A readjustment in focus, streamlining of distribution, and reduction in the wage bill has helped Dabur India turn Balsara Home Products around. Balsara became Dabur's subsidiary with effect from April 1 this year.
The Balsara range has yielded a profit of Rs 1.1 crore (Rs 11 million) for the first quarter of this financial year, against a loss in the corresponding quarter of last year, and the company's own internal assessment that it will take about a year to break even.
The turnover of the subsidiary, in this period, has jumped 52 per cent from Rs 28.5 crore (Rs 285 million) to Rs 43.3 crore (Rs 433 million). Dabur, with the help of Accenture, started working on a plan to revive Balsara even before it was actually acquired.
"Our diagnosis said their focus was not right. They were not deploying their resources in the right manner," Dabur India's group director PD Narang told Business Standard. Once acquired, Dabur lost little time in eliminating most of Balsara's distributors. Of the 500, only a few dozen were retained.
The rest of the business was handed over to Dabur's own distributors, whose number is close to 2,000.
The addition of the Balsara business gave Dabur's distributors a higher scale. At the same time, this put more bargaining power in Dabur's hands in negotiating a reduction in distributors' margins as well as in making its purchases. Some of Balsara's suppliers were eliminated. The change in distribution also increased the penetration of Balsara's products.
In human resources, only about 150 of Balsara's 350 employees stayed with the integrated company, leading to a reduction in the wage bill of the subsidiary by a whopping 60 per cent. Other overheads related to a high staff strength, too, came down.
Dabur leveraged its higher scale to improve Balsara's advertising. "We paid only about one-fifth of what they were paying to the (television) channels," said Narang.
Simultaneously, the advertising spend on the Balsara range was increased to 20 per cent of the turnover, up from 14-15 per cent earlier. This, coupled with the reduced rates, increased the visibility of Balsara's advertising manifold.