Corporate: Herbal Cure For Dabur

STRATEGY
Herbal Cure For Dabur

Succession-planning snafus and a spate of failed JVs are pushing this ayurveda major to its roots. 'Grow natural' is the new mantra.

By Paroma Roy Chowdhury

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For some time in the second half of the 1990s, it appeared as if Murphy was running things at Dabur India Ltd (DIL): everything that could go wrong, did. The ayurvedic products major's forays into snack foods, chewing gum, cheese, cosmetics, and health insurance had failed. And, four of its joint ventures-with Spain-based Agrolimen for chewing gum; Israel-based Osem Foods, for snack foods; French Bongrain SA for cheese, and Boston-based Liberty Mutual for insurance-had run aground.

It surprised no one, when, in 1999, the company announced it would implement a restructuring template prepared by McKinsey & Co. DIL followed this up by exiting three of its joint ventures-General De Confiteria India (GCI), Excelsia Foods (snacks), and The Health Insurance Tie-up-discontinuing its Samara line of herbal cosmetics, and pulling out of veterinary products and bulk drugs.

The company has returned to its original focus on family and healthcare, oncological drugs, ayurvedic medicines, and health foods. Confesses G.C. Burman, 59, Vice-Chairman and Managing Director, DIL: ''We diversified into unrelated areas and suffered. Now, we will focus only on core areas and grow through the natural route: DIL is an ayurvedic company, and it is as an ayurvedic company that it'll grow.''

Waiting for growth

The company aims to achieve a turnover of Rs 2,000 crore by 2003-04, at a cumulative growth rate of 17 per cent. That isn't out of reach: DIL logged a turnover of Rs 1,037 crore in 1999-2000, from Rs 914 crore the previous year (a growth rate of 13.5 per cent). True, some of this (Rs 21 crore) did come from its stake sale in the chewing gum venture to Agrolimen, but 17 per cent does look achievable. DIL also expects to fatten its bottomline by cutting costs: in 1999-2000, it claims to have increased operating profits 4 per cent through supply-chain revamp.

Dabur's future formulations

Dabur India Limited: Plans to grow turnover from Rs 1,037 crore to Rs 2,000 crore by 2003-04

The Family Products Division: Expects to grow from a turnover of Rs 450 crore to Rs 520 crore in 2000-01

The Healthcare Products Division: Targeting a turnover of Rs 400 crore in 2000-01 from the existing Rs 300 crore

The Ayurvedic Products Division: Hopes to grow at between 12 and 15 per cent. Current turnover Rs 100 crore

The Pharma Division: Current turnover Rs 100 crore. Estimated growth at 15 per cent overall

Dabur Foods: Plans to reach turnover of Rs 100 crore by 2001-02, and break even

Acquisition of companies in the areas of OTC, personal care, and ethnic foods are also on the horizon. Still its M&A record isn't inspiring: DIL's negotiations with Zandu Pharmaceuticals and American Food Products for its Mother's Recipe brand of pickles have fallen through. P.D. Narang, DIL's 46-year-old Executive Director in-charge of M&As, is evasive: ''We know we cannot achieve the desired topline objective through organic growth. That explains our emphasis on M&A. But we do have exciting plans for our existing businesses.''

The present rot

Toeing the McKinsey line

The fifth generation, six family members, one company, and a holding of 79 per cent-could there be a more potent recipe for a succession-planning snafu? Dabur realised this as far back as 1997 and appointed management guru Mritunjay Athreya to prepare a succession-planning template. In 1997-98, four Burman cousins-Amit, Mohit, Gaurav, and Chetan-were put in charge of specific businesses, and the eldest, Anand Burman, was identified as Dabur's next chairman. But with the diversification not yielding results, some of the Burmans ended up doing, well, almost nothing. Expectedly, a few, like Gaurav Burman, now with Dresdner Kleinwort Benson, went their own way.

Today, with the group toeing the McKinsey line in terms of restructuring, there isn't much room for the family in business. Apart from G.C. Burman, Anand, Mohit, and Amit are also involved in Dabur management. And there are no automatic plans of a next-gen Burman becoming the CEO. ''A family member will have to prove himself like any other professional. There is a good chance that none of them would be in the top job,'' affirms G.C. Burman.

A quick scan of DIL's existing businesses fails to impress. Take the Family Products Division (FPD), the largest (revenues: Rs 450 crore) Strategic Business Unit (SBU) of the company. Traditional hair care-like Dabur Amla Hair Oil (revenues: Rs 175 crore) and Vatika (Rs 100 crore)-and oral care-Lal Dant Manjan (Rs 150 crore)-offerings account for 95 per cent of the FPD's revenues. The company's hair oil brands face competition from the Rs 11,247.69-crore HLL's 'Nihar', 'Clinic-Plus', and 'Sunsilk'; Rs 555-crore Marico's 'Parachute' and its herbal variant; and Bajaj Sevashram's 'Brahmi Amla'.

Its acquisition of the Binaca brand from Reckitt and Colman in 1995, hasn't resulted in any white dental cream (WDC) offerings, presumably because of the well-entrenched Rs 1,010.76- crore Colgate-Palmolive. Agrees Subhojit Sen, 30, Marketing Manager (Oral Care), SmithKline Beecham Consumer Healthcare: ''Dabur has had success in niche brands offering herbal properties. The minute it tries to tap regular FMCG product segments, it will face hurdles.'' In cosmetics, DIL, which pulled out its Samara range in 1998-99, is relaunching it as a mass brand. Says Rajat Sabarwal, 30, Senior Analyst, Kotak Mahindra Securities: ''If Dabur wants to address the mass market it should be prepared to invest in brand-building.'' Sunil Duggal, the 43-year-old Director and Head of FPD, claims the company will be investing at least 10 per cent of its projected Rs 520-crore turnover in 2000-01 on brand-building, but that number looks puny when compared to the Rs 191 crore that Colgate-Palmolive spent on advertising last year.

The competitive position of DIL's Health Care Products Division-where, again, the bulk of the Rs 300-crore turnover is accounted for by three brands, Dabur Chyawanprash (Rs 180 crore), Hajmola (Rs 120 crore), Pudin Hara (Rs 80 crore), and Dabur Lal Tel (Rs 30 crore)-is a little better. The company is the recognised leader in ayurvedic and natural healthcare products. However, to achieve its objective of a Rs 400-crore turnover by 2000, the SBU will have to make huge investments. And Dabur's traditional image could again prevent the company from addressing the high-end segment.

Dabur's small (Rs 50 crore) ethnic foods division, ironically, derives most of its turnover from an offering that isn't really ethnic: Real, which claims a 55 per cent share of the Rs 80-crore fruit juices market. To retain that position, though, Real will have to combat Pepsi's Tropicana (with a 25 per cent share of the market), and Coke's to be launched Minutemaid. Avers Jagdeep Kapoor, 40, CMD at Mumbai-based marketing consultancy, Samsika: ''The fruit juices market in the country has just taken off. It's hard to say who'll eventually emerge on top; but it has to be someone with money, relevant brand-positioning, and distribution muscle.'' That leaves the company's pharma division, which is focusing on high-value offerings like Pacitexel, an anti-cancer drug derived from extracts of yew leaves. Sums up Burman: ''Me-too products are out; from now on, we'll be oncology driven.''

Can they pull it off?

The second brush with diversification

It's what normally happens in extended families controlling a focused company: the company diversifies just to create space for family members who need to be inducted. After a not-so-happy first brush with unrelated diversification, the Burman family, which controls Dabur, has decided that from now on any family member who wishes to launch a new venture will do so outside the Dabur framework, and that other family members will invest in the venture only as individuals. Thus, Amit Burman has a new-e company, Angel Softech, and Mohit Burman, an insurance venture. And Pradip Burman runs Sanat Products and Ayurvet, DIL's erstwhile veterinary products business, which is now an entity in its own right.

The company hopes that the new thrust areas it has identified for its SBUs will help it write a better future for itself. On the advice of The Firm, the Burman family has all but moved out of the corridors of power. Apart from G.C. Burman, the family, which once had eight members in various positions in the company in 1997, now has three: Amit Burman, who is the CEO, Dabur Foods, Mohit Burman, who assists the company's CEO, Ninu Khanna-formerly from p&g and Colgate-and Chetan Burman, a manager in the FPD unit. Still, DIL's brush with professionalisation may not be smooth: the company's hr-head, Yogi Sriram quit recently citing cultural differences.

To succeed, DIL has to deal with three issues: a 'herbal' emphasis that restricts growth beyond a moderately lucrative niche; an extended family where each member has entrepreneurial ambitions (See The Second Brush With Diversification); and the issue of succession planning (See Toeing The McKinsey Line). The cure, unfortunately for Dabur, can't be natural.

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