Win the Branding War
A $2.5 billion market with a huge growth promise. All you need to do is focusing on strong branding and channel distribution. Interested? — By Katya Naidu.
Ringing the cash counters all the way, the Over-The-Counter (OTC) market in India is charging ahead reporting a y-o-y growth of 7.7 percent. According to the research firm, Datamonitor, the OTC segment is slated to cross $3.4 billion by 2011.
Some of the products sold in India under this category are Analgesic, Antacids, Dermatology, and Mineral supplements. Being a self-medication segment, it is the branding moves such as in the FMCG sector, that yield good results.
“There has been an increased interest in the global investment community about the Indian OTC space. India is a huge market and OTC offers the opportunity of capturing mind share instantly through brand promotions and visibility”
– Alok Gupta
Says Alok Gupta, Country Head – Life Sciences & Technology, Yes Bank: “The Indian buyers are brand conscious and OTC segment is no different from any other consumer segment in this regard. It’s only a good branding strategy that will matter here in the long run.”
Opportunities for small Cos
Currently 80 percent of OTC drugs are sold through chemists and the drug store chains. The top players such as Zandu Pharmaceutical Works, Cipla, Dabur India, Nicholas Piramal India and Ranbaxy Laboratories control 51 percent of the OTC market.
Zandu manufacturers about 300 Ayurvedic drugs and is the leader in the Indian balm and rub segment. Dabur offers a wide range of products in the healthcare and personal care segments.
However, the presence of big players has not been a deterrence for small companies to come in. Being a flexible market unlike the prescription business, OTC offers companies a scope to be innovative in terms of evolving and identifying niche and differentiated areas and introduce interesting brand extensions or the OTX segments with specialized offerings for the ethical target. Close to 49 percent of the OTC space is dominated by small and mid-sized players. Some of the next rung leaders in OTC include Proctor & Gamble, Pfizer, Himalaya Drug Company, Novartis, GlaxoSmithKline, Alembic, and Paras Pharmaceuticals.
“GlaxoSmithKline’s Crocin or Paras Pharmaceuticals’ D-COLD, CRACK, or MOVE have become successful purely through smart branding and channel distribution moves. And this throws open many opportunities a global investor looking at funding a pharma venture in India,” adds Gupta of Yes Bank.
“OTC products have closely patterned themselves with the FMCG industry, which has seen a growing trend in newer offerings, brands and variants, all of which have grown with requisite brand building and market creation as well as the expansion efforts. The Indian buyers continually seek superior value and any player that can deliver sustained and credible value to the buyer will thrive,” says Deepa Soman, Managing Director, Lumiere Business Solutions.
Education is the driver
The increasing pharma-awareness of the Indian consumers is leading to a growth in the OTC sale.
As the consumers get smarter, educated, and self-reliant, comes in the self-medication, which is the prime driver behind the boom in the OTC segment.
“Indian consumers today are confident about sharing healthcare responsibility through self-medication, especially when treating common ailments,” opines Sumita Nag, Analyst at IndusView, a reputed market research and consultancy firm in India.
Increasing urbanization has changed people’s lifestyles but has also led to an increase in the lifestyle diseases. Hand in hand, improving literacy rates and strong growth in income levels have led to rising health awareness among consumers.
Distribution challenge: Expanding the pie
The optimal exploitation of the OTC opportunity by a new entrant or investor will depend on setting up an effective channel distribution network. Apart from widening their product profile and offerings, companies must increase the market reach of their products.
A distribution trend, which might help bolster OTC sales, is the emergence of large format retail. It is a general prophecy that the advent of organized retail will create new shelf space. Moreover, the pharmaceutical companies are also exploring the hitherto non-existent areas to retail their OTC drugs, i.e. going beyond the ‘chemists and druggists’.
“Out of five million retail outlets in India (the total retail universe), only the four percent are drug stores. So we should reach to retail outlets which are non-chemist then the OTC will pick up much faster,” observes P V N Raja Shekhar, Associate Director – Business Development, Indegene Pharmaceuticals.
“To increase sales of an OTC product its distribution has to be increased for which in addition to pharmaceutical distributors even FMCG distributors should be brought in since their reach is far more wider,” advises Nag of IndusView.
“As of now, selling of the OTC drugs through grocery stores is permitted only in rural areas having less than 1,000 inhabitants. The Industry is trying to change this rule, lobbying for a wider coverage of ‘kirana’ stores (the traditional grocers in India),” informs an official from Confederation of Indian Industry, an apex body of all Industry associations in India.
The industry associations including OPPI have suggested changes to the Schedule K of the Indian Drugs and Cosmetic Act, 1940.
These suggested changes stand to alter the current sales legislation regarding consumer healthcare products. Subject to approval, the new provisions will to bolster sales for aspirin, cetaminophen, analgesic balms, antacids, oral dehydration solution, gripe water, cough and cold treatments including inhalers, tetracycline-based ophthalmic ointments and low-dose hormonal contraceptives through non-pharmacy channels.
However, there is some apprehension in the government camp about allowing for a wide-scale coverage for drug sales through grocery and other on-pharmacy stores.
“The Health Ministry is concerned about permitting neighborhood kirana stores to stock over-the-counter drugs, even as multinational pharmaceutical companies are pushing for relaxation of norms,” Nag informs.
Allowing the FMCG distributors will create competition to the pure-play pharmaceuticals distributors and the traditional druggists and chemists.
This may pose a conflict management challenge to pharma companies, she warns.
The ideal time is now
Barring these few challenges, the Indian OTC market presents itself as an ideal opportunity for the global investment and pharma community.
“There has been an increased interest in the global investment community about the Indian OTC space. India is a huge market and OTC offers the opportunity of capturing mind share through brand promotions and visibility,” says Gupta of Yes Bank.
This suggests that the time ideal for investing in the Indian pharmaceutical market is today. When investments grow, so will the total market-pie.