Case Study 1Zydus Wellness Ltd. Is playing on the rising affluence in the country.

as per get richer, they tend to do less ans spend more to keep fit. zydus portfolio includes three key products that cater to these needs-sugar free, a low calorie sweetener, nuteralite, a substitute for butter, and everyouth , a range of skin care product . all these products cater to the evolving needs brought about by a change in lifestyle . and it is politely called the business of wellness.

Instead of competing with the multinationals who dominate the FMCG segment, the top management of zydus wellness decided to be a niche player by catering to the unmet needs in the market. It introduced sugar free for diabetic patients and health conscious people and nuteralite for health conscious people.

Sugar free, which has fewer calories than regular sugar, gained popularity not only because people are increasingly conscious about their calorie intake, but also because of the rising number of diabetic patients in the country. The diabetic market is pretty big and its penetration is low compared with other developed markets such as the US. Take a look at the figures-the market for artificial sweeteners stand $2 billion in the US whereas 10% of their population is diabetic. In comparision,the $21 million indian market is small but holds growth potential, more so because about 40 million Indians have type-2 diabetes (where glucose or sugar builds up in the blood instead of being broken down) and the world health organization expects their numbers to rise to 70 million by 2025.

Patels meticulousness resulted in zydus sugar free gold and sugar free nutra commanding nearly 85% share of the market for artificial sweeteners . sugar frees brand extensions include a low cal-soft drink concentrate. During its heyday, sugar free was seen as invincible. But now sugar free brand has started losing steam because of competition for foreign players.

Nutralite, a brand of margarine , an alternative to butter, again is a niche zydus found for itself. Margarine is made of vegetable fats, which as free from trans and hydrogenated fats-the stuff that causes heart attacks. It is consumed as equal in equal quantity as butter in the US, but its penetration in india is negligible less than 1%. The other advantage of offering a butter alternative was that it avoided going head to head with amul which control 70% of bulk sales and hence the market. Over the years, zydus has been publishing up its retail reach too, especially as modern retail stores offer the much needed visibility for such products. Now, about a quarter of its sales come from retail, where the margins are higher , but institutional sales continue to be the dominant revenue driver.

Skin care was also a segment that zydus ventured into with face wash, scrubs and peels. These categories were not as aggressively addressed by MNCs then and offered high margins. In the absence of cut-throad competition zydus asserted itself in these categories with its Everyuth brand, which brought in roughly a third of its revenues.

Table1: contribution of zydus brands to its revenue during 2010-2011

BRAND Sugar free Nutralite Everyouth

SHARE IN REVENUE 40% 35% 25%

In the past year , however things have gone terribly awry for all its segments. Zydus was in a sweet spot in the past few years because its choose business segments carefully segments with little competition but offered huge potential for growth. But now, that landscape has changed . firstly, growth rates in the low

calorie sweetener category has slowed down considerabely from over 20% to single digits.{neither the management nor experts seems to have a valid reason but sugar free sales have dwindled in the past year or so, says an analyst.

And then, in the face wash and scrubs segments, five years back there was hardly any competition. But now everyuth is facing heat both from MNCs such as Johnson and Johnson(clean n clear),loreal(garnier), Hindustan unilever (lakme, pears, ponds, fair and lovely) beiersdorf(nivea And procter and gamble (olay) and local rivals wipro consumer(santoor),ozone(no-marks), chandrika,himalya and VLCC.

Besides, the companys decision to remain conservative with and spends only fuelled the decline in sales. That let competition snatch away market share everyuth by resorting to high pitch advertising. Though zydus has started aggressively advertising from the fourth quarter of FY-12 it seems a bit late. Infact, a combination of weak.

To compound zydus woes, even nutralite , which contributes nearly a third revenue s, has seen its sales plunge. For nutralite , three-fourth of its sales comes from institutional players such as hotels and restaurants. Here Zydus competes with unorganized players. Now, due to an increase in palm oil prices, the company lost business to unorganized players as the latter refrained from increasing prices unlike Zydus . Not surprising that against such a backdrop revenues plummeted from Rupees 91 crore in Q1FY12 to Rupees 76 crore in December quarter.

Zydus CEO Mr. Pankaj Gupta wants Zydus Wellness to grow into Rupees 550 crore company by FY 2015 and agrees that sales will have to increased bu atleast 20% for the next three years. He remarked, FMCG at about consumer research

and specific product development .He is also betting big on nutraceuticals, where his Actilife brand brings in miniscule revenue currently. Margins can be as high as 30% but Actlife , which has prebiotic fibres as its USP will compete directly with giants such as Holricks, complan and Bournvita . Actilife is aimed at a specific adult need for add ons to their beveregaes, says Sunil Alagh , Chairman, SKA Advisors, a brand consultancy. Sure, the benefits of prebiotics fibres are known, but I dont think it is perceived yet as a lifestyle need , which is why success will be a long haul. Not surprising that analyst feel Actilife will take three to four years before it starts making a significant contribution to the topline.

Patel has a Herculean task at hand to bring back on track what was once his fastest growing business. Indeed, it is a significant challenge .

Questions : 1. How did zydus Wellness position its Products? 2. Why Zydus Wellness nurture niche segment? 3. Why are its bands showing a downward trend? What maketing strategies could be followed to check it?