0091-40-2343-0462/63/64 or write to ICFAI Center for Management Research, Plot # 49, Nagarjuna Hills, Hyderabad 500 082, India or email [email protected]. Website: www.icmrindia.org MKTG/099 REPOSITIONING DABUR Our research showed that consumers found it difficult to distinguish Dabur as a corporate brand and as a master brand. The positioning was unclear to the public. So, we decided to embark on a brand recast to identify brands based on their product properties. This essentially means that Dabur is shedding its age-old umbrella brand strategy, where its entire product portfolio was under one roof. - Sunil Duggal, CEO, Dabur India Limited in 20041. INTRODUCTION In 2004, Dabur India Limited (Dabur) which started as a medicine manufacturer in 1884, was ranked at number four in terms of sales among the Fast Moving Consumery Goods (FMCG) companies in India. The company now has interests in hair care, healthp care, oral care and foods as well (Refer Exhibit I). Though its spread into various segments has ensured that the company’s bottom-line has improved over the years, Dabur’s positioning was not clear. In the early 2000s, the o 2 company went in for a restructuring which included aligning Dabur’s brand architecture with Dabur’s brand equity3; pruning products that did not align with the brand architecture and launching new products (Refer Exhibit I and II). The companyC focused on improving its sales revenue from southern India, which contributed only 8 percent of the company’s total revenue in 2003. t o At this time, Dabur identified its ayurvedic platform as a driver of future growth and got its business units better aligned. Moving away from using Dabur as an umbrella brand, the company shifted to individual branding and cameN out with a new logo. The company tried to bring to its consumers its Ayurvedic legacy with a contemporary feel. All these changes have improved the financial performance of the company in 2004 as compared to 2003. o BACKGROUND NOTE D Set up in 1884 by Dr S K Burman in West Bengal as a proprietary firm for the manufacture of ayurvedic drugs, Dabur (an acronym of the name Dr Burman), started off with a direct mailing system to send medicines to villages in Bengal. Initially, the company marketed an allopathic drug, Plagin, to combat the then prevalent epidemic of plague. In 1896, Dr. Burman set up a small manufacturing plant at Garhia near Calcutta for mass production of chemicals and Ayurvedic drugs. In the early 1900s, the next generation of Burmans took a conscious decision to focus more on the Ayurvedic medicines market, as they believed that it was only through Ayurveda that the healthcare needs of poor Indians could be met. 1 Zachariah, Reeba, Datta, Kausik, “Dabur to do away with umbrella brand plan,” Business Standard, October 6, 2004. 2 How an organization structures and names the brands within its portfolio. 3 The sum of all distinguishing qualities of a brand, drawn from all relevant stakeholders, that results in personal commitment to and demand for the brand. Repositioning Dabur In 1919, Dabur set up a Research & Development laboratory to conduct research on Ayurvedic medicines and their manufacturing processes as described in ancient Indian scriptures, and to develop processes utilizing modern equipment to manufacture these medicines without reducing their efficacy. The following year, Dabur set up manufacturing facilities for Ayurvedic Medicines at Narendrapur (near Calcutta) and Daburgram (in Bihar). Dabur also expanded its distribution network in Bihar and the North Eastern regions. In 1936, the company was incorporated under the name Dabur India Pvt. Ltd. In 1940, Dabur launched Dabur Amla Hair Oil, and in 1949, the company launched Chyawanprash in a tin pack making it the first branded Chyawanprash in the country. The company expanded its portfolio by adding oral care products in 1970. Dabur Lal Dant Manjan was the first product to be launched under its oral care portfolio. In 1972, Dabur shifted base from Kolkata to New Delhi and started production from a hired manufacturing facility at Faridabad. In 1978, Dabur launched the Hajmola tablet. Dabur set up ‘The Dabur Research Foundation (DRF),’ an independent company, in 1979 to spearhead its research needs. In the same year Sahibabad factory became operational and this unit was one of the largest and most modern production facilities for Ayurvedic medicines in India at that time. Dabur became a public limited company in 1986 and launched its first public issue in 1994 (Refer Exhibit III & 1V for the shareholding pattern, Vision, Strategic Intent and Core Values of Dabur). y In 2004, Dabur had three strategic business units: Family Products Divisionp (FPD), Health Care Products Division (HCPD) and Dabur Ayurvedic Specialties (DASL) which contributed 45 percent, 28 percent and 27 percent respectively to Dabur’s sales revenueo in 2003-04. FPD looked after products related to Hair Care, Skin Care, Oral Care and Foods. The three leading brands in this division, Vatika, Amla Hair Oil, which is theC world’s largest selling hair oil, and Lal Dant Manjan, had a turnover of Rs. 1 billion each in 2003-04. Honey, another constituent of this segment had a 40 percent marketshare in the brandedt honey market in 2003. HCPD dealt with products related to health supplements, digestives, baby care and natural cures. Dabur Chyawanprash, part of this division had a 64 opercent market share and made sales of Rs. 1.27 billion in 2003-04. The brand Hajmola accounted for sales of over Rs. 1 billion in the same year and Hajmola tablets had a 75 percent Nmarketshare in the digestive tablet category. The herbal digestives which formed part of HCPD had a 90 percent market share in 2003. In the category of baby massage oil, Dabur Lal Tail had a 35 percent marketshare in 2003. o DASL managed the Ayurvedic medicines, numbering to 250, which were sold as prescription drugs and OTC drugs. The major categories here included Asav Arishtas,4 Ras Rasayanas,5 6 D Churnas and Medicated Oils. Proprietary medicines developed by the company included the Nature Care Isabgol, Madhuvaani and Trifgol. The company has embarked on a process to combine FPD and HCPD into a single strategic business unit known as Consumer Care Division (CCD), which will deal with FMCG products related to personal and health care. DASL would be renamed as Consumer Health Division (CHD). Supported by 13 manufacturing units spread over four countries, Dabur products are marketed in over 50 countries. In India, the company has the support of 47 C&F agents, more than 5000 distributors and over 1.5 million retail units. 4 Arishta means naturally fermented herbal supplements. Arishta are made from herbal decoctions, while Asava are from fresh herbal juices. 5 The word rasayana (‘rasa’ and ‘ayana’) refers to nutrition and its transportation in the body. Rasayana, one of the eight branches of Ayurveda, do not treat any one specific disease, but restore body functions and balance to achieve the maximum potential of the body. 6 Churnas are preparations comprising of fine powders of therapeutic drugs and may be simple or compound. Simple churna consists of only one ingredient while a compound one consists of more than one ingredient. 3 Repositioning Dabur In 2003-04, Dabur had sales revenue of Rs 11.48 billion as compared to Rs 10.49 billion in 2002- 03. The Earnings before Depreciation, Interest and Taxes (EBDIT) was Rs 1.36 billion and Rs 1.1 billion for 2003-04 and 2002-03 respectively. Net Profit increased from Rs 0.72 billion in 2002-03 to Rs 1.01 billion in 2003-04 (Refer Exhibit V and VI). THE RESTRUCTURING EXERCISE Though Dabur diversified into number of areas, the image of Dabur was that of an Ayurvedic company. In the public perception, Dabur products were associated with the 35-plus age group. With almost seventy percent of India’s population below 357, it appeared that Dabur would be missing out on this mass market, which also had high disposable income. In the early 2000s, the company tried to reorient its image from being a manufacturer of ayurvedic medicines to that of an FMCG company. Additionally, the company had been pruning its low contribution brands and refocusing on its key brands in family and healthcare products. When the company experienced a downturn in sales and profits in 2001-02 (Refer Exhibit V), and there were indications of slowing growth for the company in 2002-03 it hired Accenture, a consulting firm to recommend some changes in the company’s marketing systems and processes. Sameer Duggal, Director - Sales and Marketing, Dabur said, “Such an initiative is in line with Dabur’s philosophy of constant improvement and is a part of the larger changes to make its approach more professional.”8 Dabur’s internal assessments found that consumers perceived Dabur as an herbal specialisty and revealed that Dabur’s reputation in this field was substantial across small towns as well as in big cities.