Dabur India on Tuesday said that heavy rain and floods in parts of the country impacted out-of-home consumption and consumer offtake in September quarter. This was even as demand trends were witnessing some improvement. In its Q2 FY25 quarterly preview, the FMCG major said it expects to post “a mid-single-digit decline” in consolidated revenue due to lower primary sales as it is taking measures to correct distributor inventory levels in the general trade (GT) channel.
The company said in the last few quarters it has seen “disproportionately” higher growth in organised channels of modern trade, e-commerce and quick commerce. This has led to increase in inventory levels in the GT channel impacting ROI of the distributors.
Strategic decision
“The company has taken an important strategic decision to correct distributor inventory in the GT channel and improve their ROI. This proactive step, while leading to a temporary decline in toplines, is essential for the long-term health and hygiene of our business,” Dabur India said in a regulatory filing.
“On account of this correction, the company is expected to post a mid-single-digit in consolidated revenue for the quarter,” it stated. However, the company said that its international business is expected to record “double-digit constant currency growth” in top line. It added that Badshah Masala business also grew in double-digits during the quarter.
The company’s FMCG portfolio includes Dabur Chyawanprash, Honey, Honitus, Pudin Hara, Lal Tail, Amla, Red Paste and Real.
Revive revenue
Dabur India also noted that due to “lower primary sales”, its profitability will be impacted during the quarter. “Operating margin for the quarter is expected to decline in the range of mid to high teens due to deleverage and continued investments brands,” it stated.
The company emphasised that the “corrective step” is critical to strengthen the GT channel and enhance efficiency and growth, going forward. “By streamlining the GT channel and with the strong growth momentum in alternate channels, we expect revenue growth to revive from October 2024,” it added.
“We will continue to invest strongly in marketing and media initiative, building distribution infrastructure and enhancing our back-end capability,” Dabur India said.