Wellness Industry

Executive Summary

The Indian economy is booming at an ever increasing rate. As a result of it people’s wallets are becoming thicker. There is an emergence of a new middle class which is more educated and more aware of what’s happening around. They have preferences other than food and clothing and they have the income to spend on it. The only thing that they are running short of is time. They are aware of the fact that their new lifestyle is affecting their health and that their health is their most important asset. They are also becoming more aware of the long term side effects of allopathy. This has opened up a flood gate of opportunities for the wellness industry.

Wellness is different from sickness in the sense that wellness is for people who are already well and who want to stay that way. Wellness industry has been in India ever since, in the form of Yoga, Spa therapy and Ayurveda but it has not been able to gain much attention. But now, since people are becoming more conscious of their health coupled with the factors mentioned above, it is becoming a lucrative business to invest in.

Wellness industry in India has just started and it has a long way to go. It is mostly unorganized and faces a lot of challenges. Some of them include poor infrastructure and untrained staff, local competition and the consumer who is still not fully aware. Despite of these challenges the industry is growing at a tremendous rate and holds numerous opportunities. Companies just need to develop ways to overcome these challenges and a huge market is waiting to be catered to.

The Wellness Revolution

Consider this: O2 Spas, which is a Hyderabad based company and has shops at Delhi and Mumbai airports, has started delivering services to corporates. VLCC, which is a beauty and weight loss company, is in the process of developing a residential medical spa in Gurgaon with an investment of ₹100 crore.  Spas India Private India Limited, which is a Delhi based company and a subsidiary of Canadian Spas Worldwide, is planning to expand from its single spa in Delhi to 10 more cities including Delhi and Mumbai. First off in the expansion list is Guwahati, on which Spas India is investing nearly ₹10 crore.

Dr Batra’s, a multispecialty chain of homeopathy clinics, is bracing for an entry into hair dyes and colours as part of its recent decision to diversify into flourishing segments. Vallée de Vin Private Limited plans to open a unique “wine spa” soon. And Lalit Resort and Spas, a Kerala based company and a subsidiary of Bharat Hotels, will invest ₹70 crore in a 40 cottage spa. Rudra Spa, a Mumbai based company, recently opened a shop in pune, is already registering a cash sales of ₹15 to ₹20 lakhs a month.

What does all of this mean? Why are these companies investing so much in the wellness sector and why is the sector growing at such a rapid pace? Is our current lifestyle affecting our health? Is our awareness regarding wellness increasing or is it just that we have more disposable incomes to spend on goods and services other than food and clothing? Is wellness another fad or is it the next big thing? It is through this study of ours that we’ll try to find the answers to these questions.

Starting Point: Post- ‘91 saw great development and increase in buying capacity of the people. This also brought along with it problems like obesity, hyper-tension, high blood pressure soaring cholesterol level, skin problems, hair-loss and a whole list of other issues that people had to deal with.

People slowly became aware of all these things and some of them started to proactively make changes in their lifestyles. Naturally, to cater to this need, several products and services were introduced into the market. But they didn’t really make an impact on the psyche of the consumer. Nor were they able to make it big. But we believe that the time has come for this industry- the Wellness Industry to reach its true potential.

The New Indian Middle Class

The Indian middle class currently numbers around 50 million, but by 2025 will expand dramatically to 583 million which will be about 40 percent of the population.

This huge group would earn an income between ₹2,00,000 to ₹10,00,000. These households will see their income balloon to ₹51 trillion which will be 11 times the level of today and 58% of total Indian income. This group will consist of young college graduates, mid level government officials, traders, business executives etc.

As there will be a huge change in income there will be a huge change in consumption patterns as well. A huge shift is underway as people will spend more on choice based products like household appliances and restaurants rather than spending on the traditional necessities of food and clothing.  Households that afford discretionary consumption will grow from 80 lakhs to 940 lakhs in 2025.

As per Mckinsey’s data, India’s market, like China, will be volume driven rather than on per-capita spending. While luxury goods makers may be able to sell to India’s global consumers with little modification to their products, those catering to the India’s new middle class will need to be innovative to square the difference between the rising aspirations of the consumers and their still modest incomes. There will be growth in every sector and every sector will contribute to rising Indian GDP.

Also, communication will increase the most. This indirectly means increase in awareness of the people. This coupled with increase in education will make people more aware about their health. This will lead to an increase in their spending on health care and personal products and services which translates into around 10% growth rates in these sectors. But what is wellness? Before moving on how and why this sector holds a lot of opportunities let’s understand the meaning of term wellness and how has wellness industry developed in India.

Wellness Industry in India

Wellness is not a new concept in India. Yoga, Ayurveda and spa therapy have been in this country since a long time now. However it has not been able to attract much attention. But now it is gaining momentum. Before coming down to the reasons for it we would like to elaborate on this concept.

Wellness is slightly different from sickness. Although as per some definitions sickness industry is a part of wellness industry, there is a difference between the 2 terms. Sickness is reactive as one looks at it after getting sick whereas wellness is a proactive industry. It is for the people who are already well and want to stay that way, slow down the aging process or keep from becoming new customers of the sickness business. The money spent on wellness is invested in making one stronger to make one look better, see better, hear better and fight the symptoms of aging. Be it the hair growth industry,  cosmetic dentistry, elective plastic surgery, antioxidants and diet systems, vitamins and food supplements, fitness clubs and personal trainers, organic and natural health products or body, hair and skin care products, they all fall under the same umbrella. Wellness industry can be divided into the following 7 categories:

  1. Allopathy
  2. Alternative therapies
  3. Beauty
  4. Counselling
  5. Fitness and slimming
  6. Nutrition
  7. Rejuvenation

It can further be divided into 2 categories:

  1. Wellness Products
  2. Wellness Services

As per the FICCI – Ernst & Young report of 2008: The wellness products industry was worth ₹11000 crore and the wellness service industry worth ₹16000 crore (Allopathy has not been considered in this due to its traditional linkage to healthcare). Of this, Alternative therapies contributed about ₹6100 crore in the service segment and ₹1600 crore in the product segment. Nutrition products contributed about ₹6700 crore in the product segment.

While ayurveda and alternative treatments are predominantly unorganized, health foods, dietary supplements and drinks are more organized. Region wise, the south is much ahead in terms of organized wellness based centres: 34.4 centres per 100,000 households, compared with 13.6 for the north, 12 for the west and 10.1 in the east. It is due to the presence of more alternative based therapy based centres in south. There are also clear customer preferences in each region and with regard to each segment. For example: alternative therapy is most preferred in south while north Indian customers are more inclined towards beauty. Similarly the maximum number of fitness and slimming centres is in the west.

The industry as a whole is currently growing at 30-35%. It is this combination of products and services that represents the untapped potential in the industry. The opportunities provided by this segment are significant. As an indicator, more than 15 international players have entered into this market in the recent past. Numerous Indian players have diversified their products and service spectrum and are expanding rapidly. Companies in sectors allied to wellness industry have also forayed into the wellness space.

But this industry is still in its nascent stage in the country. More than 50% of the market is still unorganized and highly segmented with numerous small and regional players. This is a challenge for larger service providers as the unorganized sector puts tremendous pressure on pricing and thereby margins.

Role of Government

The government has a huge role to play to stimulate the development of the industry, regulate providers and most importantly, enforce a regulatory framework that facilitates calculated growth. On the regulatory front, the Quality Control of India has already launched the standards for the Indian Health and Wellness Industry. These are first of its kind as there is no similar standard in existence even at the international level.

This standard covers various aspects like technology, trained manpower, customer safety, infrastructure, processes and controls among many others, statutory and regulatory compliances. This standard lays down stringent regulations for service providers to obtain mandatory full accreditation of the total services offered.

However a lot still needs to be done in terms of enforcing these standards in the unorganized and fragmented Wellness industry. Implementing a mechanism for monitoring is another daunting challenge for the government.

Secondly, the government spend on healthcare is 4.8% of India’s GDP. The Government (central and state) spend is around 1.2% of GDP on health care, which is lower than even some of the developing countries in the world. A lot needs to be done by the government on this front. The government needs to increase spending on health care which will act as a boost for the private players. The voluntary (private) insurance cover which is still limited to only 1.4% of the total population of India has to be increased.

Analysis of Opportunities

Longetivity is affected by lifestyle. There has been a decline in trust on traditional medicines. As the disposable income of an Indian consumer increases what will he desire after he had all that money can buy?

Most probably the things that money cannot buy. Despite of the increase in awareness and education among people the obesity rates, smoking rates, diabetes rates and stress levels are increasing rapidly. Although people are aware of the ill effects of modern lifestyle they are still not willing enough to do much about it. But this mentality is changing now, although slowly. There are various factors involved in this wellness revolution:

  1. The economic downturn affected peoples’ ability to spend money on doctor’s visits, health insurance and hospital stays. Instead they are now focusing on prevention of sickness and disease. They are seeking out natural alternative ways to stay away from sickness and disease.
  2. There is a growing mistrust in the general population towards pharmaceuticals. The side effects of allopathic medicines are often serious. People are losing a hope in the fact that just taking a pill will make them feel better. Lawsuits and product recalls are further making them uneasy about it. Medicines are being designed to be taken for life and people are becoming aware of the dangers of this to their health.
  3. People are living longer now. And they want to do it in a healthy way. They are willing to invest in wellness more than ever now. They want to feel good, stay well and have health and vitality. And health and wellness industry is giving them all these answers.

With a tremendous growth in communication, active participation of government and busier getting schedules of people, opportunities for companies in this industry are increasing at a stupendous rate. Some of the factors that will help in making this revolution big are:

  1. People are becoming more aware about the benefits of being proactive about their health.
  2. As the Quality Control of India has already published the Health and Wellness standard, this will help in improving credibility and trust not only among people in the industry, but also help build people’s trust in the accredited organizations.
  3. Despite the size of the market, market penetration is very low. So basically it is a ripe market for anyone who can crack the penetration problem.
  4. With improvement in technology and with increase in income of the New Indian Middle class, health and wellness products and services will become easily affordable. Instead of thinking of it as an expense people will start thinking of it as an investment.
  5. The average consumption time of this category’s product is 2-3 months. Therefore once the customer likes it, it will ensure continuous consumption which would lead to further cost reduction for companies.
  6. Contrary to the expected trend, smaller cities are showing higher growth rate compared to metro cities.

From the above points it can be concluded that there is no stopping to this revolution. However this industry is still in its nascent stage and the revolution’s growth may be hindered by various obstacles.

Challenges faced

As identified by FICCI -Ernst and Young report, the three stakeholders in the wellness segment are providers, facilitators and most importantly users. These stakeholders hold the key to tapping the untapped potential, in this sector.

From a long time in our history, we have always been inclined towards the holistic wellness of the mind and body. The aspects on which ancient wellness touched upon are all basic in nature, namely nutrition, health and relaxation. With the passage of time, though, this term has assumed a more multi-faceted meaning. Now it would include concepts like the individual’s social acceptance, exclusivity and collective welfare. These changes have been accelerated by extraneous factors like Globalization and greater awareness for need of wellness in the individual.

This sector shows tremendous promise of rise like a number of other sectors, which have also benefitted from the rising levels of affluence in the Indian economy, and creation of newer corporate customers. Like every upcoming sector, it has its own set of challenges, surmounting which would give one a firm foothold in the sector.

But, despite of these challenges the industry holds a lot to companies who are willing to overcome these challenges. The monetary gains might not be very high initially but once credibility is established and the company has penetrated the market well, there will be huge gains. The costs would go down and the profit margins would increase. So a company willing to make a business investment should enter this sector and be a part of this revolution!

Mirk