The oil extracted from the fruit is used for cooking as well as hair nourishment. Now it is a new battlefield for the FMCG majors. At stake is a business valued at Rs 48 billion.
Dabur, a small player in coconut oil with 6 per cent market share has managed to expand that by 200 bps. It has taken an aggressive stance in the hair oil segment across categories under its new CEO Mohit Malhotra.
has drummed up aggression ad campaigns, claiming that Dabur ‘Anmol Jasmine’ hair oil offers “66 per cent more oil” than Parachute Jasmine, which is a product of .
Meanwhile, Bajaj Consumer has forayed into the coconut oil product category to tactically gain better access to distribution in South India and Maharashtra, where its market share is relatively weak, to ultimately push its mainline products.
The biggest rival for both — Bajaj and Dabur — is ultimately Marico, which dominates the category with 62 per cent market share and continues to grow the same. Thanks to its direct sourcing and large-scale buildup over the years, Marico has an advantage that’s difficult to replicate for new players, said analysts.
“Without these benefits, new players would not make attractive margins at Marico’s price points. Overall, we don’t see any big risk of market share loss for Marico, but see Dabur as a more potent challenge than Bajaj,” said Abneesh Roy of Edelweiss Research. “We expect Dabur to gain market share in coconut oil from smaller/regional players though.”
Dabur has found new-found aggression in the coconut oil category, even as it showed stellar growth in other portfolios. As of June quarter, its chyawanprash market share increased by 70 bps YoY, honey market share saw 330 bps expansion, toothpaste 100 bps and haircare 160 bps.
Now the company has launched Dabur Gold Coconut Oil in South India and Dabur Anmol in East India in order to increase its strength. But future growth is unlikely to come at Marico’s expense, say analysts.
Bajaj is a new entrant. It is never easy for a new player to gain market share in the coconut oil category. Bajaj Consumer expects to get some shelf space in South India and Maharashtra. Thus, it has priced its products 8-10 per cent lower than Marico, accepting lower margins. The distribution in South India has started with van sales and rural distributors, and the company also plans to gradually scale up urban distribution down south.
“We don’t expect any major investment or ad campaign for this from Bajaj Consumer. Neither do we expect the company to deploy coconut oil in North India,” said Roy.
Buy or Sell
FMCG as a sector has performed relatively well in the last 16-17 months. However, it has lagged other defensive and growth sectors. But analysts are mostly upbeat on the sector, as they believe economic recovery will bring in demand for the companies.
The Refinitiv database showed the consensus estimate of 37 analysts is ‘buy’ on Dabur. The stock has a median price target of Rs 645 for next 12 months. The highest price target is Rs 740 and the lowest Rs 404. The stock currently trades at Rs 640.
Marico also has a consensus ‘buy’ rating. It has a median price target of Rs 582 in 12 months from 39 analysts. Their highest target for the stock is Rs 645 and the lowest is Rs 403. Marico currently trades at Rs 555.
Bajaj Consumer Care, clearly an underperformer compared with its competitors, is tracked by 15 analysts and at least 13 of them believe you should buy it. Bajaj Consumer Care has a median price target of Rs 350 for the next one year. The most bullish analyst values it at Rs 414 and the most bearish estimate pegs it at Rs 262. The stock trades at Rs 255.