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Transcript of Herbal Prospects
Prospects of Ayurveda Industry in India
Mihir Mohanta
Background Ayurveda Industry
When we think Ayurveda …..
The other face of the Industry
The other Face of the Industry
STATUS OF AYURVEDA
•Number of registered medical practitioners: 366,812 •Number of dispensaries: 22,100 •Number of hospitals: 2,189 •Number of hospital beds: 33,145 •Number of teaching institutions (undergraduate): 187 •Number of upgraded postgraduate departments: 51 •Number of specialties in postgraduate medical training: 16 •Number of pharmacies manufacturing Ayurvedic medicines: 8,400
•In addition about 400,000 Ayurvedic practitioners, •There are over 170,000 homeopathic physicians; •India has about 500,000 medical doctors •Reliance on Ayurvedic medicine is heavy in states like Kerala. •Many Ayurvedic practitioners in small villages are not registered.
Exports of Ayurvedic medicines
•Exports of Ayurvedic medicines have reached a value of 100 million dollars a year (about 10% the value of the entire Ayurvedic industry in India). •About 60% of this is crude herbs (to be manufactured into products outside India) •About 30% is finished product shipped abroad for direct sales to consumers, •And the remaining 10% is partially prepared products to be finished in the foreign countries
Legislation for pharmaceutical
The major legislation for pharmaceutical regulation is the •Drugs and Cosmetics Act, 1940 (DCA) and its subordinate legislation, •The Drugs and Cosmetics Rules,1945 (DCR). •Drug (Prices Control) Order, 1995, •Drugs (Magic Remedies) Objectionable Advertisement Act, 1954 •Pharmacy Act, 1948
Regulatory framework for Drugs
REGULATORY FRAME WORK In India, the import, manufacture, distribution and sale of drugs and cosmetics are regulated by the “Drugs and Cosmetics Act, 1940 (DCA), the Drugs and Cosmetics Rules, 1945 (DCR). OTC Drugs ‘OTC Drugs’ means drugs legally allowed to be sold ‘Over The Counter’ by pharmacists, i.e. with out the prescription of a Registered Medical Practitioner. Although the phrase ‘OTC’ has no legal recognition in India, all the drugs not included in the list of ‘prescription-only drugs’ are considered to be non-prescription drugs (or OTC drugs). Prescription-only drugs are those medicines that are listed in Schedules H and X of the Drug and Cosmetics Rules. Drugs listed in Schedule G (mostly antihistamines) do not need prescription to purchase but require the following mandatory text on the label: “Caution: It is dangerous to take this preparation except under medical supervision”. Drugs falling in these three schedules are currently not advertised directly to the public under a voluntary commitment by the pharmaceutical industry. Currently, non drug-licensed stores (e.g. non-pharmacists) can sell a few medicines classified as ‘Household Remedies’ listed in Schedule K of the D&C Rules in villages whose population is below 1 000 subject to certain other conditions.
Regulatory framework for Ayurveda
OTC drugs registered as ‘Ayurvedic Medicines’ (i.e. traditional Indian system of medicines containing natural / herbal ingredients) are also regulated by the DCA (Drug & Cosmetic Act) and DCR. Ayurvedic drugs are manufactured under a manufacturing licence issued by the Ayurvedic State Licensing Authorities. However, they do not require a drug sale licence and can be sold freely by non -chemists. Some of the largest OTC brands in India are registered as ‘Ayurvedic Medicines’ because of their plant-based natural active ingredients e.g.
•Vicks VapoRub, •Amrutanjan Pain Balm, •Zandu Pain Balm,
Licensing Authority
Power to provide manufacturing and selling licenses’ - which are the two main stages required to manufacture and sell a drug - belongs to each individual State Government through its -Food and Drug Administration (FDA). -These Food and Drug Administrations (FDAs) also carry out enforcement of the DCA and the DCR. The DCGI office is established in modern premises in Delhi: Central Drugs Standard Control Organization Directorate General of Health Services Ministry of Health and Family Welfare Government of India FDA Bhavan, ITO, Kotla Road, New Delhi - 110002 Phone: +91-11-23 23 69 68
Emerging Industry Trends Extracts of McKinsey Report
Definition of Markets
Tier 1 markets as metros (population 1 million),
Class 1 towns (0.5 million to 1 million ) and Class
1A towns (0.1 million to 0.5million).
Tier 2 markets are the remaining urban markets
(Class II, II and IV towns )and rural areas.
From a market size of US$ 6.5 billion in 2005, the Indian pharmaceuticals market will grow to about US$ 20billion by 2015. This implies a compounded annual growth rate of 12.4 percent. In terms of scale, the Indian pharmaceutical market is ranked 14th in the world. By 2015, it will rank among the top 10 in the world.
Projected Indian pharmaceuticals market size
The incremental market growth of US$14 billion over the next decade is likely to be the third largest among all markets.
The incremental market growth
Cumulative growth rate
The growth drivers
Rising disposable incomes and an upward shift in income demographics will be the dominant factor – 40%
Growth profile of diseases
•The prevalence of diabetes will rise from 2.8 per cent in 2005 to 3.7 per cent in 2015; •coronary heart disease from 3.3 to 4.9 per cent; •obesity from 1.3 to 2.7 per cent •hypertension will grow by another 50 million cases •Key therapeutic areas that will grow as a result of the increase in lifestyle disorders are •cardiovascular •neuropsychiatry •oncology.
Market growth
• 45 % of market growth in the next decade will take palace in tier 2 markets.
•Rural markets alone will account for 27 % •Class II, II and IV towns accounting for 18 % By 2015, the share of Tier 2 markets will grow marginally to 44 per cent, implying a market size of US$8.8 billion.
Rural Market Potential
• A large part of the population is excluded by pharma companies when they don't reach out to the rural market.
• The market can grow anywhere between 10 and 17 percent, if it has access to the rural areas.
• The rural market, which constitutes 67 percent of India's villages, accounts for just 17% of total pharma industry sales, being valued at Rs 9,146 crore in 2010.
• The report states that accessibility of medication in rural areas is very poor with less than 20 percent of the population having access.
(Source Report: Pricewaterhouse Coopers Report)
•Both EBITA & PAT % margins are very low. Such margin cannot sustain a business operation.
•Capital Turn over almost 15 times in a year is very unlikely.
DABUR HHPC
Operating Results:
FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08
2009-
10
Sales Growth YOY (%) 14% 12% 9% 7% -4% 15% 24% 18% 15% 177%
EBITA Margins (%) 11% 13% 12% 12% 13% 13% 15% 17% 18% 18% 0.8%
PAT Margin (%) 6% 8% 7% 6% 7% 9% 11% 13% 13% 14% 0.4%
Debt as % Capital Employed 53% 47% 35% 44% 70% 32% 31% 20% 25% 14% 0.0%
Capital Turn Over 1.5 1.6 2.0 1.7 0.9 3.0 2.7 2.8 3.3 3.3 15.7
RoCE (%) 15% 17% 20% 13% 16% 29% 31% 39% 46% 48% 7.1%
% Earning on Face value of Share 1724% 2655% 274% 238% 322% 381% 549% 396% 324% 384% 17.1%
Key Indicators trends Dabur Compared with HHPC
Cumulative annual growth of categories
10% 10% 9%
10% 9%
13%
22%
OTC sales - India Analgesics Cough, Cold &Allergy
Gastrointestinals Vitamins, Minerals& Suppliments
Dermatologicals Lifestyle OTCs
Consumer attitude on suffering
Go to the pharmacist
44%
Go to the doctor 24%
Self-medication 23%
Do nothing 9%
Marketing Strategy Product
CLASSICAL PRODUCTS
1. Arishtas 2. Asavas 3. Bhasms 4. Chawanprash 5. Churns 6. Gutikas 7. Kashayas 8. Oils 9. Vatis
Our Classical Products are prepared as per CLASSICAL TEXT in our Vedas.
Ramdev's Top 10
Ramdev's Top 10 Category
Healing
Heritage
Presence
1 Divya Mukta Vati High Blood Pressure No
2 Divya Kesh Taila - Herbal Hair oil Hair Care/Loss No
3 Divya Medohar vati 50gm Weight Loss No
4 Orgy Oil - Penis Enlargement Sexual Health No
5 Divya Madhunashini Vati 120 Tabs Dibetes No
6 Divya Kesh Kanti Shampoo Hair Care No
7 Divya Dant Kanti Herbal Toothpaste ToothCare No
8
Divya Shilajit Sat (pure shilajit
extract) Sexual Health Yes
9 Divya Medha Vati(Tablets) 40gm
Memory
enhancement No
10 Divya Giloy Sat / Amrita Sat Body Immunity No
Comparative presence of HHPC in Lingaraj Apsara.
Sl. No Name Category
Part of
Ramdev Top
10 Category
HHPC
Presence
1 Cold Chung Cough & Cold Yes
2 Gastric Powder Digestive (Acidity) Yes
3 Trifala Powder Intestinal disorder, rejuvenation Yes
4 Trishakti Junai Akra Digestive No
5 Pimples Herbal Face Pack No
6 Black Spot Face Pack No
7 Beauty Care Eye Pack Face Pack No
8 Bleach Pwder Face Pack Yes
9 Meda Hrasaha Churan Weight Loss Yes No
10 Hair oil-1 (falling ) Hair care Yes No
11 Hair oil-1 (vitalise ) Hair care Yes No
12 Hair oil-1 (regeneration) Hair care Yes No
13 Health Powder Health Suppliment Yes No
14 Fat reduction Weight Loss Yes No
15 Pain Oil Pain Killer Yes
16 Joint Pain Pain Oil (Rehumatic) Yes
17 Kamaudipana Churna Sex Enhancement Yes No
18 Sthamandha Churna Sex Enhancement Yes No
19 Breast Oil -Growth Sex Enhancement Yes No
20 Breast Oil -strong Sex Enhancement Yes No
21 Rati shakti Sex Enhancement Yes No
22 Danta Amruta Tooth Paste Yes No
Dabur portfolio contribution
Category Sales in Lakh
Sales
Contribution
Hair Oils 56,838 20%
Chyawanprash 22,058 8%
Honey 13,650 5%
Tooth Powder & Paste 45,301 16%
Hajmola 14,661 5%
Asva- Arishta 6,477 2%
Fruit, Nector & Drinks 31,115 11%
Vegetable Paste 916 0%
Others 96,560 34%
Total 287,576
Source: Annual Report Dabur 2009-10
Category Share -Dabur
Hair Oils 20%
Chyawanprash 8%
Honey 5%
Tooth Powder & Paste 16%
Hajmola 5%
Asva- Arishta 2%
Fruit, Nector & Drinks 11%
Vegetable Paste 0%
Others 33%
Suggested Category
Sl. No Category 1 Blood Pressure
2 Hair Care/Loss 3 Weight Loss 4 Sexual Health
5 Diabetes 6 Face Care 7 ToothCare
8 Memory enhancement 9 Body Immunity
10 Joint Pain
11 Digestives 12 Honey 13 Herbal Tea
Chyawanprash-Category
Market Segment
Size 400 Crore
Growth in 2010 25%
Market Share
Volume
Zandu
Pharma Emami Baidyanath Dabur Others
2010 (Oct-Dec) 6% 9% 12% 64% 10%
2010 (Apr-Dec) 4% 9% 14% 64% 10%
2009-10 3% 6% 13% 67% 11%
2008-09 2% 6% 13% 70% 9%
*AC Neilson
There are 2 pictures one for strength & other for immunity
Radiation at the back of Dhoni is implying on power or strength
Pack is bright red, which stands out in the shelf and catches attention
HHPC is confused on trying to communicate so many things-
Cold, infection, body vitality, geriatric health care.
The baby picture feeding confuses further to be a baby food.
Ingredients are prominent than the product utility
Face Pack Comparisons
100g/Rs50/OTC/Own Retail Outlet
20g/Rs35/OTC/Trade fair
75g/Rs50/OTC/Trade fair
20g/Rs20/OTC/Trade fair
100g/Rs15/OTC/Wholesale cum Retails 20g/Rs35/OTC/Trade fair
100g/Rs20/OTC/ Trade Fair 20g/Rs32/OTC/Trade fair 100g/Rs15/OTC/Wholesale cum Retail
Face Pack Comparatives
12.5
199
17
3.75
40
6.25
21.875
43.75
0 50 100 150 200 250
Gulzar Mix fruit
Biotic Myristica
Chandan
Sandal Herbia
Apsara Herbal
S.H.G
Herbia
Fabindia
Selling Price (Rs/-) of 25gms equivalent Face Pack
Comments on Honey:
HHPC product looks messy more like a pickle bottle where as Dabur product is clean & bright.
Communication: HHPC product communicates the ingredient of the product ie honey comb, while in
the Dabur product the picture of a happy family communicates the benefit of the use of product
Dabur has the very prominent “branding” on the face where as HHPC has just the logo.
The product transparency and the golden borders expresses the purity of the product in Dabur.
Dabur Honey is marketed on product authenticity, and it provides guarantee on “Purity”
Posters: Two comparative posters intend communicating same message- weight reduction. The right
side poster catches imagination fster because of the depicted picture on it.
Honey Comparatives
Cost spread comparisons
26%
82%
2%
8%
8%
54%
41%
27%
5%
27%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Gross Margin
Raw Material
Packing Material
Processing
Marketing
Dabur
Heritage
Packaging Options
Pet: Poly Laminate with stickers- saves cylinder cost for
printing.
Common printed laminates for multiple products-
differentiation through the Labeling sticker
Craft Paper Laminate Zip pouches- for easy reuse
A wide range of colorful plastic tubes are available for cosmetic range of Packaging
– mostly Chinese
Packing Material Options
Barcodes:
Barcodes: One of the mandatory requirement for modern retail is the barcode. A product is identified and tracked through the barcode only. Below is one sample barcode. Besides the barcodes there are mandatory requirements which are necessary to be displayed in the stickers. Barcodes can be easily obtained through Internet. Below name of the web site address. https://www.officialeancode.com For more information regarding EAN codes / barcodes: Call 1-404-885-6066 (international)
BRANDING
BRANDING Brand not necessarily has to be the name of the company. Band has to be unique, simple and easy to remember word(s). It can be acronym too. A serious thought needs to be given on it. Brand is something…. M A K I N G A P R O M I S E that motivates customers, partners, investors and employees to buy from you or buy into you E X P R E S S I N G Y O U R P R O M I S E through compelling names, brand styles and communications D E L I V E R I N G O N Y O U R P R O M I S E to each party to keep it credible and keep your organization focused U S I N G W H A T Y O U S A Y , what you do and what you value to create branded experiences that build loyalty and referrals
Marketing Strategy Pricing
Price Points
Brand MRP
Dabur Honey 1kg 260
Dabur Honey 500gm 146
Dabur Honey 400gm Pet Bottle 132
Dabur Honey 250gm 89
Dabur Honey 100gm 43
Dabur Honey 50gm 23
PENNY PACKS
Hindusthan Uni Levers (HUL) strategy of entering rural markets were based on small packs like sampoo sachets of Rs1/ 2/3. Lifebuoy soap of Rs2/-. . ITC’s sale of single pieces of cigarettes contribution is more than packets. Less than Rs5/- price points are very important for the rural markets. Advantages of Penny Packs It generates maximum number of trials Laddis (strips) in small shops creates visibility Branding creates product awareness – like serving in flight or train Many a times % margins are higher in the small packs
Penny Packs
Rs 2/-,2g , Himani Ayurveda Rs 1/-, Parag Pouches Rs 1/-, Dabur
Rs 1/-, Bajaj & Company Rs 1.50/-, KM Pharma Rs 1/-,Bajaj & Company
Penny Packs
Rs 1/-, 3ml, Bajaj Corp. Rs 1/- 3ml, GK Burman Rs 1/-, 3ml, Himani Herbs
Rs 1/-, Paras Eatables Rs 1/-, Raja Spices Rs 1/-, 5ml, Dabur
Margin contribution-Dabur
Sl. No Category of Goods Yr Gross Margin % Average GM %
1 Hair Oils 2009-10 105% 110%
2008-09 134%
2007-08 92%
2 Chyawanprash 2009-10 63% 95%
2008-09 115%
2007-08 106%
3 Honey 2009-10 67% 84%
2008-09 90%
2007-08 97%
4 Tooth Powder & Paste 2009-10 209% 133%
2008-09 82%
2007-08 109%
5 Hajmola 2009-10 56% 58%
2008-09 82%
2007-08 38%
6 Asva- Arishta 2009-10 53% 65%
2008-09 62%
2007-08 80%
7 Fruit, Nector & Drinks 2009-10 48% 66%
2008-09 43%
2007-08 105%
8 Vegetable Paste 2009-10 -12% -6%
2008-09 -15%
2007-08 9%
MRP build up
Price (MRP) build-up for non-price-controlled medicines
and Ayurvedic medicines is as follows:
% %
Manufacturer’s selling or ex-factory price (MSP) 100 60.2
Central VAT (16% of 57.5% of the MRP) 115.2 69.44
State VAT (4% of the MRP) 121.8 73.4
Stockist / Wholesale price (margin = 10% of the MRP1) 138.33 82.64
Maximum Retail Price (MRP) (margin = 20% of MRP1) 165.3 100.0 165.3 100
Marketing Strategy Distribution
Channels of drug Distribution
Channels of drug Distribution
Franchise Model
MAHARISHI AYURVEDA FRANCHISE
SET UP COST M1 Model M2 Model
Minimum Recommended (Sqft) 250 600 Rs. Rs.
Interiors, Wood Work, Paint, Branding 105,000 225,000 Furniture & Fixtures 65,000 110,000
Signages 50,000 60,000 Sub-Total (A) 220,500 395,000
Equipments
Tools & Equipments 5,000 30,000 Electricals Equipments 25,000 50,000
Inverter/UPS 15,000 25,000 Computer Equipments & Software 30,000 30,000
Telephone & Internet connection 5,000 5,000 Misc. items 5,000 5,000
Sub-Total (B) 85,000 145,000
Total Capital Expenditure (A+B) 305,000 540,000 Stock of Medicines for Pharmacy 100,000 125,000
Funds for Operational Expenses (3 months) 150,000 225,000 Total Working Capital Requirements (C) 250,000 350,000
Pre Opening Marketing Expenses (D) 25,000 30,000
Total (A+B+C+D+E) 580,000 920,000
Franchise Fee 100,000 250,000
TOTAL PROJECT COST 680,000 1,170,000
MAHARISHI AYURVEDA FRANCHISE M 1 MODEL
PROFITABILITY STATEMENT PROJECTED P&L STATEMENT
PARTICULARS 1 2 3 4 5 Total Capital Investmentnvestment 680,000 680,000 680,000 680,000 680,000 Number of Patients First Time (per day) 6 8 12 18 24 Revisit (per day) 3 4 6 9 12 First Time (per year 300 days) 1,800 2,400 3,600 5,400 7,200 Revisit (per year 300 days) 900 1,200 1,800 2,700 3,600 Income from Consulting first time 450,000 600,000 900,000 1,350,000 1,800,000 Income from Consulting revisit 112,500 150,000 225,000 337,500 450,000 Income From Pharmacy 1,215,000 1,620,000 2,430,000 3,645,000 4,860,000
Gross Revenues 1,777,500 2,370,000 3,555,000 5,332,500 7,110,000 Operating Expenses Cost of Medicines 850,500 1,134,000 1,701,000 2,551,500 3,402,000 Staff Cost 360,000 360,000 360,000 720,000 720,000 Rent 120,000 120,000 120,000 120,000 120,000 Royalty to MAHARISHI AYURVEDA 84,375 112,500 168,750 253,125 337,500 Marketing Expenses 88,875 118,500 177,750 266,625 355,500 Electricity & water 60,000 60,000 60,000 90,000 90,000 Communication 24,000 24,000 24,000 36,000 36,000 Travelling & Conveyance 60,000 60,000 60,000 120,000 120,000
Total Other Operating Expenses 1,691,952 2,052,872 2,741,759 4,234,535 5,266,013 OPERATING PROFIT 85,548 317,128 813,241 1,097,965 1,843,987 % of Gross Revenues 4.81 13.38 22.88 20.59 25.94
% Return on Investment 12.58 46.64 119.59 161.47 271.17
Innovative rural distribution
Product Visibility
MODERN RETAIL MODERN RETAIL Typically however, less than 5% of sales of FMCG manufacturers in 2006 went through organised retailers. A manufacturer or importer has to make his proper arrangements for distribution to the retail level. For OTC/FMCG products Modern retails work on the following modes: Sign an annual TOT (Terms of Trade) where they negotiate the below terms MRP based marked down margin 25- 40% Annual back margin on sales target- 1-3% Occasional Promotions of certain value End cap/ display Income RTV (Expired or damaged product return to the vendor) Advantages of operating with Modern retail No need on product distribution It creates strong branding value It generates good quantity of sale It also generates consumer data Impact of Promotions can be very easily tracked Customers are aware of products – as there is planogram display
Marketing Strategy Promotion
Art work comparison
HHPC: Sexual Debility Drug
Lingaraj Herbal : Breast Strong Drug
Comment:
Most products of HHPC lacks customers connect in terms of Picturisation.
Most often the pictures are of the Ingredients & not the benefits
Recommendations:
Re look at the Artwork of the entire product portfolio.
Define USP of each of the product. Not more than 2 USP.
Produce connecting picture to the defined USP.
Do a pre-testing validation of Art work. Does it easily communicate the intended message (USP)
Rural Advertising
Rural Advertising
Modern trade display
Modern trade display
Entrepreneur
Poster of Namita Mishra
Highlights
Qualified doctor
100% herbal
Registered production unit
Product range high lights face pack & the others
Contact address & numbers
Products are basics- which would be valued
like commodities.
Well Packed- looks value added and hence can be
priced high.
Product Value Addition
Khandani (Bunyadi) Ayurvedic Jadibuti treatments
They keep migrating with mobile tents. Raw jadibuti as well as manufactured medicines are being used. They are seen in metros as well as small cities. They have a specific clientele.
Weekly Markets is health delivery platform for Rural Folk
Typically there are 5-6 jadibbuti sellers in a weekly market. They are not just sellers but also prescribe what formulation to be taken.
Weekly Markets ……jadibuti…….contd…..
Weekly Markets today are also feed by Ayurveda drug sellers….
Strategic Vision
HHPC
500
1,000
2,500
70 160
450
Phase 1 Phase 1 Phase 3
Sales (Lakhs) EBITA (Lakhs) Linear (Sales (Lakhs))
Understanding the Business - Phase 1
Business model Consolidation-
Phase 2
Rapid Organic & Inorganic
Expansion- Phase 3
Strategic business frame work for HHPC
Strategic business frame work-Proj. balance sheets
Projected Balance sheet HHPC
2014-15 2016- 18 2021-22
Operating Results: Yr-3 Yr-5 Yr-10
Sales 50,000,000 100,000,000 250,000,000
EBITA 7,000,000 16,000,000 45,000,000
EBITA Margins (%) 14% 16% 18%
Profit Before Tax (PBT) 5,600,000 13,200,000 39,400,000
Taxes 756,000 1,782,000 5,319,000
Tax Rate (%) 14% 14% 14%
Profit After Tax (PAT) 4,844,000 11,418,000 34,081,000
PAT Margin (%) 9.7% 11.4% 13.6%
Financial Position:
Fixed Assets (Net) 2,500,000 20,000,000 50,000,000
Current Assests, Loans & Advances 15,359,855 35,359,855 75,359,855
Current Liabilities & Provisions 1,400,000 2,800,000 5,600,000
Net Working Capital 13,959,855 32,559,855 69,759,855
Days of Sales 102 119 102
Total Assests 16,459,855 52,559,855 119,759,855
Share Capital 894,800 1,294,800 3,237,000
Reserves & Surplus 8,948,000 12,948,000 32,370,000
Share Holders Funds 9,842,800 14,242,800 35,607,000
Loan Funds 10,000,000 20,000,000 40,000,000
Debt as % Capital Employed 50% 58% 53%
Total Capital Employed 19,842,800 34,242,800 75,607,000
Capital Turn Over 2.5 2.9 3.3
RoCE (%) 49% 80% 96%
Equity Share Data:
Earnings Per Share (Rs) 541 882 1053
No of Shares 8,948 12,948 32,370
Thank You