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MOREPEN LABORATORIES
Sushil Suri,
Chairman and Managing Director
COMPANY STRATEGY:Launched a subsidiary,
Dr Morepen, and kicked off a media blitz. Focus is on vitamins,
supplements, and muscle-builders. A new product category--fast-moving
health goods--has also been created. |
It's
a metaphor that purveyors of medicines aren't going to like, but
in recent months Indian pharma companies have rushed into a new
terrain with the die-hard determination and hope of 19th century
gold-diggers in California. A swathe of drug firms is pinning its
hopes for growth on a three-letter abbreviation, OTC. That acronym
stands for over-the-counter products, and the drug makers are expecting
a boom in this market as a growing breed of economically active
Indians become pill-poppers. The market for non-prescription OTC
drugs is valued at Rs 1,800 crore and is growing at 15 per cent.
Add to that ayurvedic, herbal, and homeopathic drugs (all of them
OTC products) and bingo, you have a Rs 2,500-crore market.
No wonder drug companies-from old established
Indian players to MNCs to more recent first-generation enterprises-are
getting hyperactive about it. A big market size isn't the only lure
that's triggering the rush. Big profit is the other one. Drug firms
can earn margins as high as 50 per cent in OTC products-double that
of traditional prescription drugs, says Aditya Sanghi, Director
(Strategic Advisory), Rabo India Finance, a corporate bank that
specialises in pharma and biotech funding.
That explains the bullish mood at drug firms
across the industry. The 127-year-old Delhi-headquartered Dabur
India, which owns two of India's biggest and oldest OTC brands (Chyavanprash,
a health supplement, and Hajmola, a digestive), is now trying to
leverage its traditional strengths in ayurveda to come up with new
OTC winners. Says Vivek Burman, Dabur's Chairman: ''The drug market
is going through a disastrous phase, but as soon as the market picks
up, it's the OTC segment that'll do phenomenally well.''
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RANBAXY
D.S. Brar, MD & CEO
COMPANY STRATEGY: Doing research
on a host of herbal remedies in the segment, besides digestives
and pain management medicines. The company intends to launch
its OTC range in the next six-to-eight months. |
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SKBCH
(SOUTH ASIA)
Simon Scarff, Chairman
COMPANY STRATEGY:Possesses strong
OTC brands like lodex and Eno, but faces severe competition
from rivals. The company plans to storm the market with a slew
of fever and pain-reducing, and even ayurvedic, products. |
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DABUR
V.C. Burman, Chairman
COMPANY STRATEGY: Banks of Chayavanprash
and Hajmola--two of the biggest and oldest OTC brands in India.
Plans to leverage its traditional strengths in ayurveda to come
up with new winners in the OTC segment. |
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RECKITT
BENCKISER
Pranab Barua, Managing Director
COMPANY STRATEGY:A laggard so far
in the over-the-counter market, the company may be on its way
to the big league with its Disprin brand having already hogged
around one-eighth of the analgesic market. |
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NICHOLAS
PIRAMAL
Vijay Shah, Director
COMPANY STRATEGY:Plans to add more
OTC brands through acquisitions to its already considerable
stable of products. Sees Boots Piramal, its venture with Boots
UK, as the main vehicle for growth in the segment. |
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HIMALAYA
DRUG COMPANY
Ravi Prasad, President &
CEO
COMPANY STRATEGY: Pushing its rechristened
Himalaya brand. Consolidating all soft health, body care, skin
care, and hair care products sold under Ayurvedic Concepts lable
into its new umbrella corporate brand--Himalaya. |
In Bangalore, the 71-year-old Himalaya Drug
Company, best known for its Liv 52 formulation, is promoting the
rechristened Himalaya brand, consolidating its soft health, body
care, skin care, and hair care products that were earlier sold as
the Ayurvedic Concepts brand under its new umbrella corporate brand-Himalaya.
In Delhi, the Rs 500-crore Morepen Laboratories has set up a subsidiary,
Dr Morepen, to push ahead with its high-decibel re-entry into the
OTC market. Says Chairman and Managing Director Sushil Suri: ''There
is a great potential for products like vitamins, supplements, muscle
builders, products for pregnant women, and multi-vitamins-so we've
created a category between OTC and FMCG called Fast Moving Health
Goods,'' says Suri.
A Survival Strategy
Behind the frenzied rush into the OTC market
is another more fundamental reason. In less than three years, from
2005 onwards, India will have to meet the WTO requirements of following
'product patents'. Many Indian drug firms that are today exploiting
the patent loopholes by simply engineering a different process for
the same product will then be hit hard. The only mode of survival
for them would be to invest in basic research. But apart from being
risky and having a high failure rate, the fact is that pharma research
is also an expensive affair. Even Indian heavyweights like Ranbaxy
and Dr Reddy's only manage to divert 4-5 per cent of their sales
towards research whereas internationally, companies need to spend
at least 10 per cent. An analyst likens basic research to a rabbit
hole. ''You can come up with a prize catch, but equally probable
is the chance of being bitten by a snake.''
Not surprisingly, most pharma companies aren't
ready to bet their future on research. And although the over-the-counter
route isn't cheap-marketing and promotions for a new product can
cost a packet-the results do seem more tangible. Says Suri, ''With
the right kind of research and analysis, which studies factors like
lifestyle patterns, stress levels, work environment, and eating
habits, it is possible to accurately map consumer tastes and preferences
to a high degree of accuracy.''
Peddling drugs
Curiously, there's no accurate definition yet
for what constitutes an OTC drug. In practice, any drug that does
not fall within the purview of the government's prescribed schedules-G,
H or X-is de facto a drug that can be sold over-the-counter at any
retail outlet. These could be health tonics, pain relievers, antacids,
cough and cold remedies, vitalisers, and even skin care products.
Given such an environment, it's not surprising
that drug makers have embarked on a no-holds-barred marketing shindig
to push their products. Turning conventional pharmaceuticals marketing
on its head, OTC companies are splurging on advertising, using innovative
marketing channels, spawning brand extensions, and hiring FMCG managers.
Recently, Dr Morepen launched a high visibility multi-media blitzkrieg,
which included prime-time TV ads, radio jingles, and outdoor hoardings.
''Around a fifth of our first year's sales target of Rs 20 crore
shall go towards brand-building exercises,'' says Morepen's Suri.
Rival Dabur, which used elephants and dropped pamphlets from planes
at a time when mass advertising was virtually unknown, is today
counting on contemporary concepts like segmentation, brand extension,
hidden sustainability, and life-long usage for a slice of the pie.
All this need for publicity has meant that
previously ''non-existent'' advertising budgets have ballooned.
Says Jamshed Desai, Head (Research) at Taib Securities: ''Advertising
costs, which typically are around 3-4 per cent of sales for prescription
drugs can go up to 8-9 per cent for OTC drugs.'' Himalaya Drug Company,
for example, will be diverting 30 per cent of its expected sales
turnover of Rs 39 crore from the OTC division, towards advertising
expenses. Other companies, like Dr Morepen, are changing the rules
of the game trying out new distribution channels. For its OTC products,
Dr Morepen is organising health carnivals and health runs, where
the consumer will be introduced to its range. DTH (direct-to-home)
may be a buzzword more popularly associated with television broadcasters,
but that's exactly what drug companies are trying to do although
they are loath to admit it. The aim: bypass the doctor and go directly
to the consumer.
It's not surprising to find drug marketers
mimicking the strategies of FMCG marketers. Nicholas Piramal, which
has over the years built up an arsenal of OTC brands like Saridon,
Aspro, and Lactocalamine, mainly through acquisitions, plans to
go in for more. The main vehicle for its growth will be the joint
venture with Boots UK-Boots Piramal. The Indian partner will be
hiking its stake from 40 per cent to 49 per cent and will get access
to Boots' international portfolio of brands, which include Strepsils
and Clearasil. Of Piramal's Rs 900-crore pharma sales, OTC accounts
for Rs 70-80 crore, which is barely 8 per cent, but coo Vijay Shah
wants to grow that by at least 30 per cent every year.
A Growing Habit
What should be heartening for drug makers is
that pill popping is on the rise. Compared to the $50-billion global
OTC market, which is growing at 5 per cent, the demand for OTC products
in India is growing three times faster. And the biggest potential
is in remedies for coughs, cold and allergy, analgesics and vitamin-mineral
supplements. That's where the rush is too. Along with the established
companies, there are several newcomers eyeing the OTC market. Like
the Ahmedabad-based Paras Pharma, which offers similar products,
but at lower prices than say MNC drug makers. Says Jamshed Desai
of Taib Securities: ''With predatory pricing and high-decibel advertising,
it is possible to generate demand pull in the short run.'' So for
every Vicks there is a Decold, and for every Iodex, there's a Moov.
But with the market growing apace, fresh competition
isn't worrying the bigger players. Says R. Subbarayan, Director
(Sales and Marketing) at SmithKline Consumer Healthcare: ''With
competition at the door, our marketshare in percentage terms could
come down, but when the market is expanding at a brisk rate, that
is not an issue at all.''
Clearly, the OTC rush is on. Yet, it may be
too early to bet on how long it will last. Cautions Ravi Prasad,
President and CEO, Himalaya Drug Company: ''Only those who've invested
AB Initio in the development of original products are the ones who're
going to thrive. Clones will continue to exist, but only as marginal
players.'' Invariably, whenever a big opportunity appears, hundreds
of players jump in to get a bite of the action. In turn, that leads
to a shake-out. And not everyone survives those ones. Today's gold
rush could easily turn into tomorrow's flash in the pan.
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