India’s increasing affluence and accompanying ‘lifestyle’ diseases such as diabetes have boosted this Ayurvedic company’s performance, but it needs to do more on advertising and distribution.
Consider this: India has over 61 million diabetics according to the International Diabetes Foundation. By 2030, this figure is expected to cross 100 million. By that time, India will be second only to China in terms of the number of diabetics in the world. This is not all. Cancer is also catching up fast as a killer disease. According to the Indian health & family welfare ministry, some 5.35 lakh patients succumbed to cancer this year. Though marginally higher than the figure reported last year, the signs are clearly not good.
India is rapidly seeing the emergence and growth of lifestyle diseases. As affluence grows, bringing with it a change in dietary habits, ailments such as cancer, diabetes and heart problems are becoming the order of the day. Ironically it is throwing up a myriad of possibilities for the herbal healthcare company, Himalaya, which banks on the science of Ayurveda to develop products. The perception that Ayurveda is also safe in comparison to mainstream allopathy is what makes the prospects of firms such as Himalaya bright, say market experts.
The unlisted, Bangalore-based entity has a turnover of over Rs 1,000 crore. Key verticals — pharma and FMCG — which contribute 60 per cent and 40 per cent respectively to overall revenues are growing at a clip of about 25-32 per cent per annum, according to Ravi Prasad, executive chairman, Himalaya Drug Company, who has been with the firm for well over 20 years now. Under him, the largely pharma company, which was formed in 1930, stepped into the FMCG space in 1999. Considered a close confidant of the low-profile Manal family, who are founder-promoters of Himalaya, Prasad has driven Himalaya’s international expansion into markets such as Russia, Ukraine and Romania. Today, Himalaya products —both pharma and FMCG— are available in over 80 markets including the US, Europe, South East Asia and the Middle East.
Himalaya is also counting on its international markets to drive growth as it seeks to move to the next level in the coming years. The move to step into FMCG over a decade ago, say Prasad, was prompted by the firm’s need to grow. Driving growth in international markets is key now, he says.
Ironically, with the world increasingly moving from largely curative to preventive medication, Himalaya with its herbal heritage finds itself in a unique position: to address medical needs with patented products that are based on good, solid research. “Most Indian pharmaceuticals companies are in the generics space which is largely a volume-driven business. We do not operate in that segment,” says Prasad.
The pharmaceuticals market in India is roughly Rs 56,000 crore, growing at a clip of about 15 per cent per annum. Over 95-96 per cent of the market comprises generics players, who market off-patent allopathic products. Himalaya, in contrast, has opted to build a strong pipeline of herbal products. The journey typically from R&D to final product takes easily about eight to ten years, says Prasad.
Thanks to this, Himalaya has some notable products to its name including Cystone (for people suffering from kidney stones) and Liv.52 (for those suffering from kidney ailments). Liv.52, in fact, is ranked amongst the top ten pharma products in the country, according to market research agency ORG IMS (see chart).
Liv.52 also happens to be among Himalaya’s early success stories. Launched in 1955, the herbal product went on to become one of the most trusted names in liver care. Available in tablets as well as syrups, Liv.52 has a share of close to 46 per cent in its space, and consists of Ayurvedic herbs that helps restore the functional efficiency of the liver (check chart on Liv.52). The drug also acts as a daily health supplement that helps improve appetite and promotes weight gain.
Cystone, the other blockbuster drug in Himalaya’s arsenal, was launched in 1943. It has a share of 40 per cent, and is considered to be effective in tackling the problem of kidney stones in more than 70 per cent of patients (check chart on Cystone). Company executives say that what has worked for both Liv.52 and Cystone, and indeed, all pharmaceutical products under Himalaya, is their recommendation by not just Ayurvedic doctors, but also practitioners of allopathy.
Philip Haydon, chief executive officer, pharmaceutical division, Himalaya, says that it is this recommendation by doctors over the years that helped the company sustain double-digit growth.
The company is keen to replicate this success in other areas such as oncology (cancer-related medication), viral & tropical diseases, stem cell therapy and nutritional products. “These are some areas we are working on,” says Prasad. On the FMCG front, the company is looking to add advanced anti-ageing to its repertoire of products, which includes skincare (facewashes, creams, moisturisers), haircare (shampoos, conditioners, hair oils), footcare, oralcare (toothpastes) and lipcare respectively.
“There are some other vacant spots too in our FMCG portfolio such as hair colour, deodorants and men’s products. But we are not immediately rushing into these segments,” says Saket Gore, chief executive officer, consumer products division, Himalaya.
With a nation-wide presence with facewashes and lipcare, and a regional, mostly south-centric presence in other categories, Gore says that his hands are full at the moment. In face-washes, lipcare and shampoos, which are Himalaya’s most important categories, key rivals include Hindustan Unilever (HUL) and Lóreal respectively. In lip care, for instance, Himalaya is third after HUL and Lóreal, while in facewashes, it stands at number two after HUL, and marginally ahead of Lóreal.
|HIMALAYA'S STAR PERFORMERS|
|* Liv.52 was launched in 1955||* Cystone was launched in 1943|
|* The drug is made from Himsra (Capparis spinosa) and Kasani (Cichorium intybus) extracts||* It is the only herbal drug available for treating urinary stones and positive results are recorded in more than 70% of patients|
|* It is the only herbal medicine to be ranked amongst the top 10 pharmaceutical products in India||* The drug is made from Gokshura (Tribulus terrestris), Pasanabheda (Bergenia Ligulata) and Shilapushpa (Didymocarpus pedicellata) extracts|
|* Backed by 264 clinical trials and one meta-analysis study in infective hepatitis||* It has undergone 90 clinical trials and is prescribed by doctors in several countries|
|* The drug continues to be prescribed by doctors worldwide after 56 years of launch||* Cystone tablets (60s) is priced at Rs 80 and Cystone syrup at Rs 70|
|* Present in over 65 countries around the world|
|* Liv.52 tablets (100s) are priced at Rs 60 and Liv.52 Syrup 100ml and 200ml are priced at Rs 52 and Rs 75 respectively.|
For all this, analysts have an interesting take to offer about Himalaya’s FMCG play. Unlike pharma, which is the backbone of the 81-year-old-company, FMCG is a newer business, launched 12 years ago with Ayurvedic Concepts. The latter was subsumed into the larger Himalaya brand name owing to the heft it carried with consumers. From then to now, the business has grown in double-digits, but remains smaller than the mainstay pharma business. Pharma also lands up sucking bulk of the profits on account of its intensive focus on R&D.
According to Haydon, the pharma division has a three-to-five-year-pipeline of products ready. “Our basket is full,” he says. “There are no dearth of products.”
With a total reach of about 4 lakh doctors worldwide, Himalaya's pharma business is largely push-driven (that is, driven by medical representatives who hard sell the product to doctors, who eventually recommend or prescribe it to their patients). The FMCG business, on the other hand, is pull-driven (that means it banks heavily on consumers being drawn to products based on aggressive advertising, marketing and distribution).
While Gore declines to give investment details, he does admit that the firm has some miles to go on both brand-building and distribution.
In the south, for instance, the channel of distribution for Himalaya in FMCG is modern-trade (that is, organised retail stores), not traditional trade (that is, neighbourhood or kirana stores). Kirana stores give over 90 per cent of sales to an FMCG company so Himalaya's limitation to organised retail stores for categories such as shampoos is a clear disadvantage. Its national categories facewashes and lipcare, in contrast, are distributed via both traditional and modern trade. “But FMCG calls for a lot of investment,” admits Gore.
With peers in the space such as Dabur and Emami spending substantially more on both distribution and A&P (that is, advertising & promotion), the task is not easy, say analysts. Adspends as a pecentage of sales for most listed FMCG companies including Dabur and Emami is in the region of about 10-12 per cent. In the case of Himalaya, it is significantly lower, say market experts. Investment in distribution is also lower than peers, say experts. For listed FMCG companies, distribution expenditure as a percentage of sales is about 5-6 per cent of sales, they say.
Gore says that the firm is working on ramping up FMCG distribution largely through modern trade. It also has its own network of 129 retail stores, largely used as information centres than points of sales.” So far this year, we have added eight stores. And we propose to keep this momentum going,” he says.
But with competition only heating up in FMCG, thanks to the entry of new players as well as the actions of existing players, opting to play in a limited geography using limited tools of distribution may not be the best strategy, say analysts. Gore responds by saying that Himalaya’s products remain strong. “The focus for us is there,” he says.