Pravin Sathe03.01.02
Imagine a single, unified market of a billion people, a burgeoning middle class of approximately 400 million people with a sizeable and growing disposable income and to top it all off an increasing awareness about one's health and the need to preserve it in an increasingly frenetic lifestyle. This is a perfect opportunity for the nutraceuticals marketer; however, there is a catch.
A little introduction to India as a country is appropriate. Almost a continent by itself and best described as a motley collection of myriad cultures, religions and beliefs all living in syncretic harmony, the country poses many challenges.
The pharmaceutical industry in India is made up of 12,000 manufacturers across several sections including bulk drugs, intermediates and finished formulations. However, the absence of an efficient medical insurance system and a general lack of the perceived importance of preventive healthcare means overall per capita consumption of all health products is pitiably low (currently at $4 per year). Purchasing power, or rather lack of it, of a majority of the country's population is also a major issue to keep in mind. Incidentally, this statistic camouflages the reality that volumes are handsome but value realizations are low.
The pharmaceutical industry in the country is also set to undergo a major transformation with the GATT (General Agreement on Tariffs and Trade) enforced TRIPS (Trade Related Intellectual Property Rights) regime coming into effect in 2005. This means the earlier process patents regime will be replaced by a product patents regime. As a result, international companies should feel more comfortable operating in India without fear of their products being copied. This also means traditional pharmaceutical companies will need to look for newer cash cows to replace their existing (age old) ones.
The size of the total pharmaceutical market is estimated at $4.5 billion or Rs.18,000 to 19,000 crores (crores is a more regularly used term where 1 Crore rupees is equal to 10 million rupees-currently 1 U.S. $ trades at Rs. 48). This is mostly made up of bulk drugs as well as formulations and has been largely prescription driven.
Self-medication is rather low and as a result, over-the-counter (OTC) markets are not exactly booming. Currently the market size is estimated at between a low of $0.5 billion to a high of $1.0 billion. However, all of this is set to change with a major emphasis being laid on brand creation and consumer pull by OTC players. Presently this category is being re-christened as "fast moving health goods" (FMHG) and is expected to grow at a healthy 12% per year even by conservative estimates. Additionally, trends reveal that as Indian society undergoes a qualitative change, the disease patterns will also change from the infectious like tuberculosis and leprosy to the more lifestyle dependent diseases such as cardiovascular disease and diabetes.
Nutraceuticals in a narrower sense will form a subset of the OTC market. The distinguishing feature for nutraceuticals versus other FMHG products would be their ability to provide nutrition through medication as the term strictly means. However, presently there is no unanimity with respect to a definition between the various factions of this sector, which includes manufacturers, market research agencies and advertising agencies as well as the regulatory authorities. The problem has been temporarily solved, or rather shelved, with no one providing a definition at all. Purists insist only those products with a proven history of helping target segments such as convalescing patients, expectant and lactating mothers and the segment of population unable to consume a balanced diet due to skewed lifestyles, can make the grade, which would narrow the definition, leading to a decreased market potential.
Semantics aside, the segment of the country's population capable of being tapped into for nutraceuticals/FMHG is greater than the size of Western Europe. However, most companies continue to target the population for prophylactic rather than palliative or curative purposes. Also, most segments of the population consider nutraceuticals to be luxury items-the logic being "if it ain't broke, why fix it" and this is the difficult mental barrier that marketers must tackle.
Lifestyle also plays a role in defining a market opportunity for nutraceuticals.The citizens of India lead vastly different lives from one area of the country to the next. Lifestyles can range from the sedentary in the northern hills or rural areas of the country to the neurotically hassled urban professional in Bombay or Delhi to the ordinary and nearly somnolent existence of the government employee in any of the state capitals. Add to that the diverse food habits and cultural beliefs in medical treatment both preventive and curative and segmenting the markets turns out to be a nightmarish exercise.
Nearly every house in the joint family system (still largely prevalent in many parts of the country) has a maternal or avuncular figure who is considered a quasi-specialist on all matters medical and almost certainly as far as prophylactic nutraceuticals are concerned. The specialist's remedies, also called Dadimaa's (Grandmother's in the national language Hindi) remedies, are theoretically supposed to take care of all maladies except the critical or those requiring immediate surgical attention. Dadimaa's remedies owe their existence, and almost cult following, to the very rich and unarguably effective native systems of medicine such as Ayurveda and Siddha. These practices are further supplemented by systems like unani and homeopathy, both adopted from foreign lands but tailored to suit Indian requirements. The biggest point in favor of such systems is the near absence of side effects, the perceived presence of which are stumbling blocks in the acceptance of the Allopathic form of medicine as general health additives in food.
Lastly, a large portion of the population that is uneducated, especially in rural areas, still depends on the neighborhood faith healer whose trade borders on sorcery for a cure to all ills (physical as well as mental). Thus, the nutraceuticals marketer faces the combined might of the peculiar combination of the "neighborhood shaman" and the "in-house or resident savant," causing him to fall between the two stools.
So where does our confused nutraceuticals product manager go from here? Well, an optimistic salesman would view the glass as half full whereas the doubting salesman would see it as half empty. The moral of the story is most product managers today realize that rather than try to take these well entrenched forces head on, it is better to expand the overall cake to help oneself to a bigger pie. Evangelism? Yes, certainly. "Cast the net wider" and "expand the overall cake" will be the new mantras. To that end, this calls for a combination of perseverance as well as deep pockets and the ability to convince consumers that it is fashionable to consume nutraceuticals.
The major players are those that have already created a niche for themselves in the alternative medicine markets, such as Himalaya Herbal Healthcare. This company launched its Ayurvedic Concepts range of products a few years ago and was met with tremendous success. Other players would include Morepen Labs, originally a bulk drug major, who, seeing the major potential in the sector, has made a recent noisy entry, along with other Indian majors like Ajanta Pharma, Ranbaxy Labs and Dabur Products.
Among the purists, Parry Nutraceuticals, a diversified business group strong in South India, has taken the rather courageous stand of building spirulina and beta-carotene, both of which require a lot of concept selling, as their cash cows. Specifically, spirulina has many diverse uses and as a result has no USP for a marketing push. Yet the company has set up a huge state-of-the-art cultivation, extraction and processing facility where production is carried out under rigorously controlled conditions with regular and stringent quality tests and is U.S. FDA approved.
Trans national companies (TNCs) like Novartis and Abbott are quietly building up sales volumes in targeted segments like post-operative convalescing patients through their medical nutrition thrust without any mass media spending. Both of these companies believe that as urban lifestyles deteriorate qualitatively (but ironically lead to higher disposable incomes) the need to look at nutrition charitably will be incipient both at the doctor as well as patient level. This will surely lead to better volumes and sales realizations.
An intelligent segmentation that is expected to pay rich dividends could be achieved by targeting women who are endemically anemic or women that have specific deficiencies and are in need of nutritional therapies for correcting hormonal imbalance and boosting immunity. Most of these ranges would necessarily be routed through doctors by prescription.
The trade is also looking at the field with curiosity. Currently, all of the manufacturers/brand builders are players who have graduated from the traditional pharmaceutical industry and hence continue to use the channels that are in place for prescription drugs. The trade channels ensure that drug manufacturers, doctors and retailer-chemists co-exist in a very cozy relationship. However, for an FMHG range where brand promiscuity on the consumer's part can be high (as opposed to prescription where no one tampers with the doctor's advice), this has two major drawbacks. First, it is restricting in terms of reach as compared to "fast moving consumer goods" (FMCG) channels. Second, the retailer-chemist is a major buyer influence. This is because the consumer perceives the neighborhood retailer-chemist as a friendly, honorary, half-doctor and hence places a level of reasonable trust in him. The retailer-chemist in turn is happier dispensing prescription drugs, due to better trade margins, and happier to sustain the profitable relationship with his two other co-habitants. As a result the retailer-chemist would be more inclined to look askance at the entire FMHG sector unless trade margins improve and sales schemes as attractive as in the FMCG sector are introduced.
Lurking somewhere in the background and prepared to punish companies making untenable claims is FDA, which is asking companies to provide statutory disclaimers about the efficacy claims of the products. At the starting gate are newer and more segmented product ranges like pet nutraceuticals, sports nutraceuticals and cosmeceuticals. This means there is going to be enough excitement in the marketplace for the next few years to keep the adrenaline high for brand managers in the field.NW
About the author:
Pravin Sathe is director of Advantage India Consulting, Bombay, India. Advantage India consulting offers strategy for international companies wishing to set up Indian operations. He can be reached at 9122-513-89-45; Fax: 9122-510-34-22; Website: www.advantage-india.com, www.newsnmuse.info.
Healthcare in India
A little introduction to India as a country is appropriate. Almost a continent by itself and best described as a motley collection of myriad cultures, religions and beliefs all living in syncretic harmony, the country poses many challenges.
The pharmaceutical industry in India is made up of 12,000 manufacturers across several sections including bulk drugs, intermediates and finished formulations. However, the absence of an efficient medical insurance system and a general lack of the perceived importance of preventive healthcare means overall per capita consumption of all health products is pitiably low (currently at $4 per year). Purchasing power, or rather lack of it, of a majority of the country's population is also a major issue to keep in mind. Incidentally, this statistic camouflages the reality that volumes are handsome but value realizations are low.
The pharmaceutical industry in the country is also set to undergo a major transformation with the GATT (General Agreement on Tariffs and Trade) enforced TRIPS (Trade Related Intellectual Property Rights) regime coming into effect in 2005. This means the earlier process patents regime will be replaced by a product patents regime. As a result, international companies should feel more comfortable operating in India without fear of their products being copied. This also means traditional pharmaceutical companies will need to look for newer cash cows to replace their existing (age old) ones.
The size of the total pharmaceutical market is estimated at $4.5 billion or Rs.18,000 to 19,000 crores (crores is a more regularly used term where 1 Crore rupees is equal to 10 million rupees-currently 1 U.S. $ trades at Rs. 48). This is mostly made up of bulk drugs as well as formulations and has been largely prescription driven.
Self-medication is rather low and as a result, over-the-counter (OTC) markets are not exactly booming. Currently the market size is estimated at between a low of $0.5 billion to a high of $1.0 billion. However, all of this is set to change with a major emphasis being laid on brand creation and consumer pull by OTC players. Presently this category is being re-christened as "fast moving health goods" (FMHG) and is expected to grow at a healthy 12% per year even by conservative estimates. Additionally, trends reveal that as Indian society undergoes a qualitative change, the disease patterns will also change from the infectious like tuberculosis and leprosy to the more lifestyle dependent diseases such as cardiovascular disease and diabetes.
Where do Nutraceuticals Fit in?
Nutraceuticals in a narrower sense will form a subset of the OTC market. The distinguishing feature for nutraceuticals versus other FMHG products would be their ability to provide nutrition through medication as the term strictly means. However, presently there is no unanimity with respect to a definition between the various factions of this sector, which includes manufacturers, market research agencies and advertising agencies as well as the regulatory authorities. The problem has been temporarily solved, or rather shelved, with no one providing a definition at all. Purists insist only those products with a proven history of helping target segments such as convalescing patients, expectant and lactating mothers and the segment of population unable to consume a balanced diet due to skewed lifestyles, can make the grade, which would narrow the definition, leading to a decreased market potential.
Semantics aside, the segment of the country's population capable of being tapped into for nutraceuticals/FMHG is greater than the size of Western Europe. However, most companies continue to target the population for prophylactic rather than palliative or curative purposes. Also, most segments of the population consider nutraceuticals to be luxury items-the logic being "if it ain't broke, why fix it" and this is the difficult mental barrier that marketers must tackle.
Lifestyle also plays a role in defining a market opportunity for nutraceuticals.The citizens of India lead vastly different lives from one area of the country to the next. Lifestyles can range from the sedentary in the northern hills or rural areas of the country to the neurotically hassled urban professional in Bombay or Delhi to the ordinary and nearly somnolent existence of the government employee in any of the state capitals. Add to that the diverse food habits and cultural beliefs in medical treatment both preventive and curative and segmenting the markets turns out to be a nightmarish exercise.
Nearly every house in the joint family system (still largely prevalent in many parts of the country) has a maternal or avuncular figure who is considered a quasi-specialist on all matters medical and almost certainly as far as prophylactic nutraceuticals are concerned. The specialist's remedies, also called Dadimaa's (Grandmother's in the national language Hindi) remedies, are theoretically supposed to take care of all maladies except the critical or those requiring immediate surgical attention. Dadimaa's remedies owe their existence, and almost cult following, to the very rich and unarguably effective native systems of medicine such as Ayurveda and Siddha. These practices are further supplemented by systems like unani and homeopathy, both adopted from foreign lands but tailored to suit Indian requirements. The biggest point in favor of such systems is the near absence of side effects, the perceived presence of which are stumbling blocks in the acceptance of the Allopathic form of medicine as general health additives in food.
Lastly, a large portion of the population that is uneducated, especially in rural areas, still depends on the neighborhood faith healer whose trade borders on sorcery for a cure to all ills (physical as well as mental). Thus, the nutraceuticals marketer faces the combined might of the peculiar combination of the "neighborhood shaman" and the "in-house or resident savant," causing him to fall between the two stools.
Building a Strategy
So where does our confused nutraceuticals product manager go from here? Well, an optimistic salesman would view the glass as half full whereas the doubting salesman would see it as half empty. The moral of the story is most product managers today realize that rather than try to take these well entrenched forces head on, it is better to expand the overall cake to help oneself to a bigger pie. Evangelism? Yes, certainly. "Cast the net wider" and "expand the overall cake" will be the new mantras. To that end, this calls for a combination of perseverance as well as deep pockets and the ability to convince consumers that it is fashionable to consume nutraceuticals.
The major players are those that have already created a niche for themselves in the alternative medicine markets, such as Himalaya Herbal Healthcare. This company launched its Ayurvedic Concepts range of products a few years ago and was met with tremendous success. Other players would include Morepen Labs, originally a bulk drug major, who, seeing the major potential in the sector, has made a recent noisy entry, along with other Indian majors like Ajanta Pharma, Ranbaxy Labs and Dabur Products.
Among the purists, Parry Nutraceuticals, a diversified business group strong in South India, has taken the rather courageous stand of building spirulina and beta-carotene, both of which require a lot of concept selling, as their cash cows. Specifically, spirulina has many diverse uses and as a result has no USP for a marketing push. Yet the company has set up a huge state-of-the-art cultivation, extraction and processing facility where production is carried out under rigorously controlled conditions with regular and stringent quality tests and is U.S. FDA approved.
Trans national companies (TNCs) like Novartis and Abbott are quietly building up sales volumes in targeted segments like post-operative convalescing patients through their medical nutrition thrust without any mass media spending. Both of these companies believe that as urban lifestyles deteriorate qualitatively (but ironically lead to higher disposable incomes) the need to look at nutrition charitably will be incipient both at the doctor as well as patient level. This will surely lead to better volumes and sales realizations.
An intelligent segmentation that is expected to pay rich dividends could be achieved by targeting women who are endemically anemic or women that have specific deficiencies and are in need of nutritional therapies for correcting hormonal imbalance and boosting immunity. Most of these ranges would necessarily be routed through doctors by prescription.
Trade Appeal
The trade is also looking at the field with curiosity. Currently, all of the manufacturers/brand builders are players who have graduated from the traditional pharmaceutical industry and hence continue to use the channels that are in place for prescription drugs. The trade channels ensure that drug manufacturers, doctors and retailer-chemists co-exist in a very cozy relationship. However, for an FMHG range where brand promiscuity on the consumer's part can be high (as opposed to prescription where no one tampers with the doctor's advice), this has two major drawbacks. First, it is restricting in terms of reach as compared to "fast moving consumer goods" (FMCG) channels. Second, the retailer-chemist is a major buyer influence. This is because the consumer perceives the neighborhood retailer-chemist as a friendly, honorary, half-doctor and hence places a level of reasonable trust in him. The retailer-chemist in turn is happier dispensing prescription drugs, due to better trade margins, and happier to sustain the profitable relationship with his two other co-habitants. As a result the retailer-chemist would be more inclined to look askance at the entire FMHG sector unless trade margins improve and sales schemes as attractive as in the FMCG sector are introduced.
What Lies Ahead?
Lurking somewhere in the background and prepared to punish companies making untenable claims is FDA, which is asking companies to provide statutory disclaimers about the efficacy claims of the products. At the starting gate are newer and more segmented product ranges like pet nutraceuticals, sports nutraceuticals and cosmeceuticals. This means there is going to be enough excitement in the marketplace for the next few years to keep the adrenaline high for brand managers in the field.NW
About the author:
Pravin Sathe is director of Advantage India Consulting, Bombay, India. Advantage India consulting offers strategy for international companies wishing to set up Indian operations. He can be reached at 9122-513-89-45; Fax: 9122-510-34-22; Website: www.advantage-india.com, www.newsnmuse.info.
