Why Ayurvedic has become mainstream category post covid ?

Ayurvedic has become mainstream category post-Covid

Ayurveda is one of the oldest holistic healing systems and alternative medicine systems with historical roots in the Indian subcontinent. Since the pandemic and the constant need to boost immunity, Ayurveda has gained immense popularity, making it mainstream. A large portfolio of Ayurvedic medicines and immunity-boosting products like Chawanprash and honey has been in great demand. There has been a sudden spurt in demand for Ayurvedic products, and production had to be augmented.

Experts from the industry share that constructing an eighth Ayurvedic plant in Madhya Pradesh at an estimated cost of Rs 550 crore (Rs 5.5 billion) has begun to meet current and future demand takes advantage of incentives provided by the government under its 'Aatmanirbhar Bharat' program.

Even though there were obstacles due to the pandemic, there has been a 12 percent volume growth last year, which was higher than the 6-7 percent pre-Covid rate. Sales through e-commerce channels have grown to eight percent from two percent before Covid.

The pandemic may have disrupted Dabur's business initially, but the firm recovered quickly to post healthy double-digit growth in the past four quarters.

What are the key changes in consumer preference?

COVID-19 has made Ayurveda a mainstream category, and I believe this will continue even after the pandemic. We have a large portfolio of Ayurvedic medicines and immunity-boosting products. Demand for products like Chawanprash and honey is growing very fast.

How has this change impacted business?

Share of our healthcare portfolio went up to 45 percent from 30 percent, and essentials like oral care did well, while the share of skincare, hair oils, and foods shrank.

We had anticipated that our discretionary portfolio might not do well, so we diversified into areas like edible oil and launched several products.

What's the impact of commodity price inflation?

We haven't witnessed this kind of inflation in eight years. It has jacked up input costs by 5-6 percent as it has hit the entire bucket of our business.

Fossil fuel-linked packaging costs have jumped, the cost of key raw materials like edible oils is going through the roof, and prices of herbs and honey have spiked significantly.

To mitigate this, we need to hike prices by 10 percent, which is not feasible as Covid has strained household finances. We affected a three percent price hike in the first round and initiated cost optimization measures.

We planned to cut down Rs 100 crore (Rs 1 billion) worth of costs in FY22, but that will not be enough. I can't rule out pressure on operating margin till the December quarter.

What are your plans on new investments and capacity augmentation?

The spurt in demand for Ayurvedic products has exhausted our production capacity; we don't have any option but to augment capacity.

So, we have begun construction of our eighth plant in Madhya Pradesh at an estimated cost of Rs 550 crore (Rs 5.5 billion) to meet current and future demand, taking advantage of incentives provided by the government under its 'Aatmanirbhar Bharat' program. The plant will help us meet the demand for the next 10-12 years.

How have the two waves of Covid impacted your business?

The nationwide lockdown in 2020 caught us by surprise and impacted our profitably significantly, as seasonal products like juices were severely hit due to supply chain-related challenges.

Since then, we overhauled all key aspects of our operations and managed to post 12 percent volume growth last year, which was higher than the 6-7 percent pre-Covid rate.

So far in FY22, we have posted decent growth, albeit on a low base. But the business has now stabilized and is more immune to such disruptions.

What's the share of e-commerce channels now compared with pre-Covid days?

Sales through e-commerce channels have grown to eight percent from two percent before Covid. In FY21, despite travel restrictions, we raked in six percent of sales through e-commerce.

How have advertising and promotional strategies changed?

From primarily advertising through TVC in general entertainment channels, we are now focusing on religious and national TV channels like Doordarshan because they were attracting more viewers.

Thus, we diverted money from channels like Star, Zee, and Sony. Earlier, we were spending 5-6 percent on digital media, but now we are putting 25 percent of our budget into digital.

Last year, we had increased media spends, but we now have to cut it down to 8-10 percent of sales as growing costs are a threat.

Do you expect disruptions from a third wave?

People are eager to go back to offices, and the government is ramping up vaccination. So, it seems that a probable third Covid wave will not be as severe as the second one, and its impact on businesses and operations will be much lesser. I am not very concerned about the third wave.

At present, it is the management that discourages employees from coming to offices, but I think normal office operations will resume within this year.