Guest guest Posted May 27, 2008 Report Share Posted May 27, 2008 http://www.expresspharmaonline.com/20080531/market01.shtml Mapping the vet and pet market The $16 billion animal healthcare market may not be a traditional diversification strategy for Indian pharmaceutical players. But with a steady CAGR of five to six percent, some savvy Indian players have ambitious plans. *Manjusha Morgaonkar* explores One of the silent contributors to the balance sheets of some Indian pharmaceutical companies is the animal healthcare market. Off late, for a variety of reasons, there has been a paradigm shift from being a silent player to a more aggressive positioning. Zydus Cadila, Alembic, Vetnex, Virbac Animal Health India, Intas Pharmaceuticals, Intervet India, Concept Pharmaceuticals and Wockhardt are some of the major players in India who have stakes in the animal healthcare market. Their global counterparts include Pfizer, Merial, Schering Plough, DSM Nutritional Products, BASF Animal Nutrition, Bayer Animal Health, Elanco, Novartis and Ceva Sante. Market size Increasing growth in demand and supply of products is one reason why there is drastic change in size of Indian animal healthcare market. Quoting a livestock industry survey report published by Compound Livestock Feed Manufacturers Association (CLFMA) of India, Dr Raja B Smarta, Managing, Interlink Consultancy, says, " Animal health industry is poised to grow at a CAGR of six to seven percent in the next five years. Animal health products market is growing at an annual rate of eight to ten percent with a major chunk of growth coming from small and medium sized local companies. " In rupee terms, the projected valuations are considerably attractive. " The market estimation values are based on Animal Pharm Scrip reports (2006-07) which project that the total Indian animal health market is approximately Rs 1157 crore, which includes verticals like livestock cattle, poultry, companion animals, equine and small ruminants, " says Vijay Teng, Vice President, Neovet, Intas Pharmaceuticals. Sushil Mehta, Managing Director and Chief Executive Officer, Ranbaxy Fine Chemicals Limited (RFCL) reveals that Vetnex is placed third after Virbac and Schering Plough in the domestic market. Though exports are a relatively new and high growth area for RFCL, the company plans to be amongst the top ten global animal health companies in three-four years time, through a mix of organic and inorganic growth initiatives. In the export market, the focus is on food and companion animal categories. RFCL focuses on in vitro diagnostics, animal healthcare, laboratory solutions and custom synthesis through its four strategic business units, namely, Diagnova, Vetnex, Rankem and Neosynth. After acquiring RFCL in 2005, ICICI Venture decided to make animal healthcare one of its focus areas. Mehta says, " Animal healthcare is perhaps one of the most potential areas of growth out of the other three business domains of RFCL. The fact that Indian market is only one percent of the world market, demonstrates the potential available in the world. While growth comes from emerging markets like India and Africa, size comes from being present in US, EU and Latin America. " For companies like RFCL, it is very essential to exploit the vast opportunities available, moreover, since RFCL inherited a very strong and knowledgeable team from Ranbaxy Laboratories, which was well versed with the global animal health market and was excited to grow this business in a more aggressive manner. Each of the three business divisions contributes equally to RFCL's total turnover for Financial Year (FY) 2008. In comparison, at Concept Pharma animal healthcare contributes 18-20 percent of total revenue and in Intas, ten percent of approximate total corporate domestic sales revenue comes from its animal health portfolio. Market drivers " This year we have targeted exports of Rs 8 crore to various countries, which are growing at 50 percent per year. We have invested more than Rs 10 crore in the veterinary segment and also have plans to expand our activities in biological business, vaccines and ectoparasiticides. At present we contribute 18-20 percent of the total revenue earned by the company " *- Vinod Kumar Sharma* Vice President Animal Health Division Concept Pharmaceuticals " The global animal healthcare market is worth approximately $16 billion and is growing at a Compound Annual Growth Rate (CAGR) of four to five percent. However, there is a much better growth potential in the companion animal market segment, which is the largest segment in US animal healthcare market and perhaps close to the number one segment in Europe " *- Sushil Mehta* Managing Director and Chief Executive Officer Ranbaxy Fine Chemicals Limited " The company saw an opportunity to strengthen the company's roots in rural sector with a clear strategy to have a more diverse product portfolio, connecting with untapped market fragments and optimal utilisation of newly set-up manufacturing facilities in 1997 at Matoda " *- Vijay Teng* Vice President-Neovet Intas Pharmaceuticals " Although pharma companies want to tap veterinary markets, they may find it challenging because only the veterinary companies would be able to provide enough resources in competitive markets " *- Dr Raja B Smarta* Managing Director Interlink Consultancy The strong growth of the animal healthcare market sector can be attributed to growing demand for new products and industry's investment in awareness of pet owners. Although animal population has increased only marginally, the key driver for growth is the willingness of owners to spend more on the health of their animals and the ability of veterinarians to meet that need. The human-pet bond has a high economic ceiling, and both veterinarians and the animal health industry have recognised the potential of this market segment. According to Mehta, other major growth drivers for the animal healthcare market are emergence of new diseases, changes in animal production practices, new product introductions and ongoing food safety concerns. Future trends include product development for certain segments like parasiticides for companion animals, increased shopping at retail outlets and through internet and over-the-counter (OTC) products posing stiff competition to prescription. So, households will also see major growth as the number of companion animals increase and product development will focus on the needs of ageing pets, especially in Western countries. Increased spending, better pet monitoring services, pet insurance, and owner lifestyles will also shape the growth of the animal healthcare market. Smarta adds that the professionalisation of poultry industry, growth of organised dairy production and changing focus of farmers from treating to preventing diseases are other factors driving growth in this market. Growth is projected in segments like pelleted feeds, vitamin premix and fed additives like enzymes, probiotics, toxin binders, amino acids and coccidiostats. According to him, poultry sector accounts for a whopping 38 percent of the animal healthcare market. Product categories Indian pharma companies in this market space offer a wide range of therapeutics and products that cater to livestock, dairy, companion animals and small ruminants. Mehta categorises major segments in this market in two ways—species wise ie poultry, livestock and companion animals, and secondly, product wise ie therapeutics, feed and feed supplements, growth promoters, herbals, biosecurity and diagnostics. Sharma says, " Concept Pharma's veterinary products are unique due to specialised formulations like Floratone Bolus and Leptamilk Forte, specialised manufacturing process for improving the absorption of the drug and their bioavailability like Conmapi Inj, Binocin Inj and Conmox Inj and novel drug delivery system like Conciplex Inj and Albidol Powder (dispersable). " " We produce very economical herbal products, which have no side effects to animal as well as human beings. We also make products available to farmers at the most economical and competitive price, which ensures better cost-benefit ratio for them. We have designed very convenient packs, to suit the convenience of every farmer, " Sharma adds. Branding strategies India's role as a leading milk producer has long been recognised at a global level and animal health and management forms an inseparable element of the country's agronomy. Most often, this has been the reason why pharmacos decided to foray into the animal healthcare market. This focus has shaped market strategy, since the customer base was mostly rural. Accordingly, the animal healthcare industry focuses on aggressive promotion and marketing strategies, emphasising animal health benefits. For example, Concept Pharma promotes their products through specialised and well-trained veterinary sales officers located in different parts of the country. Sharma reveals, " Our promotional strategy is based on direct contact with consumers and indirect selling through veterinarians, livestock supervisors etc organising farmer meetings in rural areas and selling preventive vaccination and de-worming generates demand for our products through these customers. Such programmes are sponsored by government agencies and NGOs. " In a similar vein, the Intas animal division has its own full-fledged marketing and sales strength, which constantly inject promotion, techno-commercial services and awareness delivery to veterinarians, dairy farmers and various rural based customer segments. " We also provide well-appointed distribution network of chemists and dealers who smoothly disseminate the entire product basket in urban, semi-urban, village towns and micro-interiors levels, " informs Teng. Co-marketing efforts with milk co-operative societies and various NGOs also create a vital channel that helps players penetrate the grass-root levels. Customer segmentation based on products and wider coverage plans to call veterinary doctors, associated paramedicals, trade channel partners and farmer meetings on regular basis remains a key strategic essence to generate business, Teng adds. Growth strategies Pharmacos are attracted to the animal healthcare market as a diversification strategy and a source of additional revenue. Sharma says, " Our economy is based on agriculture, which contributes 25 percent to Gross Domestic Product (GDP), out of which eight percent comes from livestock industry. Our major focus is to provide productivity products, which boost the productivity of animals and our endeavour is to provide these products at economical price to the farmers. " According to Sharma, if their animals are healthy they will produce more and make the farmers wealthy as their livelihood, especially that of marginal farmers, depends on the income from livestock. Exploring Intas' entry strategy, Teng explains, " The later phase of 90s was a nightmare for the Indian animal healthcare market, especially due to an overall slowdown in agriculture, dairy and poultry industries. Ironically, this was the period when Intas forayed into this segment. " The company saw an opportunity to strengthen the company's roots in rural sector with a clear strategy to have a more diverse product portfolio, connecting with untapped market fragments and optimal utilisation of newly set-up manufacturing facilities in 1997 at Matoda. Sharma points out that animal healthcare drugs are similar to human pharma drugs and no specialised machinery is required for manufacturing them, nor does it require any additional investment, but at the same time, it provides additional revenue to the company. Right from its inception, Concept Pharma was inclined to become a multidivisional company to participate in all segments of the drug industry. In some products, like feed supplements, which are not governed by regulations we have better margins, points out Sharma. Challenges However, it has not been a smooth ride for these players. Smarta analyses that the animal healthcare market faces challenges due to the fragmented nature of cattle population and increasing distribution costs for animal health products. Stakeholders like integrators in animal health business and established manufacturers of animal health products, especially for the livestock segment, also pose challenges for pharmacos who have animal health portfolios. " Although pharma companies want to tap veterinary markets, they may find it challenging because only the veterinary companies would be able to provide enough resources in competitive markets, " he reasons. Speaking on regulations governing this market, Mehta says, " Animal health products regulations are not much different from human drugs. There are dedicated regulatory agencies in US and Europe like the Centre for Veterinary Medicine (CVM), but mostly these drugs are regulated in other countries either through the Ministry of Health or Ministry of Agriculture. However, in terms of compliances from a regulatory perspective, the regulations are at par with human health products. " Global hoof print Indian players are today looking at capturing a larger slice of the global pie. RFCL and Concept Pharma seem to be on an expansion spree with the former recently acquiring a European company and later planning to acquire a company in Brazil. Explaining the rationale for their proposed Brazilian buy, Sharma says, " The demand for animal healthcare drugs is very high in South American market as animals in that continent are very valuable, highly productive and diseases are similar to that of Indian continent. " Though this market is highly competitive, we have capabilities to compete in this market very effectively, he adds. RFCL's recent acquisition, Bremer Pharma, under its Vetnex vertical, is into research, manufacturing and supplying veterinary medical preparations including powders, tablets, solutions, suspensions and injectables for over 26 years, through a worldwide distribution network and around 803 global registrations. Mehta spells out the importance of this acquisition to Vetnex saying that all key people, assets brands and the name Bremer Pharma, including all exports contracts, will be transferred to Vetnex. With this agreement, RFCL will, therefore, gain a strong marketing foothold in European markets and a state-of-the-art manufacturing base, with key international certifications in place, in Germany. The Warburg-Scherfede plant has a processing capacity of nearly 6,63,000 litres of liquids per annum per shift, nearly 1032 tonnes of solids per annum per shift and 1.5 million vials of sterile solutions per annum per shift, translating into sizable volumes for RFCL. Additionally, Bremer Pharma brings along an extensive quality assurance system, certified according to DIN ISO 9001:2000 and based on the requirements of the EDQM guidelines, guaranteeing transparency and optimisation of all workflows in the organisation. Even though Concept Pharma and Intas do not have overseas manufacturing bases, they have an international client list. Concept Pharma's list includes counties like Nigeria, Mauritania, Lebanon, Saudi Arabia, Zambia, Sudan, and South Korea. " This year we have targeted exports of Rs eight crore to various countries, exports are growing at 50 percent per year. We have invested more than Rs 10 crore in the veterinary segment and have plans to expand our activities in biological business, vaccines and ectoparasiticides, " reveals Sharma. Likewise, RFCL's Vetnex division will aim for an organic growth double the domestic market growth rate. This would further get compounded through various inorganic initiatives to have a strong presence in international markets. RFCL is also reportedly in talks to acquire a US-based animal company. Expanding on the growth potential of this segment in overseas market, Mehta says, " The global animal health market is approximately $16 billion growing at four to five percent, Compound Annual Growth Rate (CAGR). However, there is a much better growth potential in the companion animal market segment, which is the largest segment in US animal health market and perhaps close to the number one segment in Europe. " Future markets Such extensive rise in animal healthcare may mark a good future for this market. According to Smarta, the pet and aqua (fisheries) segments are tomorrow's markets, while poultry will remain at the centre of animal health industry, as the functional foods market is likely to grow even in India. Therefore in India, growth of poultry and pet segments will distinguish animal healthcare markets from other markets. Though this market seems to have high growth potential, it needs to be tempered with caution. As Smarta puts it, " Potential in animal health business is always attached to sensitivity with consumers, policy markers, healthcare authori-ties and beneficiaries. Hence, animal health industry needs strategic direction and navigation to continuously grow and acquire sizeable market share. " manjusha.morgaonkar Quote Link to comment Share on other sites More sharing options...
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