Dabur Faces Growth Hurdles; Revival Hinges on Rural Demand Recovery
FMCG major Dabur is grappling with decelerating business momentum, as analysts caution that a return to robust growth may take time amid continued rural market challenges and margin pressures. The company, which reported muted growth in the December 2023 quarter, is expected to deliver only mid-single-digit volume gains in the near term.
Rural demand softness remains a primary concern, given that approximately 45% of Dabur’s domestic revenue is rural-driven. While some stabilization was observed recently, a significant turnaround in consumption trends beyond tier-1 geographies is yet to be seen. Analysts suggest that recovery in rural demand could begin in the July-September quarter of FY25, aided by favorable monsoons and improving agricultural income.
However, Dabur’s volume growth continues to trail peers, despite price hikes and product mix improvements boosting revenue. The December quarter saw a 4% year-on-year volume uptick for its India business, compared to stronger showings by competitors such as Hindustan Unilever and Marico.
In particular, Dabur’s health supplements and home care categories have underperformed. The health supplements segment reported a 1.5% volume decline YoY in Q3FY24, while home care sales dipped due to reduced demand for mosquito repellents amid warmer winters. These trends contrast with its strong showing in foods and beverages—juices and healthcare drinks contributed robust growth, driven by new product development and marketing initiatives.
Margins have improved sequentially, with Q3 operating margins rising 200 basis points quarter-on-quarter, helped by moderating raw material costs and operating efficiencies. Although this indicates internal cost discipline, analysts remain cautious on stock performance unless a broader revenue recovery materializes.
Looking ahead, Dabur plans to focus on premiumisation and innovation, as well as leveraging its rural distribution strength to support recovery. Despite these initiatives, market watchers note that any sustained re-rating of the stock depends on a tangible, broad-based consumption revival—particularly in rural and semi-urban segments.
With subdued near-term catalysts and high valuation multiples, analysts suggest a hold view until clearer signs of demand recovery emerge. The company’s performance in FY25 remains contingent on a confluence of rural revival factors, competitive response, and margin sustainability.