|
Dr. Morepen's Chairman Sushi Suri: Looking
for an angel |
MORE-PAIN
|
Cash Woes
Its parent's financial troubles hit 100 per cent subsidiary
Dr. Morepen hard
Executive Exodus
Beginning January 2003, the managing director and key execs
in marketing, logistics, and HR departed
Supply-side Concerns
Delays in payments to suppliers caused some of them to
suspend shipments
Demand-side Concerns
Distribution hassles have made the availability of Dr.
Morepen products erratic |
Remember
Dr. Morepen? This writer does: back in the winter of 2001, when
the business was being launched, the company sponsored a health
fair in New Delhi's central business-and-shopping district Connaught
Place where this magazine's offices were then located. Jingles vending
C-Sip, Gol Goli, and Dab Fizz blared out from loudspeakers as performers
squeezed into larger-than-life packages of these brands walked the
corridors of Connaught Place shocking hapless passers-by into a
state of permanent brand-recall. Around the same time, advertisements
for the business' five brands started appearing in the pages of
mainstream magazines and on popular television channels such as
Star Plus. And by the middle of 2002, Dr. Morepen had acquired Burnol
from Reckitt Benckiser, its parent Morepen Laboratories had acquired
Lemolate from Yash Pharma, and the Lifespring chain of healthcare
and beauty products stores from Total Care and transferred them
to Dr. Morepen, and its Chairman, Sushil Suri (also the chairman
of the parent), mentioned in the course of an interview to a daily
that the business was considering acquiring some brands from Novartis.
All told, Morepen/Dr. Morepen (the line between the two companies
was pretty hazy at this time) spent Rs 32 crore on acquisitions
and Rs 10 crore on advertising and promotions in its first year
of existence.
In many ways, the event at Connaught Place-the
playground of Delhi's rich in the pre-independence era-and the advertising
was a coming-out party for 38-year-old Suri and Morepen Laboratories,
the Rs 517.21 crore company of which Dr. Morepen was a 100 per cent
subsidiary until recently. Morepen was founded by K.B. Suri in 1984;
after his sudden death in 2001, Sushil Suri, a chartered accountant
who had joined the board of directors while still in his twenties,
took over. And the company, which had largely been a bulk drugs
manufacturer set its sights on becoming a global generics (drugs
that go off patent), formulations, and OTC product company. Dr.
Morepen was in the OTC business, and its launch was probably a celebration
of the company's entry into the big league.
Only, circa July 2003, Dr. Morepen ads are
off the air, its products are erratic in their appearance and disappearance
from the shelves; the parent is in some sort of financial trouble;
and its senior management team has moved on-Managing Director Kartik
Raina left in January this year as did six senior execs from the
marketing team, Head of logistics P.N. Sukumar departed in April,
and Head of hr, Prince Augustine more recently. Today, Morepen's
and Dr. Morepen's flak catcher Bhavna Sood has been made interim
Head of Marketing although she still does more than her share of
catching the flak (during this writer's meeting with her, she received
at least two calls from depositors who had put money in fixed deposit
schemes run by Morepen, only to have the company drag its feet over
returning the amount at the end of the deposit period). And the
company that proposed to replicate the OTC-products-plus-retail
business model that Boots had made a success of in the UK hasn't
added to the six stores that comprised the Lifespring chain at the
time of acquisition.
|
Dr. Morepen is engaged in rationalising the
number of SKUs at its Lifespring chain |
The Sins Of The Parent
Sushil Suri is quick to admit every one of
the problems enumerated above, maybe because he has a ready explanation
for them. So, when a former exec claims ITC stopped supplying packaging
material to Dr. Morepen in December 2002 because its payments were
overdue, and another says, "Expense accounts were not cleared
for six to seven months, salaries not paid for two to three months,
and supplier outstandings hit an all-time high," Suri doesn't
deny the facts. Instead, he claims Dr. Morepen suffered because
it was a wholly-owned subsidiary of Morepen Laboratories. And the
parent isn't really in the pink of health. Its revenues for the
year ended March 31, 2003 were, at Rs 517.21 crore, just marginally
higher than the corresponding figure for the previous year. And
its net profit for 2002-03 was, at Rs 22.19 crore, 49 per cent lower
than the previous year's figure even after removing a non-recurring
income of Rs 10 crore. On April 29, this year the Bank of Nova Scotia
recalled its working capital loan of Rs 79 crore to the company,
something that eventually led to the Debt Recovery Tribunal freezing
proceeds from the company's $15.25 million (Rs 70.58 crore) Global
Depository Receipts (GDR) issue. Suri claims the bank rushed this
despite assurances from the company that it would make good in early
May (he attributes the original delay to the fact that it took the
company almost 10 years to get its generics pipeline working).
With the parent caught in a cash crunch, the
between-the-lines-message in Suri's explanation says, the 100 per
cent subsidiary suffered. Effective April 1, Dr. Morepen became
a company in which Morepen Labs has a 20 per cent stake; the promoters,
who brought in an additional Rs 8 crore (Dr. Morepen's original
equity was around Rs 2 crore) of equity now own 80 per cent of the
company. And the Rs 120 crore that the parent has invested in Dr.
Morepen has been made preference capital, redeemable in the eighth,
ninth, and tenth years. New structure in tow, Suri is now on the
lookout for an investor to whom he can divest between 15 per cent
and 20 per cent of Dr. Morepen's equity. "We need an investor
who understands the various products under the umbrella brand,"
he says. The financial crisis the parent found itself in, Suri maintains,
delayed Phase II of Dr. Morepen's roll out. This phase, he adds,
"had all to do with products and consolidation; the communication
was Phase I". And so, the company couldn't launch products
that were ready to hit the market; nor could it strengthen its channel
network. Result? Although Morepen (and Dr. Morepen) Head of Sales
Rajesh Arora claims, "we have a presence in 807 towns through
2,40,000 outlets, retailers across the country''. Even in the company's
backyard, Delhi, retailers say their supply of Dr. Morepen products
is erratic.
The Return Of The Dr
The number of products that are in Dr. Morepen's
pipeline, waiting to be launched has swelled to 16, but it is unlikely
the company will launch them anytime soon. The bulk of the launches
will have to wait till 2004, by which time Dr. Morepen may have
an investor on board. Nor will we see a rapid roll out of Lifespring
stores: Suri believes the stores don't manage their stock keeping
units optimally. "Three hundred brands of shampoo can only
confuse consumers," he declares. Ergo, a sku rationalisation
is underway, pruning the number down from 15,000 to 9,000 by 2005.
And Suri is rebuilding a team to run Dr. Morepen. He looks at the
spate of exits the company has seen pragmatically. "The parent
was in trouble and there was confusion among (these) people about
the future of Dr. Morepen." However, he insists that his start-up
team was perfect to build the brand. Now, "in consolidation
phase," he would rather stick with "conservative"
people who are "accountable". It may be too early for
a company that boasts marketshares of between 1 per cent and 5 per
cent for its brands (except C-Sip and C-Candy, a Vitamin C drink
and a Vitamin C Candy that have created categories of their own)
to talk about consolidation, but Suri insists that the brand is
built. Now, if he can only find that investor.
|