As regulatory scrutiny and taxation issues grow in sectors such as tobacco and paan masala , companies operating in the space are increasingly de-risking their business models in a bid to ring-fence themselves from future action. Firms such as ITC have already made the shift in the last few years.
DS Group, manufacturer of paan masala Rajnigandha, is entering categories such as dairy, food and beverages and hospitality as part of a diversification exercise. Almost 74-75 per cent of DS Group’s current revenues come from chewable tobacco (brands such as Baba) and paan masala (which includes Pass Pass, Rajnigandha and varius other flavoured mouth-freshners).
The plan is to bring down dependence on these categories and increase revenue contribution from newer segments.
A DS Group spokesperson said the Noida-based firm has been taking small but firm steps in this area. These efforts were expected to be increased now, the spokesperson said.
DS Group had stepped into areas such as dahi , ghee , tetrapak milk earlier, which would now be expanded to include a full range of products from cheese to butter to milk-based beverages. The firm is expected to add almost five production units in dairy alone to the current two to increase revenuesfrom this business.
Simultaneously, DS had also entered segments such as spices and packaged water (under the Catch brand name) some time ago, the focus of which would now increase. DS is already marketing its Catch range of branded spices aggressively on TV. Actor Vidya Balan is its brand ambassador.
The company is also pushing confectionary products under the Pass Pass brand name in a bid to widen its appeal. The spokesperson said chewing gums and candies were recently launched as part of this endeavour.
While DS’s core chewable tobacco business remains a cash cow (the company derives only 22 per cent of its revenues from this business, but bulk of its profits from this segment), analysts say this trend could change in the next few years as the government looks to curb usage of these products.
Gutka consumption is already banned in a number of states since it has been linked to cancer of the throat and mouth, while health hazards of paan masala consumption are repeatedly highlighted by the government and activists in public service ads.