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RESEARCH: ASIA


of such complaint systems, the report indicates that there’s still a need to ensure awareness of, and conformity to, quality standards across the industry. “Only fi ve wellness operators have been accredited by the National Accreditation Board for Hospitals and Healthcare,” it states, although it was also noted that a further 12 applications are being considered. PwC recommends that the following steps should be undertaken/implemented for


further progression: ■ “Tailor guidelines for various segments of the wellness industry…;


■ Reduce execution challenges and costs [of cumbersome accreditation schemes];


■ Improve consumer awareness regarding accreditation…; and


■ Ensure implementation of regulatory norms”


REVENUE OBSTACLES Although it’s estimated that the wellness industry in India will grow at a rate of 15-17 per cent in 2014 and 2015, there are still some barriers operators and product


suppliers will continue to face. From a revenue perspective, the researchers identify three main challenges: the scaling up of businesses, addressing the diverse consumer segments and building up consumer awareness and trust. Signifi - cantly, ways round these obstacles are also beginning to emerge. Franchising has been a common method


of expansion for the scaling up and rapid growth of companies, but has brought with it a well-known disadvantage – the loss of control and consequent brand inconsistencies. Thus, in addition to establishing clear and consistent norms in their own facilities and choosing new franchisees carefully, operators have been adopting “hybrid models… to bridge the gap between control versus scalability”. Fitness franchise Talwalkars, for example, has developed a shared capex model where it takes on some of the costs with franchisee but maintains a 51 per cent stake in the business to ensure that it has a greater degree of supervision. Elsewhere, some operators have also


created multiple brands in order to cater to diverse markets. To stimulate consumer interest and


Franchising is a popular way to expand 104 spa business handbook 2014


demand, and to build brand trust, the PwC report suggests wellness-focused food and beverage companies have the right approach. Their strategy is to increas- ingly invest in education to promote the “benefi ts of specifi c ingredients” and this is something which is also happening in the beauty segment. The food and beverage companies also conduct free health check- ups and provide information to customers and using online media.


Graph 1: Growth in the Indian Wellness Industry by Sector*


15-17% 1050-1150* 680-720*


210-270 11-12


160-180 7-8


170-180


285-290 60


2012


Beauty care Health & wellness food & beverages


Fitness & slimming


Rejuvination Alternate therapy


*Source: Imperatives for Growth: The Wellness Industry, PwC, 2013


455-490 2015


100-115 270


PROFITABILITY LEVERS Profi t margins vary greatly in the wellness sector, which is a diverse market in itself. Yet there common strategies companies are adopting to increase profi ts including diversifying portfolios, product premiumi- sation and managing cost pressures. The report estimates that pre-tax


earnings (EBITDA) of product-only companies are the highest in the sector at between 20 per cent and 30 per cent. In comparison, service-only companies only have a pre-tax profi t of between 8 per cent and 20 per cent. Some service companies have attempted to add products to their business off er in an attempt to increase the average pre-tax earnings.


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INDUSTRY GROWTH (INR BILLION)


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