Dabur's Cinderella Man
Sumant Banerji December 23, 2016
When Sunil Duggal was offered the CEO post at Dabur, one of India's largest fats moving consumer goods, or FMCG, companies, in mid-2002, it was not the most desirable of jobs. There was unprecedented competition and Dabur, despite strong brand recall, was struggling for growth. The first attempt at transforming the over 100-year-old company from promoter-driven to being led by professionals had not got off to a good start. The first professional CEO, Ninu Khanna, had quit due to differences with the top management. Dabur was going through one of its worst years. Sales had declined and the company, for the first time, reported a dip in profits. Duggal took up the challenge.
Within a short span of time, he managed to turn around the company's financial performance and set it up for exponential growth, mainly through acquisitions. Under him, Dabur's revenues have risen sevenfold, while profits have soared almost 20 times. While doing this, he has laid down a template for India Inc. on how to professionalise a family-run business.
Duggal was not an outsider to the FMCG business, courtesy his stint at PepsiCo. Also, by 2002, he had been with Dabur for seven years. However, sailing was far from smooth. His appointment was followed by a churn in the workforce - some left on their own, disappointed by his elevation, while others were asked to go. The other problem was the dated feel of the company's product portfolio.
"I brought in a lot of changes at the top, whether it was finance or human resources or operations. I brought in people who had passion and were committed to doing something much bigger than what they had been doing in their earlier jobs," says Duggal. "I found people at the next level, who were hungry for growth. They were willing to do anything to build their careers in a different environment. They were the people that made the difference."
Product changes were kept at a minimum. Some products nearing the end of their lifecycle were revived with cheeky innovations. One example is Dabur Lal dant manjan. "You had companies coming up with toothpastes with more and more offerings at lower price points. Consumer preference was obviously going to change," says Duggal. "So, I got the brand team to work on a toothpaste version of dant manjan. It was tempting to do something traditional such as launch a mint-flavoured toothpaste. But we decided take a brave step, to stay true to the DNA, while giving the product a contemporary look. The red toothpaste is one of our biggest successes."
Duggal was also instrumental in separation of FMCG and pharmaceutical businesses. The latter was sold to German company Fresenius' Singapore arm. Dabur also went global. At the same time, Duggal drove a series of acquisitions, starting with three Balsara group companies in 2005, followed by Fem Care Pharma in 2008. In 2011, it bought Ajanta Pharma's 30-Plus brand. It also bought Hobi Kozmetik Group in Turkey and Namaste Laboratories in the US in 2010. Today, overseas markets account for onethird revenues.
"The first thing I did was to terminate franchises and launch a subsidiary for international operations with its hub in Dubai. This laid the ground for overseas growth," says Duggal, adding, "We localised the supply chain and built factories in UAE, Egypt, Nepal, Sri Lanka, Bangladesh and Nigeria."
Over the past two years, Dabur has been fighting a strong challenge to its leadership in ayurvedic products from Patanjali Ayurved, which, say market watchers, is poised to overtake it in the ayurveda category in the not-too-distant future. Duggal concedes that Dabur may have missed a trick or two here. "The playing field for ayurveda has expanded tremendously after the entry of Patanjali. The back-to-the-roots mindset means Indian and ayurvedic products are preferred by a significant mass of people," he says. "A corporate will always find it a bit hard to play this theme directly, to brand itself into a desi kind of company. In hindsight, we think we, too, could have done that, but it probably requires somebody evangelical like Baba Ramdev rather than a corporate. I do feel we missed something, but it is hard to decipher these things."
Patanjali has hit out at foreign multinationals with a "with us or against us" campaign, and while it has been relatively soft on Dabur, it has questioned the company's pricing strategy. This is because one of the biggest strengths of Patanjali is the low prices of its products. Duggal says he does not wish to get into a direct fight with Patanjali but wants to cater to consumers who are more rational about their choices.
Patanjali, say experts, may have got everybody's attention, but Dabur's market penetration can still hold it in good stead against the upstart. According to the Rural Establishment Survey conducted by Chrome Data Analytics that claims to cover over 200,000 villages with over 300 million consumers, 93 per cent rural households are aware of Patanjali but more than half, 56 per cent, do not know about at least 30 per cent of its products. The survey found that Dabur is still the most popular choice for chyawanprash, honey and hair oil. In the past three years, Dabur's income has grown at a compounded annual growth rate, or CAGR, of 10.2 per cent, while net profit has grown at a CAGR of 16.7 per cent. This show Duggal has been up to the task of holding on to his own against Patanjali.
"Before Narendra Modi became prime minister, ayurveda was considered a dismal/archaic science. I would credit the current political establishment and Ramdev for changing this," he says. "But he is not the only one in town. We can actively participate by stressing the scientific aspects of ayurveda. This is something that will differentiate us from Baba Ramdev. Many people may not be swayed by emotions and want some rational underpinning to justify the choice of ayurvedic products."
With less than two years to go before he hangs up his boots, Duggal is overseeing something that will be extremely critical for Dabur's future - succession planning. For the sake of continuity, he wants his successor to be identified as early as possible, latest by mid-2018.
He has not thought about life after Dabur yet but is happy with what he has been able to achieve. The longest-serving CEO in the FMCG industry in India has already etched his name in corporate history. "We have done far more good things than wrong things. I get the most satisfaction from having built a large and profitable international business," he says. "Dabur is today a more robust company, insulated from cyclically bad events happening around the world. It is scary to think about what I will do once I retire, but my engagement will not end with just one stroke."
The owners may not want him to relinquish the corner office but a smooth handover will probably be another of Duggal's lasting legacies.