Dabur sharpens pricing, cuts 350 SKUs as Middle East conflict fuels inflation

The impact of the Middle East conflict on crude prices and inflation is pushing Dabur India to take a harder look at its product portfolio, pricing strategy and operating costs, as the FMCG maker seeks to protect margins without compromising growth. The company is increasingly relying on a combination of calibrated price increases, premiumisation, product mix improvements and SKU rationalisation to navigate the inflationary environment.

At its analyst and institutional investor meet, Herjit Bhalla, CEO, India Business, Dabur India, acknowledged that elevated inflation had made consumption growth challenging for the FMCG sector. The company, he said, was responding by identifying opportunities across its portfolio to improve its product mix, optimise costs and take selective price increases while remaining competitive in price-sensitive categories.

"Our approach has been to look at this as an opportunity, to look across the length and breadth of our portfolio, to be able to see how we can enhance our mix, how we can drive cost optimisation more, how we can take calibrated price increases, and where we need to be competitive," Bhalla said.

The pressure is already visible in the company's operating performance. Dabur reported 11.6% growth in consolidated revenue in the September quarter, but operating profit was affected by higher inflation in its supply chain, freight and logistics costs, particularly in its international business.

SKU rationalisation and cost savings take centre stage

While the international business continues to face higher logistics and supply chain costs, Dabur has managed to contain the impact of inflation in India. Its standalone business grew 8.9%, with margin dilution limited to 10 basis points. Within India FMCG, revenue grew 10.7%, comprising volume growth of 5.5% and pricing growth of 5.2%.

Home and personal care (HPC), which has been particularly exposed to inflationary pressures, managed to mitigate a bulk of the cost increases during the quarter, according to the management.

One of the key levers in this exercise is a sharper focus on product profitability. Dabur has already eliminated six brands and 350 stock keeping units (SKUs) as part of its portfolio simplification exercise. Bhalla indicated that this would be an ongoing process rather than a one-time clean-up, with the company evaluating products based on their business size and profitability.

"We are looking at our portfolio from the lens of size of the business and profitability. And we believe that it's important for us to look at that in terms of either enhancing the profitability, or then we push to move out of that part of those SKUs," he said.

The company is also looking to extract more savings from its operations to fund investments in brands and growth initiatives. Its Project Samriddhi cost-saving programme has generated over ₹115 crore during the current three-year vision period. Dabur now wants to increase these savings by 1.5 times, targeting ₹170-200 crore.

The company has also launched IRIS, an initiative focused on continuous replenishment and improving forecasting accuracy to generate efficiencies across its supply chain.

CFO Ankush Jain said operating efficiencies across the value chain, including product mix optimisation and production efficiencies, would fund a large part of the company's investment requirements. He also indicated that recent geopolitical developments could lead to gross margin improvement in the next fiscal, creating room for reinvestment.

For Dabur, the challenge will be to balance cost discipline with growth investments. The company plans to increase advertising and promotion spending by an additional 150-200 basis points in selected areas, making savings and sharper capital allocation critical to sustaining growth.