Mega Lifesciences poised to profit from the network it has built up in Myanmar since 1995, a model it has since applied to other underserved emerging markets.
It has been 18 years since a Thailand-based company took a step that
almost no one else dared make. Its decision to enter the then-closed
economy of Myanmar has since paid off handsomely for Mega Lifesciences.
Mega today derives about one-third of its revenues from Myanmar, and
is in an excellent position to profit from the economic opening of the
country and the rising purchasing power of its people.
Best known for manufacturing and marketing the highly successful Mega
We Care line of vitamin supplements, the company also distributes
pharmaceuticals, supplements and consumer goods of other global brands
in many emerging markets.
In Myanmar, where it has nearly a two-decade head start over others,
Mega stands to benefit from its established distribution and marketing
network across the country. That network has contacts with thousands of
small family-run shops, and the ability to scale up to serve larger
retail outlets as they open.
Mega started operations in Thailand around 1983 to produce soft
capsules for pharmaceuticals and supplements under its own brand and to
supply to others, according to CEO Vivek Dhawan. A decade later, it
started thinking about growing beyond its home turf, and its first
targets were in Myanmar, Vietnam and Cambodia.
Twelve years after it set up the business in Thailand, it established
a new company in Myanmar to distribute not only pharmaceuticals and
vitamins but also consumer products.
Mega’s business expansion strategy has been to focus on developing
countries, starting small in markets that are underserved, and enjoying
the outcome of growth and its decision to be the first to enter these
markets. Today it has operations in 21 countries, mainly in Southeast
and Central Asia but also in five countries in Africa, as well as
Australia, Ukraine and Peru.
Mr Dhawan admits that running a business in Myanmar at a time when
the country was isolated from the rest of the world, with a market much
smaller than it is today, was a major challenge for the company.
“The picture of Myanmar over the past decades is still fresh in my
mind. It was difficult to travel from a place to another. Electricity
blackouts were common,” he recalls. “And if I wanted to make a phone
call when I stayed at a hotel, I had to inform the hotel officer in
advance. So, when they could get connected, they would inform me, which
it could take place even at 2 or 3 in the morning.
“But I didn’t think this to be a problem. We chose to go to a
developing country like Myanmar when only a few investors would do a
similar thing. So we had to admit that we would face tougher times
before we could reap the benefits from what we had invested.
“When we entered Myanmar, we knew that the market was very small.
Professionals in the distribution business were few. But we believed
that Myanmar would grow for sure. The country would change in the
future. And now you can see that everyone wants to go to Myanmar. So, at
that time we thought that we had an opportunity to grow there.”
Mega was right. The company has enjoyed 10-15% growth every year,
even after the 1997 economic crisis in Asia, as the Myanmar market was
still small. Pharmaceutical and supplement sales have done well and even
outpaced the development of the healthcare system. This is partly
because people who want to have good health but face limitations in
access to healthcare services choose to rely on supplements.
Apart from Myanmar, Mega also holds a large share of the supplements
market in Thailand where the overall pharmaceutical market is worth US$4
billion, compared with $400 million in Myanmar and $1.2 billion in
Vietnam.
“I’ve never thought that we made a wrong decision when we decided to
enter Myanmar,” says Mr Dhawan. “We chose to go to a developing country,
so it would take time before we would see the fruits of our
investments.”
Mega generated revenues of 7 billion baht in 2012, one-third of which
came from Myanmar. The company expects to see that portion increase in
the near future as Myanmar’s economy is growing more rapidly than in the
past years.
Despite the bright future in Myanmar, Mega so far has no plan to set
up a manufacturing plant in the country. Thailand remains its major
production, and Australia is its second home for manufacturing. The
company has also invested in research and development in Thailand.
Girish Wadhwa, managing director for Myanmar for Mega, said the idea
to diversify into distribution arose when the company could not find any
partners to do this business, so it decided to handle distribution
itself.
Apart from this, the company realised that distribution was a problem
faced by most other manufacturers who were looking to enter Myanmar, so
a business opportunity was born from necessity.
Mr Wadhwa recalls that the Myanmar market when he first went there
was very unlike the current one as there were few foreign investors,
with the exception of some who had been in the country prior to the
political upheaval of 1988. The subsequent sanctions imposed on the
military regime scared a lot of the investors out of the country, and a
few years the 1997 Asian financial crisis that began in Thailand sent a
lot of other foreign investors packing.
The biggest challenge for Mega during those difficult years was
managing currency wisely. It had to reduce cash exposure to the market
in order to prevent losses from exchange-rate volatility.
As the Myanmar market was still small, Mega decided to remain there.
As a result, it became the country’s largest distributor of
pharmaceuticals, vitamins and supplements, and one of the leading
distributors of consumer products.
In the healthcare segment, Mega handles the distribution of many
brands, including Pfizer and Glaxo SmithKline. Nestle food products and
Osotspa baby-care products are clients that have stayed with Mega for 15
and 10 years, respectively.
As existing clients such as Osotspa make plans to introduce more
products to Myanmar’s growing consumer market, business opportunities
for Mega will multiply.
Since Myanmar’s new quasi-civilian government began opening the
economy two years ago, many companies have been looking to market their
products here. Some want to negotiate business partnerships with Mega to
tap into its local knowledge. It’s good to have more clients, but Mr
Wadhwa cautions that major change may not come overnight.
For consumer product companies, he said, it takes time to set up
manufacturing plants in Myanmar and it could be two to three years
before they can start production.
“We’re also selective. We have to talk with companies that want us to
be their distributor about their investment and marketing plans in
Myanmar. We want to know that they have visions to grow in this country
in the long term before we can cooperate with them,” said Mr Wadhwa.
As well, while the economy of Myanmar is improving, the amount of
money in local people’s pockets has not increased dramatically.
Industrial development and skilled job creation need to be addressed and
implemented. Otherwise, the market will remain small for some foreign
companies, which may decide not to enter the country at this stage.
“The fundamentals of Myanmar are strong,” says Mr Wadhwa. “It has
abundant natural resources like natural gas, forests and water. How the
country can grow money from these resources is the government’s job. And
I think everyone want to support Myanmar.
“The challenge for foreign investors is not the attitude of Myanmar
consumers, but affordability. Their pockets are still small. In the
shopping mall, the average basket size is smaller than those in other
countries. People do not go out for shopping, but for experiencing the
ambience of the mall. So, the government should implement policies that
increase the amount of money people have.”
source: Bangkok Post
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