Reinhard Vocke, Rolf Fricker, Brian S. Williams, Dr. Diana Dimitrova
July 29, 2017
The health, food, and beauty markets are converging into a consumer products category that we call wellcare, a segment that is growing rapidly thanks to consumer demand, discretionary health spending, and global technology platforms. With its combined focus on wellness, fitness, beauty, and environmental sustainability, wellcare encompasses a broad range of key players, including some of the world's largest companies in the consumer healthcare, fast-moving consumer goods, biopharmaceuticals, and medical device industries. In addition to these traditional competitors, there are new entrants establishing positions, including niche organic beauty companies, functional food businesses, retailers, and technology companies that offer devices and platforms designed to monitor individuals with specific health conditions. Mobile platforms make it particularly easy for new competitors to appear out of nowhere, taking advantage of the accelerated product development cycles and the highly personalized consumer engagement tools.
Although each company has its own distinct set of advantages, the ultimate goal remains the same. Every wellcare player, new or old, needs to extend its core capabilities and competitive advantage with a continual flow of innovative and environmentally friendly new product offerings and technological breakthroughs, all designed to serve the demands and tastes of a customer who is increasingly health- and beauty-conscious and has no shortage of choices.
Companies in the wellcare space can maximize opportunities for growth through strategic partnerships, differentiated research and product development processes, differentiating capabilities, and integrated use of technology at all levels of the value chain and distribution network. Integrated ecosystems are essential to providing the supply of goods and services that consumers demand. Market participants can either generate their own ecosystems and align their skills accordingly, or link their products and services to existing platforms that are consistent with the wellcare consumer’s values and aspirations. Whichever route they take, however, a timely action is necessary.
To fully participate in the growing wellcare market, companies will need to assess their capabilities and enhance their market offerings, making use of innovative technology wherever appropriate. They must also determine whether they can support faster product innovation and customization based on consumer preferences, or if they can extend their reach and their value proposition through strategic partnerships.
These changes are necessary because, ultimately, the wellcare customer is going to demand more than just a product or service. From antiaging potions made from plant extracts to technology that monitors all of the calories burned and consumed in the course of a day, wellcare does best when focused on the microcosm of an individual customer’s needs, ensuring that the experience keeps customers coming back to a trusted brand that cares about their fitness, health, appearance, and overall well-being. To cater to the wellcare market, companies must shift their investment and organizational focus into areas with strong growth potential, all the while remaining close to their customers through technology, social media, and a deep understanding of their evolving end-to-end needs. In an industry that is likely to grow exponentially over the next decade, all participants, no matter how successful they are today, need to keep ahead of their competitors by continuing to hone their capabilities and sustain customer loyalty.
By Nikhil Bhandare
In India, Swami Baba Ramdev is something of a rock star. He teaches yoga regularly on TV and his own YouTube channel, which is watched by millions. He wrestles Olympic athletes and wins. He is involved in his country’s political scene. And he owns his own brand of wellness clinics and products, with a large and loyal following.
Ramdev’s company, Patanjali, positions itself as Ayurvedic, based on the traditional Indian system of medicine that seeks to bring the body, mind, and spirit into balance. The company itself is named for the ancient Hindu saint and yoga philosopher. The combination of modern spiritual leader and ancient values forms a natural-products powerhouse, both capitalizing on and spurring India’s naturals rebirth.
Natural products in India are loosely defined as those having natural ingredients extracted from plants (e.g., aloe vera), animals (e.g., milk), living organisms (e.g., probiotics), and naturally occurring minerals (e.g., salt). The naturals personal care market in India had revenues of approximately US$3.8 billion annually in 2016, 37 percent of the country’s overall personal care spending, and is pegged to grow about 12 percent annually over the next four to five years — compared with only 9 percent for the whole personal care market in India, according to Strategy& analysis.
Growth in naturals can be attributed to several factors: Indian consumers are by and large comfortable with these products, as the country has always had an Ayurveda heritage rooted in using natural ingredients for personal care. On top of that, the recent availability of natural ingredients in convenient packages has led to more customers purchasing these products, rather than creating their own formulations at home. Also, much as in the West, there is an increasing awareness around health and wellness and an interest in ingredients. Many consumers perceive natural-ingredient products to be more healthful and less harmful than those made with synthetic compounds such as parabens and sulfates. Indian millennials, like their Western counterparts, are becoming more aware of these “greener” options for both manufacturing and packaging. Finally, a significantly lower price point for many of the products has led to increased affordability and higher sales.
In addition to Patanjali, other Indian-based companies are having success with naturals. The three companies highlighted here all emphasize their connection to Ayurveda and natural ingredients, as do others. However, each of these three companies has chosen a unique way to promote its brand in order to distinguish itself in an increasingly crowded marketplace.
Patanjali means credibility
Patanjali has seen its sales jump 80 percent annually since 2011, to $750 million, and is targeting sales of $1.5 billion in fiscal 2018. The key to its success is Ramdev’s credibility with his 30 million followers, who faithfully tune into his yoga TV show every day. The company’s R&D process is simple: Take top-selling products from multinational companies and develop similar ones based on herbal formulations. Employees are ardent followers and willing to work long hours for relatively low compensation. Customers already trust the brand and are further attracted by the product prices, which are 20 to 30 percent less than those asked by big-brand consumer packaged goods (CPG) companies. Patanjali also benefits from essentially free advertising on yoga programs aired on the Aastha TV channel, which is owned by Patanjali’s primary shareholder. Over the past three years, the company has significantly expanded its distribution presence. Once mostly selling multibranded Ayurvedic pharmacies, the company now has 10,000 branded shops and has made deals with supermarket chains to sell products in exclusive aisles.
Forest goes for luxury
Positioning itself as luxury Ayurveda, Forest Essentials has seen its revenues rise 40 percent annually since 2011, to more than $30 million in fiscal 2016. Its products are priced at a premium — 50 to 100 percent or even more than products from its Indian Ayurvedic competitors, as well as global CPG rivals. It has benefited from a vertically integrated model, with its own manufacturing facilities and 43 branded brick-and-mortar shops, plus its online store. It has also partnered with more than 190 luxury hotels and spas all over the globe, including Taj and Oberoi hotels as well as spa resorts in 10 countries, including the Maldives, Australia, the UAE, and Japan. Investments by U.S. cosmetics giant Estée Lauder in 2008 and again in 2014 have helped streamline its manufacturing and distribution processes and improve quality.
Biotique stresses technology, experts
Biotique, which has increased revenues 25 percent annually since 2011, to more than $20 million in fiscal year 2016, stands out by leveraging its strong R&D capabilities. Its products are the result of combining modern biotechnology and ancient Ayurveda methods. With facilities in India and Switzerland, its products are designed by Ayurveda doctors in conjunction with Swiss cosmetologists and dermatologists. Biotique also employs in-store beauty advisors to educate customers about product benefits. Products, which are available in 25,000 stores, have kept their signature green-colored packaging for 24 years, which has aided in brand recall and emphasizes the packaging’s biodegradability. The company recently introduced gray packaging for its premium line.
Naturals need a unique approach
The naturals phenomenon is no longer just a trend — it is here to stay. At this point, there are no clear winners in India’s naturals space, though in terms of revenue Patanjali has a clear lead, and Forest and Biotique have carved out their unique pieces of the market.
Traditional CPG players that attempt to enter the market will need a unique approach. New capabilities will need to be honed around R&D, and Ayurveda specialists will need to be hired. An understanding of sourcing and the value chain will need to be acquired to ensure an adequate supply of key natural ingredients. CPG companies will need a go-to-market strategy that may include their own retail stores to promote their brands’ stories and alternative channels such as pharmacies and Ayurveda centers. Credibility will also be an issue, so companies will need to secure certifications and the help of local influencers.
Companies have several strategic choices to make regarding platforms, propositions, consumer segments, and channels. Those that are able to develop a coherent strategy around a clear set of differentiating capabilities stand to reap the benefits.
Nikhil Bhandare is a thought leader with Strategy&, PwC’s strategy consulting business. He is an executive director with PwC India, based in Mumbai, advising FMCG and consumer-oriented firms.