Why Dabur is acquiring Badshah Masala?🌶

Adding spices to it's category capture is super interesting.

Dabur is acquiring 51% stake in Badshah Masala 🌶
The deal values Badshah Masala at ₹1,000+ Cr💰
Here's why Dabur is getting into spices ⬇️

Quick context 🗓
Dabur represents itself as a Ayurvedic Company & sells everything from "Vatika" hair oil to "Meswak" toothpaste to Almond shampoo to "Chyawanprash" to "Odomos".

How is Dabur performing? 🙇🏻‍♂️
It made over ₹8,500+ Cr in annual revenue & ₹1,733 Cr in profits last financial year. If we go deeper, Dabur has become mature stage company and it's revenue growth has hovered around 13-15% year on year.

Enter Badshah Masala 🌶
Started as a masala brand by Jawaharlal Jamnadas Jhaveri in 1958, he would collect tin cans used to sell cigarettes, clean them, peel off the labels, and would package the masalas in them. This brand has now grown into a ₹184 Cr annual revenue brand.

Now, why Dabur is acquiring Badshah Masala? 🤔
Dabur's revenue growth is slower & will stagnate once the inflation number hits through the roof next year. Next few years it will have to work to retain it's revenue in a highly competitive Ayurvedic product category (Think Patanjali as competition). It needs to diversify, fast. Badshah's controlling stake allows it to get into a newer product category - "Spices".

But, there's more to this deal 🤭
Badshah Masala has been through a lot of things in last few years, especially the pandemic period. It's revenue isn't growing comparable to the category growth & similar companies of it's size. It needs a complete overhaul on how it approaches the distribution & market positioning. For context, another brand - Everest started 9 years after Badshah & is at ₹1,400 Cr revenue for last year, that's almost 15X of Badshash's revenue.

This is typical product line expansion theory ✨
For mature scale business such as Dabur, it's hard to penetrate into it's existing business faster. It's much more easier to acquire a new business and solve for horizontal category expansion. Dabur is doing exactly that with Badshah Masala acquisition.

Interestingly, we will keep seeing this more & more across FMCG & onto internet businesses. We wrote a similar article on why Razorpay is acquiring so many ecosystem players some time back. Read the full article Here

That’s all for now 💙
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