Dabur India Ltd (DABUR) Q3 FY22 Earnings Concall Transcript

Dabur India Limited (NSE: DABUR) Q3 FY22 Earnings Concall dated Feb. 03, 2022

Corporate Participants:

Gagan Ahluwalia — Senior General Manager of Corporate Affairs

Mohit Malhotra — Chief Executive Officer

Ankush Jain — Chief Financial Officer and Joint Chief Risk Officer

Analysts:

Abneesh Roy — Edelweiss Securities Limited — Analyst

Manoj Menon — ICICI Securities — Analyst

Avi Mehta — Macquarie Research — Analyst

Kunal Vora — BNP Paribas — Analyst

Prakash Kapadia — Anived Portfolio — Analyst

Arnab Mitra — Credit Suisse — Analyst

Shirish Pardeshi — Centrum Broking Limited — Analyst

Percy Panthaki — IIFL Research — Analyst

Latika Chopra — JPMorgan — Analyst

Kaushik Poddar — KB Capital — Analyst

Krishnan Sambamoorthy — Motilal Oswal — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q3 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, ma’am.

Gagan Ahluwalia — Senior General Manager of Corporate Affairs

Thank you. Good morning, ladies and gentlemen. On behalf of the management of Dabur India Limited, I welcome you to the earnings call for the quarter and nine months ended 31st December 2021. Present here with me are Mr. Mohit Malhotra, Chief Executive Officer; Mr. Ankush Jain, CFO; Mr. Adarsh Sharma, Executive Director, Sales; and Mr. Ashok Jain, EVP, Finance and Company Secretary. We will begin with an overview by Mr. Mohit Malhotra, followed by a Q&A session. I now hand over to Mohit.

Mohit Malhotra — Chief Executive Officer

Thank you, Gagan madam. Thank you all, and good morning, ladies and gentlemen. Thank you for joining us today. At the outset, I would like to convey my best wishes to you and your families for a new year. I also hope that you and your loved ones are staying safe and healthy during this wave three of the pandemic. The operating environment in quarter three financial year ’22 has been quite challenging with economic indicators becoming weak and unprecedented inflation impacting the input costs across the portfolio. In such an environment, strong execution with the Dabur team has resulted in the highest-ever consolidated revenue from operations of INR2,942 crores, with a growth of 7.8% versus last year. This is on a high base of 16% last year and brings us to the CAGR of around 11.8%. Consolidated profit operating profit increased by 9.3% despite unprecedented inflation across categories. Profit before tax saw a growth of 10% ahead of the top line. Our profit after tax crossed INR500 crores for the second time in a row, reaching INR503 crores during the quarter. Our strategy of focusing on market share gains continues to yield great results for the business. As a result, 100% of the portfolio saw market share gains during the quarter. In terms of the categories, food and beverage business posted a stellar growth of 38%. The juices and nectars market continue to witness a good recovery, and we have outperformed the industry, leading to a market share gain of 540 basis points during the quarter.

This is further bolstered by the recent launches of Real Koolerz, Real Fizzin, Real Frappe which have helped expand the total addressable market of our beverage portfolio. The food business under the Hommade brand also performed very well, with a growth of 26.4% driven by portfolio expansion and innovation. It is well poised to cross 100 crores for the year. Our Home and Personal Care portfolio performed very well with 8.4% growth on a high base of 16%, driven by good momentum across all subsegments of HPC. The Toothpaste portfolio posted industry-leading growth of 8.1% in the quarter despite a high base leading to a 2-year CAGR of 18%. For the seventh quarter in a row, Red Toothpaste, our flagship brand, posted a double-digit growth, riding on its strong Ayurvedic heritage in the consumer pool. Our market share in toothpaste segment increased by 50 basis points and is on track to becoming the number two company in this category. Hair Oils reported a growth of 6.1%, leading to a 2-year CAGR of 8.8%. Our market shares in the overall hair oil category improved by 90 basis points. Even in the subsegments of perfumed oils and coconut oils, we have seen strong market share gains driven by marketing investments and distribution expansion. Our coconut oil brand, Anmol, has gained number two position in the pure coconut oil category. Shampoos performed very well in the quarter and recorded a growth of 21.2%. Our market shares in shampoo increased by 40 bps during the quarter. The salience of bottles continues to see an uptrend and was around 20% during the quarter, indicating a strong traction in the urban markets for our products. Recently, new product, Vatika Ayurvedic Shampoo continues to exhibit a strong trajectory on back of good consumer acceptance. Home Care reported a strong growth of 19%, driven by double-digit growth across Odonil and Odomos franchises. Odonil reported an increase in market share of 50 basis points and Odomos increased market share by 40 basis points. Skin Care portfolio witnessed a robust growth of 20%, with good traction in all the three brands, Fem, Oxy and Gulabari. We have entered the face wash category recently, and the face washes are showing good early signs. Health care portfolio reported a marginal decline on a very high base of 28% last year. Despite that, our 2-year CAGR remains in strong double digit for the business. Health supplements, including Chyawanprash and Honey posted double-digit 2-year CAGR, and brands continued to be salient in the consumer’s mind. This was reflected in strong uptick in market shares which in Chyawanprash category went up by 200 basis points and in Honey category went up by 180 basis points. We continue to be undisputed market leader in the Honey market with strong presence in all channels, e-commerce, modern trade and general trade. The digestive portfolio registered a 12.2% growth on back of improvement in mobility and out-of-home consumption seen during the quarter. While COVID contextual OTC product saw some moderation, Honitus and Shilajit saw strong growth. Our Ethical portfolio posted 8.3% growth.

Among channels, we witnessed continued recovery in modern trade in quarter three with growth in mid-teens. Institutional business also exhibited a good turnaround. E-commerce business was slightly impacted on account of changes in the business model of the platform but continues to contribute around 6% to 7% of our business. Our rural growth was ahead of the urban growth by around 500 bps, mainly on account of expansion of our reach and infrastructure in rural. International business recorded a constant currency growth of 8.7%. Egypt market grew by 13% and the Namaste business posted a growth close to 20%. Turkey business was impacted by currency depreciation, but saw mid-teen growth of 14% in constant currency. Nepal business performed well with a growth of 17.3%. Overall, our business continues to be on a good trajectory with increase in market shares across 100% of the portfolio. Category volume declines as shown by the syndicated data, and inflation continue to be a cause of concern. But our focus on brand building, distribution expansion, innovation, efficiency enhancement, organization capability enhancement and ESG focus should hold us in good stead in the future. With this, I bring my address to a close, and open to Q&A. Thank you very much.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abneesh Roy from Edelweiss. Please go ahead.

Abneesh Roy — Edelweiss Securities Limited — Analyst

Yes, thanks. My first question is on Turkey business. So Turkish currency lira was down 44% last year and was the worst emerging market currency. 14% constant currency growth is good, but wanted to understand what are the changes in competition in that market in terms of localization and input prices, so imported quantum? Any changes you have done in that market?

Mohit Malhotra — Chief Executive Officer

Hi, Abneesh. Good morning. So in Turkey, what happened, there’s been a currency depreciation like you rightly said, it’s around 40%. Our entire raw material and packaging material, which we are using in Turkey, it’s all indigenized. So there’s hardly any element which is being imported from outside that will get impacted.

That said, whatever base raw materials like SLES, etc., that is coming into Turkey, because Turkey doesn’t produce on its own. So that is in dollar-denominated and which gets impacted by the currency and which has led to some sort of gross margin contraction in the Turkey market. So that is the cause of concern, which is there in Turkey on account of currency depreciation.

So — but what we have done in Turkey is, we are trying to put focus on our export sales from Turkey to outside, to the U.S. and to the other markets like MENA and the CIS market. So export as a percentage of Turkey business has gone up, which is all dollar-denominated, so which kind of compensates for the currency translation losses and the losses that we have on account of depreciation.

Abneesh Roy — Edelweiss Securities Limited — Analyst

Sure. My second question is on your pure hubs, a lot of new launches which you have done in Q3 and earlier also. So like amenity products, are these also indexed to the COVID waves? That’s one.

Second is, how do you plan to scale this up? Are you engaging with waves? Are you going to do a lot of mass media? So specifically Haldi, Amla, Tulsi and Giloy, for example. They’ll be very indexed to the COVID waves and will fall off when there is much lesser cases. So how do you balance between the portfolio, some products will be more structural, but some will be very linked to the COVID?

Mohit Malhotra — Chief Executive Officer

So I will just tell you, the penetration of health care and nutraceuticals in the country is very low. It’s sub 10% as compared to developed countries. The penetration is in the range of around 40%, 50% if you compare it with Southeast Asia and here. That said, the single herb market in India is roughly around 10,000 crores and we are lagging behind and a lot of other companies have taken a first-mover advantage ahead of us. So we have a lot of catching up to do here.

So we’ve introduced the single hub range last year. And we’ve got almost around five to six products in that range. We’re continuously improving or introducing our range, but we are doing it in a staggered manner one by one. So like in the current quarter, you saw in production of two new single herbs coming with the Shatavari for women’s health and arjuna for health care is what we introduced. But Himalaya and Patanjali are way ahead in the race in terms of the single herbs. And we are catching up and Dabur has the credibility and the heritage and the trust of the consumers, which will be taken into consideration. We’ll be launching products at a very fast pace.

The category size, as I told you, is around 10,000 crores. So — and we are hardly having a turnover of around three crores to four crores in this category by this new introduction. So the headroom and the space for us to grow is absolutely huge. And this is just not single herbs. Single herbs can be pivoted on ingredients or on benefits or also nutraceutical. So we are continuously working on the journey to work on innovations. Are they COVID contextual? Answer is yes, in the short term. But structurally, the market sizes are very big and the penetrations are lower in the country. So there’s a long-term head space for us to grow this business as health care for us.

As far as Amla, Giloy, Tulsi products that you talked about was concerned, yes, during COVID, there was a huge tailwind, and we had a huge growth. If you look at in the current quarter, because of the tailwind not being there, we have seen a little bit of compression in the turnover of these brands, which is drops and also juices, which had gone up by around 100% or 200% last year. So there has been some compression, but that has been more than compensated for the other parts of the portfolio.

Abneesh Roy — Edelweiss Securities Limited — Analyst

Sure. I had one question on the Real health chia seeds and pumpkin seeds. So how big is the market? Will — your focus will be essentially on the e-commerce and your earlier e-commerce kind of products like ghee and premium, say, mustard oil, etc? How have they done?

Mohit Malhotra — Chief Executive Officer

Right. So first of all, what we’ve done in the Real brand is the Real brand earlier was limited to only beverages of each. So now we have created three sub-brands under Real. One is called a fruit power, which is going to talk about fruit-linked beverages and anything to do with fruit. The second is called the milk power in which we launched the Frappe brand, and that’s the milk power, which is value-added dairies where we’ll get in. And the third vertical for us is going to be Real health. And this is a superfoods that we’ll be introducing under the Real health brand. And therefore, chia seeds and pumpkin seeds are the superfood seeds that we’ll be introducing here. They’re basically salty snacks that we are introducing and got into this category, it’s very big in size. So long term, we see and we want to grow the Real brand from a power brand to a power platform and get into foods category also and extend the franchise of Real into foods.

As far as the other parts that we introduced, coming to the second part of your question, which is the e-commerce-driven innovation. So digital native innovations are rampant. So if you look at the overall NPD ratio in the company is around 2.6 — 3.6% in the current quarter. But in e-commerce space, it is in the range of around 10%. So we are very well geared or poised to exit at a rate of around 100-odd crores for NPD only in the e-commerce or the digital space. So we will end up at around 60, 70 crores broadly. But next full year, I think we should be crossing around 100 crore level on the NPD of the digital native brands for e-commerce space. And on ghee and mustard oil, it’s doing exceedingly well. And for the sake of confidentiality, I’ll not disclose the numbers yet, but our mustard oil has got very good traction on e-commerce, and we are now selectively rolling it out in modern trade also and so applies with our ghee also. So we introduced cow ghee and now we’ll be doing extensions into other value-added ghees like A2 ghee etc. there. It’s a little margin dilutive to our business, but the category size is so big that the scale more than compensates in terms of the absolute gross margins that we get out here.

Abneesh Roy — Edelweiss Securities Limited — Analyst

And last quick question. So in beverages, your market share has improved 520 bps. Is this a Nielsen data collection issue in the base quarter? Whom have you gained market share? Is it Pepsi? And you have expanded the TAM here. So which are the new products in beverages where you have the highest confidence?

Mohit Malhotra — Chief Executive Officer

Right, first, I’ll ask — I’ll answer your second question first before I move to the market shares. The total addressable market for us, which was earlier around INR1,500 crores, in which we were around 64% market share has gone up to now around INR10,000 crores because we have expanded from juices and nectars to now drinks. So that is what is taking the total addressable market to INR10,000 crores in which our market share shrinks to around 10% level. So that’s how we are increasing the total. So if I look at the drinks portfolio, total coolers and also the PET bottle drinks that we’ve introduced and also Fizzin that we are adding. Again, we’ll be exiting the year at around INR100 crores of exit sales only on account of drinks. That’s why you see this kind of a growth. And this growth is not a hump. I think this growth will continue because the TAM has actually gone up to around six, seven times or even more 10 times the way we think.

In terms of market shares, Real has been taking market shares from its peers, which is ITC, which is RAW, B Natural and a lot of other localized companies also. And the market share gains come on account of our increasing market shares in modern trade. In modern trade, if you look at the overall market shares in juices and nectars segment is in the range of around 63.6%. But I think in modern trade, our market shares were very low almost in the range of around 30% to 40%. We were lagging behind in South of India. So we’ve gained substantially in South of India and also in West of India where modern trade is very high. And we’ve chipped away share from our competitors like B Natural who are very strong in modern trade. So our strategy very consistently is to gain shares in modern trade, which is lagging behind to GT. We are very strong in Northern geographies.

Now gradually, slowly, we are building the business in West, South and also the Eastern geographies also, and the penetration of juices being higher in the South. And also in South, we are very low in 200 ml packs. So we’ve — with the introduction of INR10 price point, we are gaining shares in the 200 ml and the INR10 price point segment also with the introduction of the Koolerz brand. As far as Nielsen is concerned, I don’t think there’s any problem in the Nielsen data. We are subscribing to the Nielsen data, and we are seeing these market share gains in line with our gains in primary and secondary, it falls in place. The category, as far as Nielsen is concerned, last year declined by around 5%, 6% on back of 5%, 6% decline of the category. The category is growing by 19%. Compared to the 19% category growth, we’ve seen our growth in the range of around 38% to 40% in juices, and they were gaining share from ITC, Pepsi and other smaller players.

Abneesh Roy — Edelweiss Securities Limited — Analyst

So, that’

Mohit Malhotra — Chief Executive Officer

Thank you, Abneesh.s very helpful. That was from my side. Thank you.

Operator

Thank you. Next question is from the line of Manoj from ICICI Securities. Please go ahead.

Manoj Menon — ICICI Securities — Analyst

Hi, Mohit and team, a very pleasing performance in the market context. So, good one and good luck. Sir, two questions and then maybe a couple of ones, if I may, after that. So one, Mohit, over the long period of time, when I look at the pricing, it is, let’s say, this quarter, 7% revenue, 2% volume. So 5% is price and mix. 5% is a reasonably high number versus the trajectory what I’ve actually seen in Dabur over a long period of time. I understand that these are exceptional times, but then I’ve observed earlier from a company’s behavior point of view, there’s a reasonable amount of reluctance. I don’t want to use the word lack of confidence, but reluctance, given the rural exposure, etc. Is there any change in thought on pricing as a vector for growth? Or let’s say if you could talk a bit more about, let’s say, revenue management linkages to pricing, some top-down thought process here with the medium-term objective. That’s question number one.

Mohit Malhotra — Chief Executive Officer

Right, so Manoj, thank you very much for your kind words. And first thing on the pricing front, I think one major priority of the company is to not let the operating margin slip by. So therefore, whatever inflation that we have, we want to pass it on to the consumers or through Samriddhi and the cost saving benefits at least absorbed, not to have the gross margin split and that’s what you’ve seen in the current quarter. Our operating margins have actually gone up by 30 bps despite the inflation. There’s some optimization on advertising, which has happened and — but a lot has been passed to the consumer in terms of 5%. I don’t say that there is any reluctance. We look at the demand situation, the consumption situation in the market, the competitive intensity and the channel mix before deciding the price increases. So if you look at the price increases, what we’ve done, we’ve got three buckets of business, which is the foods business, HC business, health care business and the Personal Care business. The highest competitive intensity is in our Personal Care business.

And if I have to bifurcate my Personal Care business also, if the competitive intensity is more only in hair oils. So in hair oils, we’ve let up in terms of taking price increases, and we’ve been very cautious and circumspect before taking price increases because we don’t want to compromise on the market share gains, which is happening in all the subsegments of hair oils. So we have taken price increases, but the inflation is huge. Inflation is — to an extent of raw material like which gets into there, with the hydrocarbon link is in the range of 50% plus, is the commodity price increases. And also packaging material, which is also linked hydrocarbon wise, PET bottles and all, there’s been a huge inflation hitting us. So we could not pass on this entire inflation to the consumer. So we have kind of — there’s been a gross margin contraction only in the Hair Oil business, which is 10% of the overall business of Dabur.

Now if you look at the other parts of Personal Care business, whether it’s Home Care, Skin Care, and Oral Care business, we’ve been able to offset the entire inflation through the price increases, and there is no cautious approach here because the market leader is taking the price increase, and so we take the price increases, which — there is no problem. Only hair oil issue is pinching. As far as the healthcare business is concerned, we have taken a 10% price increase in healthcare business because we set the pricing table — and we have taken the price increases there, be it Chyawanprash or Honey or Honitus or Pudin Hara. We have more than offset the inflation impact there. In Foods business also, while the inflation impact is not so much in our portfolio of beverages. We have taken a 1% to 2% price increases there also to compensate for the hair oil pack which is happening.

So I think our portfolio is pretty well diversified. If we face competitive intensity in one part of the portfolio, the other part of the portfolio comes in where we have the pricing power, and we are able to pass it on to the consumer. So I think that augers well for the future, while we don’t see any much abatement in inflation coming in the next two quarters. And hopefully, next fiscal year, the inflation pressures will moderate and as we lap over to the high basis also. And — but we don’t want to let up on our operating margins. I hope we didn’t do it. As far as NRN is concerned, net revenue we are going to be doing a very structured exercise, and we did it in past Samriddhi. Once again, we are looking at SQ-wise, channel-wise pricing across the board by getting engagement with some outside consultant and which I’ll talk about as and when we get into that kind of an engagement on NRN.

Manoj Menon — ICICI Securities — Analyst

Very clear. Very clear. Have a lot of follow-ups on this, which I’ll probably take it offline. Quickly, on the second question or clarification which I wanted from — again, from a medium-term point of view was let’s say, healthcare as a category without really getting into subsegments of it, including, let’s say, starting with the Chyawanprash and a lot of the existing products, including the medicines which you sell, etc. If you could help us understand because it’s been almost now close to 18-plus months of COVID and the consumer behavior changes, let’s say, creating a tailwind for this category, in general. If you could talk whatever you can disclose in a public forum in terms of the marketing side of it, let’s say, how much of your growth has actually come from, let’s say, heavy users, light users, what sort of penetration gains per cap increase. What are you — this is — point what I’m trying to understand here is, let’s say, these businesses have done well. Now, how do I really think about the growth rates for the medium term backed by some sort of statistical data? Thank you.

Mohit Malhotra — Chief Executive Officer

Right, so first of all, Manoj, health care category, I think we’re in a great space. If you look at our growth which in the current quarter and look at the CAGRs for two years, our health supplement business, the largest chunk of our health care business is chugging at a CAGR of 11.2. Don’t look at optical 8.2% depression happening in health supplement because it was on a very high base of around 40%, 45% growth, which happened on Chyawanprash and Honey. But for that, 2-year CAGR, 11.2%. Our digested portfolio backed by the Hajmola brand has grown by around 12.2%. And as mobility is improving and people have started going out, that is doing well, 12.2. Last year, we launched Chatcola brand and a huge innovation happening on that. And this year, we’ve launched LimCola. LimCola has been received very well in the marketplace. It’s a tasty digestive and the tasty digestive category is huge.

We are again increasing the TAM in the tasty digestive market and extending it to sprinklers and others. And as we speak, I’ll let the cat out of the bag. We’ve already launched Amla Candies under the Hajmola brand and — which is already around 100 to 200 crores brand established by Patanjali. So that has come in here. Our OTC portfolio is ex COVID contextual brand like health juices and health drops that we introduced is also having a 2-year CAGR of around 15.2%, has grown by 8% in the quarter. Our ethical business has grown by, again, 8% with a CAGR of around 15%. So overall, health care has again grown by around 11.4% CAGR for us, and we are in a good space. That is the 2-year CAGR for the quarter. If I compare it a little bit long term for you to understand the health of the business, our 2-year CAGR on health care business is around 18.6% around 20% on 9-year — 9-month basis, which is YTD, which is 18.6%, which is very healthy. And there is a growth in nine months by around 4.6% despite the high base in health supplement.

Now coming to a little big picture, which is a very long-term basis. If you look at the total market size of the health supplement business is again, is bigger, and we are expanding the total addressable market here. As I told you, the penetration levels are very low in health supplements. Just to give you some data and the numbers, the penetration of Chyawanprash which around two years back actually 4% is now in the range of around 8% and penetration have consistently been going up. If I look at Honey, also the penetration had gone up. But because of so many number of players actually coming in the market, the penetration of the market has shrunk a bit, but not to the extent when it was pre-COVID levels. It’s gone somewhere in between. So that’s why I’m not able to talk about the numbers so much because of the competitive intensity going high here. But the penetrations have gone down and the number of players have become higher in the honey category.

But that said, as the share of voice, but still, we are in the range of around very low double-digit kind of penetration levels in honey. And as the share of voice increases, number of players increase competitive intensity increase. The size of the pie will only increase. If I have to compare honey penetrations in India and compared to what honey penetration in the U.S., we are sitting at the 1/10 level of — for the honey penetration there. So there’s a huge potential, and Dabur is by far the market leader with around 50% market share across all platforms that we serve despite some claims by competitors that they’re one, but we are number one as far as Amazon and all platforms are concerned. And we’ve gained around 180 basis points market share here. So huge penetration gains possible in this category. And we’ve extended the honey equity into — more into cough and cold.

As you know that we launched Honey Cough & Cold now. And Honey is an adjuvant, which is used in medicines. So the potential and the scope and the headroom for growth in categories like Honey and Chyawanprash, in Chyawanprash we’ve extended Chyawanprash into tablets. So suddenly, immunity-led tablet market is very big. So — and Chyawanprash is now getting extended into powders and into granules. We’ve gone into MFD category. Chyawanprash was operating in a category which was sub around 500-odd crores. Now suddenly, you start operating in a category which is greater than 15,000 crores the moment you get into MFD. So therefore, that’s the way we look at the market size.

As far as ethical business is concerned, which is again a big business and the backbone or we say our core business, here, we have only 25% market share. So we are consistently gaining market share from other players. 75% is all smaller players, which are West and South and regional. So huge potential to grow here. In OTC, we operate in three big subsegments, which is Baby Care. In Baby Care, our market share is again sub-25%, and we’ve launched the baby care range, like you know, and we compete with J&J who’s the market leader here. So again, the potential of growth is huge, and our penetrations are going up.

Then the second space is where we operate in men’s health, where we have Shilajit, and we are extending products out there. The third space that we guys operate is in cough and cold where we have Honitus brand and Honitus is gaining market shares consistently. So OTC also a good space. So I think overall, health care is low penetrated, and our growth strides continue through innovation and also investment behind brands. And so that’s — I hope I’ve been able to answer your question in fair bit…

Manoj Menon — ICICI Securities — Analyst

Has been super helpful. Has been super helpful, very comprehensive. I’ve got a few follow-ups because it is so comprehensive, which I’ll take it offline. One last thing, and I’m going to come back in the queue, you have kind of started, let’s say, harnessing the, let’s say, the e-com opportunity by bringing some products from international. Is there a case for accelerating this? Because you already have, let’s say, the Skin Care portfolio, which you have built in the international portfolio, for example, right? I mean so are the — a lot of packaging innovation, which you’ve already done in international. The product looks truly very different versus what’s otherwise available in India. So there is a product angle there, there is a packaging angle there, etc., which you could really use internally, cross-pollination, right, if I may. So — or is it just that in the current prioritization because a lot of these things would actually need a lot of, let’s say, gestation investment. So how do we think about this as a vector for growth with a 3-year view?

Mohit Malhotra — Chief Executive Officer

Yes. So as an e-commerce the big future — have grown for us. And like I talked about cross-pollination opportunities definitely exists, and that’s a big growth vector for us. So our total NPD contribution on commerce is 10% as compared to the overall company, which is around 3.6%. Partly, it’s coming from international cross-pollination and partly coming from identifying categories undeserve in India and where we have a premiumization possibilities on e-commerce, where the ticket sizes are larger here. That’s why I told you that almost 100 crore exit rate will be our NPD contribution coming in from e-commerce.

Today e-commerce will be around 6%. The next four years, we are looking at this business becoming around 15% of our business and is doing very well and backed by innovations here and premiumization here and across different platforms, we’ll be rolling out, whether it’s a grocery platform for foods or it’s an Amazon platform, which is amenable to personal care or it’s a pharmacy platform or like 1mg and Netmeds. So it offers potential for growth across all the verticals of business, and we are working very closely. So not just international business, we also have a business like New U, where we are very strong on personal care. That also offers a good opportunity for cross-pollination here. So we are working on the same.

But we are a little mindful, Manoj, of the fact that we don’t put in products which are ahead of the curve because India market is still a little underpenetrated or uninvolved, underevolved as compared to the products which are there in the West like we have, we are market leaders in serums. We are market leaders in Hammam Zaith. We are market leaders in the new age shampoos. While we have launched Vatika Select range but the adoption by the consumer because all these no-nasties products while we put out there, and it’s acceptable by a few niche consumers. But mass acceptance is still a problem. So we are looking at it.

The opportunity exists, and it’s the timing of cross-pollinating it. It’s all there as part of our portfolio here, and we can any time cross-pollinate. And the investment requirements on e-comm and digital native brands when it is sold on a public platform like Amazon, etc., it’s fairly limited as compared to a mass-market launch. So that is a definite cradle for new products where we seed NPD. And if successful, then we roll it out in modern trade. So it’s a great playbook that we have established, and we are working on the same.

Manoj Menon — ICICI Securities — Analyst

Loud and clear. Good luck team.

Mohit Malhotra — Chief Executive Officer

Thanks, Manoj. Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Avi Mehta from Macquarie. Please go ahead.

Avi Mehta — Macquarie Research — Analyst

Hi, sir. Thanks for this and congratulations on the performance. Just one bit — I mean two questions. First, is there any further price flow-through that is expected or has taken in fourth quarter? Or would movement back to historical margins in the gross level, be more linked to moderation in commodity costs as we use other levers to maintain EBITDA in the near term?

Mohit Malhotra — Chief Executive Officer

Right. So Avi, a couple of levers for offsetting the inflation. Number one, we’ve taken price increases, second out of price increases in quarter three only, and there will be a flow-through impact which will happen in quarter four to exit market share, exit price increases impact will definitely be there in the quarter four. And our gross margins in quarter four will be better than what we see in the quarter three because of the flow-through impact coming in. But that said, the inflation impact is not mitigating. We are seeing continuous inflation despite a base of 4%, 5% inflation in last year. On top of that, we are again seeing a 4%, 5% inflation. So the company may have to take more price increases going forward. So one is the price increase, and we are mindful of, again, elasticity of demand playing out here with a price increase. So the second vector will be our Samriddhi savings and cost savings. Third vector will be leverage happening with the scale building on indirect and S&M overhead. So, all these factors will play out to try to take up the gross margin levels to the current year average at least for the next year, so that we don’t impinge upon our advertising for maintaining our operating margin. That’s the way we are looking at this, Avi.

Avi Mehta — Macquarie Research — Analyst

Okay. That’s clear. And just wanted to get your thoughts on the rural industry kind of demand. What in your view is driving this weakness? And any thoughts on when do you expect the pickup to happen? I can clearly read from your comments and please correct if I’m wrong, that we should be targeting stronger than industry growth because of distribution, but still would love to hear your thoughts on how do you see the macro playing out.

Mohit Malhotra — Chief Executive Officer

Right, I don’t know whether your question is about the macro or your question is about Dabur. Or is it both?

Avi Mehta — Macquarie Research — Analyst

It’s rural macro from your thought process? And do you expect this divergence to kind of sustain given we still have — that was broadly what I’m trying to understand.

Mohit Malhotra — Chief Executive Officer

Right. So what we see is, if you look at the macro and what the syndicated data actually tells us that rural demand is lower as compared to the urban demand. And we see a 10% growth in value happening in urban, whereas in rural is around 9%. So rural is flagging urban from a macro syndicated data that you see. But if you look at — and if you — this is the more value data, and it’s all price-driven. And if I convert this into volume, we find that in the current quarter what syndicated data tells me is that volume, rural is minus four as compared to urban, which is around flat as compared to last year. And this has been moderating, moderating quarter-after-quarter from first quarter, if you see. In first quarter, the total value growth in the entire — as far as the syndicated data is concerned, it was in the range of, I think, around 26%, and that’s come down to roughly around 10% now, and the volume is also substantially moderated. So that’s the macros.

But when you look at the Dabur business, now Dabur business is completely other way around. For us, rural is chugging ahead of urban. Our rural growth is around 7.5% as compared to urban growth, which is around 2.6% for us. So rural is definitely ahead and rural comes on 7.5% on a base of around 25% of last year. And urban also comes on a base of around 18% of last year. So for us, definitely, rural is belying the market trends, and that is because of our investments ahead of the curve on building rural infrastructure. Our village coverage has gone up from 55 to 88 as we speak. It’s ahead of the target that we set ourselves around 80,000. Our village-level entrepreneurs have gone up around 8,000 now, and we generated a sale of around INR13 crores out of that and YTD sales of around INR36 crores. So all that is over and above what the market is talking, and therefore, our rural growths are ahead of what the market is.

And from whatever government announcements that have come in post the budget, we feel that, that augurs very well for the rural FMCG space to actually pick up from here. We’ve seen MSP outlays going up and direct benefit transfers happening on account of MSPs directly to the paddy and the wheat farmers. That’s been working very well. There’s a capex investment increase of around 35%, and that will help generate better employment. MGNREGA enrollments are going up and the outlook of the government has gone down, but during the course of the year, they will increase, I’m sure the MGNREGA outlays also and behind a good harvest. I think that all augers very well for rural. It’s a matter of time. We see the gap between urban and rural already reducing from the first quarter to the third quarter, and it’s a matter of time before rural will pick up. And for us, around 46% of the business contribution is coming from rural. So we are pretty positive about rural and the rural business pickup is happening for us, yes.

Avi Mehta — Macquarie Research — Analyst

Perfect. Thank you very much. Thanks a lot. I’ll jump back in the queue.

Mohit Malhotra — Chief Executive Officer

Thanks.

Operator

Thank you. Next question is from Kunal Vora from BNP Paribas. Please go ahead.

Kunal Vora — BNP Paribas — Analyst

Yes. Thanks for the opportunity. First one, on seeds and nuts market, you currently have some niche products introduced, pumpkin seeds, chia seeds. Would you consider entering larger categories of trade such as dry fruit, which is largely an organized market?

Mohit Malhotra — Chief Executive Officer

Still, there is a work in progress happening, but yes, we are looking at a sub-brand of Real called Real Health, and we’ll get into most of the superfoods out there, which are more [Indecipherable]. So we are working on the same. For the sake of confidentiality, I’m not able to talk about it.

Kunal Vora — BNP Paribas — Analyst

Would these categories have lower margins, much lower margins? I understand that target market could be much larger, but — some of them will be commodity categories.

Mohit Malhotra — Chief Executive Officer

Not really. In chia seeds and this thing, our price point, this is a margin-accretive business for us. So our base margin in the Foods business is in the range around 46%, 47%. This is all higher and accretive of that. And the e-commerce space, so we are finding — these are premiumization initiatives for us.

Kunal Vora — BNP Paribas — Analyst

Sure, sure. Second one, on the 10,000 crore beverage market, what is the market share aspiration over the next three to five years? And like last — for 2022, predominantly in terms of growth, like what’s really driving it? I understand that you entered into new categories, how much are they contributing? And even if I look at the market itself, very strong growth, 18%, 19%, what’s driving the market growth in the beverage segment?

Mohit Malhotra — Chief Executive Officer

See the market growth is being driven by low basis of last year because there was a COVID situation and out-of-home consumption was impacted and also institutions, HoReCa, hotel channel, all that were impacted. So the base was very low. On back of a low base, now you are seeing the market growth of around 19%, which is coming in. As far as Dabur growth, which is two times of what the market growth is, is on back of NPDs, as you rightly said, by increasing the TAM. And that’s what we have done. And that I told you exit rate will be around INR100 crores, but the market size is huge. We will be around 10% market share in this huge category. And we have aspirations of taking it to around 20% going forward. That’s our aspiration. But gradually, slowly, we have built because the infrastructure requirements and the rural penetration requirements or the urban penetration requirements also different — which is different from juices and nectars where we are present in. So as we inch up our market share, we’ll be ramping up our infrastructure. And then we will grow. Today, we have a huge headspace in terms of our infrastructure in juices and nectars, which is being used for the drink space also. And we’ll be extending it. So we are changing our organization structure also a little bit in the company, and we are creating a different vertical for the Foods business to provide a thrust on building infrastructure and also building innovations as we speak, yes.

Kunal Vora — BNP Paribas — Analyst

Understood. Just one last question. Any thoughts on the PLI scheme and the benefits which you expect from that over the next few years?

Mohit Malhotra — Chief Executive Officer

Yes. So we applied for the PLI, and we’ve been fortunate to get the PLI approvals done. And there is roughly INR170 crores of benefit that we’ve got on back of our investment of INR550 crores which happened in the Indore plant from the juice line that we’ll bid up. This will shore up our margins by 2% to 3% long term. This benefit will get over a period of next five to seven years and as we are putting the investments. So around two to three notch up on the margins of the Foods business will be on account of PLI.

Kunal Vora — BNP Paribas — Analyst

Understood. That’s it from my side. Thank you, sir.

Mohit Malhotra — Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Akash Kapadia from Anived Portfolio Managers. Please go ahead.

Prakash Kapadia — Anived Portfolio — Analyst

Yes, hi. This is Prakash. Thanks for the opportunity. Two questions from my end. Baby products, now we have a wide range. So if you could comment what’s the game plan. Because there are 20 million-plus babies born in India. Lal Tail has been doing well as a brand, it has gained traction. And with some of these newer launches, can this portfolio become two times, three times in the next four, five years? And if you could comment on the current size, that will help. And secondly, on Chyawanprash we’ve launched some new variants Awaleha. So is it at a test marketing stage? What is the price difference to the base variant? If you could give some inputs that will help.

Mohit Malhotra — Chief Executive Officer

Right, so Baby Care, we have launched on e-commerce space. So it’s completely digitally native brand for us with Baby Care. We still haven’t rolled it out to modern trade. And so we are watching the progress, while it’s doing very well for us. And we’ve got good gains on Baby and it’s also margin accretive to our business. We are trying to complete the range, again, in Baby Care on the e-commerce space before we roll it out to selective modern trade. And so we are in no hurry to scale up this business. So we are waiting and watching, seeing, getting the consumer feedback and making improvements in our portfolio, and then we will be scaling it up. But the potential is absolutely huge like you rightly alluded to. So that’s how we are working. But we want to — Lal Tail is our power brand and a power brand which is only in the range of around INR100-odd crores. So we have a plan to take up rather this power brand from INR100 crores to a INR1,000 crore level. That’s our game plan for all our power brands going forward in long term. And that’s why this initiative of rolling out the entire Baby Care is because no company in Baby Care exists in isolation for a product format. So you have to be existing as a range. And this range has to be promoted with medical practitioners, and that’s how the entire credibility comes in with the consumer, and that’s the path that we’ll be working on, on Baby Care.

Prakash Kapadia — Anived Portfolio — Analyst

Sure, that’s clear. And on that Chyawanprash, how well are the — where are we in, is it test marketing, is it a premium product?

Mohit Malhotra — Chief Executive Officer

Okay. So Chyawanprash, we have launched an extension of Chyawanprash. Chyawanprash today sold under the OTC range for us and OTC, we reached out to around 2.75 lakh chemist outlets. And this vertical of the business is very different from the other vertical, which is Ethical business vertical, wherein we go to the Ayurvedic counter and sell our Ethical products. Because Chyawanprash moved from Ethical business to OTC business, today, Ethical business doesn’t have Chyawanprash available with them. So this Chyawanprash that we’ve introduced as excess Chyawanprash is basically a gate opener for Ethical business. And it’s for the prescription market and it’s much more premium as compared to what the existing Chyawanprash and will be sold through the medical practitioners and not through the advertising group. That’s why this new Chyawanprash is coming, which is the classical recipe from another classical text.

Prakash Kapadia — Anived Portfolio — Analyst

Okay, okay. And it will be what, 1.5 times to two times the base variant?

Mohit Malhotra — Chief Executive Officer

Around two times the base variant.

Prakash Kapadia — Anived Portfolio — Analyst

Understood. Thanks. I will join back.

Mohit Malhotra — Chief Executive Officer

Thanks for your questions.

Prakash Kapadia — Anived Portfolio — Analyst

Thank you.

Operator

Thank you. The next question is from Arnab Mitra from Credit Suisse. Please go ahead.

Arnab Mitra — Credit Suisse — Analyst

Yes. Hi, Mohit. Congratulations on a very good growth on the high base. My first question was on your food growth. So if I look at 2Q FY 2020, which is the last quarter before COVID, you had about a INR200 crore turnover in foods and beverages, which has now become INR300. So this growth, you mentioned about INR100 crores annualized is coming from the new products. So has the core nectar business also seen higher growth? Or is there some other categories which have also come in here, which have helped this INR100 crore addition over this two-year period.

Mohit Malhotra — Chief Executive Officer

So Arnab, as far as Foods business is concerned, our business has increased in market share. We’ve gained around 540 basis points in market share as far as food is concerned, and that market share gain is happening in the juice and nectar market. So in juice market also, wherein we have Activ brand and the nectar market, where we have one liter mixed fruit juices, so we basically gained market shares of 500 basis points, reaching up to around 63.4 market share, the highest ever in the core space of the nectars. To top it up, we have launched drinks, and in drinks, our gain in market share is very marginal because the category is so big around INR7,000 crores. So that is very marginal, therefore, I’m not talking about market share gains there. It’s core business market share that I’m talking about. So majority growth that you see happening at 38%, majority is coming out of our core business in which we are gaining market share, which I talked about earlier in modern trade, in regions we are not very strong, basically modern trade, where our national market share is around 63%, 64%, but our modern trade market shares are sub-50%. So there, we have increased market shares, which are much ahead of 500 basis points also on back of good tactical schemes, consumer promotions, and we’ve gained shares from our lead competitors, which is Trop or four which could be B Natural and others. So that’s on back of that. But that said, our future that we are looking at long term is entry of drinks in INR10 price point. And there, we are making big strides because that market is very big. And therefore, now we started internally looking at not just market shares in the juice and nectar space, but also in the drink space. And we are tracking that very well, and that’s got an excellent reception in the marketplace. Both our pet bottles and Coolers which are INR10 price point and Tetra Pak, and now we’ve gone into the fizz market also, which is a huge INR30,000 crore market wherein the share of throat will come from carbonated beverages, which is Cokes and Pepsis of the world.

Arnab Mitra — Credit Suisse — Analyst

Sure. Mohit, my second question actually related to this is this INR100 crore run rate that you have, as you mentioned, you’ve seen very good offtakes and there’s no challenge in offtakes in the market. So what is the constraint of growth here in the sense given the size of the category? Is it your own capacity? Or is it that you want to be at a slightly higher price point, so you will not play in the belly of the market? And therefore, how should we think of potential scale up from this INR100 crores as you go forward? Also if you could just talk about the distribution a bit in terms of how much of your existing direct reach actually is carrying any of these beverage products.

Mohit Malhotra — Chief Executive Officer

Right. So therefore, a couple of constraints here, Arnab. One is capacities. Today, we are looking at third-party manufacturing. So as the business scales up of drinks, we’ll be putting up own lines, and we’ve got a PLI benefit also in Indore Greenfield, wherein we are putting up two lines for the beverages also. This is both for Tetra Pak and also the drinks line. And as you know that the GSTs have gone up in aerated beverages. So that’s also been a little bit stumble that we’ve had, but we are taking up the case with the government, and there are big boys in the marketplace who are also lobbying with the government to reduce the GSTs on the aerated fruit beverages basically. And we are looking at setting up our own unit.

Still plans are early. I can’t talk about that, but we are looking at plans of setting up our own greenfield for the aerated beverages. That is as far as the capacity is concerned and augmenting capacity. But there’s sufficient capacity available in third-party. But the moment you do third-party, you have margin downside there. So therefore, eventually, as the business scales up, we have to bring it internal. As far as distribution is concerned, today, we are adding on the juice and nectar distribution. As the business scales up and as it is scaling up, the way we are seeing a very strong reception, we are building a separate network of distribution, which is the E&D distribution, which is completely different from the way the distribution of G&N is happening. So we are creating a separate vertical. We’ve actually created a separate vertical of food. As you know, there was a separate vertical. We are just scaling it up. The number of feet on street is going up. The infrastructure is being ramped up, and we have a different organization structure now to handle the Foods business going forward. So these are the two impediments that we see. But investment is no impediment from the company, whether it’s capex investment or advertising investment. Because this is more of an impulse purchase and you sell what is seen on the shelf. So it’s more impulse. It’s more point of sale, which is important and driven by more distribution here.

Arnab Mitra — Credit Suisse — Analyst

And just one last question on this. It was like Hommade, you have this target of potentially reaching a INR500 crore turnover. Do you have any such thought on the drinks business on what size it should be in three, four years’ time?

Mohit Malhotra — Chief Executive Officer

Yes. So we are looking at around 5% to 6% market share year’s gain in — by the way, I’m not talking about that. We are actually working on a vision exercise, and we have a separate forum wherein we talk about a little long term of around four to five years is what is our ambition on the same. But it’s a 5% gain in market share in drinks’ case. Yes. Thank you.

Arnab Mitra — Credit Suisse — Analyst

Okay. Thanks a lot. Thanks, all the best.

Operator

Thank you. Next question is from the line of Shirish Pardeshi from Centrum Capital. Please go ahead.

Shirish Pardeshi — Centrum Broking Limited — Analyst

Yes. Hi, Mohit. Good afternoon. Thanks for the opportunity and congratulations. Just two observations, when we look at the international business, we had a very strong growth. And on a high base, we have grown almost 8.7%. What I was trying to look at, again, when we look at quarter 4, our base growth was almost 21% ahead in constant currency. So in the current circumstances, how one should look at the growth in the international market? And maybe if you can spare a minute explaining how one should look at the margin, because largely, you have addressed these all issues in last two to three quarters.

Mohit Malhotra — Chief Executive Officer

Yes, Shirish. So IBD is in a good space, the way I see. We are looking at a long term, the full year growth of around double-digit growth rate happening in IBD, the different parts of our international businesses are faring at different rates. First, I’ll talk about our MENA region. Our MENA region was impacted by high inflation happening on back of the crude, where the Personal Care business was affected. There was a margin contraction which happened. But on back of some repeat benefits and others, we’ve been able to do a lot of mitigation out there, and the business has grown by around 5% to 6% in the MENA region.

The hard currency regions like North America has done very well with Namaste business has grown by around 20%. Our Turkey business totally has grown by 14% and Nepal business is doing exceedingly well, growing by around 17%. So overall, I think the business is on a good trajectory of growth, and double digit is what we are looking at as a long-term growth coming on back of, a, geography expansion, and b, our market share gains in the respective markets.

Our market shares in all the categories even in the MENA region are growing well for us. So as far as margins are concerned, we are working on the margins, and we are taking commensurate price increases in all the categories. You know the per capita incomes are higher. And we are at a low price point in most of the categories where we exist. So there is an opportunity on the headspace to take the price increases. And on back of that, we are looking at no margin contractions, but margin expansions. And we will see our operating margins only going up in the international business for us.

Shirish Pardeshi — Centrum Broking Limited — Analyst

Yes. Just a quick observation. On slide six, there is no mention of Bangladesh business. Is it by mistake or the Bangladesh business is not important for us?

Mohit Malhotra — Chief Executive Officer

No, no, Bangladesh business is very important for us. I think there’s a huge opportunity in Bangladesh. Bangladesh in the last quarter was impacted by COVID and impacted by some supply constraints, which happened in Bangladesh because of containers not being available. So it is short term. If you look at the CAGR growth of Bangladesh, it is in the high single digits. But we have some work to do in Bangladesh. That’s why you don’t see a mention out there.

Shirish Pardeshi — Centrum Broking Limited — Analyst

Okay. My second and last question, on the Oral Care, you did a fantastic job, and you mentioned that you gained 50 basis point market share. Especially, you’re saying that you’re targeting to number two. What is it that’s working? And this is product expansion into the mass natural segment, how big opportunity we can see in next two to three years? And if you can spell out what is the current exit market share in the month of December for Oral Care?

Mohit Malhotra — Chief Executive Officer

Yes, so our market share is in the range of around 16.4%. That’s the kind of market share that we have in Oral Care and red Toothpaste, our flagship brand, doing exceedingly well and gaining market shares. On Red Toothpaste, we saw a growth of around 11% happening on RTP, where the category was growing at around 6% odd. So we’ve gained market shares in the Oral Care space and much ahead of the lead player. Our herbal toothpaste that we’ve launched in South market and other markets is also doing exceedingly well for us. And we’ll be looking at launching premium variants on e-commerce space also and to ramp this up. But long term, we will look at a double-digit growth happening in Oral Care through our premiumization initiatives and other regional initiatives also.

Shirish Pardeshi — Centrum Broking Limited — Analyst

Thank you. You will continue surprising us.

Mohit Malhotra — Chief Executive Officer

I don’t know. I hope its on the positive side of the surprise.

Operator

Thank you. Our next question is from the line of Percy Panthaki from IIFL. Please go ahead.

Percy Panthaki — IIFL Research — Analyst

Hi. Good afternoon. I just wanted to understand on the interplay between your margins, ad spends, etcetera. So I see this quarter, while the EBITDA margin has expanded slightly, it is on the back of a double-digit cut Y-o-Y in the ad spend. And I’m assuming, given the innovation pipeline you have, you would need to increase the ad spend from the current level. So meanwhile, I think input costs have further inflated also. So with a higher ad spend and input costs also sort of inflating sequentially in Q4 versus Q3, how do we look at the EBITDA margins for the next quarter? And I mean, not particularly first about the quarter, but let’s say, for the entire full year FY ’23, do you think there is a risk that the Y-o-Y EBITDA margins will slip down?

Mohit Malhotra — Chief Executive Officer

So Percy, the way — first of all, let me tell you that we will not allow the operating margins to actually slip by. If you look at the YTD numbers, our EBITDA margins have actually remained where it is, and they’ve actually expanded by around 900 — 99 basis points marginal. So we’ve been able to maintain the EBITDA margins for the whole business. And that is what we will maintain going forward in the next quarter also to have a full year operating margins not to slip by in the business. That is something that we are working with, and we will not let that get compromised at all. So that said, how will we deliver that? Your question is. Our top line growth is the first priority for the business. So we want to drive top line on back of innovations, e-commerce, modern trade entry, our GTM expansion, rural. So therefore, when the top line is robust, then we’ll get a leverage across all the other heads. So therefore, we will look at our manpower expenses, leveraging. We will look at our treasury income coming in a bit. We will look at our indirect overhead, actually leveraging, and we are getting some repeat benefits also. Our variable cost, fixed cost, all that leveraging and helping and growing at a lesser rate than a top line and therefore, a positive leverage. That is the first contributor to our management of the margins.

The second is price increases across verticals wherein we are price leaders and we are the ones that control the pricing table. Like I alluded to, in health care, we’ve taken 10% price increase, the inflation may not be that much, but we’ve taken 10%. In Foods, we’ve taken price increases. In other parts rather than Hair Oils, we’ve taken in other parts of the HPC portfolio also we’ve taken price increases. And if need be, we’ll take another price increase, another round of price increase also to offset the inflation impact. And as far as advertising is concerned, we will continue to invest behind our power brands. And what you see is in advertising, optically, it may seem that we’ve reduced our advertising spend by 16%. But what is not visible to you is the trade spends and the consumer spends and the other spends. So if you look at that, our overall spends have remained flat. Overall ad accrual has remained flat. We have just taken out resources from one bucket and put into the other bucket and managed. So that’s the way. And in an inflationary environment, a little bit optimization of the advertising expenses can’t be ruled out. So that will happen going forward also. But we are not starving our power brand. So this power brand architecture is working very well. If you look at our power brands contribute around 60%, 70% of the business, there, our advertising expenses are in line with the top line growth. So we’ve not cut back on advertising expenditure in power brands. If you look at the YTD advertising growth for us, it has actually gone up by around 16%, around — the total advertising expenses have gone up by around 16%.

Ad accrued expense has gone up by 16%. So in one quarter, we have moderated. But overall, if you see it’s not. And if you look at, the absolute percentages are also in the range of around 8%. And this will remain around 7% to 8% advertising to top line ratio percentages also. So we are not cringing. We are continuously focusing on investing behind our power brands, investing behind our innovations and trying to draw out the cost from efficiencies in the business.

Percy Panthaki — IIFL Research — Analyst

Understood. Secondly, just wanted to understand your take on the price elasticity of demand for your products. So do you think that price increases will be accretive to the overall sales growth? Or do you think there will be some zero-sum game between price increase and volume growth, and therefore, the top line growth that you had projected, let’s say, six months ago, whatever you had budgeted, the same kind of top line growth will come through?

Mohit Malhotra — Chief Executive Officer

No, Percy. I must first tell you our volume growth for the whole year, if you look at the YTD nine months ending December, our volume growth has been 13% is the business the way you see. Our quarter volume growth is 2%. Now why this is 2%. While optically you see that volume is reduced sequentially, it’s not the case. My case sales or the tonnage growth in the business is around 11%. My cases have grown by 11% because my juices are sold more as compared to my other portfolio, that’s why you see a volume growth of around 2% here. So that’s the optical sort of volume growth because which is value weighted is what you see. As far as price elasticity…

Percy Panthaki — IIFL Research — Analyst

Mohit, my question was more looking forward for the next four, five quarters because still now in the nine months, we have not seen very high price hikes. We have seen maybe an average price hike of 4% or something for the nine months. But going ahead, as the price hikes pile on, how do you expect the equation between volume, price and value to play out? Is it sort of — do you think we will have to as analysts increase our overall top line growth estimates? Or do you think it will just be a rebalancing between price and volume?

Mohit Malhotra — Chief Executive Officer

No, no, I don’t think so. I think that’s a case of scenario of a market leader. If you look at our price increases, our price increases are happening in health care. Health care is relatively inelastic to price increases and people buy a cough syrup irrespective of it going up INR up or down. So it’s pretty inelastic health care portfolio, which is 30%. In another 20% of our portfolio, which is Foods business, again, we are market leaders, and there also prices and we’ve gone into the drinks market as well. I don’t think there’s a price issue because we are into taking market shares. And in Personal Care also, we are looking at our volume gains coming on back of market share increases. Not really as a price leader that if I take up the prices and the elasticity and will become a zero-sum game and the volumes will actually shrink. But yes, we have to be mindful of the category growth rates, and we will continue to win in the marketplace and grow our business higher than the category growth by gaining market share. And that’s how you’ve seen in the current quarter the business has happened and that’s how we’ve been doing in the past couple of quarters, and that’s a journey that will be reversing going forward.

Percy Panthaki — IIFL Research — Analyst

Understood. One last quick question, if I might squeeze in. In the last couple of years, we have seen a really sort of a revolution in the BPC space in India in terms of online brands, Nykaa, Purplle, Myntra, everyone getting into this and this space premium BPC is really exploding. And I think we have a gap there in terms of our product portfolio. And I think we have a clear sort of right to win in terms of introducing natural ingredient based or Ayurvedic-based skin care or rather overall BPC kind of brand. What are your thoughts on that?

Mohit Malhotra — Chief Executive Officer

Sorry, did you mention D2C or did you mention BPC?

Percy Panthaki — IIFL Research — Analyst

BPC, beauty and personal care. Something like skin care or some related products to beauty and personal care is where I think — I know we have a small participation through Gulabari and Fem, but that’s not really fully capitalizing the market opportunity that has presented in the last two to three years. It’s really exploded.

Mohit Malhotra — Chief Executive Officer

So you’re right, Percy. Absolutely rightly alluded. And we are very conscious and cognizant of this opportunity, which is coming up, especially for the digital native and for the e-commerce platforms, and we are working on the same as we speak and working very aggressively, and we are not just open to organic, we are working on organic entries, but also we are open to inorganic plays here. And that’s why we’ve a war chest of around INR5,500 crores kept in our balance sheet for that purpose because it’s a quick ramp-up through inorganic and there are a lot of start-ups which are available.

As and when we see a right valuation and more synergistic target, we’ll get into that and ramp up BPC space through that. And we’ve evaluated some brands also. But unfortunately, we’ve not been able to get all through. So we are working on that space. And also, there is an organic entry being planned because one thing is that in this space, we have existing brands and existing brands have got their extendability issues, like you said, Fem and Gulabari, but a lot of work needs to happen. So the team is already on it and conscious of this opportunity.

Percy Panthaki — IIFL Research — Analyst

Thank you and all the best.

Mohit Malhotra — Chief Executive Officer

Thank you, Percy. Thanks.

Operator

Thank you. The next question is from Latika Chopra from JPMorgan. Please go ahead.

Latika Chopra — JPMorgan — Analyst

Yeah. Thank you. Hi, Mohit, probably extending a little bit from what are the prior questions on your growth expectations on top line for the next year. Considering you said a large chunk of your revenues or a significant part will relatively be inelastic towards price. And you always kind of targeted a high single-digit volume growth for the business overall. So are we putting in a case that next year, probably we are looking more at a mid-teens kind of revenue growth considering pricing growth is going to be more like 4%, 5%, 6% given the kind of price increases you’ve undertaken so far?

Mohit Malhotra — Chief Executive Officer

Right. So Latika, we’re still in the process of creating our vision exercise for next four years to come. I think the work is already in progress, and I can’t really talk about the numbers for next year. But yes, for the current year, definitely, a double-digit volume growth and a double-digit value growth is what we are — we had targeted and that’s what will be exceeding our targets also. So in the current year, definitely, it’s a double-digit volume and value and for the full year basis. Now for next year, the vision exercise is underway, and we’ll talk about the numbers as the vision document is created for us.

Latika Chopra — JPMorgan — Analyst

Sure. The second bit that I wanted to check was, there’s a lot of product portfolio expansion by Dabur over the last two years. Is it possible for you to share what is the total SKU size for the company today versus what it was two years ago? And I remember, if I’m not wrong, you mentioned that the share of NPDs in channels, excluding e-commerce, is 3.6%. So could you — could you elaborate how we define this entity? Is it like products introduced over the last one year or two year or three years?

Mohit Malhotra — Chief Executive Officer

Right, so the way we see is that innovation is going to be the center stage of all the activities that we guys do, and it’s going to be an important pillar for growth. If you look at the last vision, last four years also, around 4% to 5% of the business has been contributed by the new products and so will be the case going forward in the future also and across all the verticals of health care, Foods and Personal Care. And we see a lot of opportunity in both evolving our brands and also renovating and also innovating across our portfolio. The total SKU size in terms of numbers has gone up from around 1,300 SKUs odd to around 1,500 SKUs. That said, this is the NPD introduction, but — we have also done the rationalization of the tail as we go along. So we have rationalized quite a number of SKUs. Mr. Ankush is here. Ankush can talk about it.

Ankush Jain — Chief Financial Officer and Joint Chief Risk Officer

Yes, your question on this, the SKU rationalization as well, last year beginning, we did some exercise and almost 15% of our SKUs, which were contributing less than 1% of our sales, we almost cut. And we will be doing a similar exercise and we are making a governance framework around this as well to improve productivity and efficiency and –.

Latika Chopra — JPMorgan — Analyst

Sure. And then the definition of NPD is what you’ve launched over the last two years or three years or…

Mohit Malhotra — Chief Executive Officer

The way we define NPD is last year and the current year.

Latika Chopra — JPMorgan — Analyst

Last year and current. Okay. And the last bit, Mohit, was you’ve given this increased size of the portfolio or NPD. Of course, e-commerce is a big channel driver here, but any more changes you have made on the general trade or modern trade sales distribution infrastructure? I did — you did allude to something on the F&B side earlier, but you followed pet sales structure. Have you gone one notch down in that level to enhance the productivity per store?

Mohit Malhotra — Chief Executive Officer

That’s right. So what we are doing Latika is, first of all, let me talk about the distribution system. So earlier, we had three verticals for distribution. One is HPC, one is HC and one is Foods verticals. So what we’ve done is we’ve done experiments. And in a couple of main towns, we have divided our HPC portfolio into HPC one and HPC two. That has given us a very good dividend as we’ve done those changes in the North market, and we will be extending that going forward. So the HPC portfolio will be divided into two, that’s one. As far as efficiency is concerned, for the productivity improvement in the sales, we’ve already put out the EDGE score, which is called Everyday Great Execution, which talks about lines sold, bills cut and how much time the salesman is actually spending. So that’s more of machine learning of the data and the heuristics that we have and then giving a push list out to the consumers. Therefore, the productivity has gone up. Our EDGE scores are consistently actually going up, and we are bifurcating our sales force into bottom boxes and top performers. Top performers being rewarded and elevated in the company and bottom boxes being churned in the organization, also, that said a lot of sales force has been put on third-party payroll and from the stockist payroll. So that exercise is also happening. As far as the Foods vertical is concerned, to provide focus as we’ve gone into the drinks, we are ramping up our infrastructure and next three to four years, we’ll be adding roughly around 900 feet on street for the distribution focus and juices will be a big focus. And this is generally a resource to drive the food business being created, reporting to executive director of sales for us.

Latika Chopra — JPMorgan — Analyst

Sure. Thank you so much and all the best.

Mohit Malhotra — Chief Executive Officer

Thank you. Thank you, Latika. Yeah.

Operator

Thank you. The next question is from the line of Kaushik Poddar from KB Capital Markets. Please go ahead.

Kaushik Poddar — KB Capital — Analyst

Hi. You spoke about the e-commerce part. So can you talk about what is the current — I mean, how do you see the e-commerce, say, three to five years down the line?

Mohit Malhotra — Chief Executive Officer

So e-commerce today contributes to around 6% of our business. In four years’ time, we expect e-commerce to go up to around 14% of our business. That’s the way we see e-commerce as a channel growing in the country.

Kaushik Poddar — KB Capital — Analyst

In five years or three years, the 14%? Five years?

Mohit Malhotra — Chief Executive Officer

In three to four years, yeah.

Kaushik Poddar — KB Capital — Analyst

Three to four years, okay. And see, in e-commerce, you have introduced this mustard oil and all those things, probably at a little bit of premium pricing. So how do you see that playing out? Those kind of products playing out? And what is the long-term strategy? Do you plan to introduce those things in the modern trade after some time?

Mohit Malhotra — Chief Executive Officer

Absolutely. That’s — for us, e-commerce is cradle for innovation. So all the value-added foods will put out there and as they scale up and we reach a threshold level of business coming in e-commerce, then we will be rolling out in selective modern trade, premium modern trade and then from premium modern trade to regular modern trade to OFOs and then to GT. That’s the way we’ll follow a lifecycle of a brand going forward. But the intent long-term is to grow those businesses and build scale there.

Kaushik Poddar — KB Capital — Analyst

Okay, okay. Thank you. Thank you, Thank you.

Mohit Malhotra — Chief Executive Officer

Thank you.

Operator

Thank you. Our next question is from the line of Krishnan Sambamoorthy from Motilal Oswal. Please go ahead.

Krishnan Sambamoorthy — Motilal Oswal — Analyst

Yeah. Thanks. Thanks for the opportunity and congrats to Mohit and team for a very good set of numbers in the current environment. Mohit, my question goes back to the comment that you’ve made about 200 basis to 300 basis point margin improvement on — in the F&B business as well as under the PLI benefits. Just to put this in context, INR100 crores of sales it brings, has this been margin dilutive for the category? And particularly now that you’re targeting to double that, would that be lead to a margin — a downward revision in margins, which would then be reset to, 200 basis or 300 basis points higher because of PLI?

Mohit Malhotra — Chief Executive Officer

Yeah. That is on the entire Foods business and the vertical that we have, which includes juices and nectars, and also the drinks segment. It is just not limited to drinks, like maybe you understood it or not. It’s an entire business. And we are looking at our business, also scaling up and doubling the way it is growing. So this PLI benefit will be happening on the entire business. So that’s the way it is, Krishnan.

Krishnan Sambamoorthy — Motilal Oswal — Analyst

Yeah. My question was more on will there be a downward reset in the interim because of higher share of drinks INR100 crores and maybe potentially INR200 crores of revenue? Because drinks may be lower margins than juices and nectars, can you just clarify that?

Gagan Ahluwalia — Senior General Manager of Corporate Affairs

So in the current quarter, which we are discussing, yeah there would be — drinks would have slightly lower margin, but it has being more than compensated by improvement in margins in other portfolios. And if you have seen the margins, PBIT margins as per the segment reporting, the margins in our Foods business have improved by 300 basis points.

Mohit Malhotra — Chief Executive Officer

Those are — if you look at the segment reporting, which we’ve already published, our Foods margins are going up, Krishnan. So the PLI benefit will only help and support that margin going up. To add to that, we have premiumization initiatives also in Real Activ that we’re introducing, a lot of premium brands like you saw the Chia seeds and all, that will compensate and the drinks — drinks portfolio that we talked about is a little margin dilutive, but not so much. That also we are doing a third party today. The moment we bring it in-house, I think then our margins will notch up here. Overall, next three to four years, we are only looking at our food margins to go up. We have launched milkshakes and masala range of juices, which are also margin accretive to the overall business.

Krishnan Sambamoorthy — Motilal Oswal — Analyst

Very clear. Thanks a lot Mohit and Gagan.

Mohit Malhotra — Chief Executive Officer

Yeah.

Operator

Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the floor over to Ms. Gagan Ahluwalia for closing comments, thank you, and over to you.

Gagan Ahluwalia — Senior General Manager of Corporate Affairs

Thank you for participating in this earnings call. A transcript and Webcast will be available on our website soon. For any clarification and queries, you may please contact us. Wishing you a nice day ahead. Thank you. Bye.

Mohit Malhotra — Chief Executive Officer

Thank you. [Operator Closing Remarks]