The OTC Switch is ON in India

Presentation at OTC Action Workshop,19th Mar10 -India

Salute to India’s IQ….(Immunity Quotient)

When Rest of the World caught the Cold…

• Domestic demand driven economy • Younger demographic profile• Growth in spending among Middle Class and Rural Consumers• Savings led investments > stand at 38% GDP• Govt. stimulus on time

Indian Consumers most upbeatECONOCURIOUS STUDY 2009

• 9 countries• Consumer outlook• Comparison between developed and BRIC countries

• India –the strongest BRICK in the BRIC !• Most number of optimistic people (70% vs 46% of CHINA and 60 % of BRAZIL)• In next 6 months most likely to spend on :

• Vit /Health supplements (46%)• Home entertainment/

electronics (40%)• Cars/house (36%)• Savings (42%)

• Brand loyal > not swayed by Value deals• 54 % more positive than global average of 22%, that financial situation will improve

Do you want to live forever?

Survey featured in Reader’s Digest June 2009

In just 5 years the Consuming class has grown by almost 50%

The growing Consuming Class in India

•10 alpha cities, which include the four metros and Hyderabad, Bangalore, Ahmedabad, Pune, Surat and Coimbatore, the cities that are the first to adopt change.

• Alpha cities are also the most open to changing lifestyles and more westernized / cosmopolitan in character than other Indian cities

Changing Market Segmentation Models

However our IQ is also Challenged…

Epidemics /,Heart/Diabetes/Obesity,

Addictions, Stress, Rising healthcare costs

Our lifestyles are changing

Time is getting premium with no

scope for downtime

Hectic consumer lifestyles

favouring ‘on-the-go’

products

We are increasingly aware of health and

well-being

We have more money… …but we

demand low prices as well as premium offers

We’re also getting older…• 1950: 46.5 years• 2000: 65.0 years• 2050: 75.0 years

* average lifespanl

Its not relief but healthy lifestyle…

Key healthcare Concerns

17

22

22

15

19

26

27

22

32

6

6

6

6

7

10

10

11

17

0 5 10 15 20 25 30 35

Onset of age related health problems like...

Sleeplessness

Backache

Cardiac problems

Depression

Lack of energy/general tiredness

Stress/mental tension/anxiety

Weight control problem

Inadequate physical fitness

Rank 1-3 Rank 1

Source: The Knowledge company,Technopak

Tired

Stressed

Overweight

• Quick acting

• Hassle free

• Non-drowsy

• Back in action

Motivations to manage Lifestyle inhibitors are changing

“ Too much trouble to get a glass of water to down that Tylenol? 30% of households don’t medicate for headaches because it’s too inconvenient “Advertising Age

What consumers do to stay healthy

8

17

19

23

31

53

41

62

67

71

72

0 10 20 30 40 50 60 70 80

Going for preventive health check up

Taking vitamins.tonics & health supplements

Cutting dow n on smoking,liquor intake

Regular exercise in w alking,playing sports etc

Reducing stress

Getting regular sleep

Eating less of fried items /sw eets

Eating a w ell balamced nutritional diet

Eating more of home made food

Eating on time

Eating right quantities of food

Any food- related activity- 99%

Source: The Knowledge company,Technopak

Healthcare spending, which grew from 4% of average household spending in 1995 to 7% in 2005, is expected

to touch 13% by 2025.

Changing Healthcare Needs

There is indeed Wealth in Health

So who is taking advantage…

• Besides the growing Functional Food business ,a recent 2009 report by FICCI and Ernst & Young has estimated the wellness services market at US$ 2.4 Bn (Rs 11,000 crs).

• Rejuvenation services such as spas, alternative therapies and beauty treatments are expected to grow at 30% over the next five years, while fitness services would grow at over 25%.

• New age services like Calorie Care has entered the niche market with its health foods. Calorie Care delivers calorie-counted meals homes and offices of its clients, comprising mostly of busy professionals in the 28-50 age bracket.

So who is taking advantage…

What about the Indian OTC industry ?

OTC brands getting bigger than Rx brands in the company

EC pills: Aggressive marketing strategies4 Nov 2009, 0531 hrs IST, Nina Mehta ,In a country which is rather prudish about discussing matters related to sexuality, the surge in the emergency contraceptives (EC) market over the past year has been astounding . Switch on the idiot box and chances are an emergency contraceptive brand will be talking to you directly.

GlaxoSmithKline to tap modern retail :

GSKCH now plans to give its over-the-counter (OTC) brands a similar push.Two of GSKCH’s OTC products —Eno and Iodex — command a household penetration of 9 and 10 per cent respectively in metro cities. “As a result of this exercise, the antacid category has grown six times in Shoprite and the pain balm category has doubled. Today, GSKCH brands of Eno and Iodex contribute 86 per cent and 47 per cent to the antacid and pain balm category respectively in Shoprite,” Navneet Saluja, executive vice-president (sales), GSKCH, told Business Standard.

The OTC Buzz….

Aggressive launches….

• i-Pill• Unwanted 72• Norlevo• Prosoy• Nutricharge• Sunova Cough

syrup• Breathe right• Fimaleton• Itchmasol…..

Line extensions….

• Moov Shoulder Gel

• DCold Natural

• Revitalite

• Crocin cold & flu

• Dabur Chyawanprkash…

and Switches too….

• Volini• Chericof• Supractive• Pediasure• Digene• Combiflam

gel• Otrivin….

So what does the Report Card say ?

Data from the new robust DB6 2010 which also includes Nielsen Data

Mass

advertised

Deemed

OTX

Generics

Moov, Vicks,

Gelusil, Crocin

Becosules

Shelcal

Calpol

Voveran,

Combiflam

Brufen

Paracetamol,

Aspirin

True OTC products.

Allowed OTC and

promoted OTC

Allowed OTC but

promoted through

doctors

Schedule H drugs, with

high consumer pull.

Sold largely w/o

prescriptions

Products with a high

retailer push. Sold w/o

prescriptions

India OTC

market

The OTC Market definition in India

23%

17%

26%

45%

13%

66%

65%

57%

30%

80%

10%

12%

17%

11%

7%

0% 20% 40% 60% 80% 100%

Cough cold and fever

Gastrointestinals

Pain relievers

Skin care

Nutritionals

FMCG cos M.S Ethical Pharma M.S. Pharma OTC M.S.

Deemed OTC presence

Source: ORG IMS analysis & estimates

Comparison of FMCG vs Ethical vs OTC cos.

The Indian OTC market >> growth trend

Data - DB6 2010

1243.4

1371.41491.0

1638.9

1813.4

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

1800.0

2000.0

Sales in US mn $

at MSP*

Grth5.9%

Grth10.3% Grth

8.7%

Grth9.9%

Grth10.7%

CAGR9.9%

2005 2006 2007 2008 2009

* Manufacturers Selling Price

The OTC Category split..

Analgesics 14%Dermatologicals

13%

Gastrointestinals 18%

Vitamins, Minerals & Supplements

35%

Cough, Cold & Allergy

18%

Lifestyle OTCs 2%

Indian OTC MarketUS $1.8 Bn

(Rs.8430 Crs)CAGR : 9.9%

Data - DB6 2010

OTC Categories > 2009 Growth Drivers

Data - DB6 2010

VMS634,8.8 %

GI333,10.4%

CCA318,7.8%

Dermat237,11.3%

Anal259,15.8%

Lifestyle33,38.9%

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

0 100 200 300 400 500 600 700Sales in US$Mn

Gro

wth

09/

08 (%

)

OTC Grth: 10.7%

Lifestyle OTC's33, 22.32%

Dermat236, 13.18%

Analgesics259, 9.67%

GI333, 9.49%

CCA318, 8.77%

VMS634, 9.14%

Total OTC1813

9.89%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

0 200 400 600 800 1000 1200 1400 1600 1800 2000

Sales in US$mn

CA

GR

OTC Categories > CAGR Forecasts 2014

Data - DB6 2010

10.2%10.3%

9.7%

10.3%

9%

10.2%

10.2%

The Super Performers

10.4

10.7

10.9

12.1

12.3

12.7

12.8

13.9

14.7

15.0

15.5

16.0

19.0

22.6

0.0 5.0 10.0 15.0 20.0 25.0

Systemic analgesics

OTC sales - India

Topical decongestants

Traditional digestive remedies

Antacids & antiflatulents

Acne remedies

Antidiarrhoeals

Antiseptics & disinfectants

Scalp treatments

Minerals - iron

Laxatives

Chest rubs & inhalants

Topical analgesics

Herbal & natural supplements - ginseng

Growth Rate (%)

Data - DB6 2010

The Non-Performers

-25.0

-7.7

-3.0

1.2

3.2

3.4

4.2

5.0

5.6

5.8

6.0

6.2

7.0

10.7

-30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0

Vit C

Anti-itch

Vit E

Antiparasitics

Sore throat remedies & medicated confectionery

Multivitamins

Sedatives & sleep aids

Herbal & natural supplements - others

Smoking control

Cough remedies

Systemic cold & flu

Liver & bile remedies

Chyawanprash

OTC sales - India

Growth Rate (%)

Data - DB6 2010

The Star Brands

10.1

10.2

10.7

11.3

11.3

11.5

11.6

11.6

14.6

15.0

16.5

17.8

18.2

20.7

24.8

37.6

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Otrivin

Emami Mentho Plus

OTC sales - India

Saridon

Strepsils

Dabur Chyawanprash

Digene

D'Cold

Disprin

Gelusil

Moov

Himani Fast Relief

Iodex

Revital

Eno

Volini

Growth rate (%)

Data - DB6 2010

Interesting targets for OTC shifts

25.8

24.9

18.818.0

16.4

15.912.5

12.4

11.6

11.2

10.0

9.79.4

8.5

8.1

7.87.1

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Sales US $ Mn

CA

GR

(%)

Cobadex

DexorangeZincovit

Lactacyd

Naturolax

Orofer

Shelcal

Cremaffin

Polybion

BetadineBecosules

CalpolElectral

Sinarest

Liv 52

Ostocalcium

A to Z

*

* CAGR Year 2005-09 Data - DB6 2010

at MSP (Manufacturers Selling Price)

Time

Sa

les

Illustration

• New introductions have taken away time from ‘Active detailing’ for many established brands

• As a result, product lifecycle of pharmaceutical brands have shortened today• Most commonly followed PLC extension strategy by companies is launch of

line extensions; OTC approach not completely explored by most companiesIntroduction Growth Maturity Decline

Saturation

Extension

Short term

Long term

‘Rx to OTC’ >untapped opportunity

In summary…The OTC switch is ON in India

• Need to tap into the consumer mood of spending for health and wellness

• The Indian OTC opportunity is probably understated than what it really is

• There would be many opportunities in our market to encash through focused strategies & implementation

• Its probably best time to analyse portfolios and manage effective Rx to OTC switch, invest in building brands through improved consumer awareness

• Innovation is the key & being plugged into the global trends would be important elements to move early & drive success

Lets go for it !