It's time to wrap up our business accounts & sales target for the year 2018, at this moment I decided to start preparing a report about the year gone by & expectation/outlook for 2019.
This report, is based on what we see, observe & listen from India & China market. I have tried to make this report on basis of facts & figures but the main part is based on market sentiments & behaviour.
India Side
The year gone by cannot be considered as very encouraging & constructive. The year started on optimism of fantastic 2017, but soon that enthusiasm wears out. One of the main reason could be that Indian industry starts to adjust to a new tax regime which started in July 2017. That tax regime has significant effect on industry & how we use to keep inventories.
Due to this new tax regime taking effect, most of the industry player had no need to keep high inventories levels of their Finished Formulations as well as API. They start to reduce their inventory level from 3-4 months to 1-2 months, this has notable & negative effect on demand. Earlier there was a different tax in different states in India so every distributor, wholesales & retailer had to keep inventories, now after ONE TAX regime came in to effect, these supply chain channels didn’t have to keep so much stock as they can get stock from other distributors under one tax. All API supplier start to feel the pinch of this change & it evident in low demand.
When demand reduces, the first thing it affects is profit margins, I found for every unit of supply chain had reduced profit margins on their business. When margins reduce, every other cycle starts to get affected, be it expenses, investment OR R&D, etc.
Price capping is one of the major challenges for the industry in India. Govt is relentlessly watching & increasing their control over the prices of Finished Formulations. This is the biggest deterrent for any new investment & upgradation. Unless there is decent profit in any industry, there will be no investment in future growth & there will be no expansion. Also instead of more focus on price capping, govt shall spend more time on the betterment of quality of Finished Formulations. Indian Finish Dosage Forms are cheapest in the world & I don’t see that there shall be any reason to reduce its future.
Liquidity - this year is particularly bad for Indian businessman as there is a serious liquidity problem in the market & especially from banks & investors. Due to various incidents in thisyear, the bank has reduced their exposure from businesses, which definitely has a gloomy & unfavourable impact. I can see a big liquidity crunch in the market as most of the businesses were based on banks, on the large extent, for their cash flow. Worse, I can see this liquidity shortage is going to be bigger in 2019. More & more businesses will face cash flow problem & low margins have added to the woes of limited liquidity to manage & expand businesses.
Compliance & regulatory is getting stricter & wider for businesses. The move to increase registration fees is definitely going to impact in a big way in the next 3 years. Apart from increased fees, my main worry is Audit fees, which is now USD 25000 (earlier it was USD 5000), so we can expect more audits as govt will get more revenue now. Indian FDA is getting stringent, making imports of API more difficult in future. However, implementation of a few of regulatory rules is still my main concern as a lot of non-registered material is coming to India.
Govt spending is reducing in India on healthcare, as per recent reports, govt is now spending less in every state compared to growth in last years. This is definitely not a good sign. Like in most countries, govt is the biggest buyer of healthcare products, in India, it was the same, but there is no growth in this spending, which makes few govt tenders at lower prices.
Sentiments play very *important* role in any business, especially in India. Current market sentiments are weak, bleak & fragile. Businesspersons are apprehensive & anxious. No new investments are happening in this sector. Whenever I met Traders / Distributors OR any size of END-USER, I don’t see optimism & confidence in their future projections.
Election year - 2019 is going to be election year & that’s the major event which will affect the growth & businesses in India in a big way. Govt will spend most of their time, money & resources towards winning this election & most of the policy decision, govt spending will take back seat.
China Side
Supply - I could see that supply is getting stable & better as the year passes by. What happened in 2017, will not happen in the next 5 years. Most of the producers have adjusted & upgraded themselves as per new norms of govt. Though I don’t see a major expansion of production capacities in the coming year surely the supplies will not be reduced. In my Opinion, supply is still more than stagnant global demand. India & China has solved the mystery of customer-supplier relation to a large extent, I don’t see any big change in this as no new supplier OR customer is going to add in a big way which can disrupt the market.
Global demand is slowing down, making supplies better OR more. Globally every country now wants to protect & promote their own industry, which led to more supplies & more barriers in other countries. This makes China their biggest economic rival. However, I still feel that China’s advantage in chemistry, large infrastructure & better liquidity will difficult for other countries to match. Also due to a lot of Geo-political situations, we will see more trade wars & sanctions in the coming year. Every govt will use every trick in their law to create more trade barriers.
Well, I don’t want to sound too pessimist but I definitely want to be realistic. I feel there is shining in darkness. Sometimes sluggish demand gives us time & opportunity for us to go back to drawing board, to reflect & if needed, change our business style. I feel this is the time to consolidate supply chain channels, this is the time to be more watchful, time to be more patient & persistent. This is time to support & build a strong supply chain. This is time not to beat your competitor but outsmart them. This is time to understand & give importance to sentiments, which drives belief in businesses.
I see a lot of chances of understanding, learn & change. I see time is there to create & offer value proposition instead of value. Shall focus on understanding customers need, which is for the same product but with better service. Move to new & innovative ways to capture & retain the customer. I always say that the market is bigger than the customer & it will always remain this way. Everyone shall focus on the market rather than a customer. Consolidation in the market will help every customer.
Most of the above-mentioned contents are based on my Observations & study about India & China market & after meeting so many suppliers & customers in a year.
I hope & wish a better year in 2019, but we all shall be ready for challenges with better value proposition & by being a differentiator.
Let’s move ahead with Trust, belief & supporting each other. Happy New Year 2019！
Mehul Shah Shah TC
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回顾2018 & 展望2019
一、印度市场
过去的一年并不能被认为是鼓舞人心且具有建设性的一年。2017 年开始的乐观的市场行情, 很快就消失了。其中一个主要原因可能是印度工业逐渐适应了开始于 2017 年 7 月的税收制度。新的税收制度对于整个医药行业影响巨大并改变了行业供应链上的库存习惯。
由于这一新的税收制度生效，大部分行业从业者不再需要保持曾经需要保持的高库存水平，原料药同样如此。原料药从业者们将 3-4 个月的库存，降低到1-2 个月的水平，对需求产生了显著的负面影响。早些时候，印度不同的邦之间税率不同，所以分销商、总代和零售商均需要保持一定的库存水平。而今统一税制情况下，供应渠道内不必再保持高库存，而可以从其他的分销商处获取。所有的原料药供应商对此种变化及它所带来的需求减少感到了压力。
当需求减少时，首先影响的是利润率，供应链上每个环节的利润率都有所下降。同样的，当利润率降低时，例如企业各项费用、投资、研发等也都将受到影响。
价格限制是印度医药行业面临的主要挑战之一，印度政府正在无情地监视和加强他们对于成品药价格的控制。这是任何新的投资和升级的最大障碍。除非某个行业有可观的利润，否则在未来的增长都不会有投资，不会扩张。同样的，和更多的聚焦价格控制相比，我认为政府应该花更多的时间在提升成品药的质量上面。毕竟印度成品药的价格是世界上最便宜的。
这一年对于印度商人来讲是糟糕的一年，市场出现了严重的流通问题，特别是来自于银行和投资者。由于今年发生的各种事件，银行减少了业务的风险敞口， 这无疑带来了消极和不利的影响。我可以看到市场上出现了巨大的流通性紧缩， 因为大多数企业的现金流在很大程度上是基于银行。更糟糕的是，我可以预见到2019 年这种流通性紧缩将进一步加剧。越来越多的业务将面临现金流问题和低利润率带来的有限的流动性管理和业务扩张的困境。对企业来说，合规和监管正变得越来越严格和广泛。提高注册费的举措肯定会在未来 3 年产生重大影响。除了增加注册费用，我最担心的是审计费用，现在是 25000 美元(之前是 5000 美元)，我们可以预计将有更多的审计，因为政府现在会有更多的收入。印度食品药品监督管理局(FDA)越来越严格，使得未来进口原料药更加困难。然而一些监管规则的实施仍是我主要担心的问题，因为大量未经注册的原料药正在运往印度。
印度政府在医疗保健方面的开支正在减少，根据最近的报告，与去年的增长， 相比，现在每个邦的政府开支都在减少。这绝对不是一个好兆头。和大多数国家一样，政府是医疗产品的最大买家，在印度也是如此，但这方面的支出没有增长， 这使得政府将以更低的价格招标。
情绪预期在任何商业活动中都扮演着非常重要的角色，尤其是在印度。当前市场情绪疲弱、黯淡而脆弱。商人们忧心忡忡，在这个领域没有新的投资。无论何时我遇到贸易商、经销商或任何规模的终端用户，我都看不到他们对未来预测的乐观和信心。
2019 年印度大选，将对印度的增长和商业产生重大影响。政府将花费大部分的时间、金钱和资源来赢得这次选举，而大部分的政策决定，政府开支将退居次席。
二、中国方面
我看到，随着时间的推移，供应正在变得稳定和好转，2017 年发生的事情，预计未来 5 年不会再发生。大多数生产商已经按照政府的新标准进行了调整和升级。尽管我认为明年的生产能力不会大幅提升，但供应肯定不会减少。在我看来，供应依然大于全球需求。印度和中国很大程度上解决了供应需求这个问题， 我不认为会有什么大的变化，除非有新的供应商或者客户以扰乱市场的姿态介入。
全球需求正在放缓，使得供应变得更多更好。在全球范围内，每个国家都想保护和促进自己的工业，这导致了其他国家更多的供应和更多的贸易壁垒。这使得中国成为他们最大的经济竞争对手。然而，我仍然认为，中国有在化工、大型基础设施和更好的流通性方面的优势，其他国家难以匹敌。此外，由于许多地缘政治局势，我们将在新的一年看到更多的贸易战和制裁。每一个政府都会用法律上的每一招来制造更多的贸易壁垒。
我并不想太过悲观，但我绝对想要现实一点。我觉得有东西在黑暗中闪闪发光。低迷的需求同样给了我们时间和机会，让我们去反思，并在需要的时候改变我们的商业风格。我认为这是巩固供应链渠道的时候了，是更加警惕的时候了，是更加耐心和执着的时候了。是支持和建立一个强大的供应链的时候了，现在不是打败你的竞争对手，而是战胜他们的时候了。是理解和重视情绪的时候了，因为情绪会推动人们对企业的信心。
我看到了很多理解、学习和改变的机会。我看到时间用来创造和提供价值主张而不是价值。专注于了解客户需求，相同的产品但有更好的服务。采取新的和创新的方式来抓住和留住客户。我总是说市场比顾客大，它会一直这样。每一个人都应该更加专注于市场而不是某个具体的客户。市场整合将帮助每一个客户。
以上大部分内容都是基于我在一年的时间里接触了很多供应商和客户的基础上，对印度和中国市场的观察和研究。我希望并祝愿2019年是更好的一年，但我们都要准备好迎接挑战。
Mehul Shah Shah TC
