Dabur's international business stands at around Rs 380 crore (Rs 3.8 billion), out of which Nepal accounts for Rs 40 crore (Rs 400 million), while Pakistan contributes around Rs 10-12 crore (Rs 100-120 million).
Dabur is in the process of setting up a manufacturing facility in Pakistan which will start functioning from the third quarter of the current fiscal.
"What we are doing in Pakistan is to have a simple packing operation first for packaging and assembling the products shipped into Pakistan and later evolve it to a fully functional manufacturing unit," Sunil Duggal, CEO, Dabur India, told Business Standard. Bulk products will be shipped out of Dubai and other markets and will be assembled at the new facility in Pakistan.
Last year Dabur saw flat sales in Pakistan largely due to political instability and the change in the import policy which led to higher duties, which in turn impacted both revenue and margins.
"This year while the margin comparison still remains, we see stability come in and hence we will see much better topline growth," Duggal said. At present, a range of Dabur products, including cosmetics and some medicines, are imported by Pakistan mainly from Dubai.
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On the other hand, its subsidiary Dabur Nepal has been losing production days due to the Maoist unrest in Nepal. "We saw at least 21 days of lost production within the first quarter this year and it has immense downstream consequences in terms of product availability," Duggal said.
Dabur's Nepal manufacturing facility is largely a juice factory, running full capacity, and sources the raw material from distant locations like Brazil and Norway. Any dislocation in supply chain takes at least 2-3 months to restore operations.
"The profitability of our Nepal plant is very high as is the capital investment involved. Thus, we haven't been able to find an alternative to Nepal," Duggal said. It has raised the bar in terms of inventories to deal with lost production days.
"Even if we are less efficient in terms of our inventories, we will build additional capacities to deal with disruption," Duggal said. The company will take up the present 21-day raw and packaging material inventory time to 35 days. While this may increase the cost of production, Dabur does not wish to compromise on market share and consumer confidence.
However, the bulk of Dabur's international business comes from the GCC (Gulf Cooperation Council) countries and Africa.
Sales of Dabur products in GCC region have been growing at around 30 per cent year-on-year led by higher pricing power and increased consumer offtakes, while sales in the African markets more than doubled during the quarter, led by strong growth in Nigeria. The international business grew by 25.5 per cent last year.