Dabur India Limited (DABUR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q4 FY '24 Results Investor Conference Call of Dabur India Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Gagan Ahluwalia. Thank you, and over to you, Ms. Ahluwalia.

Thank you. Good afternoon, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to this earnings conference call pertaining to results for the quarter and year ended 31st March 2024. Present here with me are Mr. Mohit Malhotra, Chief Executive Officer Dabur India Limited, Mr. Ankush Jain, Chief Financial Officer; and Mr. N. Krishnan, DGM Finance, along with Ms. Isha Lamba who has joined Dabur as Head IR. We will start with an overview of the company's performance [indiscernible], and this will be followed by a Q&A session. I now hand over to you Mohit.

Thank you very much. Good evening, ladies and gentlemen. Welcome you to Dabur India Limited conference call pertaining to the results for the quarter and the year ended 31st of March 2024. During the quarter, the operating environment was largely in line with what has been in the preceding quarters with some uptick in rural consumption, which grew ahead of urban for the first time in last 3 years. The input cost environment has been largely benign as deflationary trends continued in quarter 4. The currency devaluation continued across emerging markets, impacting translated growth in INR. Climate changes marked by uneven weather pattern such as unseasonal rainfall delayed and contracted vectors impacted our seasonal portfolio. We remain optimistic of the gradual uptick in consumption trends over the course of next fiscal year, considering normal monsoon, improving macros, continued government spending and lower inflation. In this volatile environment, Dabur delivered a resilient performance, our consolidated revenue grew by 10% in constant currency terms and 7.6% in INR terms during financial year '24. India business, including Badshah grew by 7.7%, backed by volume growth of 5.5% and International business registered a growth of 16.4% in constant currency terms. Our operating margin for the full year reached 19.4%, which is in line with our guidance. On a like-to-like basis, the operating margin was 20.2%, an increase of 130 basis points. We continue to see the market share gains in 95% of our portfolio for the full year and also in the quarter. During quarter 4, the company recorded consolidated revenue growth of 7.3% in constant currency terms and 5.1% in INR terms. Our India business, including Badshah reported 5.6% growth backed by volume growth of 4.2%. Consolidated gross margin expanded by 280 bps and operating margins were up 14% Y-o-Y. Profit after tax recorded a growth of 16.2% during the quarter. In terms of categories, HPC portfolio recorded 8.1% growth during financial year '24. I will now cover each of the subsegments in detail. Oral Care, our penetration has reached 52%. With every second household consuming Dabur Oral Care product, we are nationally the #2 player in Oral Care category and becoming gradually #1 in many of our geographies with Orissa, Karnataka, AP, we are already #1 there. Our strategy of driving herbal category with Dabur Red being the core is working well for us. Home Care continued a strong double-digit trajectory for financial year '24 led by Odomos and Odonil. We saw our market share in mosquito repellent cream category expanding by 600 bps and air freshner category is expanded by 260 bps. In line with our strategy to increase total addressable market for Odomos and Odonil, we have forayed to liquid vaporizers and Odonil gel formats. In the Hair Care category, hair oils gained 115 bps market share during the year. Our strategy of building Dabur Amla and flanker brands yielding good results. Our shampoo portfolio is continuing its growth momentum, and this year, we registered a growth of 8%, led by the Vatika franchise. In Skin Care, Gulabari grew by around 18% in the year led by premiumization initiatives and extending the franchise into a decent categories like body wash. The Healthcare portfolio grew by 4.2% in financial year '24 led by digestive category, which witnessed a strong growth of around 16%, led by Hajmola and consequently, our market share in digestive category increased by 210 bps. In OTC and Ethical verticals, market share in Honitus and Lal Tail increased by 114 and 70 bps, respectively. Due to the delay in contracted winter, our health supplement portfolio was impacted and was flattish. However, we have continued to consolidate and gain market share in Chyawanprash and Honey. We are undertaking multiple initiatives like newer formats, Doctor advocacy, all weather communication to enhance consumption, relevance and penetration of health supplements. Our beverage portfolio was flat during the year on the account of unseasonal rains during the peak summer season. However, the Foods business, which includes culinary products under Hommade brand recorded a stellar growth of 23.2%. Badshah business reported a 23.3% growth during the year with gain in market shares. Emerging channels like e-commerce and modern trade are the fastest-growing channels driving urban growth and contributed to 19% to 20% of the India business. Our digital spends have gone up to 30% of our total media shares. Distribution expansion is a key growth lever. We have expanded our reach to 1.22 lakh villages through 22,000 yoddhas, direct reach of the company has gone up to 1.22 million outlets and total reach is at all-time high of 79 lakh outlets. We have added 2 lakh outlets during the year, the highest addition among all the FMCG peers. Therapeutics division, which is our Doctor Advocacy vertical is gearing up well, and we now cover around 1.1 lakh ayurvedic and allopathic doctors, which turnover of more than INR 120 crores. International business grew at 16.4% in constant currency in financial year '24 led by strong growth in Turkey, which grew by 52%, Egypt that grew by 46%, MENA markets that grew by 12% and South Africa that grew by 11%. However, we lost 2.5% of our top line due to currency devaluations. Let me now talk about profitability. Our gross margin expanded by 240 basis points during the year and 280 basis points during the quarter 4. On the account of deflation and cost saving initiatives under projects [indiscernible]. We remain steadfast in investing behind our brands and as a result of this, we have increased our spending in AP by 33%. Our consolidated operating profit grew by 14% during the quarter and 11% in financial year '24. Adjusted for Namaste legal costs, our operating profit grew by 16% in quarter 4 and 15.2% in financial year '24, touching 20.2%, almost near to pre-COVID levels. Our PAT grew by 16.2% in quarter 4 and 7.9% in financial year '24. Adjusted for Namaste legal costs in Badshah amortization, PAT saw a growth of 22.7% in the quarter and 16.8% in financial year '24. We are optimistic that with the expected normal monsoon and improving macroeconomic indicators, government spending, global inflation and FMCG demand, we'll see a gradual uptick primarily driven by rural that augurs well for Dabur. We will continue to drive profitable growth because of our business verticals, backed by investments in our distribution network, brands, manufacturing, digital and organizational capabilities. With that, I conclude my address and open the floor for any Q&A. Thank you.

[Operator Instructions] The first question is from the line of Abneesh Roy from Nova.

Congrats on a good set of numbers. My first question is on beverages. So I understand the high base and unseasonal rains in March month. My question is, if I see even full year your dip is impact around 2% and dip is there even in this quarter. So I wanted to understand Q1 very hard summer projected. So would you see strong double-digit growth here coming back and what would be your target for the full year also because the base here is minus 2%. And what could have gone here better because there are other beverage players who are growing much faster. They may not be competing head-on, but they are broadly in the same segment on the overall level.

Thanks, Abneesh. Yes, overall, I think beverage was a kind of a muted performance last year coming on a high base, like you rightly said, and it could have been better. But during the peak of summer, we saw seasonal rains, therefore, out-of-home consumption got impacted and therefore use consumption also got impacted. So that was the first quarter issue. And subsequently, also we had some supply chain problems also. We were gearing up manufacturing in the new plant in the [indiscernible]. So there was some cost and supply chain. Going forward in next year, I think if the summer is what it is now, what do you see summers in Delhi and Bombay, but we see in the some northern parts where rainfalls still persisting and [indiscernible]. So it is a very high per capita consumption market. But if weather remains, our beverage business should fire, and we have taken a target of double-digit growth for the full year going forward for the Beverage business and we've seen in the past also. So as we go through a number of periods, it still one year down. Next year, the business kind of bounces back for us. So we are hopeful that if the weather supports us and the beverages as the portfolio should do well for us. And we've also already made an entry into drinks and aloe vera , so we are very well prepared in terms of meeting our capacity also to beat the marketplaces.

Sure. My second question is on Badshah. So one is on the industry leaders like the top 2 players, they are facing ethylene oxide issue in SGHK. So does that open opportunity for you? And second, if industry leaders are facing this kind of an issue. Is there a risk that given raw material sourcing could be fairly common in terms of the channel, would you also face that kind of a risk? And second is for Badshah, how do you see growth in FY '25? I understand a lot of pricing growth has happened in the second half of the year. How do you see margins? Have you passed on fully? And how do you see overall sales growth in FY '25?

All right. So first is this burning issue of ethylene oxide. Now there are 2 regulatory bodies, Abneesh, as we see there's a domestic regulatory body under the international regulatory body. The domestic regulatory body being FSSAI. So whatever mandated regulatory norms that FSSAI are there, we are following those norms and ethylene oxide is not a part of their norms. So we don't give any radiation to our product when we are servicing the domestic market with this at all. So as far as domestic is concerned, we are performing with the regulatory norms of the law of the land is FSSAI. As far as the international business is concerned, there is an Indian Spice Board and all our batches go through proper screening and the Indian Spice Board before we send it to any one of the export markets. We have increased export markets. Ethylene oxide is generally radiated to prevent any microbial growth in the Indian Spice Board with certain limits, and we are within those designed limits of this Spice Board. EU recently have reduced the limits drastically and that's why the problem happened with the market leader like it happened. But we guys are within the precised limits of them, so we think that we are on the safer side. Whether it opens an opportunity or not, as of now, nothing from our portfolio has been bought or highlighted. So to that extent, there could be a limited, I think, upside which would happen if the competitor is under radar. But I wish them well also, and I hope this issue is behind the entire industry and the whole market should grow. The market is very unbranded and there is a huge opportunity to brand in the market and also both in the international and also in the domestic. As far as Badshah growth is concerned, we grew by 20% plus last year, partially came from price and partially came from volume. Going forward as the -- not inflation, but a muted inflation sets in, we are single-digit sort of inflation, last year to double-digit inflation with some price increase happened.. Some rollback of prices is what we have initiated also to spur the volume growth. And -- but overall, we've taken a value growth of more than 20% in Badshah because a huge upside which is there in geographical expansion and international expansion and our portfolio growth in terms of entire arena happening. And just to [indiscernible] figure on the quality, we have also constructed a micro lab, which was earlier in the stream when we acquired the company. It's now in action. And we are sterilizing all our export batches. Sterilization is a preferred method of sanitizing your entire produce. So we are in steam sterilization unlike other competitors radiating ethylene oxide. I hope I answer your question. Then as far as margins are concerned, we think the margins in Badshah will expand next year because, of a little lesser inflation and we have taken price increase, although the roll back will happen, but pretty much, I think margin expansion will happen. So we've taken a higher growth in bottom line as compared to top line in terms of targets that we...

Sir. My last question will be on Oral Care. All the 3 listed players seem to be doing well at least this quarter, as you grew 22% on a soft base or minus 3, you actually saw good double-digit growth and market leader also is likely to report strong double-digit growth in this part of the business. So I wanted to understand, is the #4 player losing market share? Second is South India leading the charge here? Or is it broad-based growth, which is delivering this kind of a double-digit growth? Third is, could this be a precursor to revival in other FMCG categories? Because this kind of a growth for the full year also double digit, for this quarter also strong double digit, why other categories are not showing for you and for the other companies also? So could this be a precursor for revival in other categories?

Yes, Abneesh. So first thing, I think the entire category of Oral Care is showing an uptick. If you look at the Oral Care category, which is 90% benefited in the country is growing at around 7.5%, which is a very good growth as compared to the FMCG market which is growing at around 6-odd percent. So it actually growing ahead of the FMCG market. So Oral Care is doing well. Now all the players, I think, secularly are doing well. I would not say the 4th player. We are getting market share at the cost of the 4th player. While we see 4th player under radar, I think we're on the same page on referring to the fourth player that you are seeing, but he is also gaining market share in the Oral Care category is what we seen, additionally, in line with Unilever and GSK, Colgate. And so are we, we've gained our 20 basis points in Oral Care and all the 3 brands are doing well. Our herbal toothpaste which is a new foray, we have already clocked the turnover of more than INR 11 crores INR 12 crores is that also, although it's just a modern trade and selective geography law that is doing well. Our gel that we introduced last year is already clocked a turnover of INR 40-odd crores and that's towards good success in the Oral Care category. Our Dabur Red has grown by around 25%, 26% , our rural base. That's also done well and market share kind of reached up. And this growth is happening secularly across more geographies and more in South India SKU because for us, at least Dabur Red go through towards South India, and it's doing well there. South India market is also doing well. Per capita income is going higher. People preferring more functional products in South of India. So that's doing well. Now is it a precursor to other categories also showing green shoots and therefore growing? To me, I can't answer with the great conviction, but in terms of our categories, I think it is, because even the Hair Oil category in the last quarter has grown by 8%. If you have syndicated data to go by, Hair Oil as category has grown by 8% in value, Dabur has grown by around 12% in value and -- which is very unlike Hair Oil business going up. And that actually is an illustration of the fact that rural growth is kind of coming back because it is rural. And in Nielsen also we've seen 120 or 150 basis points in rural areas. While urban growth is kind of almost remain same or a little bit come down, but rural growth is kind of picking up and that's happening sequentially in 2, 3 months that we have seen. But if you actually traded back rural growth, we have seen rural growth from minus 5, gradually slowly now it has become plus 6, almost now over 120, 130 basis points ahead of urban. So rural is trying to come back after COVID. So after almost 3 years of time, we are seeing the rural ahead of urban and I hope it is more structural in nature and not one of blip that we see. With the infrastructure spending of the government and all the initiatives is happening and monsoon also seem to be normal going forward, I think this should augur well for all of us and the overall FMCG space.

One small follow-up on the market share, which you mentioned. So the top 4 or 5 players in toothpaste will be around 90% market share. So if all are doing well, the tail of 10% is too small, right, for others to report a double-digit number or market share gain. So if you could clarify in the last 6 months out of the top 3 listed players and maybe even #4, who has grown faster in terms of market share? Who has a lot of market share if that's available?

So I don't remember the numbers off the hand, but I think Patanjali would have gained market share and they have been gaining market share consistently. Colgate in my mind has lost market shares. I'm talking volumetric market shares now. So Dabur has gained market share. Himalaya has lost a bit in terms of market share. And GSK has gained value market share, and they have gained volume market share on back of Sensodyne. So that's -- the smaller players would have gone down and there would have been consolidation because this is [indiscernible] spending also by the organized players, which is kind of spurred off the growth of the category and also will lead to shrinkage in other players going down because distribution ramp-up has also happened by the organized players. And that's my sense.

The next question is from the line of Mihir from Nomura.

Congrats on good set of numbers. So my first question is actually on the macro front. You did mention rural is showing signs of recovery, and it has been growing at about 6-odd percent. You mentioned. However, when we see the -- your volume growth and the volume growth for other organized players is lower than the industry volume growth, indicating that the unorganized guys are clawing back share that they lost in the past few years. How should one think about this trend going forward? Should one expect rural recovery to continue and organized players also to be benefited or there will be a phase where our organized players with rural will improve, but organized players will not be a key beneficiary of this rural recovery. So that's question one, sir.

Yes. So I think overall -- now this is a very short time frame. As I was telling you in 3 years' time, the rural business come back in like next 2, 3 months, regularly one after the other. And if these numbers are anything to go by, I think rural recovery should continue because there is such a long hiatus of rural lagging urban. So it should continue, and that should be well for the entire industry. I think it's a wave and this wave will continue for some time and rural take all boats up. So like they say both organized and also unorganized. So one thing is organized player generally get better dividends when this happens because we have better infrastructure, investments put in place. I talk about Dabur here now. We ahead of the curve, we've putting lot of infrastructure investments, our villages have gone up from 100,000 villages to 120,000 villages now, so significant improvement in our village coverage. Our yoddhas have gone up to around 21,500 which is again substantial improvement. Our overall direct coverage has moved up substantially, so all of these are moats in a way to protect the organized players with unorganized players generally go through wholesale and wholesale is not easy to come by because advertising expenses as that's going up. So on price, how much they can do. And so during a deflationary environment, a lot of unorganized players come in because the margin [indiscernible] but consumer promotions and other tactical measures and price rollbacks prevent attack price, plugging in gaps by organized players, prevent the unorganized players to really make a headway. To me, the dividends will be more in organized going forward. [indiscernible] different categories and different margin profiles at organized, unorganized very strong category. So I can't comment upon detergents. That's not where we play. As far as hair oil is concerned, I think unorganized players fairly limited. Oral Care unorganized players fairly limited. Home Care unorganized players fairly limited, it's being more urban category and therefore difficult more entry barriers, unorganized space. Skin care, Gulabari and all, we see some unorganized players, but then we give value offerings wherever the margins lower than we edge out unorganized players. In health care, in any case, unorganized doesn't play much. In beverages, yes, a lot of unorganized players come in, it is easy to curate the portfolios. Well, that we are to be very competitive and therefore, in the marketplace. So that's the flavor here on the big picture.

Understood, sir.

I hope I answered your question.

Yes, I get a flavor of what you're trying to highlight. Sir, on volume growth, how should one think about Dabur's volume growth going forward. Over the past 4 quarters, 3% to 4% volume growth was on a low base or a flattish base. Now we will be starting to cycle 3% to 4% volume growth, so while you indicated that rural recovery is happening and you're growing ahead of peers, can we see more constructive volume growth to sustain? Or do you think there will be a softness in volume growth going forward?

I think the question of softness in volume growth doesn't arise. If we have to grow volume growth is mandatory to have and as far as the annual operating plans are concerned, we've taken a target of a mid-volume growth, mid- to high volume growth, you take if we have to grow at a high single to a low double-digit growth rate. So it's not something which we can decide, I think we have to grow volume growth, and it's in line with our vision of Ghar Ghar Dabur and Ghar Ghar Ayurveda, so we need to increase our penetration. We are already there 8 out of 10 households, 80% penetration. If we want our entire portfolio to go to every house, volume growth is something that we have to do. It's no questions asked, there are no compromises yet. So I think volume growth will be the way forward. Till last year, we were lapping over or we were at least having some price increases midway. And now going forward, it's going to be mostly driven by volume across categories. While we posted a 3% price increase, but price increase will be fairly limited in some parts of the portfolio, which will all be driven by volume only for us. So we feel it will be mid- to high-single digit volume growth, top it up with around 3% value, high single to low double kind of a business that we will want to achieve, and that's the number that we've taken.

Got it, sir. Sir, and lastly, on margins, what can be possible tailwinds for gross margin given pricing will be limited going forward, mix improvement will be one. But do you see potential higher gross margins going forward? Yes. So that's my last question.

Yes. In terms of gross margin, we've seen 280 basis points of gross margin inching up on back of deflation, so we've taken up price increases. So we will see some amount of gross margin expansion, but it will not be in line with what we've seen in past 1, 1.5 years because we've taken drastic price increases and the rate of price increases come down. So it will not be as high as that. And whatever gross margin improvements happen, we invested partly in media and partly would flow down to operating margins. Going forward, gross margin in midterm to long term will grow, but not to the extent that we've grown in last year, we also want to take out the media percentage, which is now more 6% as we got 7% now when we inch it up from 7% to 7.5% to 8% in terms of the media. So with that, I think mid to long term, our margins should improve. We've also embarked on the second leg of Samriddhi project, which is the cost saving initiatives. [indiscernible] consulted and outside interventions is required for optimization of our spends and expenditures across the value chain in the company. They are working with us. So on back of that, we should see around INR 100-odd crores benefit coming in this year on back of cost savings. That should yield strong gross margin expansion and therefore, investment in media and operating margin. So we ended up with operating margin of around 19.4%, but this includes the legal cost, like I mentioned. So on a like-to-like basis, it was around [indiscernible]. So we want to take it up to around 20%. So I think that's what I can guide you with all these initiatives put together.

The next question from the line of Arnab Mitra from Goldman Sachs.

Mohit, my first question was on health supplements where you've seen a big decline this quarter and also the full year has been relatively soft. So if you could help us understand, is there a problem limited to Chyawanprash and how the other parts of health supplements are doing? And what's your own analysis on what is the issue with Chyawanprash, is the product losing appeal? What other steps you are likely to take to get the growth back in the segment?

Yes. So there are 3 products for our healthcare portfolio. The first part of our healthcare is the largest is health supplement business. Health supplement business Chyawanprash is a relative problem. A, I think the weather did not support us, Chyawanprash generally skewed towards winter and winters have been delayed and contracted. And the way wholesales all the trade behavior is typically in the beginning of the season, pull up a lot of stock and increase the stock as the season progresses. So this time, because of delayed winter, upstocking was limited and whatever upstocking happens due to contracted winters that remain on the shelves and because of delayed winter the downstocking happened. So the better thing is that we don't have inventories -- too much inventories for next year. But Chyawanprash we are modifying the format. We brought Chyawanprash in capsule form. As you know already we are introducing Chyawanprash in gummy form and powder form, trying to improve or modernize our formats in Chyawanprash so that we can extend the usage and increase relevance of the category and thereby increase the penetrations. But penetrations are definitely kind of gone down, while we increased market share for Dabur Chyawanprash overall category penetrations have gone down. So there's an endeavor by the company to have all-season communication, not being restricted to only winter, have a communication for monsoon, extended the PG to women, extend the PG to kids, to geriatric population and also do advocacy on Chyawanprash through doctor channel and make it secularly both ayurvedic and allopathic, both use it for immunity building. That's what we are trying to do, as far as Chyawanprash is concerned. Honey was [indiscernible] by season. I don't think there's any problems with the Honey. Honey will be consumed. And Honey is doing well for us. We are gaining market share consistently. There was a little stock issue on the Honey and crystallization problem, which we've corrected going forward and it was in winter and because the spike of winter, it actually happened. So that was the reason why the Honey has been softer. Glucose has done well for us. Summers are approaching, acute summer. So we had a 14% growth in the last quarter, as far as glucose is concerned and increasing market share. And it's a globally we and Zydus and we are gaining market share. As far as our digestive portfolio is concerned, Hajmola has unabated, unrestricted growth. Our new version of [ Mr. Aam ], variant of Hajmola is doing exceedingly well. Our Chatcola and Cola and all the other variants have done well. Variants are contributing to our 22% -- 20% of the overall franchise. The bottles are doing well, so as sachets for us. So -- and we are looking at the extension of this brand to the unbranded digestive category. So that's doing well. Our Isabgol. We [indiscernible] last year, it's grown 112%. Pudin Hara has shown a 14% growth. Honitus and Lal Tail Cough and Cold is again a big problem. Now because we are certainly in a higher base, Honitus showed a little decline and so did Lal Tail. But both the baby care category the cough and cold category are resilient in India, and we will come back after we navigate a high base. Our Baby Care portfolio is already around INR 40 crores, INR 45 crores. It was last year around INR 20 crores. So we've almost grown by 60%, 70% in Baby Care. Our Super Pants and Baby Care are doing exceedingly well, both on e-commerce and also on the advocacy channel. The third part of the portfolio is OTC and ethical. Our ethical business has grown by 8%, which is the classical portfolio has grown by 88%, and that's doing well. And Shilajit has grown by 21%, and the market is really blossoming on Shilajit. So I think overall healthcare is doing well, but with the exception of Chyawanprash and we have initiatives lined up to take Chyawanprash to new level. And so that's where we are. So it's a small part of our business. So I think we should be able to come around. We are introducing gummies and new age formats also...

Understood. And one simple, I mean, any update on the legal case in the U.S.? And do we expect the same level of legal costs in FY '25 as we reported in FY '24 or is there any change in that expectation? That will be my last question.

Yes. As far as the legal is concerned, it is pretty much status quo. The last update that I've given you on legal is that the depositions have already happened, fact sheets have been received from the plaintiff's lawyers. Discovery phase is still continuing. We've been able to achieve corporate separateness of Dabur International and Dermoviva from Namaste. So no Dabur entity is involved in it including Dabur International and Dermoviva, only Namaste is involved, which is less than 1% of our turnover in terms of top line and profitability. So we've been able to [indiscernible] Namaste and limit our risks to a very great level. So I think that's on the update, because this will continue for another, I think, 1 year, 1.5 years. We are trying to expedite the scientific discovery, scientific phase in which we are requesting the plaintiffs to give us fact sheets on how this allegation or accusation have been made that this is injurious, where this has been used for generation, et cetera, in the Africa population. So the moment it comes to the scientific phase, I think the case will get really diluted and it will come in our favor. As you know that this is based on unsubstantiated, incomplete study which has been held redundant by Cosmetic, Toiletry, Perfumery Association, et cetera. So we are pretty confident and Dabur is confident that we will win this case and it comes to the end of the case, when we are trying to expedite as much as possible. A lot of our peers who have been involved in it have not even cited this case and not even kept a provision. So we are also trying to see that our insurance gives us a claim of the legal cost that we have actually incurred in which case we could pleasantly surprise you going forward. But that is another litigation that is happening as we speak with the insurance companies to reimburse the cost that we are incurring on this because of the stipulated number of how much they give you in terms of number. But I don't want to [indiscernible] go on. But I think only had a good news as an update which we've given you last time. Subsequently does not -- we are incurring a cost -- this year we are incurring a cost of INR 105 crores and next year -- we'll continue next year also. We've taken a budget of INR 80 crores, INR 90 crores similar cost for next year also, but it's lapped over. So there's no incrementality in terms of the legal costs that we incur next year or around of the case.

The next question is from the line of Harit Kapoor from Investec.

My first question was on the distribution side. So you mentioned that the pace of distribution expansion for you has been higher than historical levels as well as higher than what peers have done. I just wanted to get a sense about, say, the next year or 2, do we see now us consolidating especially on the rural and direct side, and focus more on throughput? Or do you see this to be a continued fairly sharp expansion, especially because at 1 point 2-odd million outlets as well as on the rural side, we've done a fairly strong job order. So I just wanted to get a sense on how do you see this going forward? Is this the next phase like starts about now? Or will you see a focus on throughput?

Yes. The distribution expansion is a very key strategy growth pillar that we see. So there are 2 legs to distribution. One is the expansion leg and one is the efficiency leg. Expansion leg is rural expansion and also urban expansion. Rural expansion is more village expansion. I told you that villages went up by 20% from 1 lakh to 1.20 lakh, but the headroom for increasing the number of villages is huge. We were about 6 lakh villages and as government is investing in infrastructure, roads and highways and railroads, et cetera, most of the rural India is actually becoming urban India and therefore, the headroom only remains us to convert rural into urban. And therefore, on yoddha playbook and stockist playbook rural expansion is working well for us, and that's what is giving us higher than peer dividends as far as rural is concerned. So that's as far as expansion. In urban, we are expanding by our direct reach. As you know, we are reaching out direct to around 14 lakh outlets as compared to almost 79 lakh outlets that we are at present as compared to peer this should be around 20%, 30% of our direct plus indirect reach. So again, huge headroom available to take up 14 lakhs to something like 20 lakh that's our direct reach expansion of outlets in urban. As far as the urban, urban is concerned, I think the e-commerce is already 10% -- 9% to 10% of our overall business. We continue to engage with e-commerce and get deeper into e-commerce with e-commerce continuing. This is already contributing to us 30% of the e-com business that presents a big opportunity to us. And we were to get it in with Swiggy, Zomato, Zepto all those coming and opening up in the towns one after the other in urban India. So that presents a big opportunity and modern trade also. Last year, modern trade last quarter, modern trade has only grown a 7%. But if you look at the treasury system, modern trade treasuries have grown by around 22%, 23% for us because the Reliance kind of teed up their inventories, I think prior to listing or whatever the case may be, but the held back on primary sales, tertiary sale was very good Reliance and Reliance is big for us, around 30% contributing to modern trade. So I think as it clears the inventories next year, again, [indiscernible] that that's the third leg of our distribution expansion center. The second is efficiency. Efficiency, we have metric or A score, every day great execution. In that A score, we monitor a number of outlets we visit, the number of lines we sold and what is the premiumization that we do in every outlet. That is happening as we speak and there were a lot of churn as the exports happen there. People who are not performing below the radar of ROI, we churn and the shop venture. So pretty much similar strategy, staying the course on our strategy and not anything very different than what we've been talking about in the future. This is giving us results. So we will continue, but continue with discipline. I think we are a little lackadaisical on monitoring them. I think the moment we got more discipline to and monitor it more steadfastly, this will only become better.

Just my last question was on the pricing side. Your long-term model is medium to high single-digit volume growth and mid- to high- volume growth and some pricing, probably 3% odd. So I was just wondering is -- at a time where pricing is not so easy to come forth, would F'25 also have a similar kind of 3-odd percent pricing you think at an average or that will only happen through the year. So we shouldn't assume an average for the year at 3%.

Average for the year is different for different verticals. We are looking at our juice portfolio, which is very price sensitive, only a 1% price increase there. In health care, this is more resilient, we're looking at a 4% price increase. In HPC we're looking at about 2% odd price increase in line with all the competitor dates as we have followers there. So the weighted average of that will be around 3% for the full year through the year. So we are not looking at any digit price increases. I think Honey will have a little bit of price increase because the table of Honey, commodity price is actually inching up. And so that's where we are on the price.

We have the next question from the line of Vivek M from Jefferies India.

Two questions. First is, again, something that has been asked for F '25 and even the earlier participant asked about medium term. But let's say, if you have to grow your earnings, let's say, double digit over the next, let's say, 3, 5 years. And at some point of time, margin upside will be limited, that will imply that maybe volume growth has to be about 7%, 7.5% and 2.5% pricing to get to, let's say, 10%, 11% kind of revenue growth, which essentially means after a point, once margins, let's say, start to plateau, the entire bottom line growth will be led by top line. Do you think over a 3, 5-year perspective -- from a 3 to 5 years longer term perspective now, not just you, but a lot of your peers will have to settle for growth, which is like 9% to 11-ish from an earning perspective, is that a fair model?

I think our number is, Vivek, stacked up well. So you also feel that the volume should be around mid- to high and 7.5%, this should be the volume, but as of now, the way FMCG market is actually behaving, is, I think, mid-single is one is looking at, and therefore, a high single-digit growth is what one looks at, in price increase. In our portfolio where we are market leaders in a lot of categories, where we are existing, pricing could be a little better, but because the rural favors Dabur, if rural comes back, I think volume growth will also be driven by the rural, for us. That's what I'd say. But I think long term, that's what it will be. So if the commodity is remained benign, which is not the case internationally. Internationally, the inflation is much more severe as compared to India's inflation. If India was to follow international, I think more price increases will come to India also like we have seen in the past one year. India has been insulated by that kind of inflation, which is what we are seeing in the U.S., that's why the rate cut haven't happened in the U.S. as of today also. So I think because of elections, so they are also keeping a lot of inflation down. And post that, I don't know what the mix will be. So as far as now is concerned, we are looking at a mid-single -- kind of volume is looking more plausible, monsoon is well, everything goes well, stability of government happens, everything is consistent, there it can be 7.5%, otherwise 7.5% volume growth is little on higher end. I would say a better mix would be our 5.5% or 5.4%, and that what the right sustainable sort of volume growth. But if you look at Dabur, Dabur portfolio is pretty widespread and diversified. We are better off than our peers. So like we have seen in the last quarter also that our beverage business and our health care business, both were impacted by unseasonal rains and climate changes, et cetera. But our HPC portfolio, which also are fair diversity, it came and bailed us out an international business, also HPC, came and bailed us out. So I think we should be in a better position than our peers. That's what my take would be.

Got it. And if I actually add to that, Mohit, I would imagine, in some ways, let's say, what you have done with in the toothpaste, and there have been communications from you in the past to, let's say, mainstream Ayurveda and natural herbals. So arguably, you can still grow faster, gain shares, let's say, health supplements. It all depends on what you keep in the denominator or even on the -- some of your health care products or even the mainstream FMCG business also, given the herbal orientation. So if you have to move, let's say, volume growth to a higher level, which arguably could be easier in your case versus your peers, given that you have share gain opportunity just sheerly because of you have this architecture. How would you do that? Otherwise, for the industry, I think, your peers as well as you, if we assume margins flat at some point, the best case is like 8%, 9% earnings growth, right?

Absolutely right. I think we are in a better position. So no, one good thing for us is, besides the rural leg that I explained the expansion, that is definitely for a portfolio, which is more accessible price points of INR 10, INR 20, INR 50, INR 100. But beyond that, you suddenly find modern trade in e-commerce where Dabur is the only differentiated player in natural and owning natural and driving the growth to your point of where we've done in Oral Care. We can do it in shampoos. We can do it in hair oil. We can do it in hair supplements and we can do it in food also and all natural and that's how we can grow. So 2 pivots of growth. One is more rural driven growth, which is expansion driven growth and one is more modern trade, e-commerce driven growth for us. So 2 legs. One is premiumization leg and other is penetration leg. So that can come in, and that's what we've been attempting to do. So to harness or to leverage our rural infrastructure, we created bundles of products which are of accessible price points, which the teams are driving there and in terms of verticals of the distribution, we are creating separate food and beverage -- separate food, separate beverage, separate HPC and HC distribution verticals also in ayurved. So opportunity is there, but we are limited by bandwidth and time and resources. So that's where -- but intent is to -- what you're saying is right, to grow at double digits, yes, driven by volume, yes.

Got it. And the second question is, if I look at your fourth quarter numbers for -- so post pandemic, once things started to normalize, every year, you are seeing that your fourth quarter margins are significantly lower than the first 9 months whether it's F '24, F '23 or I think F '22 also. And if you go back to F '19, the margin delta between fourth quarter and the rest of the year [indiscernible] previous quarter was never that high. Now part of the reason that I see is, your revenues actually declined quite a bit in fourth quarter versus, let's say, third quarter, your other expenses, even if you adjust for the legal cost, that also moves up quite a bit on a sequential basis. So what has changed so much after pandemic that fourth quarter revenues go down quite a bit. Other expenses jumped up quite a bit and your margins actually moved down fairly significantly?

We are actually prepared to this answer. I will ask Ankush to give that answer. He has templated the question answers for you. So I will -- over to Ankush.

Thanks Mohit. Vivek, just to broadly answer this ,5 years ago, and over the last 2 years, structurally, the saliency of business has changed. So if you look at exact numbers of 4, 5 years ago, which is pre-COVID, our business agency it used to be 25% in Q4. Today, as we speak, it's 22.7%. So just to give a broad number, average first 9 months, we have done INR 3,200 crores average per quarter, for first 3 quarters. In this quarter, it's INR 2,800 crores, which means last quarter, is slightly lower. And because there the leverage in overhead is slightly lower, And hence, so therefore, in our business model, you have to probably see at both -- yearly numbers. And that will probably be the right way.

Thanks Ankush. So that's the diagnostic of the issue and why it has happened post-pandemic. So very intelligent question, and therefore, rightly answered by Ankush. But how we course correct? I think we have to increase the relevance of summer portfolio and therefore, inch up summer to leverage all the expenses. So what we're doing is, we are launching a lot of summer portfolio products, like you know, Cool King came in last year. So which is a Thanda Tel, with sales in summer. We are putting a lot of pressure on Pudin Hara. A lot of pressure is happening on juices portfolio, glucose as a portfolio. So we are trying to summer skew, a lot of our products so that, that actually comes up. So as we speak, we are launching talcum powders also under the Cool King brand and trying to build that brand so that we are able to increase the salience of summer-driven portfolio for us in Q4.

And just to add one [indiscernible] point, Vivek, also the 4, 5 years ago, our expense in Q4 used to be least. But now even in this quarter it is plus 6%. So it used to be [indiscernible] 5%. So that structuring is also impacting margins. So therefore, you have to actually see more [indiscernible].

Sorry if I'm stretching this a bit longer. But my point is -- so 2 things, absolute revenue, why is it lower now versus pre-pandemic, what has changed, number one. Number two, even if you look at other expenses, forget about the denominator, but even if you look at it on an absolute basis, your fourth quarter other expenses, rupees crore also jumps up quite a bit. So why is revenue base lower? What has changed since pandemic? And why absolute other expense is also higher?

No. absolute revenue is not lower. What we said, the saliency of the revenue in quarter 4 is lower than what it was pre-COVID. So absolute revenue is still higher. We used to be around INR 2,200 crores in Q4. Now we had still INR 2,800 crores. So absolute is higher, the saliency of the quarter 4 has gone off.

I think there is some more color, which has to be given. So Vivek we can send it across or we can have a discussion post this meeting with you to explain you. So the way I want to summarize is, you see salience has come down in quarter 4, but absolutely, our turnover has gone up. So 23% as compared to 25% what used to be happening during COVID or immediately post-COVID and post-COVID, Chyawanprash was selling all through the year because COVID continued. And after that, Chyawanprash saliency went down, profitability went down and it's juice salient in summer brand, where overheads remain the same.

The next question is from the line of Prakash Kapadia of Spark Wealth -- Spark Private Wealth.

Most of the questions are answered. I just had one question, Mohit. You mentioned monsoons are expected to be good. The pace is fairly low in rural. So what kind of momentum would we expect in the near term? And what categories will drive this growth for us on the overall domestic business? And if you could give some color on rural and urban, that would be helpful.

Yes. So therefore, if you look at the previous quarter, our rural has grown by 8%, our urban has grown by 4%. So there's 400 basis points difference between urban and rural. And that is indicative of what things will be going forward as the rural growth is ahead of the urban growth. So rural for us -- so we are kind of a barometer of how the performance in the market will be. So our rural will chug along well. On back of our portfolio, which is more summer-centric portfolio, we, as a brand, is also pretty rural-centric. Our Ayurvedic products do well in rural India as compared to urban India. In urban, we have a premiumization strategy. This is different from 2 month Ayurveda but temporary scientific Ayurveda, so in rural it is more traditional product for us. So it will be OTC-driven, health care-driven, Oral Care-driven, also fairly 90% penetrated, hair oil-driven, shampoo-driven, so it goes. And in beverages, also, we have entered into drinks, which is at a price point of INR 10, INR 20, INR 60, which also trends well in rural. Earlier juices was only INR 160 or INR 150, more urban phenomena. So we are getting more into rural and leveraging our rural infrastructure. So I don't think I can say there's any particular part of portfolios which will do well. rural. I think, it's across the board. If we are able to bring up brands to accessible price points and leverage our rural village infrastructure for our portfolio, I think the potential is huge as we increase our Yoddhas and make inroads into more internal.

Okay. Okay. And at least what we are reading and hearing, monsoon seems to be on the right trajectory. So will that also add to the momentum, especially in rural?

Yes. I think so because agrarian, -- rural is agrarian economy and if the monsoon is good, agricultural crops will be good, more money in the hands of the farmer, and therefore more shampoo sachets, more toothpaste, more hair oil consumption should happen, which is more discretionary in nature.

And for the legal cost, you mentioned around INR 85 crores would come in this year also. So will it be a portion throughout the year, it will be across quarters or how will that pan out?

It's roughly around INR 20 crores to INR 25 crores per quarter because this is pertaining to the legal fees for the lawyers and that generally is spread out through the year.

We have the next question from the line of Aditya Soman from CLSA.

I mean, just following up on the question earlier in terms of seasonality for revenues. I think, can you explain why the salience of -- in 4Q has come off. I mean, you mentioned that the 4Q sales salience is lower than earlier. Can you just talk through why that has happened? And then -- yes. And then the second question is just on EBITDA margin guidance excluding this legal cost of INR 20 crore to INR 25 crores per quarter.

So quarter 1, quarter 2 and quarter 3 is generally in the range of -- quarter 3 is actually higher because of Chyawanprash and Honey and high-value items' selling. And because the value is higher, therefore the saliency is higher, typically in the third quarter. The fourth quarter, juices the [indiscernible] is much lower. There was a value saliency goes down, albeit in volume, the number of pieces that we sell is almost same as the quarter 3, but value actually is lower in this quarter 4 because the seasonal business, so you sell more of juices, and you sell more of Pudin Hara and other things as compared to Chyawanprash and Honey, which typically goes in the winter. And that's why the saliency is lower in the quarter 4. During COVID, it became also -- because Pandemic was there also and we were selling Chyawanprash and Honey, also in the summer season. So that has actually reversed since COVID. As far as EBITDA margins are concerned, we want to go back to 20%. And if you look at without legal costs, our operating margin is already in the range of 20.2%, so we should go back to 20%. Ankush, there is a challenge for our CFO here, to reach up our operating margin to 20%. So Ankush, you want to add any lines or so.

Yes, definitely, I just want to add. Pre-COVID, our operating margin was 20.4% and today, as we see, adjusted for legal cost is almost there, 20.2%, and it's also because we have acquired Badshah, [indiscernible] it's almost there, 20.4%. So I think, any upside now, will also be partly redeployed back in advertisement and generating demand. So I think -- what we saw this year, the expansion of 150 bps, as you see for legal cost, obviously, will not be there, but our endeavor would be, to gradually increase it in mid to long term.

Very clear. Just on the first question, I mean, in terms of the salience coming down, I understand during COVID, health supplements did very well through the year. But even prior to that, I mean, the gap between 4Q and 3Q wasn't as sharp. So why are we seeing such a big drop?

Yes, even pre-COVID, our saliency of Chyawanprash was slightly higher even in Q4, but now we've seen that even in this quarter, at least this quarter, saliency of Chyawanprash and health supplement actually went down and therefore, overall saliency was lower.

The next question is from the line of Tejash Shah from Avendus Spark.

Mohit, the last annual presentation, which we did somewhere, beginning of the year, this fiscal year. A key focus for this year was supposed to be transforming our power brands to our platforms. Now when I see our filing presentation for this year FY '24, there's no mention of platform word itself. So I was just wondering, where are we on that journey? And is it much longer term, it should not be monitored on a quarterly basis.

Tejash, absolutely. So, our strategy doesn't change. I think it remains same. In the presentation, it doesn't mention because it was more based on the quarterly results and not on the strategy, but as far as budget presentation was concerned, it was pretty much based on that. That's why you look at that in -- category after category, we are plugging the gaps and spaces where we are not present and wherever the power brands can extend, we are extending them. Like Dabur Red is what is extended to Bae Fresh, and that's what we've done in Oral Care. Dabur Amla is getting extended into value-added hair oils and that's what we are doing. Home Care, Odomos is not extend into LVP. It was just a personal application. Now we are resending in to LVP, this is the most larger addressable market and therefore, a platform. Odonil was more solid locks for us. We returned it to Gel platform, and Gel is already got a INR 50 crores turnover coming in now. Gulabari, which is only a rosewater, was extended to body washes. So therefore, [indiscernible] platforms from power brands. And in Chyawanprash, Chyawanprash in powder form is what we are introducing, Chyawanprash in gummy form we are introducing. Honey is also getting extended into breakfast cereals as we talked about, therefore, platform there, to take honey from the medicine's chest to maybe bring it to the breakfast table and therefore contiguous categories like breakfast cereals which will be honey-based will also come in the picture. And in the beverage segment, we will extend juices to nectars to drinks. So that's also a platform extension and now in to carbonated also. So it's across the board, Homemade from culinary is moving into the food category. So we are very consistent with the strategy that we laid out in point of view on the Capital Markets Day. And that's what, the numbers may vary, but the strategy remains on course.

Great. Second question, if I look at our annual growth from the lens of power brands and non-power brands, except Oral Care, I believe the other 6 power brands would not have contributed above our company's average growth rate for this year. So it also means that a large part of heavy lifting for growth was done with a long tail of other brands, with the emerging brands, which would have done. So first of all, is the math correct on this? And if you can share some insight on the same?

Tejash, what you're saying is right, now, because power brands contribute to 75%, 80% of the business, if season doesn't favor you. So, real as the power brand will get impacted and that will impact. So juices got impacted, it was flat turnover, so it didn't fire. Chyawanprash is a power brand did not fire. So that took down the business. and other brands, saliency looks up. But that said, the power brand contribution to the business remains as the growth may not come because of some seasonal issue or others because, it is the power brand at the end of the day, that could positively or negatively impact the business, but the strategy of power brand remain. That doesn't change over quarter-to-quarter, you have to look at it from a 4-year period of 5 years period, it's a strategy of the company. So therefore, if you look at the CAGR period, you will find power brand CAGR like real CAGR, 15% over past 2, 3 years. Last year was 13% growth, this year is flat. So average growth is around 15% higher than the company average. So that's the way to look at services.

And also, I think just to add on may be. In every power brand, we continue to gain market share, both in the quarter end and in previous years. We have actually also seen a relative performance when there is a some [indiscernible].

And distribution initiatives also, in power brands, will go up and by virtue of that distribution expansion has been 200,000 outlets in the current year because you can't distribute a smaller brand because that doesn't have the strength to get distributed and neither there is advertising spend on it. So yes.

And sir, last one, if I may. Sir, given the surge in this consumer and judicial activism that we have seen globally and in India, and now there are increasing frequency of these accidents, which are happening on brands now. So as a very responsible company, do you think that, industry at large, will be kind of investing more on product quality and safeguard, so that we are not attacked very so frequently, A. And we also will have to, time and again, reinvest in branding equity. So at a very long term or medium to long-term level, do you think that margin expansion will take a back seat versus protecting product and brand equity going forward, at least in the near term?

Yes, a very good point. I think consumer activism and consumerism and placing the consumer interest first, is the priority of the brand as the brands become more responsible. Because if you look at social media and growth and digital growth, this is not what's coming and consumers in the metro, the consumer in the millennials and the Gen-X are all embracing brands, which are talking about environmentally friendly products, which are eco-friendly, which have more sustainability, which do not contain that acids, which do not contain plastics. So therefore, this really consumer-first approach with the environment, climate, and health will take a front seat. But I think I don't agree with the second point that you have made that will the margin take a backseat? The moment the brand becomes environmentally conscious, sustainable, consumers are ready to pay a price premium for that. So the moment they pay a price premium and you become environmentally friendly, it becomes a virtuous loop. Premiumization grows, the brands become quality conscious and environmentally friendly and the premiumization happens and therefore, profitability also inches up. So I think consumer rewards you, with the profitability and the value that the consumer gets. Now this is relevant for urban area today. Rural India for the per capita incomes of India is being so low, I think, still it's a little time away for the rural India and at least 65% of the population of this country is still fighting hunger and poverty and therefore sustainability and eco-friendliness and climate care is urban phenomena. But it's catching up. The consciousness is catching up. So that is where we are. So if you look at the examples of plastic straws and paper straws, paper straws are still more expensive as compared to plastic straws but the prices of paper straws have almost become 40% more premium to plastic straws, which used to be 200% premium. So I think the whole price label comes down, but everybody is making more money because the capacity is going up and scale improves the profitability. So yes.

Next question is from the line of Nillai Shah from Moon Capital.

Mohit, there are a few questions on margins. I just had a question on margins from a longer-term perspective. I've had this discussion, I think, on the call with you earlier. But since you just finished your annual review, maybe you can shed some more light on it. Your margin aspiration near term of 20%, when I take it line by line and compare your businesses with your competition, let's say, in the case of Oral Care with Colgate in the case of health care with RX companies, et cetera, your margins seem very, very low. Most of these companies in India are now trading at -- now reporting margins which are in the mid-20s. I understand you've got a beverage portfolio, but you also have a very large health care portfolio, which should offset those margins. What are your thoughts on margin expansion from a long-term perspective, as in the next 3 to 5 years?

Nillai, very valid question. And I think it's good that you keep reiterating this, it actually puts more discipline in our minds also to inch up the margins. So long term, we know that there is a pharmaceutical business that we take business from, that's our source of business and there, the margin profiles are much higher as compare to what margins we have and that's why we drill the advocacy vertical of going to the doctor and they were advocating our brand. But still it is slower, it's going to take time. So to your point, that's a more long-term margin improvement that we're doing. We have driven the business of baby care, skin care and also our general in the doctor. So it's only INR 120 crores for us. So gradually, slowly, as we put more products there, we'll be able to get better margins out of that. So if I compare my pharma business, which is going to doctors, I make a 70% margin as compared to the health care, where I make 20% to 50% margin, to your point. The more products are put on that bridge of advocacy, the more margins are in [indiscernible]. So the -- but the scale of the business takes time to build. So long term, we have the same path and on the same thought process of building margins on back of OTC, RX, et cetera, but they are time taking business like before I came on board, 2, 3 years back, we only used to go to Ayurvedic doctors. And Ayurvedic doctors, again, commoditized the play of Churnas and therefore, you can't command on premiums. Since we are now going to allopathic doctors, there is a huge upside on the margins that one can get. And in vast categories like Oral Care and Hair Care, we were busy fighting with our competitors and gaining shares on back of pricing. There's a huge opportunity to premiumize that. In Dabur Red, for example, sensitive is at much higher margin, can we launched Dabur Red Sensitive, answer is, absolutely, there's a category is doing well on the back of GST, there is an answer. There is no natural play there, and Dabur has a right to win in that market segment, we can do that. In Ayurveda, Ayurvedic hair oils like Indulekha, where again, Dabur has the right to win, has got a higher margin profile in mass categories also. So there also, there is a vertical, so we are thinking on those lines and working on it.

Just to be clear, Mohit, when you benchmark your different categories with the competition. In some cases, you are the #1 player, but elsewhere, when you benchmark, are you saying that the margins that those categories make for Dabur are similar -- broadly similar to what competition is able to deliver and report? And the only difference at this point in time is the fact that the health care business is probably making the 50% margin, which can be higher from a long-term perspective. Is that the synopsis of your answer?

Yes, also the digital category we're operating in, our gross margin profile is pretty similar to our competitors. So it is similar, we've done the benchmarking. And we've not done the benchmarking. We've taken the big 4 consultants to help us through benchmarking like BCG, McKinsey have done their benchmarking for us and assured on the gross margin profile remains the same. But sometimes what happens is, we are only 15%, 16% market share. As we scale up the business, we'll be able to leverage the overheads and therefore it will flow down to the operating margin. Because overheads are higher, that's why operating margin will be lower, but the gross margin, profile is very similar. In Oral Care if you see our gross margin profile will be very similar. If there are areas in which gross margin is lower, we are continuously working on optimizing our formulation and packaging to ensure that our gross margins are there because we are not compromising on price. Our price is actually higher or back over differentiation of Natural and our cost is also benchmarked to competition. But the only area where we suffer is, because of the lower scale, we are now able to leverage our overheads, but with scale it is come in because of the diversified to the various portfolio that Dabur has here.

Next question is from the line of Priyank Chheda from Vallum Capital.

Sir, my question is on the progress, if you can share on the 3 new categories within health care that we had shared while we met last year in your annual [indiscernible], which is baby care, free market within baby care herbal and then the large segment of [ therapeutics ]. So a broader progress within these 3 categories would be helpful.

So on baby care, last year, we had turnover INR 20 crores and this year, we are talking of turnover of almost INR 40 crores, INR 40 crores, INR 45 crores of baby care turnover. That's the update as well as Baby Care. Baby Care is being sold through both e-commerce for us and also through therapeutics portfolio. The second category we talked about is health juices, health juices, we did a turnover of about INR 20 crores. We've done INR 26 crores in the current year. On tea, we have test marketed it because it's a very competitive category, while we have a right to win but the proposition was not very differentiated. We have improved our formulation and we got INR 12.6 crores turnover as far as tea is concerned. That's on the Health Care category. We had also done Ghee where the margins were lower. So therefore, we were not too much pushing it, but we have improved our market now on back of scale, and we have delivered INR 24 crore sale on back of Ghee also. So these are the core poor updates on the Health Care portfolio. As far as HPC is concerned, we had built Bae Fresh. Bae Fresh I told you has done around INR 40 crores for us. Gel Pocket, extending the Odonil into Gel Pocket is around INR 25 crores. And LVP is around INR 12 crores for us. So Odomos was getting extended to LVP. Extending our power brands to power platforms and increasing our total addressable market. That's -- and our drinks portfolio is INR 200 crores, which we mentioned -- this year, we've not grown on drinks because of the season issue, but I hope next year, this will really inch up for us.

Right. And how are we tracking the therapeutics proposition that we were supposed to take from Ayurvedic doctors to allopathic doctors, that sales of the portfolio which is ready and Dabur, how do we track that progress?

So we have an advocacy vertical and [indiscernible] is the one who is driving it. We've done a turnover of INR 120-odd crores, all the therapeutic vertical, it's more advocacy with the doctors and after advocacy, we go to the chemist outlets in the vicinity, and that's how we sell. We got a turnover of INR 120 crores, but more importantly, it's more qualitative that we are reaching out to 1.1 lakh doctors as compared to 20,000 customers I said we had earlier. So this has moved up to 1.1 lakh and it's pediatricians, dermatologists, it's gynecologists. So it's women, baby and the geriatric. So we are focusing on these 3 -- and pediatrics to start with.

In Baby Care, we had targeted a subsegment for hygiene, where in diapers and wipes were one of the products to be launched, any progress or update on that?

Yes. So we have launched Dabur Super Pants which is baby diaper sort of, and that's done very well -- grown almost, last time it wasn't there. How much is it? We saw to turnover, I think around INR 10 crores, INR 11 crores of Baby Pants alone, which is doing very well e-commerce and categories very lowly penetrated and it's increasing. Yes.

Okay, okay. And just a last question on the overall premiumization portfolio. What would be the premiumization portfolio and how are we tracking that and the growth that we saw in FY '24.

Yes. So the way we look at premiumization is, we look at the average pricing of the category and 20% premium, than the average category price [indiscernible] price is what we categorize as the premium brand, 18% of our portfolio is premiumization portfolio. We are tracking it on a yearly basis. And we see premium brands, we are tracking it on all power brands and giving targets to the team to increase premiumization year-on-year. So it's a very objective exercise of tracking and increasing the premium portfolio, which is more driven from modern trade and e-commerce which contributed to 20% of the business. Besides doing premiumization internally on power brands, we are also are doing joint business planning with Reliance and Zepto and e-commerce players also and planning premiumization wherever gaps are there as well their demand. Just to give you some examples of that, we are building apple cider vinegar with one platform. So now this is all premiumization, but we've done JVP with Reliance and Reliance wants to be the rose brand on their own. So Reliance and Dabur collaborated together. We've introduced Gulabari soaps, only in Reliance, that itself is a turnover of INR 12 crores, only on back of Reliance alone. So that is another innovation stream that we have started with them. Yes. But this is not really premiumization, just giving you an example.

And what would be the new product contribution, new product NPD sales and contribution in FY '24?

3.5% but it varies differently, vertical-wise. For food's business, it is 4.6%; 2% for HPC and around 4% for health care also.

As there are no further questions, I would now like to hand the conference over to Ms. Gagan Ahluwalia for closing comments. Over to you.

Thank you. I thank all the participants for joining today's earnings call. The webcast and [indiscernible] transcript will be available on our website. Thank you, and have a great evening ahead.

On behalf of Dabur India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.