India has come a long way from being a passive receiver of benefits, to being one of the few nations in the world with the capability to create a successful vaccine for a large-scale pandemic, bring it to market within record time and even offer it to the rest of the world. India’s prowess in the medical field is well recognised by the global community. However, India is still ranked as the nation with the third-highest HIV cases by the United Nations. And this is reflected in the surprisingly small market size of condoms — a product that is essential for the reproductive and sexual well-being of the world’s largest youth population.
Breaking the price ceiling
The condom market size in India is estimated at a mere ~$200 million as of March 2020, as compared to a global market size of $8.5 billion in 2019. At $200 million, the Indian condom market is little above two per cent of the global market in value while it has 8 per cent of the world’s users (volume). Despite having a large population within the reproductive age bracket, especially the youth population, the current capacity utilisation of industry hovers around 40 per cent, including exports. Thus, building a case for an urgent re-look at the current market model. The Indian condom market has been struggling with a price ceiling that limits industry growth in more ways than one. Since April 1 2021, the price ceiling on condoms has been revised at Rs 9.15 per piece by the National Pharmaceutical Pricing Authority post a 0.5 per cent increase in the Annual Wholesale Price Index (WPI).
Product innovation plays an important role in encouraging usage by adding attributes that align with one’s value system, health restrictions, and even pleasure preferences. While the global market is witnessing innovations in the form of non-latex condoms manufactured using polyurethane and even plant fibre, eco-friendly condoms, the world’s thinnest condoms, musical condoms to even novel panty condom that provide more control to women, in India the innovation graph remains fairly plateaued and restricted to attributes such as flavours and textures. Large-scale innovations can be capital intensive and require a significant risk appetite, and a price ceiling of mere Rs 9.15 would hardly allow the expected return on investments to encourage a culture of non-linear innovation. In fact, price caps can make it financially unviable for players to stay in the market, forcing them to scale down or exit. An example of this is visible in the Indian market for coronary stents used in heart surgeries. Some makers of specialised and other premium stents felt that the State-ordered price ceiling did not make commercial sense and were eventually forced to withdraw their offering as a result. Thus, tampering with market forces can more often than not result in ineffective and inefficient market conditions that cause more harm than good.
Similarly, with the current pricing model, there is little or no incentive for the stockists to stock the condoms in the more expensive front shelves, in order to enhance both visibility and access. Additionally, Point of Sale promotions such as installing dispensers would not only allow better access but also reduce the awkward interaction at the sales counter. Thus, addressing a key barrier to purchase. However, these aforesaid solutions and marketing innovations would require considerable investments from the supply chain that is neither supported nor encouraged by the current pricing model.
The welfare argument
While there is merit, in ensuring that the vulnerable sections of the society are adequately protected, the price of the condom does not appear to be a substantial deterrent here, as the government already offers free and subsidised condoms through its social marketing programmes. The family planning programme distributes condoms at government health centers and directly to people through Accredited Social Health Workers or ASHAs.
The number of free condoms procured for supply by the government in 2016-17 was 432.82 million, while 399 million were sold through social marketing. Despite free and subsidised condoms, the overall condom usage remains low in India at 5.6 per cent, according to National Family Health Survey (NFHS)-4. The commercial and social marketed condoms only have an annual volume of 2.1 billion condoms. A couple would need to use 120 condoms a year to protect themselves from pregnancy and thus there remains a huge potential to further increase the volumes. If 50 per cent of the unmet demand was fulfilled, the market size for condoms, volume wise, would touch 4.15 billion pieces. There is a significant behavioural barrier, owing to psychological and social norms constraining usage, that appears to pose a greater concern than price. The awareness of the need for condoms and the intent to use them remains low, especially among the youth. According to insights from a study – Increasing Condom Adoption Among Youth from SHOPs Plus India in 2020 — the fear of pregnancy is much higher than the fear of contracting STIs/STDs, with most of the youth unaware of STIs other than HIV. Commercial enterprises contribute 67 per cent of the volume and have conducted various awareness programmes such as the ongoing The Birds and Bees Talk by Reckitt; roadshows and free distribution by the TTK Group along the highway where truck drivers halt for a break; as well as the #DurexJeans campaign to build a trendy imagery while reinforcing the need to always carry a condom.
The hybrid model
While the above efforts have been commendable, there is a need to create more such campaigns and programmes at a large scale to bring about the necessary long-term behavioural change in society at large. Awareness campaigns are capital intensive and price ceilings make it harder for commercial players to justify large-scale category expansion investments. However, it is equally important to ensure that there is enough supply at a reasonable price for the low-income users as well. Thus, there might be merit in reorganising the market structure to address concerns at both ends of the spectrum to ensure an efficient as well as an equitable market. The government could mandate commercial players to use a fixed portion of their turnover to create large scale awareness campaigns to build the category as a whole, as well as fix a certain percentage of the production to be shared with the government or placed in the market at a pre-determined price, akin to a price ceiling but with a caveat. The free condom drive by the government can continue, while it can also benefit from the distribution expertise of the commercial players for the subsidised condoms.
This hybrid model would ensure that the commercial players have enough incentive and margins to take calculated business risks, innovate to match global standards, and simultaneously grow the market by fulfilling the diverse needs of an evolving consumer base. The hybrid model would also benefit the more vulnerable sections through educational campaigns that raise awareness and a guaranteed supply of reasonably priced condoms, besides the free ones already available through government channels. For a nation as diverse as ours, a one-size-fits-all approach rarely works, making it imperative to re-look and re-organise the current price ceiling model to build a more nuanced hybrid model.
Arijit Ghosh is Brand Growth Hacker, Pharmaceuticals & Medical Device Industry Observer & Marketing Enthusiast. Views are personal.