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Cashing in on the herbal craze

Nandini Lakshman, with inputs from Smita Tripathi

It is a massage parlour with a difference in Chennai. Opened in the last week of May, the Ayush Therapy Centre offers a range of services from body massages to hair care advice and weight loss programmes.

But the Ayush Therapy Centre was a precursor of bigger things to come. On June 3, the Rs 100 billion foods, detergents and toiletries giant Hindustan Lever announced its foray into the herbal care market under the Ayush umbrella. Its five products included cough syrups, balms, hair oils, shampoos, and soaps. It wants Ayush to be a Rs 3 billion brand by 2005.

Come September, and Delhi-based Ranbaxy will unleash a new range of herbal and ayurvedic drugs. And Morepen is negotiating tie-ups with ayurvedic colleges for seminars and developing courses in herbal medicine.

In Mumbai, pharma consultant R K Srivastava is juggling back-to-back appointments helping herbal companies to market their products better.

Dabur's Vatika herbal hair oil, which was a mid-sized Rs 300 million brand two years ago, is now a Rs 1.50 billion brand. And the fairness creams - Fair & Lovely and Fairever - have seen a 50 per cent surge in sales ever since they turned herbal last year.

Prescription for growth

Clearly, a herbal wave is lapping at Indian shores. Companies are turning out everything from herbal hair oils to herbal-based prescription drugs for ailments like arthritis and diabetes.

There's also a slew of over-the-counter pharmaceutical products like cough syrups and ointments. And, of course, customers are guzzling evergreen products like chyawanprash and isabgol.

"The future for the herbal industry in serving the personal and healthcare needs of consumers across the world looks bright and promising," says Ravi Prasad, managing director of Rs 2.50 billion Bangalore-based Himalaya Drug Company.

The73-year-old company has a portfolio of brands including the hepatoprotective Liv.52, Gasex and Rumalaya.

Its Ayurvedic Concepts range of personal care products launched in 1999 accounts for 40 per cent of sales (herbal products which are plant-based account for 70 per cent of ayurvedic medicines.

A blend of plants, minerals and metals puts it in the ayurvedic group). According to retail audit company ORG-Marg, the Rs 25 billion herbal market has been growing at 25 per cent and is likely to double by 2005.

Of this, while the Rs 18 billion OTC market has seen a 30 per cent growth, the Rs 7 billion ethical (sold only through prescriptions) products grew at 18 per cent to 20 per cent.

The new onslaught

In fact, it is these scorching growth rates which have seen companies chant the herbal mantra. And as competition increases, even traditional ayurvedic companies like Dabur, Himalaya Drugs, Charak, Zandu, Sri Dhootapapeshwar and Baidyanath are sprucing up their act to face the onslaught.

From expanding their range, upgrading manufacturing facilities, investing in R&D activity, strengthening distribution and marketing, the players are all exploring ways to reach out to the consumer.

Why the craze for herbal? For one thing, a herbal craze is sweeping the western world and the market in the developed countries is now reckoned to be worth around $6.2 billion.

"We always had a herbal tradition where we had smaller players. But with the west taking to it in a big way, there is general awareness now," says S S Juss, executive director, marketing at three-year-old Millennium Herbal Care. Some of the products of the Rs 35 million company include Somavit energiser tonic, Antarth anti-arthritis and Encof syrup and lozenges for coughs.

But, in India, there are other factors at play. For one thing the sudden enthusiasm for herbal products is largely a survival tactic for companies at a time when toplines and bottomlines have been sagging. "So what better way to grab opportunities than to jump on to the latest roaring bandwagon," says Srivastava.

Consider HLL. In 1998, its topline growth was 22.40 per cent with a whopping 44 per cent bottomline growth.

Last year, this had trickled down to 3.42 per cent topline and a 17.6 per cent bottomline increase. Going herbal was one way of invigorating its growth chances.

Even Marico, which has seen its Parachute target audience being weaned by Dabur's Vatika, is trying to recapture lost ground by going herbal. It has introduced a herbal variant - Parachute Sampoorna - recently.

Or, look at the pharma companies. Until now, Indian pharma companies survived on process patents. Come 2005, and the World Trade Organisation rules will become applicable. They will lose their suzerainty over process patents, as product patents too will be effective. "That's when their pipeline of new products could dry up," says D G Shah, a pharma consultant and head of Vision Consulting.

The pharma companies have also realised that there's growing concern about the side effects of allopathic drugs. Says S G Pradhan, knowledge director of Interlink Marketing Services, which tracks the pharma industry: "In some therapies like hypertension, people have begun to replace their medicine chest with herbal preparations as they have a high efficacy rate with no side effects."

It is this potential for growth that many like HLL find irresistible. HLL has tied up with Coimbatore-based herbal company Arya Vaidya Pharmacy for product development.

Says Dalip Sehgal , executive director, new ventures & marketing services, HLL: "People are moving towards solutions perceived to be better than what is being offered."

HLL's herbal foray is in sync with consulting firm McKinsey's Millennium Report commissioned two years ago. Healthcare was one of the high growth areas identified for HLL.

At the moment, though, a lot of the action is happening in the herbal OTC segment. In fact, HLL refers to it as the fast moving herbal care market. The OTC market is further segmented by personal care products that account for 40 per cent of the market and which is growing at 25 per cent.

It is followed by cosmetics, galloping at 50 per cent, and generics like chyawanprash or general health boosters, which constitute 10 per cent of the market.

But while the non-pharma companies are taking the OTC route, companies like Ranbaxy, Gufic, Wockhardt and Anglo-French plan to unleash a smorgasbord of ethical herbal products. Nevertheless, the pharma companies are extremely tightlipped about the range of products that they plan to introduce.

Ranbaxy has hinted at a herbal launch in September. Others like Lupin, Gufic and Wockhardt have had a minuscule presence with a handful of herbal products.

With players drawing on the Indian tradition of ayurveda, developing a herbal product is going to be much easier than their existing line of business. Also, with the availability of herbs, companies have so far mixed and matched ingredients to churn out their recipes. For instance, there are half-a-dozen chywanprash brands in the market.

These include Dabur, Zandu and Charak. And with no good manufacturing practices restrictions, except for a handful of companies, most of the herbal outfits have been backyard operations.

"The products manufactured by the unorganised players lack quality and purity, resulting in the end consumer receiving sub-standard ayurvedic products," says Himalaya's Prasad.

According to K S Kohli, dean of Mumbai-based Anandilal Poddar Ayurvedic College, there are today 10,000 small and big ayurvedic companies in the business, up from 3,000 five years ago.

Changing dynamics

But competition is going to change the dynamics of the herbal market, say players. What is also going to change is the way companies approach the business.

Says Ranjit Puranik, chief executive officer of the 130-year old Dhootapapeshwar which makes Vimliv for liver, Myostaal and anti-arthritis and Ashotone, a gynaecological product: "With competition, you have to upgrade quickly to come to the Millennium Age. We have to move from being supplier driven to being customer driven."

Adds Ram Shroff, third generation director of the 52-year-old, Rs 1 billion Charak Pharma: "We will have to pull up our socks against competitors like HLL and Ranbaxy. We have to match them in clinical trials, reach and product specifications."

He says, that today, Charak is a traditional company following the systems of ayurveda. By 2005, with stricter licensing rules, they will look at a whole new way of selling.

Three months ago, Charak's 100,000 sq ft plant at Silvassa became operational. It will manufacture a range of OTC products - Hungree appetite booster, Gulkand and Chyawanprash.

Unlike its earlier plants at Samalkha in Uttar Pradesh and Umergaon in Gujarat which make ethical products, this one has a World Health Organisation and ISO certifications. There are plans to upgrade the facilities and get ISO certifications for the other plants as well. "This will help us when we decide to export," says Shroff.

In fact, Charak forayed into the OTC market only two years ago under Charak Piramal, a 50:50 joint venture with Nicholas Piramal. Its OTC brands like Hungree were launched under this banner. This needed a change in mindset - especially spending big bucks on advertising - for both the partners.

So after the initial burst of mass media communication, Charak Piramal curtailed its activities.

A costly dilemma

Today, without any dealer or company push, the products are languishing on the shelves. Shroff says that there is a rethink underway.

"There is growth there, but the entry costs like distribution and advertising are large," he says.

Big budget advertising is something that most of the family-run units find difficult. At Dhootapapeshwar, Puranik says that the company is also going in for ISO certification. "Getting an ISO for an ayurvedic company is a big task. To bring the number of ingredients and its variables into a standard formulation protocol is labour intensive," he says.

He gingerly admits that there are plans to enlarge its current OTC range which includes Sheelapravang, an energising rejuvenator and Swamala, a chyawanprash-based product.

For now, the market will be driven by the new players. HLL, for instance, appears to have worked out a meticulous gameplan for Ayush.

While Sehgal says that it is difficult to push penetration and trials for new players, it is looking at extensive sampling and in-shop activity. "With our power brands, we also have the ability to cross promote," he says.

There are plans to set up 30 odd Ayush Therapy centres by next year. Sehgal says: "We want to give consumers an experience beyond production. We see an opportunity to leverage both." And yes, the company is open to acquisitions to leave a mark in the herbal care market.

All this will no doubt stretch the finances of the competitors. As Shroff says: "The new players will only open the markets and throw up new opportunities." Sure. But it all depends on who is ready to grab them.

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