It's all about wellness

The smell of menthol is all pervasive as one enters Amrutanjan's office on Luz Church Road in Chennai's Mylapore. The 15-minute wait to meet the Managing Director and CEO of the company, Sambhu Prasad, for an interview is made interesting by old newspaper cuttings of the brand's advertisements, neatly framed and hung on the wall alongside an old wooden staircase. Even the interiors are muted. Conservatism shows at every level. Prasad is the fourth generation entrepreneur. BrandLine met him a day after the Rs 90-crore company acquired fruit-based beverage brand Fruitnik. During the 40-minute interview, he answered a range of questions on the rationale behind the acquisition. To a specific question, he said size notwithstanding, Amrutanjan is a 117-year-old company that went public way back in 1936, and it's been a great honour to sit in this chair and run the company. Excerpts:

For over 100 years, Amrutanjan remained an OTC pharma product company. Why did you acquire Fruitnik, and how will it complement your existing product portfolio ?

First thing, we wanted to diversify into the beverages segment. Second, if you take the beverages market, the health shift is very obvious. Globally, people are now slowly shifting from carbonated soft drinks (CSD) to natural, fruit-based drinks. The Rs 16-crore Fruitnik is more of a natural, fruit-based drink brand than CSD. Though the company also has the Rejoice brand of CSD, our focus will only be on the natural fruit-based drink.

Would consumers be able to relate the brand Amrutanjan, which is almost synonymous with pain management, to a beverage? Won't they find it difficult?

Maybe, yes. But, the brand ‘Fruitnik' will anyway be retained. We want to ride on its equity. To say a few things about our brand attributes … we are currently working on a rebranding exercise to launch our mother brand Amrutanjan. In the process, we spoke to a lot of brand-loyal customers. The takeaway is that the brand, in addition to pain balms, is also driven by other attributes such as ‘strong', ‘pure', ‘natural', ‘health' and ‘wellness'. So, we believe Fruitnik fits in well with Amrutanjan's equity and brand image of health and wellness. Moreover, we see Fruitnik as a vehicle for us to launch our own health and energy drink products that are in the development stage. It's a well-known brand in the South and gives us a ready platform for our proposed products.

Will you tweak Fruitnik's formula to make it a health drink?

It's too early to say anything about that. But if you see, a lot of beverages sold abroad have ginseng in them. Similarly, you can add vitamins to fruit juices. Today, consumers want some health benefits from whatever they buy.

Fruitnik is known only in Tamil Nadu. Will you take the brand to other regions?

We will. We will take Fruitnik to other parts of the country. To start with, we will take the brand to Andhra Pradesh, Karnataka and Kerala. While the erstwhile owners did not have the means to take it to other parts of the country, we have the necessary distribution network in place for that.

Fruit drinks are a different category altogether. It calls for different distribution and marketing expertise. Does Amrutanjan have all that it needs to run the show?

If you take Amrutanjan and the way we turned around the brand in the last four to five years from a Rs 60-crore brand to a Rs 100-crore brand now, competing with multinationals such as GSK, Reckitt Benckiser and P&G in the ‘pain and cold' space, we picked up a lot of lessons. We feel we can apply some of those lessons in growing the beverage brand as well.

Do you see any synergy in the distribution models?

There are synergies in distribution and procurement too. If we take the distribution side of it, barring a few outlets such as paan shops and restaurants, both pain balms and fruit drinks are sold in common outlets now. Even in the supply chain management, there is synergy. If Fruitnik is all about glass bottles, there is no synergy. Because, glass bottles are recycled – they are collected every evening and cleaned and then used again. More than 90 per cent of Fruitnik's revenue comes from the PET bottle SKUs. So, on the procurement front too, both Amrutanjan and Fruitnik buy PET bottles from the same suppliers. Besides, we recently revamped our entire distribution system. Earlier, our products were stocked and distributed mostly by pharma stockists. But now, even FMCG (fast-moving consumer goods) stockists stock our products. Today, I can proudly say our distribution system is more like that of FMCG. This, in my opinion, is the most important thing to reach your product everywhere on time.

So, now both pharma as well as FMCG stockists stock your products …

Yes. Earlier it used to be in the ratio of 80:20 – now it's almost 50:50.

Any plan to foray into the foods segment?

Very soon. We are planning to launch a range of ready-to-eat foods packaged in retort pouches that will have a shelf life of one year. To start with, there will be 12 products including bisibelebath, dal, sabzi and gajar ka halwa under the brand ‘Kitchen Delights'. We are targeting mainly the export market.

Are you going to manufacture them on your own or outsource?

We are going to source them from Punjab Agro Industries in Chandigarh.

Also adding more products to your OTC pharma kitty?

Of course. We are getting into the women's hygiene products category very soon. In the next couple of weeks, we will launch sanitary napkins. And then, adding handwash liquid to our homecare products category. Currently we have only hand sanitiser — Nogerms — in that. We are also evaluating some personal care products.

How are you going to fund these projects?

We have enough reserves in our books. And, as of now we are a debt-free company. Moreover, these projects are not highly capital-intensive.

How has the market for pain balms been growing?

There has been a steady growth in the market. It has been growing at 10-15 per cent a year.

What's your market share?

We have 10 per cent share. Today, there are 500 pain balm brands in the country. And 10 of us control 70 per cent of the market share. That's why no player in this segment has more than 15 per cent share in this category.

Who's the market leader in this segment?

In terms of value and volume, Vicks is the market leader – with roughly 15 per cent share. Vicks is followed by Zandu Balm. Amrutanjan and Moov are neck to neck for the third place. However, in terms of the number of units sold, we are the second largest after Emami. Our Rs 2 sachet pack drives the growth here.

Do you feel any cost pressure?

Like the FMCG industry, we are also suffering margin pressure. Menthol is the key ingredient for our products. Menthol prices have doubled since last year. A few people control the prices.

There was talk that Amrutanjan was an acquisition target …

That's absolutely baseless. Why would we sell the company? This is a 117-year-old company … older than Ford Motors. We went public in 1936, and have been profitable ever since. Moreover, Amrutanjan is a testimony to Indian innovation. We want to expand and grow the company. We are currently working on a rebranding exercise, and will soon relaunch the mother brand Amrutanjan with new positioning that will appeal to youth.

What's your growth target?

We want to grow gradually. Our target is to grow at 30 to 35 per cent a year. We do not say we want to grow 100 per cent in two years or earlier.

Do you plan to export also?

Yes. Export will be our future growth market. We have registered the brand Amruntanjan in 13 countries. The US is also one of our target markets. We are currently working on reformulating some of our products to comply with the US regulatory norms.

How's your pain relief and wellness spa business — Osmosys — doing?

To be honest, we are not able to find the right model. We are getting walk-ins. We are really serious about that business. We currently have only one outlet and planning one more now. But, now I think we need to go to the medical community, instead of just approaching consumers. People generally go to the primary physician if they suffer any pain. Only if the physician recommends they go there. So, we need to convince the medical community, the doctors, first and say look, we are building a credible pain clinic.

Are you going to spin this off into a separate entity?

No. But we will spin off our fine chemicals division into a subsidiary in a month or so. It's doing around Rs 8 crore a year. We recently signed an MoU with the US-based Austin Chemical Company Inc to form a joint venture — Amrutanjan Pharmaessense Ltd. It's making losses currently, draining our OTC business valuations.

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