Oral care: The Ayurveda Revolution

Oral care accounts for 17.3% of its India FMCG business. In FY18, Dabur’s flagship product Dabur Red Paste crossed the Rs 500 crore turnover mark while the company’s operational revenue for FY18 stood at Rs 7,748 crore, from Rs 7,701 in FY17.

As is true for certain product categories, there is a gradual but notable inclination among consumers to try ‘natural’ products — be it organic alternatives in food or eco-friendly options in clothing. The same is true for the personal care category, especially the oral care segment. Consumers have been increasingly making the switch to herbal or ayurvedic alternatives.

Sameer Shukla, executive director –retail measurement services, Nielsen India, says, “As per MAT (moving annual total) ended June 2018, the natural segment occupied 30% of the total toothpaste sales in the country, up from 23% in the same period two years back. In growth terms, the natural segment has grown five times the rate of the non-natural segment in the oral care category.”

What came to be known as the ‘Patanjali effect’ — armed with its herbal range, Patanjali is bullish about weaning customers off products from MNC market leaders — is most pronounced in the toothpaste category. So, the growth potential for players such as Vicco and Dabur given their long-standing equity is considerable. “What Patanjali has done is make herbal and ayurveda more acceptable across consumer sections, which is helping us a lot,” says Harkawal Singh, marketing head – oral care, Dabur India.

The rural story

Consumer upgradation in the dental care segment has followed a peculiar pattern. While in urban cities, the shift is from regular toothpaste to herbal/ ayurvedic variants, in the rural markets, the same shift is happening from either powder or other plant-based homegrown dental care solutions. Pradeep Srinivasan, research analyst, Euromonitor International, says, “Growing consumer awareness of the adverse effects of fluoride, the main ingredient in toothpaste, has led many consumers to switch to herbal and natural products. This is expected to lead more rural citizens to replace tooth powder with toothpaste containing natural and herbal ingredients.” If this holds true, it is likely that rural consumers could skip the regular toothpaste variants altogether.

Consider how Dabur India organises trials at mass gatherings such as haats and melas in rural areas for consumers to try out toothpastes through dispensers. For other markets, in addition to TV advertising, the company conducts oral hygiene classes, consumer contact programmes and initiatives at schools to impart oral hygiene values. The annual advertising and promotional spends for Dabur are 10-12% of revenue. “We have significantly strengthened our rural footprint, with Dabur now reaching close to 42,000 villages across the country,” says Singh. The company currently has a presence in 6.3 million retail outlets across India.

Oral care accounts for 17.3% of its India FMCG business. In FY18, Dabur’s flagship product Dabur Red Paste crossed the `500 crore turnover mark while the company’s operational revenue for FY18 stood at `7,748 crore, from `7,701 in FY17.

Both Colgate and HUL are bolstering their portfolios to gain ground in the oral care segment with the launch of herbal/ ayurvedic products. HUL’s offerings under Lever Ayush and Colgate’s launch of Swarna Vedshakti toothpaste are cases in point. Colgate, the leader in the category, saw its total revenue come down to `4,367.24 crore in FY18, from `4,560 crore in FY17. In the toothpaste category, volume market shares for FY18 stood at 53.4%, down from 55.1% in FY17.

Making the switch

For the consumer to break loyalties and make the switch, trials play a key role. And trials work best when pricing is not a hindrance and the value proposition is highly differentiated. Harsha Razdan, partner and head – consumer markets, KPMG India, says, “It is always a difficult decision for any MNC to introduce low-priced SKUs as, typically, these SKUs end up having a lower gross margin percentage, though the overall gross margin may be much higher in value.” In an MNC-dominated oral care market in India, there will always be a challenge in going below a targeted gross margin percentage, he adds.

IBEF’s FMCG report notes that as of FY17, the contribution of herbal products to the overall personal care products market in India stood at 6-7% and is estimated to grow to 10% by FY20. It also states that the rural segment accounts for 45% of revenue share to the overall revenue generated by the FMCG sector in India.

The distribution strengths of both HUL and Colgate will hold them in good stead, believes Ankur Bisen, VP – retail and consumer products, Technopak. “The rural market entails reaching out to about seven million outlets. HUL’s reach is the maximum in the country — 6.5 million outlets — so for argument’s sake, Patanjali is the cheaper product and people could graduate to that,” he observes. “But Patanjali currently does not have the distribution reach to match.”