Dabur looks at Africa, West Asia for growth to beat slowdown

Dabur, the fast moving consumer goods major, is increasingly turning to markets outside India for growth, as the domestic market continues to be subdued.

A little over a third of revenue comes from abroad and it is investing Rs 500 crore to expand operations in West Asia and Africa. It recently set up a subsidiary and bought a manufacturing plant in South Africa, to cater to the southern part of the continent, a region Dabur earlier served through import. The move will bring down cost, Sunil Duggal, chief executive officer, said in a recent investor call. "The objective of localisation is not to improve profitability as much as it is to lower prices and thereby improve our market position."

According to Lalit Malik, chief financial officer, the move could increase its revenue from South Africa by four times to Rs 250 crore a year. Expanding its operations in Africa has a rationale, as Dabur gets nearly a third of its Rs 2,900-crore international sales from there.

Another focus area is West Asia, generating 23% of its annual revenue from overseas operations. It has already started production in Turkey and is setting up a manufacturing unit in Iran, to be ready by 2017. As consumers keep their purses closed in Saudi Arabia due to economic turmoil, increasing the sales in other markets of the region will be helpful, says a JM Morgan report dated October 3. The market generates a tenth of Dabur's sales and nearly a fifth of profit from international operations.

The firm also recently set up shop in Myanmar. According to Malik, Dabur plans to expand its portfolio, apart from launch of existing products, in newer territories. Local currency fluctuations are an issue; recent devaluations in Nigeria, Turkey, and Egypt impacted Dabur's revenue.

It expects the growth in foreign markets to remain higher than that in India. Its two product lines continue to grow at 10% a year by volume. Duggal says they plan to invest another Rs 300 crore in the next year; they're also open for acquisitions.