Asia OTC investment in Middle East & Africa

In last week’s blog, we looked at rising Chinese investment in Africa, specifically in the area of pharmaceuticals, and this week our focus is on Indian & SE Asian OTC marketers expanding their operations across the Middle East & Africa. Here we summarise some of the key developments that form this growing trend over the past 6-9 months.

In July 2017, it was reported that a number of Indian pharma companies, including Dr Reddy’s and Lupin, were planing to expand operations in Africa. While Lupin is focused on opportunities in South Africa, following the establishment of a new regulatory authority (SAPHRA) in the country in mid-2017, Dr Reddy’s is targeting an expanded presence in French-speaking countries in Africa, which are markets where Indian generic companies have traditionally been underrepresented.

OTC development by Indian marketers in Africa will not be limited to generics, however. In summer 2017, Emami announced that it is evaluating setting up manufacturing units in international markets to meet growing demand for its brands. The marketer also revealed that it is expanding into Nigeria and Ghana via product launches.

More recently, in January 2018, Strides Arcolab agreed – via its wholly-owned subsidiary Strides Shasun – to acquire a 55% stake in South African-based Trinity Pharma for R55mn (US$4.5mn). Strides Shasun MD, Shashank Sinha, said: “This … provides further impetus to our ‘In Africa for Africa’ strategy as it fast tracks Strides’ presence in the lucrative and high entry barrier market of South Africa. With this acquisition, we are now present in East, West and South Africa, covering all the key markets in Sub-Saharan Africa.”

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Strides Arcolab’s wide presence in Africa

As for Southeast Asian marketers, Indonesian OTC company Dexa Medica launched a brand called Stimuno in Nigeria in November 2017. Formulated with Phyllanthus niruri extract 50mg, Stimuno is a herbal & natural immune stimulant available in packs of 10 capsules. Dexa Medica is already one of Nigeria’s Top 5 OTC marketers, thanks to the success of its systemic analgesic brand Boska, and the company decided to leverage this brand equity by launching Stimuno at an event in Lagos called Pain-Free Day. Boska Brand Executive, Tunde Ojedokun, said that Stimuno is recommended for everyone, both healthy and unhealthy, for the total maintenance of the body system.

In February 2018, Indonesian drugmaker Kalbe Farma announced it is eyeing expansion across the Middle East, as well as Sri Lanka. Following a positive response to test-marketing of its packaged coconut water in the Middle East, Kalbe is now considering launching a range of nutritional products across the region. With local sales still sluggish, Kalbe’s new President Director Vidjongtius is focusing on new markets to broaden the company’s reach beyond Southeast Asia. 

OTC DASHBOARD remains your best port of call for the latest consumer healthcare trends in the Middle East & Africa. In the coming months, we will be updating our reports on 11 countries across the region, including Nigeria and South Africa. 

Chinese investment in Africa

One business book from my Christmas list that I’ve just finished reading is The Next Factory of the World: How Chinese Investment Is Reshaping Africa, by McKinsey consultant Irene Yuan Sun. This book highlights in great detail a trend that is noticeable across several industries, including pharmaceuticals – fast-growing investment in Africa by Asia-Pacific marketers. China is leading the way, especially in terms of expanding Africa’s manufacturing base, but there is a wider trend (encompassing OTCs) of companies across Asia-Pacific looking for growth opportunities in Africa.

Irene Yuan Sun’s book highlights two important economic fundamentals:

1) Over the past quarter century, China has gone from generating 2% of global GDP output to 25%
2) Over the next decade, 8 out of the 10 fastest-growing economies are projected to be on the African continent

The author makes the case that, from the start of the Industrial Revolution in Britain in the 18th century, economic prosperity has always followed where new factories are built. Citing the theory of the flying geese paradigm (see video below), the book examines how manufacturing shifts across countries and continents, as labour costs rise and competitiveness falls. Today, it is China that has reached this inflection point and it is Chinese entrepreneurs that are driving business investment in Africa.

Focusing on four countries (Nigeria, Lesotho, Kenya and Ethiopia), the book is structured in two main parts: the first about the reality of these factories being built, and the second about the economic, political and social possibilities. The author points to the irony that, despite high demand across the continent for certain drugs, notably antiretrovirals, Africa’s pharmaceutical firms are small and in some cases on the verge of collapse.

In Ethiopia (population: 100mn), there are just 9 pharmaceutical manufacturers, while Germany (population: 81mn) has nearly a 1,000 pharma manufacturers. With the exception of South Africa, Kenya and Nigeria, most African countries have no more than a handful of manufacturers. Kenya is the standard bearer in East Africa (40 factories, but generally of low quality), while Nigeria has about 40 too, the leading number in West Africa, but again few meet GMP standards.

There are reasons to be positive, however. South Africa, Kenya (national plan to encourage domestic production) and Ethiopia (similar plan) are all taking steps to revive pharma manufacturing in their countries. A few years ago, GSK showed showed interest in building a local manufacturing plant in Ethiopia, but after two years of deliberation the company decided not to go ahead. This is leaving a space that Chinese pharma companies appear more willing to fill. For example, in 2016 Humanwell decided to invest US$80mn in a manufacturing facility near Ethiopia’s capital, Addis Ababa.

Having seen rapid economic transformation in their own country with their own eyes, Chinese entrepreneurs are perhaps better placed to recognise the potential for similar change in Africa.

Next week on the blog, we’ll take a closer look at how several Asia-Pacific OTC marketers are looking to expand their operations across the African continent.

OTC DASHBOARD remains your best port of call for the latest consumer healthcare trends in the Middle East & Africa. In the coming months, we will be updating our reports on 11 countries across the region, including Nigeria and South Africa. 

OTCs in Action Episode 35: More play time instead of pain time in Nigeria

OTCinActionheaderThis week, OTCs are in Action in Nigeria where RB has just launched the leading global ibuprofen brand, Nurofen, for both children and adults. “Nigerians are known to be hard working, constantly seeking ways to lead a better life; they therefore do not want anything that would weigh them down or slow their pace,” Mr. Rahul Murgai, General Manager, RB West Africa, said at the launch ceremony. “Nurofen can provide them instant relief from headaches, lower back pain, cold symptoms, dental pain and fever thereby giving them more play time instead of pain time.”

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Rahul Murgai, General Manager, RB West Africa

Legitimate OTC brands that offer consumers safe and efficacious self-medication in developing countries are very important, because they offer an alternative to the under-the-counter (without a prescription) distribution of Rx drugs, which is in common practice. As governments regulate pharmaceuticals, and national healthcare programmes are prioritised, enforcement against UTC sales will become more rigourous. For the time being, the Nigerian government is curbing distribution of counterfeit and substandard drugs, with new government drug distribution centres and a ban on the flow of drugs between manufacturers / importers and retailers.

Markets such as Nigeria will benefit from these regulatory measures, encouraging investment such as RB’s launch of Nurofen. Although the OTC market is quite small at $114mn (+9%) in the 12 months to end-March 2015, Nigerian OTC will continue to grow as brands like Nurofen expand consumer options for legitimate self-medication.