Dabur : Repositioning its `Real Activ'

Dabur India Limited (DIL) is the fourth largest FMCG Company operating in India with a turnover of Rs. 21,113 mn during the year ending March 31, 2008. It operates under three major business categories namely Consumer Care Division, Consumer Healthcare Division and Foods Division (Dabur Foods Limited was merged with DIL in July 2007). Many of the company’s products are based on traditional medicine – ‘ayurveda’. Dabur’s flagship fruit juice brand– Real, launched in 1996, carved out a niche for itself amid mainstream players like Coca-Cola, Pepsi, Godrej, and Parle Agro by claiming to be the only fruit juice in packaged form that is 100% preservative free. Since 2005, there has been an increase in the level of health consciousness among consumers in case of foods and beverages. Sensing this opportunity, Dabur repositioned its Real Activ as a health drink instead of fruit juice. This repositioning also meant that Real Activ would stop being a mass juice brand and cater to a niche market that accepts a premium health drink. The case deals with the dilemma whether the repositioning would help Dabur shed its mass marketer tag and also highlights the sustenance of the repositioned Real Activ in the long run.

There are a lot of juicewalaas in city markets, so juice is not something Indian consumers had not seen before. And, we felt if we give them juices in a packaged form, which is more hygienic, it should do well.

- Amit BurmanCEO, Dabur Food Ltd.

Dabur India Limited (DIL) is the fourth largest Fast Mov ing Consumer Goods (FMCG) company in India with interests in health care, personal care and food products. Dabur foods' flagship brand, Real, which offers fruit juices, was launched in 1996 amidst the branded fruit drinks of several players like Coca-Cola, Pepsi, Godrej and Parle Agro, i.e., Minute Maid, Tropicana, Jumpin and Frooti respectively. At the time of the launch, the acceptance of packaged juices was low as Indian consumers preferred fresh juice to packaged juice. But, Dabur challenged this consumer perception by claiming that its juices contained no preservatives. Over the last two years, i.e., 2006-08, the fruit juice market in India grew at a rate of 25% per annum. According to a report by Frost & Sullivan (F&S), exceptional growth in the Indian economy and increasing awareness of healthy functional ingredients is driving the Indian foods and beverages market. Realizing the opportunities in the Indian health drinks segment, Dabur began re-orienting its focus on health conscious-consumers who are willing to pay a premium for healthy beverages by repositioning its brand as `Real Activ'.

Dabur India Limited

Dabur is not only India's fourth largest FMCG company but also a world leader in Ayurveda with a portfolio of over 250 herbal/ayurvedic products. Dabur Group's principal activity is to manufacture healthcare, personal care and food products. The Group operates in five segments: Consumer Care, Consumer Health, Food, Retail and Other. The Group's products include health supplements, digestives, baby care, hair care, skin care and oral care products.

Dabur India Ltd., started as a small pharmacy and it is the first company to provide health care through scientifically tested and automated production of formulations based on Ayurveda. In 1940, Dabur forayed into the personal care segment through Ayurveda and launched Dabur Amla Hair Oil (Annexure I). Continuing the usage of traditional Ayurvedic products, the company launched Chyawanprash in packaged form, which became the first branded Chyawanprash in India. In 1970, Dabur entered the oral care and digestives segment and introduced Lal Dant Manjan, a packaged herbal toothpowder at affordable cost to the masses. Dabur carried on introducing innovative products based on traditional science and in 1978, launched Hajmola tablet, an Ayurvedic medicine used as a digestive aid. A decade later, in 1988, the company launched pharmaceutical medicines and later on, in 1994, it entered into the oncology segment. In the same year, Dabur established its leadership in healthcare segment as one of the two companies worldwide to launch the anti-cancer drug Intaxel (Paclitaxel). In 1996, Dabur entered the food business with the launch of Real Fruit Juice, which was the first local brand of 100% pure natural fruit juice made according to international standards. In the year 2002-03, Dabur laid down its long-term plan of transforming into a focused FMCG player. In this process, the company demerged its pharmaceuticals business as a separate entity, Dabur Pharmaceuticals Ltd. With this, Dabur India largely comprised of the FMCG business that includes personal care products, healthcare products and Ayurvedic specialities, while the pharmaceuticals business includes allopathic, oncology formulations and bulk drugs.

Prior to 2003, Dabur operated through two divisions - the Family Products and Healthcare Products divisions. However, considering the commonalities in marketing, distribution, retailing and sales, the company decided to merge them into one division - referred to as Consumer Care Division (CCD) (Annexure II).

In 2005, as a part of the company's inorganic growth strategy, Dabur India acquired Balsara's hygiene and home products businesses, in an all-cash deal of Rs. 1,430 mn. Balsara was a provider of oral care and household care products in the Indian market. The year 2007 marked Dabur's entry into organized retail business through a wholly-owned subsidiary, Health & Beauty (H&B) Stores Ltd. In the same year, the company unveiled the new packaging and design for Real to mark the completion of 10 years of the brand. Following this, Dabur India merged with its wholly-owned subsidiary Dabur Foods Limited to extract synergies and unlock operational efficiencies in the food and beverages business.

Referring to the opportunities in the Indian functional foods and beverages segment, Frost and Suvillan (F&S) conducted an analysis and stated, "Rapid transformation in the lifestyle of Indians, particularly those living in urban India, has resulted in a dramatic increase in the demand for processed or health food, packaged and ready-to-eat food products." According to another study conducted by McKinsey and Confederation of Indian Industry, there is growing health and wellness consciousness among consumers. It is also mentioned that over the past three years, i.e., during 2004-07, consumer health consciousness has been the stimulus for the rise of the industry with an approximate total turnover of $69.4 bn, of which value-added food products comprise $22.2 bn. The report also added that the Indian health food market is in its nascent stage, and most of the products placed in retail outlets are imported. According to Ashish Kirpal

Pandit, CEO, Fortis Health World, "The Indian health food market is still at a nascent stage as about 75% of the health food brands are imported and have a high turnover". Contrary to this, F&S mentioned that functional foods are likely to witness an expanding consumer base and reported that they earned revenue of over $185 mn in 2007 and estimated this to reach $1,161 mn in 2012. The report also mentioned that the year 2007 witnessed a rise in food retail outlets across India, which, in turn, enhanced the scope for growth and availability of health food products to the desired consumers.

F&S further mentioned that the highest growth is likely in sub categories such as energy drinks, enhanced shelf stable juices, probiotics, and omega fortified food and beverages. In value terms, the health food drink market is around Rs. 14,000 mn and in volume terms around 65,000 tons per annum. GlaxoSmithKline (GSK) with four brands - Horlicks, Boost, Viva and Maltova - is the leader in the Indian health drink market. Complan and GluconD from Heinz and Cadbury's Bournvita are also among the popular Indian health drink brands. According to retail audit unit ORG Marg, GSK with four brands in the category has a 70% volume market share and in case of Complan, the share is 13%.

The Rs. 5,000 mn non-carbonated beverage market in the country comprises fruit drinks, nectar and juices. While the fruit drinks segment is estimated to be approximately Rs. 2,500-3,000 mn (branded and packaged), the juice market is valued at Rs. 1,500 mn and the nectar is a small category of nearly Rs. 350-500 mn. In the non-carbonated beverages sector, Parle Agro's `Frooti' remains as the largest brand in the fruit drinks segment, while Dabur's `Real Fruit Juice' leads the packaged fruit juices category. Dabur's Amit Burman, CEO, Dabur Foods further adds, "The share of Dabur's Real fruit juice is now 60%."

Dabur pioneered the packaged fruit juices segment in India. It is among the top five companies in the world to use the latest spin cap tetra pack, cold fill technology and spill-proof double seal cap for packaging. Real offers the widest range of fruit juices, which are an assortment of traditional Indian and international flavors - orange, mango, tomato, pineapple, mixed fruit,

grape, guava, litchi and cranberry. Real Activ is targeted at health conscious young executives for whom fitness is a way of life. Dabur has its presence in the malted health food drinks segment under the brand "Chyawan Junior". Real is the company's flagship brand in addition to its already established and powerful brands like Dabur Amla (hair oil), Dabur Chyawanprash (Ayurvedic based health supplement), Vatika (shampoo and hair oil), and Hajmola (digestive tablet) (Exhibit 1).

After the success of its Real brand, Dabur forayed into health drinks and expanded the foods and fruit juices business through low-priced packs. The company launched a health drink, Chyawan Junior, a chocolate-flavored drink which is priced on par with rivals' products such as Horlicks and Bournvita in the MFDs (Malted Food Drinks) category. In line with this, KK Chutani, Dabur

India's General Manager - Marketing (Foods) mentioned that apart from expanding the business of Real and Activ juice brands, it is also focusing on educating the customers about the health benefits of these drinks and also attempting to highlight the difference between fruit drink and fruit juice. He further adds, "Lots of players in the market are selling fruit drinks under the garb of fruit juices. Being the leader in the market, it's our responsibility to educate the consumer about the difference between a fruit juice and a fruit drink and what's truly healthy for them."

Repositioning `Real Activ'

From 2002-03, Dabur geared itself to become a serious player in the FMCG segment through a structured implementation of strategic initiatives. The company had already positioned itself on the herbal specialist platform to create a niche within the FMCG space. On the strategic front, there were two distinct phases formulated by the company. The first one was between 2003-04 and 2005-06, while the second one commenced from April 2006 with clear milestones for 2010.

Accordingly, a four-year strategy, Vision-I>, was crafted, which targeted sales of Rs. 20,000 mn by the year 2006 (Exhibit 2). At this juncture, Dabur streamlined the brand architecture as the flagship brand Dabur which actually operated at three distinct levels, displayed several different meanings leading to customer confusion. Regarding the difficulties in brand message communication to customers, Sunil Duggal, CEO Dabur India Limited said, "Realizing that one brand cannot straddle so many categories, we decided to adopt a key brand strategy". He mentioned that the overall brand architecture with five powerful brands was established with a well-calibrated mix of products under each brand. To interrelate its brand equity with its new brand architecture, Dabur changed its corporate identity and according to Duggal, "While the current logo has been with Dabur for years, we now felt the need to contemporize it and make it more relevant" (Annexure III). Along with its new brand identity, Dabur changed its organizational structure by establishing a Consumer Care Division (CCD) that consisted of a diverse portfolio of family and healthcare products.

One of the key strategies of the company was to enter into new categories and innovate new product offerings. During the period 2002-06, the company entered into a number of new categories such as toothpastes, soaps and skincare that together contributed about 42% growth in CCD (Exhibit 3). The CCD brands also adopted the strategy of communication through focused positioning and used celebrity endorsers such as Amitabh Bachchan, Rani Mukherjee, Vivek Oberoi and Virender Sehwag.(The first three are popular actors from the Indian film industry and the latter is a famous cricket player in India). Sales of the CCD (including foods) increased by 14.5% from INR 15,990 million in 2006-07 to INR 18,300 million in 2007-08 (Exhibit 4).

On the distribution side, the process of streamlining the sales organization had already begun in 2002. This was further consolidated during 2004-05, which helped the company penetrate much deeper into semi-urban and rural markets and tap into the demand growth in these areas. In the same period, on the cost side, there was growing concern regarding escalating input cost - especially of oils, packaging materials and transportation. Competitive pressures prevented all FMCG companies from passing on these cost increases to customers. To mitigate the cost push effects, Dabur developed an optimal mix of manufacturing facilities at different locations to reap

maximum benefits from fiscal concessions and economies of scale. In addition, further efficiencies in the supply chain right from procurement to production helped to cap input costs.

In 2004, Dabur further redesigned its organizational structure and another division, Consumer Healthcare Division (CHD) was created. Advertised over the counter (OTC) and value added OTC products were envisioned as key growth drivers for this division. To build OTC capability, the division focused on pharmacy distribution, selling and merchandising, healthcare professional endorsement, media and trade promotions.

After completion of its first phase of strategic development in April 2006, Dabur embarked on its next strategic phase and unveiled `Vision 2010'. The company focused on three key strategic drivers - Expansion, Acquisition and Innovation. Dabur widened its business canvass by extending its products and organization capabilities to service the entire `Health and Wellness' space. Vision 2010 is designed to address the changing macroeconomic trends in India. Between 2003-04 and 2007-08, private consumption expenditure increased at a compound annual growth rate (CAGR) of 6.9% and opened up new opportunities at the higher end of the FMCG market (Annexure IV). By this time, the Indian consumer class became more conscious about lifestyle related issues that affect its health and well-being. Dabur re-launched 15 different brands and products in the last two years that appeal to the more affluent Indian consumers.

The year 2007-08 has been a critical period in the overall long-term strategic growth for the company. A key element of this consolidation process has been the folding in of the wholly-owned subsidiary, Dabur Foods, into the parent company Dabur India Limited. The strategy was to marry the specialized knowledge and skills residing in Dabur Foods with the powerful FMCG machinery existing in the consumer care division of Dabur. The other key development in 2007-08 was the company's foray into the retail business through a wholly-owned subsidiary H&B Stores Limited under the brand name `new U'.

The foods business continued to revolve around juices and culinary additives. Sales increased by 19% from Rs. 2,020 mn to Rs. 2,410 mn. These were driven by a 20% increase in the Real range of fruit juices, while the culinary additives also recorded strong growth. The company's key strategy in the foods segment was a renewed focus on creating products and propositions with enhanced back-end operations, especially the supply chain. In this process, Dabur re-aligned the product offerings under the three umbrella brands - Activ and Real for the beverages and Hommade for culinary products. The company also expected that by developing strong ties with the distributors and investors in modern trade, it can benefit in building competitive advantage.

Regarding the company's brand positioning and strategy, Burman said, "We sold off Dabur Pharma because we wanted to put all our efforts into FMCG. Plus, we now have very specific plans for the Dabur Group, that is, we want to be a niche player and not a mass market player, which means we have to work on our strategy and brand positioning." He further explained that brand positioning for the company means further building on the health bandwagon that already exists with its products like Chyawanprash, Hajmola, Real, and Pudinhara (digestive tablet).

For its flagship fruit juice brand Real, the marketing and the packaging strategy was primarily targeted at mothers and children. This strategy was based on the concept - `tastes like eating a

fruit' as mentioned by Burman, who further adds, "The key driver for product acceptance has been taste." As a result, by the end of March 2006, nine different flavors were launched under the brand. Real Fruit Juice, India's first and only packaged fruit juice brand to get Societe Generale de Surveillance (SGS) certifications for high safety standards used in packaging that conform to the stringent Hazard Analysis and Critical Control Points (HACCP) and Good Manufacturing Practice (GMP) standards. Dabur Real maintains leadership status of 57% in the fruit juice market and shares shelf space with a number of competing offerings from Tropicana, Safal, and Ladakh (Exhibit 5).

Following the success of Real, Dabur launched Real Activ in 2002 and Real Junior in 2004 to cater to niche audiences without diluting the equity of the core brand. Real Activ was mainly targeted at the health conscious young adults. According to Sanjay Sharma, GM Sales and Marketing, Dabur Foods, "We wanted to tap the fitness crazy young consumers." This product was positioned as a premium product and the entire marketing mix was customized for Real Activ, helping it secure a niche in the juices market, distinct from its parent brand Real. In 2003, the range of Real Activ was enhanced by the introduction of the fruit-veggie range, a mixture of fruit and vegetable juices. Further, in 2004, a 330 ml pack was also introduced. With the introduction of the first packaged vegetable juice, the Real Activ range now included variants in the fruit, fruit-vegetable and fruit-soya categories (Annexure V). Regarding the Real Activ brand, Sanjay Sharma said, "The fruit juice market has seen an accelerated growth in the last two years and innovation has been the key driver for this growth. Real Activ, targeted at health conscious consumers, offers the benefit of `no added sugar' and is an excellent source of vitamins and minerals".

Real Activ, according to Burman, is the company's answer to the juice commodity market and adds, "Juices have now become a commodity rather than a health drink. That is the mould we want to break". He also believes that its rival, Coca-Cola's Minute Maid is advertised in a way that makes it seem like a health drink with orange pulp. The truth is that the drink is only 10% orange juice and the rest is water and sugar, he observes, while Dabur has its Real and Real Activ range, which contain about 80% pulp. "Our plan is to move out of the fruity commodity game and get into healthy juices and other products," said Burman. The company, whose `Real' and `Activ' juices account for 13% of sales in its consumer care division, is focused on differentiating between fruit juice and fruit drink and highlighting health benefits to the customers through the juices campaign. At this juncture, Dabur hired international advertising agency Lowe for its `8 times more' campaign to promote Real juice as a healthy and nutritious fruit juice. Dabur adopted a 360 degree approach towards the campaign, which included print and electronic media campaigns and also heavy outdoor activity through branding on buses, mall activations and consumer events at modern trade outlets across the country. For the promotion of its Real Activ, Dabur relied mainly on print media (Annexure VI).

On the pricing front, Dabur is driving its price point down with Real Twist. After targeting housewives, children and senior citizens with its premium juice offering Real and its variant Real Activ, the company extended its portfolio with Twist to reach out to the youngsters. Real Twist is priced at Rs. 45 for 1.2 litres, while its fruit juices like Real and Real Activ are priced between Rs. 72 and Rs. 85 per litre. While its rivals, Coca-Cola and PepsiCo priced their juice brands Minute Maid at Rs. 25 for a 400 ml bottle and Tropicana at Rs. 22 for 350 ml bottle respectively.

Apart from advertising and promoting, the company realized that distribution plays a significant role in building awareness about the brand. According to "Beverages for Health and Wellness in the Indian Market", a report by Ivan Fernandez of F&S, the growing trend of on-the-go consumption presents beverage suppliers with new distribution opportunities like workplaces, gyms and colleges. Dabur ensured that the brand is widely available through retail networks in India while expanding its reach in the food-service industry by securing placement in hospitals, airlines, railways, hotels and restaurants. Realizing the opportunity of distributing its juice drinks through retail stores, Dabur forayed into the retail segment and set up a wholly-owned subsidiary, H&B Stores. It also catered to the specialty `Health and Beauty' format under the new-U brand. Referring to its foray into the retail segment, Sunil Duggal, CEO, Dabur India said, "The group has already plunged headlong into retail with new-U, which is part of our overall strategy to emerge a stronger player in the beauty, health and wellness market". He further mentioned that Dabur spotted a gap in this retail space with no major player as yet in it, and this enabled it to have an early mover advantage. Apart from its presence in the health juices segment, the company entered the Rs. 15,000 mn malted health food drinks (MFD) market with chyawanprash blended with chocolate under the brand name "Chyawan Jyothi".

Though Dabur's health juices have prospects in the Indian market, there are a number of concerns too. Almost 90% of the fruit juice brands Real and Activ are being produced at Dabur's Birganj plant in Nepal. The company plans to scale that down by expanding capacity at its Newai plant in Rajasthan. Referring to its scaling down of operations at Nepal, Burman said, "We are trying to derisk our strategy and would be able to manufacture 30% - 35% of Nepal's production from India if the disruption happens. We won't shift the plant to India. We'll replicate a plant in India where we have the opportunity or capability to do different combinations of fruit".Aside from labor unrest, spiraling prices of fruits have also put pressure on Dabur Foods as mentioned by Burman who added, "Commodity prices are up. The price of orange juice concentrate more than doubled, so is the case for apple and other fruit." The other issue identified is competition in the beverages market in India. According to Food & Beverage (F&B) News, players like Coca-Cola, Pepsi, Godrej and Parle Agro are already in the market and in view of the swift growth in demand, newcomers like Surya Foods and Agro, Mother Dairy, Ladakh Foods and Pioma Industries have come into the market with new products in recent years.

Although Dabur's flagship brand Real and Real Activ occupy 57% market share in the juice segment leaving mainstream players behind, it has to be seen how long it can sustain its position and retain its customers, given the fact that all are trying to squeeze the same fruit - the Indian consumer.