New Delhi: Mid-tier consumer goods company Dabur India Ltd is all set to relaunch the Vatika brand, which is used for soaps, shampoos and hair oil.

“We are relaunching the Vatika brand with a fresh brand image, a new logo and overall new brand proposition. We will also be expanding the brand portfolio,” said Rana Banerjee, deputy general manager, marketing, Dabur India. “We are changing the brand proposition to suit the urban youth by highlighting the naturalness of our products.”

Another senior executive of the company, who didn’t want to be named, added: “Dabur Vatika is looking at launching new variants in the shampoo and hair oil category and also plans to enter the medicated soap segment by the next year.”

The moves come 12 years after Dabur first launched Vatika hair oil in 1995. Vatika shampoo was launched in 1999 followed by soap in 2005. Vatika contributed some Rs170 crore to Dabur’s revenue of Rs2,234 in the year ended March, with shampoos contributing Rs80 crore, followed by Rs70 crore from oil. The firm plans to add a new leaf logo to the Vatika brand to signify the “naturalness” of the products. “We would like to keep pace with the trends in this segment, which are pointing towards conditioners and hair serums” eventually, says Banerjee.

According to data by ACNielsen, a market research firm, Vatika shampoo and hair oil account for 5% and 6% of the annual shampoo and coconut hair oil market, valued at Rs1,500 crore and Rs1,200 crore, respectively. The competing brands in these segment include Parachute hair oil from Marico Ltd and herbal product range from Ayur, a New Delhi-based herbal product brand. Dabur has rolled out an advertising campaign for its Vatika anti-dandruff shampoo and will soon start one for a repackaged shampoo. “The market has changed with the entry of modern trade. For a brand to stay ahead of competition, it is important for the products to stand out on the shelves and to connect with consumers at all levels,” said Banerjee. “Our communication to consumers will get more specific as we will emphasize on sub-branding initiatives,” he added.

Dabur is trying to move Vatika out of the overcrowded mass market and carve a niche for it in the fast growing urban market, says Rajeev Ramchandani, manager, research, at HDFC Bank. “There’s nail-biting competition with firms launching quality products at highly competitive prices.”

ITC Ltd “recently entered the shampoo space at very low prices. Rural consumers, who account for almost 70% of FMCG sales, don’t look at brands, but prices. With ITC trying to capture the market Vatika has been present in, it will be important for Vatika to look at a new growth strategy.”

priyanka.m@livemint.com

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Dabur Vatika Case Study: leveraging natural positioning to create differentiation in the Indian hair care market

DATAMONITOR VIEWo Catalysto Summary

INTRODUCTIONo Identifying and maintaining a natural positioning helped Vatika evolve from a

premium hair oil brand to become an umbrella brand for Dabur’s haircare products ANALYSIS

o Dabur Vatika's launch was backed by thorough consumer research among Indian women to understand their haircare regimen

Amidst increasing competition, Dabur Vatika’s clear brand positioning helped it to carve and maintain a niche in the haircare market

o Dabur extended the core product formulation into other haircare segments without altering the brand image

o Early realization of a few unsuccessful brand extensions helped bring the brand back on track

o The re-branding of the parent company Dabur created a ‘Superbrand’o Well-timed micro-segmentation and change in communication strategy helped

Dabur grow during the peak of the ‘natural’ revolution in Indiao Dabur has made effective use of different media to engage and interact with

consumerso Conclusion

APPENDIXo Case study serieso Methodologyo Further readingo Ask the analysto Datamonitor consultingo Disclaimer

1 1

FIGURESo Figure: Healthy hair is considered by most Indians as a sign of beauty and overall

well-beingo Figure: The presence of natural/organic ingredients is a key influencer in Indian

consumers’ choice of haircare productso Figure: Dabur Vatika’s product packaging and advertisements clearly reflected the

natural formulation and positioning of the brando Figure: Successful brand extension in the haircare market was a result of Dabur

Vatika retaining the natural formulation and positioningo Figure: Repositioning Vatika from a natural haircare brand to a ‘natural/herbal

beauty’ brand was unsuccessful because the brand had a strong association with haircare in consumers’ minds

o Figure: Dabur’s logo change in 2004 reflected a move to something ‘more contemporary and relevant’ and aided in strengthening its image in both India and international markets

o Figure: Dabur’s presence in the haircare market was strengthened with micro-segmentation efforts in the shampoo category and the launch of conditioners

o Figure: Over time, Dabur Vatika’s advertisements shifted from promoting just the ‘natural’ positioning of the brand to communicating other product benefits as well

o Figure: Ensuring well-timed and apt celebrity endorsements helped Dabur Vatika’s brand promotion right from the time it was launched in the market

o Figure: Throughout the brand’s existence, Dabur Vatika has made efficient use of various media vehicles to engage and interact with its consumers

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 Dabur’s 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 FY 01 FY 02 FY 03 FY 04 FY 05 FY 06 FY 07 FY

08 FY 09 Sales 982 110 0 120 0 128 5 123 6 141 7 175 7 208 0 239 6 283 4 Other Income 34 19 12 7 9 9 13 26 34 47 EBITDA 128 137 144 162 164 217 300 376 443 517. 3 12

Growth in Sales 12 % 9% 7% -4%15 % 24 % 18 % 15 % 18%

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 Dabur’s 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 Dabur’s total revenue.

First Dabur India had acquired 72.15% of Fem for Rs203.7 crore in an all- cash deal.

Further due to SEBI’s 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. 4.1.1 VISION 2010: ANALYSIS 1. Doubling of Sales Figure from 2006.

After the successful implementation of 4-year business plan from 2002 to 2006, Dabur had

launched another vision for 2010. One of the plans for 2010 was to double the sales figure

from what it had been in the year 2006. From the exhibits, we can see that the sales figure at

the end of the year 2006 was Rs. 1757 crores 13

and by the end of year 2009, it was Rs. 2834 crores which shows an increase of 61% in the

sales. Though it has not yet reached the double figure, it seems close to achieving the figure in

2-3 years. 2. Growth to be achieved through international business, homecare, healthcare and foods The division wise revenue is: •

Consumer Care Division (CCD) – 69% •

Consumer Health Division (CHD) – 7.9% •

International Business Division (IBD) – 18.1% •

Others – 5% Dabur delivers revenue growth of 20.9% in the 9 months ended 31st December 2009. o

CCD grows by 16.1% o

CHD grows by 15.8% o

IBD grows by 31.1% 3. Southern markets will remain as a focus area to increase its revenue share to 15 per cent

The south India market share has increased from 6% in 2002 to 12% in 2009. This is the

result of the initiatives taken by Dabur to suit the south Indian market e.g. launching herbal

toothpaste in Kerala and Tamilnadu and launching Dabur Lal Dant Manjan as Dabur Sivappu

Pal Podi etc. The market share increased after the acquisition of Balsara as Balsara had strong

presence in the south and western region. The other factors were POS promotion, customised

packaging and commercials & customised product launch. 4.2 Phase#3–Marketing Perspective It was only after its association with its partner, Accenture, that it made radical changes in its strategy. A company which was considerably inept to changes, 14

both organically and inorganically, now started planning acquisitions and detailed 5 year

plans for its existing segments. The reasons behind these initiatives are as follows:

1. Its existing products were considered to be targeting the mid aged and above aged

segments, but the demography was changing in the country. India was emerging to be a

young nation and Dabur recognized the need to have products for the younger generation,

while retaining the older segment.

2. Rise of the regional players. Players like Balsara, Zandu, Emami were fast emerging highly

competitive with more or less similar products. The market share of Dabur was suddenly

shrinking in some of the categories.

3. Rise of the Rural India. With disposable incomes rising in Rural India, Dabur could use its

distribution channel to meet the demand in Rural India with differentiated products in newer

segments at affordable prices. 4. Low penetration levels in certain categories. The acquisition of Balsara and Fem were mostly due to this reason.

5. Expanding in the new markets, especially the international markets. With a diversified kitty

and acquisition of established players (Fem - South East Asia, Balsara - South India), Dabu