Piramal Enterprises eyeing rural market for OTC products
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Mumbai: Piramal Enterprises Ltd, which has been aggressively growing its over-the-counter (OTC) products portfolio over that last few years, is looking to expand its reach and enter the rural market after about two years, Kedar Rajadnye , chief operating officer of the company’s consumer products division, said.
Currently, the company has a distribution network of 350,000 retail outlets across more than 1,500 towns in India.
“We don’t have presence in rural right now; we are just focusing on urban areas and building on our strengths there. Two years from now, we believe that we will have to start looking at rural and build our expertise there. We will have to build our coverage and distribution in rural,” Rajadnye told Mint in an interview.
Piramal Enterprises has been among the fastest growing companies in the OTC products space with a compounded annual growth rate of 21% during 2008-2016, and has a portfolio of 16 brands such as Saridon, Lacto Calamine and i-pill.
In the financial year ended March, the company’s consumer products’ sales rose 44% on-year to Rs375 crore.
The company plans to grow this business both organically and through acquisitions. In the recent past, it has made a few acquisitions, including baby care brand Little’s, five brands from Organon India Pvt. Ltd and MSD BV, and four brands from Pfizer Ltd.
“While we are growing at 20-22% organically, our ambition on acquisition has not stopped. We are looking at acquisitions in future; we are looking at product categories in adjacent areas of the categories we are present,” Rajadnye said.
Women healthcare, respiratory and allergy, gastrointestinal category, including digestives and anti-diarrheal segments, and nutritional products are some of the areas in which Piramal Enterprises sees good opportunities.
The company has a pipeline of 16 products across various categories. Currently, two products are running on a pilot basis—Throatsil and Untox—which may soon be launched pan-India, Rajadnye said.
By 2020, Piramal Enterprises has a target to take consumer products’ sales to Rs1,000 crore and become the third largest player in the OTC space.
From the 40th position in 2008, the company has come to the fifth spot in the $3 billion domestic consumer healthcare market in 2016, said Rajadnye .
The company works on an asset-light model and focuses on building brand equity. All the products are manufactured by third parties.
Over the next two-to-three years, it will invest in enhancing capabilities in digital technology, analytics, and marketing and promotion.
“The way we see India evolving in the next three to years, I think consumers are changing very fast. Digital and mobile apps are becoming much more accessible. So there is a huge opportunity for brands to leverage that in reaching out to consumers,” Rajadnye said.
He said the company invests heavily in advertising and promotion and in the last fiscal, expenses on advertising were up about 43% on-year.
“It is not easy to build brands in India. It takes time, investment and consistency. Putting suboptimal money into promotion in India is not going to work. Advertising-to-sales ratio has to be much more in sync with brand size,” he said.
Internally, capital allocation to different brands is done on a milestone basis. “We work on a bi-monthly kind of a cycle, which means if in two months a brand meets its milestone, then the fresh wave of investments come in. Our entire investment model is channelizing capital on brands which are delivering growth,” Rajadnye said.
He said that given the high level of competition in the OTC space, having a differentiated set of products is important for strong growth.
“We do not want to compete with Patanjalis of the world. We are very clear that there is a certain niche and certain segment of products that we have and we would like to operate in that. So we say that most of products that have a problem solution angle to it, we will look at them,” Rajadnye said.