Excelling with a Lowcost... Growth Hormone
- Hits: 3209
21 April 2010
“Ten years ago, Ramesh Juneja was a medical representative. He then rose like a meteor to set up Mankind, which is already India’s biggest marketer of ED drugs and contraceptive pills,“ writes Khomba Singh
From an obscure company just a decade ago, Mankind Pharma has come a long way. It required a wonder drug and several new low–cost remedies for the ultimate push that Ramesh Juneja, founder and managing director thinks will help Mankind become the country’s top drug maker by 2015.
Started in 1995, the Delhi–based company has grown by selling medicines at prices, which are a fraction of what the brand leaders sell their products for and by betting on the unexplored hinterland. The maker of the world’s cheapest Viagra clone Manforce and emergency contraceptive pill Unwanted 72 is today the ninth biggest company in the country’s Rs 40,000–crore drug retail market as per market research firm ORG IMS. There are over 20,000 drug makers in India, making it one of the world’s most competitive markets.
“Success has not changed the humility of Mr Juneja. The company has never forgotten the common man,” says Sanjiv Kaul, managing director at private equity firm ChrysCapital, who has known the man since 2007. According to this industry veteran of 30 years, it is more often than not that managers lose touch with grassroots executives after they attain a size. This has not been the case with Mr Juneja. “Despite having a field force of about 5,500 people, he has retained that human touch and man management skills,” he said. This is a wisdom, which is easier said than had.
ChrysCapital bought a small stake in the Delhi–based company for $24 million in 2007, which Mr Kaul rates among the firm’s top portfolio investment. Today, the company turnover is over Rs 1,000 crore.
Now a well–known strategy, the 54–year old who began his career selling Lupin’s medicines as a medical representative and later as area sales manager in Meerut grew by adopting what Mr Kaul describes as a ‘flanking strategy’, the opposite of what pharma companies in India did for decades.
The company targeted the country’s rural and small town market by selling medicines at “pocket–friendly prices”. It established its brands in less competitive and inexpensive small town and then caught rivals unawares in urban market with its drugs that cost a fraction of the brand leaders. It also avoided spending money on setting up infrastructure and got their drugs made through contracts enabling.
Mr Juneja’s logic is simple. Two–thirds of India’s population consumes 40% of the Rs 40,000–crore drug market. He started working out thin–margin models. The company cut prices of its products and took competitors by surprise. For instance, its antibiotic Moxikind CV sells for Rs 11 (a six–tablets pack of 500 gm) against GSK and Ranbaxy’s brands priced at Rs 40. Needless to say, both trade and consumers have given this strategy a thumbs up.
Mankind now has over 300 brands in its portfolio and its products are the fourth largest prescribed medicines in the country, as per ORG–IMS, prescription audit, 2008. While 21 brands are ranked number one in their respective segments. A drug in India could have as many as 200 brands in the market place. Current market leader Cipla holds about 5.5% while Mankind now has 2.7%.
“They created market instead of fighting with bigger rivals within a smaller segment. It has no fancy R&D setups like bigger companies but merely leveraged on the opportunities,” says Vijay Zutshi, Associate director, healthcare, at research firm Synovate.
About 60% of doctors in India prescribe at least one medicine of the company. The numbers of doctors who prescribe the company’s medicines is growing at 18% compared with 8–9% for the top five players, he said. “The company is aligning with the industry trend. It has forayed into the chronic segment and is aggressively pushing its OTC drugs. So its growth looks pretty sustainable,” he said.
nies are now hurriedly adopting a similarGlobal and Indian pharmaceutical compa business model. Ranbaxy, Sanofi Aventis, Elder Pharma and many big players now plan to hire in hundreds to penetrate into the country’s hinterland. There are 6.3 lakh villages in India. Mr Juneja says the company will strengthen its sales force to augment its position.
The marketing strategy in terms of pricing, distribution, packaging and innovations for a rural market is quite different. “So hiring sales team need not deliver you the results,” Mr Zutshi points out. Also, a higher margin play by competitors would restrict them to a certain price point, whose prices will remain higher than Mankind’s brands.
Mr Juneja openly admonishes the drugmakers in India for being exorbitant. “Most Indian companies’ increase hike their prices when the cost of active pharmaceutical ingredient (API) imported from China goes up. But, when API’s price fall, they don’t pass on to the consumers,” he adds.
A senior executive from a local drugmaker says that the margins of some leading pharma companies are indeed ‘beyond normal’ and that Mankind’s prices have forced some to reduce their margins.
For all this, Mankind does not boast of fancy or high–flying executives. Though his family members have been inducted on the board, the company has a flat management structure. He regularly visits small towns and spends time with executives and their family members to appreciate their work,” Mr Juneja says. The results are showing.