Why Piramal Healthcare is giving stronger impetus to growing its over-the-counter business
When Ajay Piramal sold his formulations business to Abbott in May this year for Rs 17,000 crore, he retained some divisions of Piramal Healthcare: Contract manufacturing, critical care, real estate and over-the-counter medicine (OTC) which can be bought without a doctor’s prescription. The four together did Rs 1,700 crore in sales last year, the smallest contributor being OTC. Still, the plans for it in the days ahead are ambitious. “OTC, being a consumer-facing business, is important to us because it has its own momentum. Even before hiving off formulations, we had identified it as important. That is the reason we did not sell OTC to Abbott; we wanted to grow it ourselves,” says Piramal Healthcare Executive Director & Chief Operating Officer N Santhanam. The company has bumped up its OTC marketing budget by five times over the last two years.
Piramal Healthcare’s OTC range straddles the pharmaceutical space as well as the personal care space. It has brands such as Lacto Calamine (skin care), Supractiv Complete (nutritional supplement), Saridon (headache analgesic), iPill (emergency contraceptive) and Polycrol (antacid) in its portfolio. Of course, the possibilities are huge: The OTC market is estimated at Rs 9,000 crore per annum and personal care at Rs 25,000 crore. The flip side is that Piramal Healthcare has two set of rivals — large pharmaceutical companies like GlaxoSmithKline, and nimble-footed fast-moving consumer goods (FMCG) companies like Hindustan Unilever and Procter & Gamble.
Piramal Healthcare had started life in OTC once it bought Saridon from Roche and Lacto Calamine from Duphar in the early 1990s. In 1998, it did joint ventures with Reckitt Benckiser and Boots to get their OTC range to India. But the going wasn’t easy. “There were issues like how should we bring these products to India — with tweaks in product and pricing or without? All communication had to be sent to the partner abroad for approval, and there were questions on who should bear the media expenses upfront in India,” says Piramal Healthcare President (consumer products) & Chief Operating Officer Kedar Rajadnye. The company decided to play on its own, which it did in 2007 when Reckitt Benckiser bought Boots worldwide. “In the joint ventures, our portfolio grew at only 3-4 per cent per annum. In the last three years, the portfolio has grown at 34 per cent,” says Rajadnye. The brands too are growing at a faster pace than the categories in which they operate. For example, Lacto Calamine is growing at 44 per cent when the skincare market is clocking 22 per cent. Even Polycrol has grown at 23 per cent in the antacid market growing at 11 per cent.
Time for change
The first thing Piramal Healthcare did was to go to the consumers for their feedback. First up was Lacto Calamine. “We asked them what would they replace the product with, if it was not in the shop,” says Rajadnye. The answer surprised the marketers. “All along we had thought other pharmaceutical products to be the competition for the lotion and that it was used for healing skin. But the survey showed us that consumers were using it as regular skincare because the alternates they listed were all leading skincare creams from FMCG companies,” recalls Rajadnye. The consumer also complained about the fuddy-duddy packaging that harked back to a couple of generations earlier. Realisation dawned that the entire mix for the product from packaging to its communication had to change.
To widen the relevance of the brand, Elephant Design + Strategy, which was given the task of repackaging, rebranded it LC — Lacto Calamine was retained in smaller print so that the name didn’t restrict extensions in the future. “At the same time, we could not remove the visual cues of the packaging and alienate loyal consumers who identified with it,” says Rajadnye. Hence, the bottle shape was retained as was the colour scheme. A new campaign played on the aspirations of a much younger woman than it had depicted earlier. Increasing its focus on touching base with consumers, Piramal Healthcare also conducted door-to-door sampling for Lacto Calamine across 25,000 households that saw sale shoot up by 40 per cent in those cities.
A new variant was added. While Lacto Calamine suited oily skin, Piramal Healthcare had to address consumers with dry skin. A variant with aloe moisturiser was the answer. “The brand was growing in single digits; after these changes, Lacto Calamine is now growing at 44 per cent,” says Rajadnye. With a turnover of Rs 65 crore in 2009-10, Lacto Calamine could be Piramal’s first Rs 100-crore OTC brand. The line has got extended to face washes to tap into the larger category of skincare. Calamine lotions (roughly at Rs 100 crore) are only a fraction of the Rs 5,000 skincare market (including fairness, anti-ageing creams and face wash) according to Nielsen data. Market observers say that the company is working on ways to extend the brand to fairness, sunscreen and anti-ageing products. “We are setting up a dedicated research team that would not only look at new product extensions but also the packaging,” adds Santhanam.
Saridon saw its sale rise when the company merged packaging insight with distribution needs. For Saridon, there was a large chunk of outlets which were being catered to by wholesalers. In line with the practice, Piramal Healthcare sold packs of 30 strips. But with a greater understanding of retail, it saw the need to decrease the size of the packs. “Consumers would buy only one strip per purchase. Hence, the 30-strip packs were cumbersome for the retailer,” says Rajadnye. Piramal Healthcare changed the pack to 10 strips, ensuring more retailers started stocking Saridon.
The 50-year-old Saridon also tackled another drawback. “Tablets to relieve headaches were often consumed out of home. At home, consumers would often avoid medicine and stick to balms,” observes Rajadnye. At the same time, the company could not address just one issue as fears ranged from building a resistance to medicines to damaging the stomach lining by taking tablets. The communication it devised externalised the alarm people felt at taking tablets. It depicted a siren going off above the headache-ridden victim, drawing in other people who found him sitting amidst medicines. Saridon was shown as the alternative that would not set off such an alarm because there was no side-effect.
Agnello Dias who had spearheaded the campaign at JWT (as national creative director), and is the chief creative director at Taproot India now, says: “It was a layered communication which did not talk of immediate relief as most others did. The instant relief was a given; we decided to focus on the psychology of the consumer by showing his dilemma in choosing a harmless headache pill.” With 9 per cent of the Rs 600-crore analgesics market, Saridon has crossed the Rs 50-crore mark.
Its latest addition, iPill, however, has presented a challenge in communication. The Drug Controller General of India has asked companies to desist from advertising emergency contraceptives until further notice. Observers say Cipla had invested as much as Rs 70 to 80 crore to launch it and consolidate its first-mover’s advantage. With Rs 39 crore of revenues last year, it enjoys around 51 per cent of market share.
While Santhanam confirms that Piramal Healthcare has two or three products in the pipeline, he admits that personal care would need inorganic growth. “We will not entertain valuations that are too high, and would be more interested at certain brands rather than buying an entire company. You would be surprised at the number of brands that are not among the top five but still do well,” he adds. While it has reworked its bigger brands, it also has some me-too brands such as Itchmosol with 4 per cent market share (Itchguard from Paras was the first to enter the Rs 200-crore itch cream market). Workz cough lozenge had to be relaunched in 2010, after hiccups in 2008. When Workz was launched, distribution was a paltry 30,000 outlets and the launch took three months. To fare better the next time, Piramal Healthcare identified all the towns with more than 100,000 people, and started servicing 400,000 chemists and general stores there with its 1,200-strong sales force.
So how do analysts rate the company’s chances? “OTC will also grow if distributed in rural India where bigger pharmaceutical companies can’t reach. For such products, Piramal Healthcare will not have to send out medical representatives but will have to advertise on the mass media,” says HDFC Securities Analyst Ranjit Kapadia. “Personal care might be tricky and the world of antacids and painkillers safer.”