Launching liver product in food supplement market in vietnam master project in business and marketing management

MBMM4 THIEU THI VY VY LAUNCHING LIVER PRODUCT IN FOOD SUPPLEMENT MARKET IN VIETNAM MASTER PROJECT Tutor: PhD... DECLARATION I hereby enclose eight hard copies & two soft copies of my

MBMM4

THIEU THI VY VY

LAUNCHING LIVER PRODUCT IN FOOD

SUPPLEMENT MARKET IN VIETNAM

MASTER PROJECT

Tutor: PhD HOANG THI PHUONG THAO

Ho Chi Minh City

2010

DECLARATION

I hereby enclose eight hard copies & two soft copies of my final project

“Launching Livica - liver product in food supplement market in Vietnam” to Solvay Business School and Ho Chi Minh City Open University

I confirm this final project is my own work And I certify that all data and

references using in this project are legal

ACKNOWLEDGEMENTS

Firstly, I would like to express sincere thanks to my tutor - PhD Hoang Thi Phuong Thao for her whole-hearted guidance and feedback which I really appreciate

In addition, I would like to show my big gratitude to my special colleagues –

Mr Phan Thanh Trung, who accompanies with me the whole course of MBMM4

& Mr Nguyen Phong Phu, who assists me to conduct the quantitative research for the information of this final project, and other colleagues in United Pharma Vietnam, who assist me to complete this final project

Finally, I wish to acknowledge and thank to all professors, coordinators and

my classmates of MBMM4 program who have delivered valuable experiences, knowledge and assistance to me during the course

TABLE OF CONTENT

LIST OF TABLES

LIST OF CHARTS

LIST OF ABBREVIATIONS

EXECUTIVE SUMMARY 1

Chapter 1: INTRODUCTION 1.1 Background 2

1.2 Objectives of launching project 3

1.3 Scope and limitation of launching project 4

1.4 Research study method serving for project .4

1.5 Structure of project report .5

Chapter 2: MARKETING SITUATION ANALYSIS 2.1 EXTERNAL ANALYSIS 7

2.1.1 Hepatic market data analysis (IMS market research agency) 7

2.1.2 Competitors analysis 8

2.1.3 Market & consumer’s attitude toward liver products 9

2.1.3.1 Respondents information 9

2.1.3.2 Market overview 9

2.1.3.3 Evaluation of product concepts 12

2.1.3.4 Ideas for pricing 14

2.2 INTERNAL ANALYSIS 15

2.2.1 Historical business share by regions / provinces in Vietnam of United

Pharma’s products .15

2.2.2 Historical business share by channels of distribution of United Pharma’s products 15

2.3 SWOT ANALYSIS 16

2.3.1 Strengths 16

2.3.2 Weaknesses 16

2.3.3 Opportunities 17

2.3.4 Threats 17

Chapter 3: MARKETING STRATEGY TO LAUNCH LIVICA 3.1 MARKETING GOALS & OBJECTIVES 18

3.2 MARKETING STRATEGIES 19

3.2.1 Target segmentation 19

3.2.2 Livica positioning 20

3.2.3 Marketing mix 20

3.2.3.1 Product strategy 20

3.2.3.2 Pricing strategy 22

3.2.3.3 Distribution strategy 24

3.2.3.4 Promotional strategy 25

3.2.4 Action plan for launching Livica 27

3.2.4.1 Consumers 27

3.2.4.2 Pharmacy 29

3.2.4.3 Private clinic 30

Chapter 4: FINANCIAL ANALYSIS & CONTROL

4.1 SALES FORECAST FOR 5 YEARS 33

4.2 MARKETING EXPENSE FORECAST 33

4.3 BREAKING EVEN ANALYSIS 34

4.4 CONTROL 35

CONCLUSION 36 REFERENCES

APPENDIX

LIST OF TABLES

Table 2.1: Market relevant of hepatic market 7

Table 2.2: Competitor analysis profile 8

Table 2:3: Respondent profile 9

Table 2.11: Business share among 4 channels of United Pharma 16

Table 3.1: Sales forecast of Livica in 5 years 18

Table 3.3: Price of Livica 23

Table 3.4: Competitor pricing analysis 24

Table 3.5: Sales share among channels 24

Table 3.7: Summary of action plan 2011-2013 .31

Table 4.1: Livica’s sales forecast in 5 years .33

Table 4.2: Marketing expenses for 5 years 34

Table 4.3: Break-even analysis .35

LIST OF CHARTS

Chart 2.4: Current hepatic market .10

Chart 2.5: Purpose of taking Hepatic products 10

Chart 2.6: Consumers’ perception on famous brands 11

Chart 2.7: Influencers of hepatic category 11

Chart 2.8: Evaluation on 2 product concepts 13

Chart 2.9: The attractive attributes of concept 2 vs concept 1 14

Chart 2.9: Pricing evaluation 14

Chart 2.10: Historical business sales of United Pharma VN 15

Chart 3.2: Novex science study on absorb of Siliphos 21

Chart 3.6: Delivery system of United Pharma’s Distributor 25

LIST OF ABBREVIATIONS

MD : Medical Doctor

EXECUTIVE SUMMARY

With the strategy to expand the business of United Pharma VN through exploring the new & potential market – food supplement market, the project of launching a liver food supplement product is suggested The project depicts plan

of launching Livica, which strengthens liver health and protects liver from diseases It describes clearly the whole process of how to launch Livica in food supplement market Starting with the introduction of the project on how & why the product is selected Then it moves to the market situation analysis which bases on data & information from conducting quantitative market research & existed internal information of the company Following that the marketing strategy is developed to describe how Livica approach its market It’s the most important part of the project to present many key concerns of a product launch, like what is its target segment, what is Livica positioned in consumer’s mind, what is the marketing mix of Livica Finally, the finance analysis & control is suggested to evaluate & manage the success of the project

Chapter 1 INTRODUCTION

1.1 BACKGROUND

United Pharma VN is a subsidiary pharmaceutical company of Unilab in Philippine It has been established in Viet Nam since 1994 as a representative office From 2000, it has been become a limited foreign company with a factory

in Vietnam At present, United Pharma VN has been one of the biggest OTC pharmaceutical companies in Vietnam with famous brands like Decolgen, Alaxan, Enervon, Obimin, etc It has more than 300 employees with sales representatives in most of provinces in Vietnam The average revenue growth in the past 5 years was about 23% and the operation management has also been expanded with many new departments like Marketing Information & Services, Portfolio Medical, Trade Marketing departments The vision of United Pharma is the world-class healthcare partner for life And the mission that United Pharma provides quality and affordable products and services that promote and enrich life for all communities

Inconsistence with the vision & mission of United Pharma, Livica is suggested to launch Food supplement with herbal compositions has become the new trend in the world, and Vietnam has started to follow that trend nowadays Consumers have been more aware of side effects of medicines in long term treatment & move forward to take herbal products for both prevention & treatment

The product is chosen about liver protection because of two reasons

Firstly, according to IMS data (IMS - a research company supplying data for pharmaceutical industry in Vietnam) that total hepatic protection category had a high average growth of 38%, which was faster than the average OTC growth of 17% from 2007 to 2009 Among this category, total food supplement products achieved a remarkable average growth of 304% Secondly, because of the emergence of active life-style, the number of potential sufferers who usually drink and eat out is probably increasing In sight of this vitally emerging demand

of hepatic protection, the launch of a liver food supplement product is necessary

to penetrate the potentially lucrative segment

Livica contents Siliphos & multivitamin, which is better than most of the existed players in formula & benefits Siliphos is the combination of Silybin & complexation with soy Silybin is the standardized extract (silymarin) obtained from the fruit of S Marianum and containing main constituents SILYBIN, SILYDIANIN and SILYCHRISTIN, is widely used in European medicine in the treatment of liver diseases Livica will be imported from Unilab, the mother company in Philippine Livica is a pioneer of food supplement product for United Pharma to explore & test the new attractive market in Vietnam

1.2 OBJECTIVES OF PROJECT

The project will be gone in depth with three main objectives as follows:

o To explore & analyze the characteristics of the current market and competitors to launch Livica in food supplement market

o To analyze potential consumers’ attitude & usage to Livica product

o To create shape & sound marketing strategy to launch Livica successfully in Vietnam

1.3 SCOPE AND LIMITATION OF PROJECT

This project will be implemented in nation wide of Vietnam from 2011 However, due to the limited time of preparing the project, the market research on consumers & market is just conducted in HCMC and the result will be assumed to nation wide

1.4 RESEARCH STUDY METHOD SERVING FOR PROJECT

There will be two methods using for this project: desk research and quantitative research:

o Desk research: the analysis bases on secondary data from internal and external source:

9 Internal data: The project will get sales value of United Pharma products through past three years 2007 – 2009 from sales portal system of United Pharma as the data reference

9 External data: The project will get market data of hepatic market, sales volume & value of players through past three years 2007 -

2009 from the data panel of IMS The hepatic market in IMS presents data of both medicine & food supplement products These data are collected from the sales of distributors to pharmacies in 5 key cities, which are HCMC, Hanoi, Cantho, Danang & Haiphong and are set as representative for the whole national market

o Quantitative research: this research is conducted by face to face interview with 100 respondents in HCMC following list of questionnaires The target respondents are set into 3 groups as follows:

- Group 1: (40 respondents)

• Past 6 months users of liver products

• Users of Boganic, using the brand regularly with or without intervals

1.5 STRUCTURE OF PROJECT REPORT

The project includes four chapters, in which

o Chapter 1, “Introduction”, introduces the where the project comes

from, the objectives, the scope of work and research study methods to write this project

o Chapter 2, “Marketing situation analysis”, goes to analyze the

market overview of liver products, the competitors which are about the top 2 players with their strengths & weaknesses, the historical sales performance by regions of United Pharma products, and the

quantitative research result which explores the target segment, the ideas for pricing & evaluation for winning product concept Then the project analyses the SWOT of Livica before moving to do the marketing strategy for launching it.

o Chapter 3, “Marketing strategy to launch Livica”, presents the key

contents of the launching project which are developed based on the information & data analysis of chapter 2 In this chapter, the objectives are set and the marketing strategy is deployed from defining the target, the product positioning to the marketing mix to for action plan of launching

o Chapter 4, “Financial analysis & control”, mentions about the sales

& marketing expenses of the project As the criteria of launching new products in United Pharma, the sales target should be forecasted for first 5 years to see how potential growth of product for investment Then the project is calculated the all the expenses from operations to product marketing expenses to make the project be broken even in 3 years And the needs to set up criteria the project measurement

In summary, chapter 1 gives an overview on the reasons of launching Livica, setting up objectives for project and suggesting study methods to be applied and the structure which the project will go through So the 1st step of launching a new product is to analyze the market it will enter

Chapter 2 MARKETING SITUATION ANALYSIS

2.1 EXTERNAL ANALYSIS

2.1.1 Hepatic market data analysis (IMS market research agency)

The IMS research result shows that among players in hepatic market, the hepatic food supplement products emerged from 2007 and quickly showed the potential development & trend of liver food supplements in Vietnam with 304% of average growth from It’s easy to understand the big growth of hepatic supplement It’s the trend of taking food supplement products to avoid the side effects of medicine in long term treatment Table 2.1 describes clearly the market trend of liver products

Table 2.1: Market relevant of hepatic market

2.1.2 Competitors analysis

In general, the classification of total hepatic market is based on therapeutic classification, which products have similar ingredients in treating

or protecting liver diseases And the process of defining competitors of Livica

is based on the ranking of products in hepatic market (mostly leader), product claims, the advertising claims, and the activeness of marketing activities of players in same market Therefore, the competitors of Livica are Boganic & Bar, who are in top five of rank with big market shares; have the advertising claims competing with Livica, which is for liver protection & treatment, and same target customers (consumers, pharmacist and MD) The table 2.2 will summarize the competitor analysis profile for a general view of readers

The table 2.2: Competitor analysis profile

- Maintain healthy liver

- help to produce liver enzymes

-support liver f unction

- detoxif y liver

- prevent & support treatment of high cholestorol,biliary tract disorder

- support liver f unction

- secrete toxicity, antiallergic

- antherosclerosis

Targe t Cus tom e rs

_ Consumers _ Pharmacists _ MD in private clinic

_ Consumers _ Pharmacists _ MD

_ Consumers _ Pharmacists _ MD

Buying Price 38,500 vnd / box (100 tab) 35,000 vnd / box (180 tab)

- Heritaged brand

- Low price

- Strong distribution

- Lack of emotional claims

- Limited promotion activity

- Not appealing packaging

dysf unction

Remedy f or toxicity secretion

Ke y prom o

ctivitie s

PR program, Conf erences

f or MDs. -OOH: Billboard in highw ay

2.1.3 Market and consumer’s attitude toward liver products

2.1.3.1 Respondents information:

There is no significant difference between the general and potential market Female looks more dominant than male in hepatic category and the group have more concerns on their liver health is in middle age from 30 to 50 year olds And most of them are self-employed and housewife See table 2.3

Table 2:3: Respondent profile

General MARKET POTENTIAL MARKET GENDER

Chart 2.4: Current Hepatic Market

40

6

12 25

54 54 44

Chart 2.5: Purpose of taking Hepatic products

From that, only Bar & Boganic have gained the clear position in consumer’s mind as liver tonics Bar is currently the only product to win both and enjoys more association with skin benefits, while Boganic is more likely to be used for protection against beer / alcohol See chart 2.6

Chart 2.6: Consumers’ perception on famous brands

POSITIVE PERCEPTION

INDIRECT BENEFITS 84 DIRECT BENEFITS 55

Treat yellowish skin 52 Remove/Neutralize toxic in

the liver 28

OTHERS OTHERS

Has herbal ingredients 3 Has herbal ingredients 10

Don' t know 7 Don' t know 31

Base: Those who are aware of brand, Q5,6

Besides, this category is influenced by MD, pharmacists and WOM Females, particularly, are more influenced by private clinics See chart 2.7 Chart 2.7: Influencers of hepatic category

2.1.3.3 Evaluation of product concepts

The two product concepts are proposed to consumers to check their perception & evaluation toward the product And based on consumer’s feedback, it helps to define the product positioning and ad claims for advertising activity later And here’re the 2 concepts tested in the research:

Concept 1: (focus in protecting liver from beer/alcohol for male) Active life-style like too much eating & drinking habits bring bad effects on your health And liver is one of the most affected organs in your body

You need to find a way to protect your liver from the harmful effects

of alcoholic drinks and unhealthy eating Besides improving eating & drinking habits, taking liver tonics is necessary to remove toxics out of your liver

Product A – specially formulated & clinically proven liver protection tablet composed of Siliphos and multivitamins Siliphos is extracted from the native milk thistle which was proven by clinical trials that it protects the liver from harmful toxins from drugs, alcohol and food Product A also has vitamin B complex, vitamin E and zinc which will help keep the liver healthy and functioning well

The product is made from herbal extract therefore it is safe to use Take the product everyday for healthy liver and you can enjoy life

Concept 2: (communicate multi-benefits for both male & female)

Industrial living, air pollution, and eating habit bring bad effects on our health Liver is affected the most by those factors

Besides improving eating habit, taking medication like liver tonic and liver cleans are another ways to protect your liver against harmful toxins from alcohol and pollution

Introducing product B which formulates Artichaut extract, extractum polygoni avicularis, pulveres ipomoeae helping to protect liver effectively, treat skin allergic, pimples, jaundice, fullness, detoxification from the bad impacts

With product B, you would fully enjoy dining, drinking and do not have to worry about the pollutions The product is made from herbal extraction so you can use it everyday For this reason, you would enjoy

a beautiful life with your be-lovers

The research finds out that concept 1 receives quite good ratings in various indications, meets standards requirements of 75% overall liking and purchase intent, and it appears more to males However, concept 2 even generates more positive perception, and potentially draws more people to try the product This is the result of multi-benefits communications and relevance to both genders See chart 2.8

Chart 2.8: Evaluation on 2 product concepts

Concept 1 wins a plus with males due to the highlighted protection against beer / alcohol, while concept 2 speaks to both genders and gathers more mass support Therefore concept 2 definitely triggers more purchase See chart 2.9

Chart 2.9: The attractive attributes of concept 2 vs concept 1

2.1.3.4 Ideas for pricing

The acceptable price ranges of Vnd 2,200 – 2,900 per tablet is very narrow, indicating high level of price-consciousness See chart 2.9

Chart 2.9 Pricing evaluation

2.2 INTERNAL ANALYSIS

2.2.1 Historical business share by provinces in Vietnam of products in United Pharma:

The distribution of United Pharma is strong mostly in HCMC & cities

in Mekong area The top 20 cities contribute 85% of company’s business and the distribution has covered more than 2,500 pharmacies See table 2.10 Chart 2.10: Historical business sales of United Pharm VN

Source: Sales portal system of United Pharma in 2009

Order Province Business

Share

No of Buying Outlets

1 Ho Chi Minh City 28.6% 732

3 Ha Noi City (Old) 6.4% 240

2.2.2 Historical business share by channels of distribution:

United Pharma’s products are distributed through 4 channels Among these, retailers are the key channel which company wants to increase the business share for OTC products to lessen the dependable to wholesalers & PPC, so the company can control the market more powerful and strictly, and enhance the direct communications of brands to pharmacists & consumers Here’s the table which shows the sales share among channels in 2009 See table 2.11

Table 2.11: Business share among 4 channels of United Pharma

• Livica is heritaged from the available strong distribution system

• Livica is come from famous OTC pharmaceutical company

• Livica has a promising active promoting strategy to its target consumers

2.3.2 Weaknesses

• Livica is a new player, so there’s no brand awareness yet

• Livica is positioned as premium brand so its pricing is quite high vs its competitors

• Livica will not be prescribed & hardly recommended by doctors due

to the regulations of food supplement products

Chapter 3 MARKETING STRATEGY TO LAUNCH LIVICA

3.1 MARKTETING GOALS & OBJECTIVES

To win product launch the project needs to establish clear goals & objectives The goals are the biggies and the objectives are discrete and measurable Once the goals & objectives are set up clearly, it helps the project be measurable Hereby are the goals and objectives of Livica launching

Table 3.1: Sales forecast of Livica in 5 years

• To create the brand image of a liver protection specialist to target market

So to deliver the suggested goals & objectives, the marketing strategies should

• Demographic: they are male & female, aged from 30 to 50 year olds, come from BC social economic class They are self-employed like businessmen of coffee shops, stationeries shops, fruity shops & IT shops, etc & housewife

• Psychographic: they are those who value family environment & social relationships, they are always care of health for themselves and families, that why they mostly take liver products for the purpose of protecting their livers For males, they want to protect their liver against beer / alcohol whereas females are more concerns on skin problems 3.2.2 Livica positioning

Once the market segment has been identified and targeted, the positioning should be described as the next step before the marketing communications mix are considered to draw up for the best suited to the product So, with such above target market of Livica and the appreciation of consumers toward product concept 2 & the differentiation with its competitors – Bar & Boganic, Livica’s positioning is defined as follows

Livica is a unique, all-natural, complex multi-ingredient liver product, which is much better than existed products with medical information to back

up its claims It helps regulate levels of enzymes (Siliphos), optimizes assimilation (Vitamin B complex) and prolongs the youth of liver-cell thanks

to anti-oxidant (Vitamin E and Zinc) So it’s safe & effective in protecting liver against harmful toxins from beer / alcohol for men and toxic affected to skin beauty of women Therefore, Livica lets you free from worry of liver problems and give you full enjoyment beautiful life with your be-lovers

3.2.3 Marketing mix

After defining target segmentation & product positioning of Livica, the 4P marketing mix including product, pricing, place (distribution) and promotional strategy need to create for a full market strategy to launch Livica

3.2.3.1 Product strategy

Livica is not the first-to-market product in hepatic market but it applies the fast-follower product strategy “Fast product development abilities enable sustained competitive advantage and ability to stay ahead competition” – Mc Grath 2001 Livica was researched & developed by new technology Its key ingredient contents Siliphos® including Silybin & complexation with soy derived phosphatidylcholine,

is much better absorbed Novex Science has conducted proprietary, randomized, cross-over bioavailability study on 26 subjects Results show that Siliphos® is ~300% better absorbed than Liveraide, the leading Philippines Silymarin brand See chart 3.2

Chart 3.2: Novex science study on absorb of Siliphos

Source: Project of R&D of Unilab in Philippine

Besides the unique compositions for outstanding benefits vs the competitors, Livica is designed in nicer packaging which looks more appealing to consumers It is packed with 60 tablets per box for the convenient using for a month Here’s visual pack shot of Livica (after importing, the name of product Livercare will be changed to Livica, cause there has been a liver product named Livercare in Vietnam already)

3.2.3.2 Pricing strategy

There’re a lot elements affected to the pricing strategy for Livica Firstly, according to the quantitative research the consumers in this market are price sensitive Secondly, the product strategy of Livica

is defined as the premium product with such its advantage ingredients

& clinical proved benefits vs competitors Thirdly, the target segment of Livica is decided to aim to a group of middle class BC only which occupies 79% of potential market Therefore, the pricing strategy of Livica should be a combination of penetration pricing & skimming pricing Meaning, the price of Livica is not too high to “skim the cream” off the top of the market, or is not low to pursue the objective of quantity maximization, but it’s positioned with a quite high price vs the leader to be fit with it target segment & product strategy In this case, the price is used as signal of high quality in an attempt to position Livica as the quality leader

And following United Pharma’s policy in setting the specific price level that achieves the pricing objectives, mostly two pricing methods are applied They are target return pricing & psychological pricing Target return pricing which sets the price to achieve a target to return-on-investment (gross profit should be from 60%), and psychological

pricing which sets the price on factors such as signals of product quality, popular price points, and what the consumers perceive to be fair

Here’s how the price of Livica is done with the template of Finance department of United Pharma, in which the landed cost Livica is 50,250 vnd / box, and with gross profit of 62% leading to the distributor list price with VAT is 150,000 vnd / box and the estimated price to consumers is 180,000 vnd/box For detail description, please see the table 3.3

Table 3.3: Price of Livica

Cost of Sales ( Landed cost) 50,250