Several Indian pharmaceutical companies, including Cipla, Glenmark, Lupin, and Mankind Pharma, have demerged their consumer healthcare businesses to focus on growth and expansion. This trend is also being seen globally, with companies like GlaxoSmithKline, Johnson and Johnson, and Sanofi separating their consumer healthcare divisions. The rationale behind this strategy is to create a separate entity that can operate with a more agile and fast-moving consumer goods (FMCG) mindset, allowing for more focused marketing and advertising efforts.
According to Rajeev Juneja, Vice Chairman and Managing Director of Mankind Pharma, the company’s objective was to create a separate division for its over-the-counter (OTC) brands, which require a different environment, culture, and talent compared to prescription brands. The company had previously run its OTC business like its prescription business, but found that it was not effective. Juneja explains that some prescription brands can be transitioned to the consumer healthcare business within the regulatory framework, but everything should be different, including management, to stay focused and agile.
Subhakanta Bal, Managing Director and Head of Healthcare and Consumer at Rothschild & Co, notes that there are commonalities between consumer healthcare and the core prescription-driven business, but also differences. For example, consumer healthcare requires a more FMCG-like mindset, with a focus on marketing and advertising to drive sales. Bal observes that pharma companies often bring in FMCG veterans to run their consumer healthcare divisions, and that a separate entity can be more “fit for purpose”.
The pursuit of growth is the key reason behind the consumer healthcare demerging trend, according to Vishal Manchanda, Senior Vice-President at Systematix Group. Pharma companies are developing a second platform for growth, given the challenges in the domestic branded business and global uncertainties. However, it’s not an easy task, with intense competition from store-owned brands and pressure on prices.
The demerging of consumer healthcare businesses is expected to lead to better value realization, potentially through listing, as FMCG businesses in India trade at a higher value than domestic formulation businesses. Internationally, big pharma companies have separated or exited consumer healthcare to focus on innovation, but in India, the trend is driven by the need for right managerial talent, marketing, and advertising to ensure success. As the Indian pharmaceutical industry continues to evolve, the demerging of consumer healthcare businesses is likely to be a key strategy for growth and expansion.