Indian companies are continuing to target Africa as a conduit for growth, with one of the latest being Dabur India Ltd.
Bloomberg reports that Dabur, a maker of packaged honey, traditional medicine and hair oil, plans to set up two new factories and introduce more products in Africa as part of a goal to almost double profit in three years. The factories in Johannesburg and Nairobi will start production by June next year, CEO Sunil Duggal said.
Expanding overseas may help Dabur boost profit to US$221 million by March 2014, he said in Ghaziabad near New Delhi, where the company is based.
Dabur, controlled by billionaire Anand Burman, also plans to add a factory in Sri Lanka to make beverages as it seeks to pare reliance on India, where inflation and competition from Unilever Plc and Procter & Gamble Co. are squeezing profits. The maker of Vatika shampoo aims to increase the share of overseas sales to 28% in three years from the current 22%.
“It makes sense to move, spring out to other emerging markets, because competition these days is very hard in India,” Taina Erajuuri, a Helsinki-based fund manager with FIM Asset Management Ltd. said. “It’s easier for Dabur to go to emerging markets than developed markets because there you have Unilever, Procter & Gamble and L’Oreal.”
“The Africa market is the epicentre of our growth prospects for the future,” Duggal said. “The upsides in some of these markets are as much, if not bigger, than India. I’m talking about not just revenue growth, but profitable growth.”
He didn’t disclose the value of the company’s investments in the new factories. To tap the demand in Africa, Dabur has built two factories in Egypt and one in Nigeria that make products such as hair oil and toothpaste. Last year, the company acquired Turkey’s Hobi Kozmetik Group, which makes skincare and haircare products, and U.S.-based Namaste Laboratories LLC, a maker of hair products. As much as a third of Namaste’s sales come from Africa, Byas Anand, a company spokesman, said.
Dabur also sells bath gels, shampoos and skin creams in the continent under the Hobby brand, which came with the purchase of Hobi Kozmetik.
Marico Ltd. and Godrej Consumer Products Ltd., Indian competitors of Dabur, are also expanding in Africa through acquisitions. Marico has purchased the consumer division of Durban-based Enaleni Pharmaceuticals Ltd. and South African healthcare brand Ingwe. Godrej bought a hair colour company in South Africa and a soap and body lotion maker in Nigeria.
Article written by the Imara Africa Securities team. Imara is an investment banking and asset management group renowned for its knowledge of African markets.