Value-added OTCs on the radar

India currently ranks 11th in the world for over the counter (OTC) drugs. The market is poised to grow to the ninth position within five years. The Indian OTC drug market is around Rs 12,000 crores and is growing at 12 to 14 per cent annually. Success stories of brands like Otrivin (nasal spray format), Crocin Advance (fast acting Optizorb Technology), Volini (nano and duo technology), Disprin (fast dissolving aspirin) has made a mark within the market in the form of consumer recognition, trials and acceptance. Hitesh Gajaria, Partner, KPMG says sales of OTC medicines in India are predicated to increase from Rs 141.3 billion ($3.03 billion) in 2011 to Rs 267.8 billion ($6.23 billion) in 2016.

Adding value

Presently, the market has 70,000 OTC brands which are competing with each other and is a burden for the customer’s wallet in India. It is imperative that companies focus on differentiating their products which is demanding to add value to an existing product which may involve launching it in more palatable flavours for example products like ENO, more patient compliant dosage forms like Crocin drops for paediatric patients), and more effective medication such as Iodex gel for better permeability.

As Gajaria, points out, “The objective of any value-add exercise should be to meet the consumer needs that can be of varied kinds, from quick and long lasting relief to psychosomatic relief.”

With changing market dynamics and consumer demands, market players are compelled to take a leap in the profitable OTC drugs business.

“As the competition started to intensify, it soon became clear to the marketers that they need to ‘value-add’ their products in order to get consumer attention and stand strong amongst the clutter.”
Susan Josi
Managing Partner, Sorento Healthcare

Susan Josi, Managing Partner, Sorento Healthcare feels, “As the competition started to intensify, it soon became clear to marketers that they need to add value to their products in order to get consumer attention and stand strong amongst the clutter. Pharma companies have always been competent in the area of novel formulation technology. Till date they were leveraging this competence in Rx brands and so with the new opportunity in OTC, they are leveraging the same competence in this space. Hence, the marketers have started investing in R&D to offer OTC products with a value-add to gain a competitive advantage, as well as to provide a best fit for consumers’ needs.”

“Value addition is to remain competitive and alive in established brands and that makes companies reinvent the existing product to offer something new to customer.”
Dr Manu Chaudhary
Director- Research, VMRC, and JMD, Venus Remedies

Dr Manu Chaudhary, Director- Research, VMRC, and JMD, Venus Remedies emphasises, ‘Value addition is to remain competitive and alive in established brands and that makes companies reinvent the existing product to offer something new to the customers. Over the years, OTC industry has shown a significant growth due to the rising consumer confidence in such products which is reflected in the expansion of its market.”

Josi reveals, “There are more than 80 therapeutic categories of OTC drugs available in the Indian market for categories like acne and weight control products. There are about 400 brands playing in the market, of which 76 per cent brands are promoted through doctors but enjoy a deemed OTC sale (repeat buy by consumers) while rest 24 per cent brands are frank OTC brands and they are advertised directly to consumers. These 24 per cent brands contribute 35 per cent to the total sales of the Indian OTC market.”

She continues, “With tightening price regulations and shrinking R&D pipelines, pharma companies started exploring newer avenues to grow. Additionally, emerging markets like India are in a phase where consumers are becoming increasingly cautious of lifestyle ailments and are also seeking convenient and suitable solutions for same.”

“This definitely is new trend in the industry and will stay. There are definitely some companies which have products that can be taken into the OTC space.”
Kedar Rajadnye
President & COO, Consumer Products Division, Piramal Healthcare

Kedar Rajadnye, President and Chief Operating Officer, Consumer Products Division – Piramal Healthcare predicts, “In the future we will find that more and more pharma companies will enter this space with their existing products along with new areas with line extensions or new brands.”

Spelling out this opportunity, Josi says, “There are huge untapped opportunities which exists for non- advertised brands to switch to OTC promotion and achieve higher sales turnover.”

Many pharma companies are exploring the OTC market by finding niches, targeting specific demographic segments as well as offering newer formats. Companies are also exploring the Rx-to-OTC switch strategy to widen the consumer base of their established Rx brands. Globally successful brands like Gaviscon, Mucinex are being test marketed and are likely to be rolled out nationwide soon, according to Josi.

“Innovator companies introduce an OTC drug, to extend the life of their product which is nearing patent expiry or has already witnessed high competition.”
Hitesh Gajaria
Partner, KPMG

Companies like Ranbaxy, GSK, Johnson & Johnson have wide OTC portfolios and are investing significantly in building their brands, mentions Gajaria.

Rajadnye explain why pharma companies have started adding value to their OTC products and says, “For most of the pharma companies, OTC space is an usual growth lever. However, unlike pharma industry, where the customer can be the doctor himself, for OTC the customer is the consumer. With increase in sources of knowledge, the awareness level among consumers has gone up significantly and consumers have become more demanding. Therefore, it becomes all the more important for pharma companies to create differentiators to help them gain higher market share.”

Joshi avers, “Almost all companies who are long-standing players in the OTC segment are seriously investing in innovation. So you have GSK, Ranbaxy, J&J, Dabur, Piramal, Emami among many others are launching value added products. Value added OTCs is a comparatively newer trend. With increased competition and parity products in the same space, companies are forced to think of value adds as differentiators and also at times to command a premium. This also arises from the need to fulfil consumer latent needs like convenience (on-the-go formats), speed of action (technology), organoleptic properties (taste, smell, feel).”

New trends

OTC segment has been there since ages but majority of the Indian pharma companies are primarily focused on bulk drug manufacturing. Besides this, OTC products demand creative marketing techniques and a lot of branding to reap the benefit of entering into this particular segment.

Chaudhary informs, “Ranbaxy was the first Indian pharma company who broke the ice with four OTC products: Revital, Garlic Pearls, Pepfiz and Gesdyp. There is a huge potential and untapped space in the OTC segment for domestic players. Brand building, and proper positioning of the OTC product is the key to success in this market, which has traditionally been the strength of FMCG companies. Customer needs value for money and quick solution to his problems; therefore, the response is exciting. It is increasing with the rise in paying capacity of the customer.”

Extending horizons

With market players sparing no efforts to add value to their existing OTC products, how far will this trend create a sustainable business environment? Expressing his opinion, Rajadnye stresses, “This definitely is a new trend in the industry and will stay. There are definitely some companies who have products that can be taken into the OTC space. However, the business of OTC is very different as compared to the pharma business and therefore they will have to evaluate this market thoroughly before they get into this space. This market has a huge competition (as you will be competing with virtually all the players from telecom, automobiles to FMCGs for the consumer mind space amongst the media clutter), lower success ratio, requires excellent customised distribution infrastructure and high financial commitments. All those who have been able to create value by product differentiation, meet their unmet needs and are able to create brand registration in the already cluttered media that are hitting the consumers, will see a positive response from the consumers.”

Gajaria feels, “The OTC segment has a tremendous growth potential. Both innovator and generic companies are increasing focus on the OTC segment. Innovator companies introduce an OTC drug, to extend the life of their product which is nearing patent expiry or has already witnessed high competition. Generic producing pharma companies are also lured towards this segment owing to the increased acceptability it fetches when marketed as an OTC product as opposed to a prescription drug.”

Since this trend is here to stay, several pharma players are devising strategies to leverage the opportunities available at the moment.

Enlightening on the recent move taken by Venus Remedies, Chaudhary highlights, “We have introduced our first OTC product ‘EZENUS’, a stress reliever in the domestic market. It is a herbal sugar free candy for stress reduction with strong blood purifying, antioxidant, hepato-protective and immune boosting activity. Herbal OTC is a growing segment with many companies working on different lifestyle needs. Market will soon be flooded with more OTC products but strict controls on medicine systems will restrict irrational entry of allopathic medicines in this segment.”

Which are the areas which could see such products? “On-the-go formats which are convenient for consumers on the go. Cough and cold and antacids preparations could be offered in unit dose sachet packs for on-the-go convenience. (eg. Gaviscon has sachet packs globally). Eye care is another flourishing area which could benefit from technology innovations offering liquigels with cooling effect to treat dry eye syndrome,” suggests Josi.

Miles to go

Chaudhary predicts, “There are many therapeutic segments which need new technologies especially stress management, depression, pain management segment, allergies, cough syrups, skin ailments and so on.”

“There is a tremendous opportunity and scope for innovation in the field of sports medicine and general fitness. Neutraceuticals in general offer a huge opportunity for companies. With consumers taking healthcare more seriously and the large importance being given to preventive healthcare via government initiatives and the corporate sector; the segment offers immense potential,” feels Gajaria.

With the market players striving to be one up on their peers, it is ultimately the consumer who stands to benefit as each brand endeavours to position itself to fit a new need; sometimes even before the consumer recognises his own need! Thus all signs predict smooth sailing for the OTC market.

u.sharma@expressindia.com

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